The regional effects of Germany’s national minimum wage

Abstract

We show that the minimum wage introduced in Germany in 2015 led to spatial wage convergence, in particular in the left tail of the distribution, without reducing relative employment in low-wage regions within the first two years.

Using Occupations to Evaluate the Employment Effects of the German Minimum Wage

“…In contrast, Ahlfeldt et al (2018) and Dustmann et al (2019) do not find any discernible effects on total employment using regional-level data if they account for region-specific differences in employment trends prior to the reform. Other studies that use regional wage variation distinguish between regular and marginal employment and identify negative effects; however, usually, only the effect on marginal employment is precisely estimated (Bonin et al 2019;Caliendo et al 2018;Schmitz 2019).…”

“…(1) and (2) produces similar results. Ahlfeldt et al (2018) and Dustmann et al (2019) demonstrate how the estimates of the employment effects shrink towards zero when group-specific trends are included in the diff-in-diff specifications they use. This is the case because diverging pre-reform trends bias the estimator.…”

“…Theoretically, this may be rationalised by monopsonistic competition (Manning 2003). Concerning the German reform, previous studies found no discernible employment effects (Ahlfeldt et al 2018;Dustmann et al 2019) or at most moderately negative effects (Bossler/Gerner 2019;Caliendo et al 2018). Furthermore, some studies have identified a positive impact on regular employment, i. e. jobs that yield earnings above €450 per month, alongside a negative impact on marginal employment, i. e. jobs that pay below this threshold (Garloff 2019;Holtemoller/Pohle 2017;Schmitz 2019).…”

The German Statutory Minimum Wage and Its Effects on Regional Employment and Unemployment

“…Our findings are consistent with Caliendo et al (2018a) who also report moderate negative effects on overall employment in the short run until 2015, which are mainly driven by a sharp decline in marginal employment. However, we extend the period of investigation to the medium run until the fourth quarter of 2016 and explicitly study the effects of the minimum wage on regional unemployment levels (also see Ahlfeldt et al (2018)). Moreover, we exploit variation in the minimum wage bite at a finer regional level, focusing on 257 labor market regions.…”

Macroeconomic Long-Run Effects of the German Minimum Wage when Labor Markets are Frictional

“…It is, however, unclear whether this can be linked causally to the introduction of minimum wages. Employing an inter-regional comparison, Garloff (2016) and Ahlfeldt et al (2018) do not find evidence for disemployment effects using inter-regional variation in the minimum wage's marginal impact. Garloff (2016) further documents that employment requiring the payment of social security contributions increased strongest in regions where the number of mini jobs decreased the most.…”