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On January 1, 2015, Germany introduced a general statutory minimum wage of €8.50 gross per hour. This thesis analyses the effects of the minimum wage introduction in Germany as well as wage floors in the European context, contributing to national and international research.
The second chapter of this dissertation summarizes the short-run effects of the minimum wage reform found in previous studies.
We show that the introduction of the minimum wage had a positive effect on wages at the bottom of the distribution. Yet, there was still a significant amount of non-compliance shortly after the reform. Additionally, previous evidence points to small negative employment effects mainly driven by a reduction in mini-jobs. Contrary to expectations, though, there were no effects on poverty and general inequality found in the short run. This is mostly due to the fact that working hours were reduced and the increase of hourly wages was therefore not reflected in monthly wages.
The third chapter identifies whether the job losses predicted in ex-ante studies materialized in the short run and, if so, which type of employment was affected the most. To identify the effects, this chapter (as well as chapter four) uses a regional difference-in-difference approach to estimate the effects on regular employment (part- and full-time) and mini-jobs.
Our results suggest that the minimum wage has slightly reduced overall employment, mainly due to a decline in mini-jobs.
The fourth chapter has the same methodological approach as the previous one. Its motivated by the fact that women are often overrepresented among low-wage employees. Thus, the primary research question in this chapter is whether the minimum wage has led to a narrowing of the gender wage gap. In order to answer that, we identify the effects on the wage gap at the 10th and 25th percentiles and at the mean of the underlying gender-specific wage distributions. Our results imply that for eligible employees the gender wage gap at the 10th percentile decreased by 4.6 percentage points between 2014 and 2018 in high-bite regions compared to low-bite regions. We estimate this to be a reduction of 32% compared to 2014. Higher up the distribution – i.e. at the 25th percentile and the mean – the effects are smaller and not as robust.
The fifth chapter keeps the gender-specific emphasis on minimum wage effects. However, in contrast to the rest of the dissertation, it widens the scope to other European Union countries. Following the rationale of the previous chapter, women could potentially benefit particularly from a minimum wage. However, they could also be more prone to suffer from the possibly induced job losses or reductions in working hours. Therefore, this chapter summarizes existing evidence from EU member states dealing with the relationship between wage floors and the gender wage gap. In addition, it provides a systematic summary of studies that examine the impact of minimum wages on employment losses or changes in working hours that particularly affect women. The evidence shows that higher wage floors are often associated with smaller gender wage gaps. With respect to employment, women do not appear to experience greater employment losses than men per se. However, studies show that the minimum wage has a particular impact on part-time workers. Therefore, it cannot be ruled out that the negative correlation between the minimum wage and the gender wage gap is related to the job losses of these lower-paid, often female, part-time workers. This working arrangement should therefore be specially focused on in the context of minimum wages.
Essays in labor economics
(2022)
This thesis offers insights into the process of workers decisions to invest into work-related training. Specifically, the role of personality traits and attitudes is analysed. The aim is to understand whether such traits contribute to an under-investment into training. Importantly, general and specific training are distinguished, where the worker’s productivity increases in many firms in the former and only in the current firm in the latter case. Additionally, this thesis contributes to the evaluation of the German minimum wage introduction in 2015, identifying causal effects on wages and working hours.
Chapters two to four focus on the work-related training decision. First, individuals with an internal locus of control see a direct link between their own actions and their labor market success, while external individuals connect their outcomes to fate, luck, and other people. Consequently, it can be expected that internal individuals expect higher returns to training and are, thus, more willing to participate. The results reflect this hypothesis with internal individuals being more likely to participate in general (but not specific) training. Second, training can be viewed either as a risky investment or as an insurance against negative labor income shocks. In both cases, risk attitudes are expected to play a role in the decision process. The data point towards risk seeking individuals being more likely to participate in general (but not specific) training, and thus, training being viewed on average as a risky investment. Third, job satisfaction influences behavioral decisions in the job context, where dissatisfied workers may react by neglecting their duties, improving the situation or quitting the job. In the first case, dissatisfied workers are expected to invest less in training, while the latter two reactions could lead to higher participation rates amongst dissatisfied workers. The results suggest that on average dissatisfied workers are less likely to invest into training than satisfied workers. However, closer inspections of quit intentions and different sources of dissatisfaction paint less clear pictures, pointing towards the complexity of the job satisfaction construct.
Chapters five and six evaluate the introduction of the minimum wage in Germany in 2015. First, in 2015 an increase in the growth of hourly wages can be identified as a causal effect of the minimum wage introduction. However, at the same time, a reduction in the weekly working hours results in an overall unchanged growth in monthly earnings. When considering the effects in 2016, the decrease in weekly working hours disappears, resulting in a significant increase in the growth of monthly earnings due to the minimum wage. Importantly, the analysis suggests that the increase in hourly wages was not sufficient to ensure all workers receiving the minimum wage. This points to non-compliance being an issue in the first years after the minimum wage introduction.