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A 22 Percent Increase in the German Minimum Wage: Nothing Crazy!

Author

Listed:
  • Bossler, Mario

    (Institute for Employment Research (IAB), Nuremberg)

  • Chittka, Lars

    (Destatis)

  • Schank, Thorsten

    (University of Mainz)

Abstract

We present the first empirical evidence on the 22 percent increase in the German minimum wage, implemented in 2022, raising it from € 9.82 to € 10.45 in July and to € 12 in October. Leveraging the German Earnings Survey, a large and novel data source comprising around 8 million employee-level observations reported by employers each month, we apply a difference-in-difference-in-differences approach to analyze the policy's impact on hourly wages, monthly earnings, employment, and working hours. Our findings reveal significant positive effects on wages, affirming the policy's intended benefits for low-wage workers. Interestingly, we identify a negative effect on working hours, mainly driven by minijobbers. The hours effect results in an implied labor demand elasticity in terms of the employment volume of −0.2 which only partially offsets the monthly wage gains. We neither observe a negative effect on the individual's employment retention nor the regional employment levels.

Suggested Citation

  • Bossler, Mario & Chittka, Lars & Schank, Thorsten, 2024. "A 22 Percent Increase in the German Minimum Wage: Nothing Crazy!," IZA Discussion Papers 17575, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp17575
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    More about this item

    Keywords

    minimum wage; labor market effects; empirical evaluation; Germany;
    All these keywords.

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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