Long-Term Employment Effects of the Minimum Wage in Germany: New Data and Estimators

Author:

Marco Caliendo, Nico Pestel, Rebecca Olthaus

Keyword:

Economics, General Economics, General Economics (econ.GN)

journal:

date:

2023-10-23 16:00:00

Abstract

We study the long-term effects of the 2015 German minimum wage introduction and its subsequent increases on regional employment. Using data from two waves of the Structure of Earnings Survey allows us to estimate models that account for changes in the minimum wage bite over time. While the introduction mainly affected the labour market in East Germany, the raises are also increasingly affecting low-wage regions in West Germany, such that around one third of regions have changed their (binary) treatment status over time. We apply different specifications and extensions of the classic difference-in-differences approach as well as a set of new estimators that enables for unbiased effect estimation with a staggered treatment adoption and heterogeneous treatment effects. Our results indicate a small negative effect on dependent employment of 0.5 percent, no significant effect on employment subject to social security contributions, and a significant negative effect of about 2.4 percent on marginal employment until the first quarter of 2022. The extended specifications suggest additional effects of the minimum wage increases, as well as stronger negative effects on total dependent and marginal employment for those regions that were strongly affected by the minimum wage in 2015 and 2019.

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