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Introducing minimum wages in Germany employment effects in a post Keynesian perspective

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  • Arne Heise

    (University of Hamburg)

  • Toralf Pusch

    (WSI)

Abstract

The long ongoing discussion about the employment impact of minimum wages was recently reinvigorated with the introduction of an economy-wide, binding minimum wage in Germany in 2015. In the traditional line of reasoning, based on the allocational approach of modern labor market economics, it has been suggested that the impact is clearly negative on the assumption of a competitive labor market and clearly positive on the assumption of a monopsonistic labor market. Unfortunately, both predictions conflict with the empirical findings, which do not show a clear-cut impact of significant size in either direction. As an alternative, a Post Keynesian two-sector model including an employment market is presented here. Its most likely prediction of a negligible employment effect and a sectoral shift is tested against the German case of an introduction of a statutory minimum wage in 2015. Despite substantial wage increases in the low wage sector, our empirical analysis reveals very low overall employment loss, amounting to about 26,500 workers, as a result of a small sectoral shift from low wage industries to higher wage industries.

Suggested Citation

  • Arne Heise & Toralf Pusch, 2020. "Introducing minimum wages in Germany employment effects in a post Keynesian perspective," Journal of Evolutionary Economics, Springer, vol. 30(5), pages 1515-1532, November.
  • Handle: RePEc:spr:joevec:v:30:y:2020:i:5:d:10.1007_s00191-019-00652-9
    DOI: 10.1007/s00191-019-00652-9
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    Cited by:

    1. Arne HEISE, 2020. "Comparing economic theories or: pluralism in economics and the need for a comparative approach to scientific research programmes," The Journal of Philosophical Economics, Bucharest Academy of Economic Studies, The Journal of Philosophical Economics, vol. 13(2), pages 162-184, November.
    2. Arne Heise, 2022. "Mindestlöhne, Beschäftigung und die „Harmonie der Täuschungen“," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 48(1), pages 83-107.
    3. Arnd Kölling, 2022. "Monopsony power and the demand for low-skilled workers," The Economic and Labour Relations Review, , vol. 33(2), pages 377-395, June.
    4. Arne Heise, 2019. "The resilience of modern neoclassical economics – a case study in the light of Ludwik Fleck’s ‘harmony of deception’," The Journal of Philosophical Economics, Bucharest Academy of Economic Studies, The Journal of Philosophical Economics, vol. 13(1), pages 1-18, November.
    5. Dosi Giovanni & Virgillito Maria Enrica, 2024. "Minimum Wage for Italy: From Social Justice to Productive Efficiency," Intereconomics: Review of European Economic Policy, Sciendo, vol. 59(4), pages 231-235.
    6. Arne Heise & Toralf Pusch, 2021. "Die „Harmonie der Täuschungen“ muss enden, damit Politikberatung glaubwürdiger wird," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 101(12), pages 940-942, December.

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    More about this item

    Keywords

    Post Keynesianism; Minimum wage; Aggregate demand; Aggregate supply;
    All these keywords.

    JEL classification:

    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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