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Wage Inequality in Germany after the Minimum Wage Introduction

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  • Bossler, Mario

    (Institute for Employment Research (IAB), Nuremberg)

  • Schank, Thorsten

    (University of Mainz)

Abstract

We revisit the development of monthly wages in Germany between 2000 and 2017. While wage inequality strongly increased during the first years of this period, it recently returned to its initial level, raising the question what the role of the German minimum wage introduction for this reversal is. We identify effects of the minimum wage from difference-in-differences based on unconditional quantile regressions applied to German administrative employment data. The results show significant wage effects of varying magnitudes along the lower half of the wage distribution. Employment dynamics do not explain effects along the wage distribution, implying strong wage increases among the existing workforce. The increased individual labor income is not offset by decreasing social benefits. Overall, the introduction of the minimum wage can account for about half of the recent decrease in wage inequality.

Suggested Citation

  • Bossler, Mario & Schank, Thorsten, 2020. "Wage Inequality in Germany after the Minimum Wage Introduction," IZA Discussion Papers 13003, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp13003
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    Keywords

    wages; inequality; minimum wage; Germany;
    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

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