The Short-Run Employment Effects of the German Minimum Wage Reform

37 Pages Posted: 16 Dec 2017

See all articles by Marco Caliendo

Marco Caliendo

University of Potsdam; Institute for the Study of Labor (IZA)

Alexandra Fedorets

German Institute for Economic Research (DIW Berlin)

Malte Preuss

Free University of Berlin (FUB)

Carsten Schroeder

German Institute for Economic Research (DIW Berlin)

Linda Wittbrodt

University of Potsdam

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Abstract

We assess the short-term employment effects of the introduction of a national statutory minimum wage in Germany in 2015. For this purpose, we exploit variation in the regional treatment intensity, assuming that the stronger a minimum wage "bites" into the regional wage distribution, the stronger the regional labour market will be affected. In contrast to previous studies, we draw upon detailed individual wage data from the Structure of Earnings Survey (SES) 2014 and combine it with administrative information on regional employment. Moreover, using the Socio-Economic Panel (SOEP), we are able to affirm the absence of anticipation effects and verify the assumption of a common trend in wages before the reform. Based on hourly wages, we compute two regional bite indicators – the share of affected employees and the Kaitz index – for 141 regional labour markets. In order to get a broader picture, we construct and compare a variety of these measures, including a bite based on full-time workers only. All of these display a considerably strong correlation. Overall, we do not find a pronounced significant effect on regular (full- and part-time) employment in most specifications, although some estimations yield a small significant reduction amounting to 78,000 (roughly 0.3% of all regular jobs). The results concerning marginal employment are more pronounced. We find evidence that mini-jobs dropped substantially from 2014 to 2015, making for a reduction of about 180,000 jobs (about 2.4% of all mini-jobs). This result is robust to a variety of sensitivity tests.

Keywords: minimum wage, regional bite, employment effects

JEL Classification: J23, J31, J38

Suggested Citation

Caliendo, Marco and Fedorets, Alexandra and Preuss, Malte and Schroeder, Carsten and Wittbrodt, Linda, The Short-Run Employment Effects of the German Minimum Wage Reform. IZA Discussion Paper No. 11190, Available at SSRN: https://ssrn.com/abstract=3088934

Marco Caliendo (Contact Author)

University of Potsdam ( email )

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Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Alexandra Fedorets

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Malte Preuss

Free University of Berlin (FUB) ( email )

Van't-Hoff-Str. 8
Berlin, Berlin 14195
Germany

Carsten Schroeder

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Linda Wittbrodt

University of Potsdam

August-Bebel Strasse 89
Potsdam, 14482
Germany

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