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The short- and medium-term distributional effects of the German minimum wage reform

Author

Listed:
  • Marco Caliendo

    (University of Potsdam, IZA, DIW, IAB)

  • Alexandra Fedorets

    (German Institute for Economic Research)

  • Malte Preuss

    (German Council of Economic Experts)

  • Carsten Schröder

    (SOEP at DIW and Free University Berlin)

  • Linda Wittbrodt

    (University of Potsdam)

Abstract

This study quantifies the distributional effects of the minimum wage introduced in Germany in 2015. Using detailed Socio-Economic Panel survey data, we assess changes in the hourly wages, working hours, and monthly wages of employees who were entitled to be paid the minimum wage. We employ a difference-in-differences analysis, exploiting regional variation in the “bite” of the minimum wage. At the bottom of the hourly wage distribution, we document wage growth of 9% in the short term and 21% in the medium term. At the same time, we find a reduction in working hours, such that the increase in hourly wages does not lead to a subortionate increase in monthly wages. We conclude that working hours adjustments play an important role in the distributional effects of minimum wages.

Suggested Citation

  • Marco Caliendo & Alexandra Fedorets & Malte Preuss & Carsten Schröder & Linda Wittbrodt, 2023. "The short- and medium-term distributional effects of the German minimum wage reform," Empirical Economics, Springer, vol. 64(3), pages 1149-1175, March.
    • Handle: RePEc:spr:empeco:v:64:y:2023:i:3:d:10.1007_s00181-022-02288-4
    DOI: 10.1007/s00181-022-02288-4
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    Cited by:

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    2. Laszlo Goerke & Markus Pannenberg, 2023. "Minimum Wage Non-compliance: The Role of Co-determination," SOEPpapers on Multidisciplinary Panel Data Research 1199, DIW Berlin, The German Socio-Economic Panel (SOEP).
    3. Fana, Marta & Giangregorio, Luca, 2024. "The role of tasks, contractual arrangements, and job composition in explaining the dynamics of wage inequality: Evidence from France," Labour Economics, Elsevier, vol. 87(C).
    4. Kunaschk, Max, 2024. "The effects of minimum wages on employment and prices—Evidence from the hairdressing sector," Labour Economics, Elsevier, vol. 88(C).
    5. Gerlinde Titelbach & Martin Ertl & Susanne Forstner, 2024. "Effekte einer allgemeinen Lohnuntergrenze für Österreich," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 50(2), pages 19-43.
    6. Manuela A. de Paz-Báñez & Celia Sánchez-López & María José Asensio-Coto, 2024. "Effects of the Minimum Wage (MW) on Income Inequality: Systematic Review and Analysis of the Spanish Case," Economies, MDPI, vol. 12(9), pages 1-37, August.

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    More about this item

    Keywords

    Minimum wage; Wage distribution; Hourly wages; Inequality;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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