Fair Enough? Minimum Wage Effects on Fair Wages

44 Pages Posted: 27 Jun 2019

See all articles by Johannes Koenig

Johannes Koenig

German Institute for Economic Research (DIW Berlin)

Levent Neyse

German Institute for Economic Research (DIW Berlin); Kiel Institute for the World Economy

Carsten Schroeder

German Institute for Economic Research (DIW Berlin)

Date Written: June 25, 2019

Abstract

Work satisfaction and productivity depends on workers feeling they are paid fairly. Minimum wage laws aim to raise wages for low-income workers. However, we do not know how minimum wage laws affect workers' fairness perceptions. Using survey data from the German Socio-Economic Panel, we show that the introduction of a minimum wage law in Germany increased the stated fair wage of affected workers. We then experimentally investigate whether the rise in fair wages is only a mechanical response to obligatory wage increases or whether the designated minimum wage serves as a reference point for fair wages. We do not find that the minimum wage acts as a reference point. Our experimental results suggest that the existence of a minimum wage does not change how individuals evaluate the fairness of wages.

Keywords: minimum wage, fair wage, hourly wages, effort

JEL Classification: A13, C92, C93, J31, J38, J22

Suggested Citation

Koenig, Johannes and Neyse, Levent and Schroeder, Carsten, Fair Enough? Minimum Wage Effects on Fair Wages (June 25, 2019). Available at SSRN: https://ssrn.com/abstract=3409913 or http://dx.doi.org/10.2139/ssrn.3409913

Johannes Koenig

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

Mohrenstraße 58
Berlin, 10117
Germany

Levent Neyse (Contact Author)

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

Mohrenstraße 58
Berlin, 10117
Germany

Kiel Institute for the World Economy ( email )

Kiellinie 66
Kiel, Schleswig-Hosltein 24105
Germany

Carsten Schroeder

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

Mohrenstraße 58
Berlin, 10117
Germany

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