Statutory Minimum Wage Research Articles

Introducing minimum wages in Germany employment effects in a post Keynesian perspective

The long ongoing discussion about the employment impact of minimum wages was recently reinvigorated with the introduction of an economy-wide, binding minimum wage in Germany in 2015. In the traditional line of reasoning, based on the allocational approach of modern labor market economics, it has been suggested that the impact is clearly negative on the assumption of a competitive labor market and clearly positive on the assumption of a monopsonistic labor market. Unfortunately, both predictions conflict with the empirical findings, which do not show a clear-cut impact of significant size in either direction. As an alternative, a Post Keynesian two-sector model including an employment market is presented here. Its most likely prediction of a negligible employment effect and a sectoral shift is tested against the German case of an introduction of a statutory minimum wage in 2015. Despite substantial wage increases in the low wage sector, our empirical analysis reveals very low overall employment loss, amounting to about 26,500 workers, as a result of a small sectoral shift from low wage industries to higher wage industries.

Employment Effects of the New German Minimum Wage: Evidence from Establishment-Level Microdata

The authors present the first evidence on the consequences of the new statutory minimum wage in Germany, which was implemented on January 1, 2015. Using the IAB Establishment Panel, they identify employment effects from variation in the extent that establishments are affected by the minimum wage. A difference-in-differences estimation reveals an increase in average wages between 3.8% and 6.3% and an employment loss by approximately 1.7% in establishments affected by the minimum wage. These estimates imply a labor demand elasticity with respect to wages ranging between −0.2 and −0.4. The authors also observe a transitory reduction of the working hours in the first year after the introduction and that the employment effect seems mostly driven by a reduction in hires rather than by an increase in layoffs.

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

AbstractThis paper evaluates the short to medium run employment effects of the 2015 introduction of a statutory minimum wage in Germany. The effect of the policy is recovered from variation in the bite of the minimum wage across occupations using a difference-in-differences estimator. The analysis reveals that the reform only had a small impact on employment and highlights the importance of regional effect heterogeneity. In East Germany, marginal employment decreased by about 18,000 jobs in the short run and 52,000 jobs in the medium run, respectively, due to the minimum wage. In West Germany, no negative employment effects are detectable, but regular employment increased temporarily because of the reform. The medium run estimates include the impact of the first marginal increase of the wage floor from €8.50 to €8.84 in 2017.

Editorial: Effects of the Introduction of the Statutory Minimum Wage in Germany

Editorial: Effects of the Introduction of the Statutory Minimum Wage in Germany

Employment effects of introducing a minimum wage: The case of Germany

Income inequality has been a major concern of economic policy makers for several years. Can minimum wages help to mitigate inequality? In 2015, the German government introduced a nationwide statutory minimum wage to reduce income inequality by improving the labour income of low-wage employees. However, the employment effects of wage increases depend on time and region specific conditions and, hence, they cannot be known in advance. Because negative employment effects may offset the income gains for low-wage employees, it is important to evaluate minimum-wage policies empirically. We estimate the employment effects of the German minimum-wage introduction using panel regressions on the state-industry-level. We find a robust negative effect of the minimum wage on marginal and a robust positive effect on regular employment. In terms of the number of jobs, our results imply a negative overall effect. Hence, low-wage employees who are still employed are better off at the expense of those who have lost their jobs due to the minimum wage.

Дотримання рівнів соціального забезпечення в Україні часів незалежності

Проаналізовано стан дотримання рівнів соціального забезпечення та охарактеризовано особливості формування параметрів соціальних стандартів в Україні і в інших державах світу. Запропоновано перелік заходів, що сприятимуть вирішенню питань щодо зростання життєвого рівня населення України.

The ‘personal work relationship’ in Austria

When assessing the personal work relationship in Austria, first the contractual relationship needs to be scrutinised. Following the differentiation between employees, semi-dependent workers (with the sub-category of employee-like working persons) and businesspersons, all, only some, or none, of the statutes and laws falling under the category of ‘individual labour law’ (e.g. Working Hours Act, Holidays Act etc) apply. Collective bargaining agreements, providing, amongst others, for minimum wages (N.B. there is no statutory minimum wage in Austria), can be concluded for employees only, though (with very few and specific exceptions for persons in the media sector). This paper analyses the legal situations of the different categories of working persons and critically assesses the non-application of most labour laws, including collective bargaining agreements, to employee-like working persons. It questions whether, from a teleological point of view, a different assessment would be necessary.

The Effects of Germany’s Statutory Minimum Wage on Employment and Welfare Dependency

AbstractIn January 2015, Germany introduced a federal, statutory minimum wage of 8.50 € per hour. This study evaluates the effects of this policy on regular and marginal employment and on welfare dependency. Based on the county-level administrative data, this study uses the difference-in-differences technique, exploiting regional variation in the bite of the minimum wage, i.e., the county-specific share of employees paid less than 8.50 € before the introduction of the minimum wage. The minimum wage had a considerable negative effect on marginal employment. There is also some indication that regular employment was slightly reduced. Concerning welfare dependency, the minimum wage reduced the number of working welfare recipients, with some indication that about one half of them left welfare receipt due to the minimum wage.

Living wages in international and European law

A number of countries worldwide provide for a statutory minimum wage. Generally speaking, however, it is not a living wage, although the right to a living wage is guaranteed in a variety of agreements under both international and European law. The Council of Europe’s European Social Charter (ESC), for example, codifies a living wage and, according to the case-law of its supervisory body, the level of 60 per cent of the net average wage is to be taken as the basis for appropriate remuneration. This article argues that the Charter of Fundamental Rights of the European Union also incorporates the right to a living wage, which should be at least 60 per cent of the net average wage. The Charter is legally binding for EU institutions, agencies and other bodies. Member States are bound only to the extent that the material scope of the relevant EU laws has been opened, which is the case when EU law is implemented or when obligations arising out of specific Union legislation are required for the relevant subject area, as will be explained in the article. In purely national situations nevertheless, values laid down in international law have to be observed when interpreting national laws.

The Impact of the Minimum Wage on Working Hours

AbstractThe present paper analyzes how the statutory minimum wage introduced on January 1, 2015, has affected working hours in Germany up to 2016. The data used come from the Socio-Economic Panel (SOEP), which provides not only contractual working hours but also actual hours worked. Using a difference-in-differences estimation approach, we find a significant and robust reduction incontractualworking hours among employees who are subject to social security contributions and earned less than the minimum wage before the introduction. The effect in 2015 is about −5 % and corresponds to a 1.7 hours reduction in average weekly working hours. The effect on actual hours is smaller and estimated less precisely. Extending the analysis until 2016 does not yield significant effects on contractual or actual working hours, while some specifications reject the common trend assumption.

Mindestlohn-Umgehungen fordern Kontrollbehörden und Politik heraus

Since the introduction of the statutory minimum wage, reports on its implementation and compliance have received a great deal of attention. Studies published to date have not provided a clear picture of the extent of the minimum wage bypasses. In this article, the reasons for the sometimes very different figures are worked out. New results from the earnings survey (Verdiensterhebung) and additional evaluations with the SOEP data set show that the number of bypasses has risen again after the first increase in the statutory minimum wage at the beginning of 2017. With regard to the example of Great Britain, some possibilities for promoting better compliance with the minimum wage are shown.

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

AbstractThis paper studies the effects of the introduction of Germany’s statutory minimum wage in 2015 on employment and unemployment on the level of regional labor markets. Using variation in the regional exposure to the new wage floor, we employ a difference-in-differences approach that compares the evolution of employment and unemployment between regions with varying minimum wage bites. Overall, we find no statistically significant effect of the introduction of the German minimum wage on regular employment subject to social insurance, but a statistically significant negative effect on marginal employment. The reduction is not accompanied by a proportional increase in unemployment.

The introduction of a ‘monthly living wage’ in Slovenia

This article provides a chronological account of the Slovenian trade unions’ successful campaign to turn the statutory national monthly minimum wage into a living wage. The campaign led to a 23 per cent increase in the minimum wage and a change of its adjustment mechanism in 2010 and successive changes to its definition. The analysis starts with a historical overview of minimum wage developments in Slovenia and an account of the events prompting trade unions to launch their campaign. Reviewing the impact of the 23 per cent minimum wage increase, the Slovenian experience shows that turning the monthly minimum wage into a living wage does not necessarily lead to negative macroeconomic effects in terms of reduced growth or increased unemployment. The example of Slovenia furthermore illustrates that, even though the campaign was not explicitly couched in terms of a living wage campaign, the trade unions managed to adapt key elements of the living wage concept to the country-specific institutional context.

The Impact of the German Minimum Wage on Individual Wages and Monthly Earnings

AbstractThis paper evaluates the short-run impact of the introduction of a statutory minimum wage in Germany on the hourly wages and monthly earnings of workers targeted by the reform. We first provide detailed descriptive evidence of changes to the wage structure in particular at the bottom of the distribution and distinguish between trends for regularly employed and marginally employed workers. In the causal analysis, we then employ a differential trend adjusted difference-in-differences (DTADD) strategy to identify the extent to which these changes in wages and earnings can be attributed to the minimum wage introduction. We find that the minimum wage introduction can account for hourly wage growth in the order of roughly 6.5 % or€\euro0.45/hour and an increase in monthly earnings of 6.6 % or€\euro53/month. Despite finding wage growth at the bottom of the distribution, the paper documents widespread non-compliance with the mandated wage floor of€\euro8.50/hour.

The effects of the new statutory minimum wage in Germany: a first assessment of the evidence

Germany did not establish a statutory minimum wage until 2015. The new wage floor was set at an initial level of €8.50 per hour. When it was introduced, about 11 percent of German employees earned less than that amount. Based on descriptive figures, qualitative research and difference-in-differences analyses, we provide an overview of the available evidence regarding some of the topics that have attracted the most attention in international research and policy debates: the effects on wages and the wage distribution including issues of compliance in relation to the implementation of the new minimum wage, on the risk of poverty, on employment and the impact on businesses for instance with respect to productivity, prices or profits. The evidence shows that the minimum wage has increased hourly wages significantly, while the effect on monthly salaries has been far less substantial, as companies have partly reduced contractually agreed-upon working hours. Besides reductions in working hours or increases in work intensity, companies highly affected by the introduction of the minimum wage have used price increases and have had to accept profit reductions as a response to the new wage floor. If studies found any employment effects, they were—whether positive or negative—rather small in relation to the overall number of jobs. As in other countries, the minimum wage has not helped to reduce welfare dependency and the risk of poverty. Non-compliance remains a challenge for the implementation of the new statutory minimum wage.

Minimum wage violation in central and eastern Europe

AbstractThis article analyses minimum wage violations over the period 2003–12 in ten central and eastern European countries which all have national statutory minimum wages. Using European Union Statistics on Income and Living Conditions (EU‐SILC) data and the methodology proposed by Bhorat, Kanbur and Mayet (2013), the authors measure the incidence and depth of violation. In addition, they conduct regression analyses on individual, workplace and macro‐level determinants of non‐compliance. While the incidence of violation remains relatively low, the workers that minimum wage policies seek to protect appear to be the most likely to be affected by non‐compliance. Over time, higher minimum to average wage ratios are related to a higher incidence of violation.

Violations of farm workers’ labour rights in post-apartheid South Africa

ABSTRACTCommercial farm workers in South Africa endured centuries of exploitation and abuse until the 1990s, when progressive legislation was promulgated that confers rights to workers aimed at improving their living and working conditions, including through a sector-specific statutory minimum wage. However, violations of labour rights are widespread in the agriculture sector, and farm workers are arguably more vulnerable than before as they face ongoing evictions, casualisation and exploitation. This research study, conducted among women farm workers in the Western Cape and Northern Cape provinces, documents labour rights violations in the areas of wages and contracts and occupational health and safety. Apart from farmers themselves, government is responsible for failing to enforce compliance with pro-worker legislation, while trade unions have failed to represent farm workers and hold farmers and government to account.

Recent trends in wage inequality from an EU perspective: a tale of two convergences

This paper presents an analysis of two processes of convergence between European countries, in wage levels and wage distributions, and the extent to which they explain recent trends in wage inequality for the EU as a whole. The results show that wage convergence was the main driver behind wage inequality trends for the EU as a whole in the last decade, which was significantly reduced prior to the crisis as a result of wage catch-up growth mainly in Eastern Europe, a process which was interrupted during the crisis but reactivated again in the most recent period. On the other hand, the contribution of within-country wage developments to explain changes in wage inequality for the EU as whole over the last decade was much more limited, although it is interesting to note as well a process of convergence in wage distributions between European countries towards intermediate inequality levels. Policies directed at reducing wage disparities within countries offer the best prospect to tackle wage inequalities both at the national and EU-wide level, as illustrated by the introduction of the German statutory minimum wage in 2015.

The availability, prices and affordability of essential medicines in Malawi: A cross-sectional study.

IntroductionThe Malawian government recently introduced cost-covering consultation fees for self-referral patients in tertiary public hospitals. Previously, patients received medicines free of charge in government-owned health facilities, but must pay elsewhere. Before the government implements a payment policy in other areas of health care, it is important to investigate the prices, affordability and availability of essential medicines in Malawi.MethodsData on availability and prices of 50 essential medicines were collected in 44 health facilities in two major cities and two districts. These included 12 public facilities, 11 facilities of the Christian Health Association of Malawi (CHAM), nine retail pharmacies, eight wholesalers and four private clinics/hospitals. Price, availability and affordability were assessed based on the methodology developed by the World Health Organization and Health Action International, which compares local prices to international reference prices.Results and discussionThe overall availability of medicines was 48.5% in public facilities, 71.1% in retail pharmacies, 62.9% in CHAM facilities and 57.5% in private clinics. The availability of essential medicines varied from 0% for ethosuximide to 100% for amoxicillin and cotrimoxazole tablets. Antibiotic formulations for adults were widely available, in contrast to the low availability of pediatric formulations. Several medicines for non-communicable diseases like sodium valproate, phenytoin, paraldehyde, captopril and simvastatin showed poor availability and affordability. The overall median price ratio compared to the international reference price was 1.11 for wholesalers, 2.54 in CHAM facilities, 2.70 in retail pharmacies, and 4.01 in private clinics, which is low compared to other countries. But nevertheless, for 18 out of 32 medicines assessed, the cost of one course exceeded the statutory minimum daily wage, making them unaffordable to a majority of the population. Therefore, continued provision of free public health care is still of critical importance for the foreseeable future until other financing mechanisms have been explored.

Дослідження сучасного стану заробітної плати в Україні у контексті забезпечення соціальної справедливості

The level of wages of citizens is one of the most important factors in the development of the state, the basis for the formation of society on the principles of social justice. Being under the constant influence of all participants of social and labor relations, the level of wages requires constant analysis and monitoring. In this case, special attention should be paid to the assessment of how wages perform their basic functions and ensure social justice, namely, contributes to the reduction of poverty and improve the overall standard of living of the working population. The article investigates the features of the formation of wages in the Ukrainian economy during 2010-2018. The dynamics of the minimum wage in the context of the impact on the poverty level of the working population of Ukraine is considered. The changes in the level of wages on average in the economy, the indices of nominal and real wages, as well as the differentiation of wages by individual types of economic activity that has developed in Ukraine in recent years are analyzed. The study revealed that the formation of wages in the Ukrainian economy does not correspond to the principle of social justice in society. Raising social standards, namely the statutory minimum wage, is aimed primarily at reducing only extreme forms of poverty. In recent years, Ukraine has seen a slowdown in the growth rate of both minimum and average wages, there is a drop in the overall standard of living of the working population. Traditionally, wages remain low (less than the national average) both in socially important activities (health and education) and in priority ones in terms of sustainable economic development (construction and agriculture). Low wages generally reduce the attractiveness of work, the motivation of workers, contribute to the outflow of labor to other activities (or even abroad), lead to imbalances in the labor market and the emergence of a shortage of qualified personnel. Thus, the issue of ensuring social justice in the formation of wages requires an immediate solution and should be a priority of state policy in the coming years.