Using the variation across space, age and sex and the variation across space and sectors, we analyse the relationship between the minimum wage and (un)employment growth in 2015. We use difference-in-differences specifications and instrument the bite of the minimum wage by the lagged bite. The results provide stable evidence that a higher minimum wage bite is related to a higher growth rate of regular employment. We also find stable evidence that a higher minimum wage bite is related to a lower growth rate of marginal employment. These results are consistent with a transformation of marginal to regular jobs. The relationship to total employment is slightly positive in our preferred specification but insignificant or negative in others. For unemployment, we find a positive relationship between the bite of the minimum wage and unemployment growth in our preferred specification but insignificant or negative results in others.

Die Discussion Papers dienen einer möglichst schnellen Verbreitung von neueren Forschungsarbeiten des ZEW. Die Beiträge liegen in alleiniger Verantwortung der Autoren und stellen nicht notwendigerweise die Meinung des ZEW dar.Discussion Papers are intended to make results of ZEW research promptly available to other economists in order to encourage discussion and suggestions for revisions. The authors are solely responsible for the contents which do not necessarily represent the opinion of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp0579.pdf Nontechnical summaryThis paper studies the employment and wage dynamics under skill-biased technical change and different social welfare concepts. In a general equilibrium model, we show that different state schemes of poverty reduction lead to different developments in unemployment rates for the low-skilled across systems and to a different dynamics of wage dispersion. Using the social legislation of European and Anglo-Saxon countries and data from the OECD, we demonstrate these connections empirically.We claim that one system to circumvent poverty, the European system, is such that poverty is perceived as a relative concept. Therefore, the payments of the central system to avoid poverty, social benefits, must be linked to per-capita income. Because the wage of the low-skilled workers in general depends on their outside option, the low-skilled workers wage is linked to social benefits and therefore to the average income. Thus, skill-biased technical change increases the wage of the low-skilled because it increases the productivity of the high-skilled and affects via the average wage their outside option. Unemployment of the low-skilled increases because their wage increase is not justified by a respective productivity increase. On the other hand, when, as in the U.S., the poverty line does not depend on the average income, and therefore, social benefits do not depend on average income, there is no link between skill-biased technical progress and unemployment. In this system, too, the unskilled workers wage depends on the outside option. But, the outside option of the low-skilled does not depend on average income and therefore not on the wage of the high-skilled workers. Wage dispersion in the form of rising real wages for the high-skilled increases, while unemployment is unchanged in the course of technological development.Our model demonstrates that the basic intuition underlying the above argumentation is correct: in a system where benefits depend on average income, unemployment increases when the productivity of the high-skilled increases. The dispersion increases, too, but less strong if compared to a market where benefits do not depend on average income. Thereby, we show, that the model is able to reproduce the stylized facts for the developments in the European and the Anglo-Saxon model over the last 20 years.Empirically, we demonstrate, that the basic claims of the paper are correct. We show that in almost all Euro...

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Die Discussion Papers dienen einer möglichst schnellen Verbreitung von neueren Forschungsarbeiten des ZEW. Die Beiträge liegen in alleiniger Verantwortung der Autoren und stellen nicht notwendigerweise die Meinung des ZEW dar.Discussion Papers are intended to make results of ZEW research promptly available to other economists in order to encourage discussion and suggestions for revisions. The authors are solely responsible for the contents which do not necessarily represent the opinion of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp0595.pdf Nontechnical summaryThis study provides a comprehensive descriptive analysis of labor market transitions and wage mobility in the German labor market based on a large administrative data set, the IAB employment subsample 75-97. The analysis is motivated by equilibrium search theory, which predicts a close relationship between labor market frictions and the wage distribution in a cross section of workers. The friction parameters govern job separations (job destruction rate) and job accessions (job offer rate), thus determining the residual wage dispersion for a set of workers with comparable attributes. The basic argument is the existence of imperfect information ("slow" job accession) on the one hand and economic turbulence (job destruction) on the other hand.As the first step of our analysis, we provide a detailed analysis of job destructions, job accessions, job-to-job transitions, and all other labor market transitions, which are identifiable in our data set. We focus on the differences across individuals with different characteristics as well as on the cyclical behavior of transition rates. The latter reveals information on cleansing and sullying effects of the business cycle. The time series properties of both stocks and transition rates are considered. The data show marked differences across different groups of individuals. Some of these differences are consistent with search theory and other labor market theories. For example, the data confirm that individuals often change jobs when they are young and when they earn lower wages. It is also found that individuals with low formal educational level are most likely to become benefit recipients and that they are least likely to be employed in two consecutive periods. Regarding cyclical features, we find that the job-to-job transition rate is clearly procyclical, while the rate of transitions from job to benefit recipiency is clearly countercyclical.Human capital theory predicts a central role for the acquisition of human capital on the job for wage growth, while search theory predicts a central role of job mobility for wage growth during the course of an individual's career. As the second step of our analysis, we examine direct job-to-job transitions and associated wage changes, We control for the position in the wage distribution and other characteristics. We find that most individuals (almost two thirds) gain from job mobility, earning on average about 25% more after t...

Using a large linked employer–employee data set, this article studies whether the existence and use of flexibility provisions within centralized collective wage agreements alter the structure of pay across employers. Using level regressions and first‐difference methods, we find that—compared with contracts without any flexibility—wages under opt‐out clauses are more responsive to local profitability conditions in below‐average‐performing establishments. In contrast, the sensitivity of wages to local profitability is smaller in high‐performance establishments. Our results provide further evidence for a threat potential of the existence of opt‐out clauses whose impact on flexibility is larger than the real application.