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What Does the German Minimum Wage Do? The Impact of the Introduction of the Statutory Minimum Wage on the Composition of Low- and Minimum-Wage Labour

Author

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  • Dütsch Matthias

    (Secretariat of the German Minimum Wage Commission, c/o Federal Institute for Occupational Safety and Health (BAuA), Berlin, Germany)

  • Altun Orkun

    (Secretariat of the German Minimum Wage Commission, c/o Federal Institute for Occupational Safety and Health (BAuA), Berlin, Germany)

  • Grundmann Luisa

    (Secretariat of the German Minimum Wage Commission, c/o Federal Institute for Occupational Safety and Health (BAuA), Berlin, Germany)

  • Himmelreicher Ralf

    (Secretariat of the German Minimum Wage Commission, c/o Federal Institute for Occupational Safety and Health (BAuA), Berlin, Germany)

Abstract

In this article, we examine structural changes in minimum wage and low wage labor following the introduction and first increase of the German minimum wage. Changes in the impact that workers face earning gross hourly wages below the minimum-wage or low-wage thresholds are identified by comparing individual, company and sectoral characteristics based on the Structure of Earnings Surveys (SESs) 2014 and 2018. The SES is a mandatory survey of companies that provides information on wages and working hours for approximately 1 million jobs and nearly 70,000 companies across all industries. Using these rich data, we present the first systematic analysis of how structural changes in individual-, company-, and industry-level determinants affect minimum- and low-wage workers. Using descriptive analysis, we first summarize the changing pattern in jobs, companies, and industries after the introduction of minimum wage. Second, we use random intercept-only models to estimate the explanatory power at the individual, company, and industry levels in 2014 and 2018. Third, we perform logistic and linear regression estimations to assess the changing trends in having a minimum- or low-wage job and the distance between a worker’s actual earnings and the minimum- and low-wage thresholds. We conclude that the minimum wage had an elevator effect on minimum wage labor. However, compositional effects regarding the minimum-wage and low-wage workforce were evident in terms of individual and company factors. There was a selective redistribution of minimum wage employees into slightly higher wage ranges. Furthermore, convergence seems to have occurred predominantly among sectors, as their explanatory power for lower wages declined.

Suggested Citation

  • Dütsch Matthias & Altun Orkun & Grundmann Luisa & Himmelreicher Ralf, 2023. "What Does the German Minimum Wage Do? The Impact of the Introduction of the Statutory Minimum Wage on the Composition of Low- and Minimum-Wage Labour," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 243(3-4), pages 355-396, June.
    • Handle: RePEc:jns:jbstat:v:243:y:2023:i:3-4:p:355-396:n:2
    DOI: 10.1515/jbnst-2022-0070
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    References listed on IDEAS

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    1. Mattis Beckmannshagen & Carsten Schröder, 2022. "Changes in Working Hours Are Driving Earnings Inequality," DIW Weekly Report, DIW Berlin, German Institute for Economic Research, vol. 12(32/33/34), pages 195-201.
    2. Gerhard Bosch, 2018. "The making of the German minimum wage: a case study of institutional change," Industrial Relations Journal, Wiley Blackwell, vol. 49(1), pages 19-33, January.
    3. Bachmann Ronald & Dürig Wolfgang & Frings Hanna & Höckel Lisa Sofie & Flores Fernanda Martinez, 2017. "Minijobs nach Einführung des Mindestlohns – Eine Bestandsaufnahme," Zeitschrift für Wirtschaftspolitik, De Gruyter, vol. 66(3), pages 209-237, December.
    4. Bachmann, Ronald & Frings, Hanna, 2017. "Minijobs nach Einführung des Mindestlohns," RWI Impact Notes 171352, RWI - Leibniz-Institut für Wirtschaftsforschung.
    5. Beckmannshagen, Mattis & Schröder, Carsten, 2022. "Earnings inequality and working hours mismatch," Labour Economics, Elsevier, vol. 76(C).
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    Cited by:

    1. Wagner Joachim & Bauer Thomas K. & Riphahn Regina T., 2023. "Empirical Studies with Micro-Data from Official Statistics in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 243(3-4), pages 197-198, June.

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    More about this item

    Keywords

    low wage; minimum wage; social inequality; wage differentials;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J83 - Labor and Demographic Economics - - Labor Standards - - - Workers' Rights

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