Long-term employment effects of the minimum wage in Germany: New data and estimators

Marco Caliendo, Nico Pestel, Rebecca Olthaus

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

We investigate the long-term effects of the introduction of the German minimum wage in 2015 and its subsequent increases on regional employment. Using comprehensive survey data, we are able to measure the regional bite of the minimum wage in 2014, just before its introduction, as well as in 2018, before it was raised substantially in several steps. The introduction mainly affected the labour market in East Germany, while the minimum wage increases increasingly affected low-wage regions in West Germany, with about one third of regions changing their (binary) treatment status between 2014 and 2018. We use different specifications and extensions of the canonical difference-in-differences approach, as well as a set of new estimators that allow unbiased effect estimation with a staggered treatment adoption and heterogeneous treatment effects. Our results show a small negative effect on total dependent employment of 0.5%, driven by a significant reduction in marginal employment of 2.4%. The extended specifications suggest additional effects of the minimum wage increases, as well as stronger negative effects for those regions that were strongly affected by the minimum wage in both periods.
Original languageEnglish
Article number102648
Number of pages42
JournalLabour Economics
Volume92
Early online date23 Nov 2024
DOIs
Publication statusPublished - 2025

JEL classifications

  • j23 - Labor Demand
  • j31 - "Wage Level and Structure; Wage Differentials"
  • j38 - Wages, Compensation, and Labor Costs: Public Policy

Keywords

  • Minimum Wage
  • Employment
  • Regional Bite

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