Reallocation effects of the minimum wage

Abstract

"Our findings suggest that the concerns among many economists that the introduction of the minimum wage in Germany in 2015 would cause substantial job losses were unfounded. Rather, we show that the introduction of the minimum wage boosted wages of low-wage workers, did not lower employment, and induced a reallocation toward more productive establishments. As such, the minimum wage has helped to reduce wage inequality, across workers and local areas. These results do not imply that no establishments or workers lost out as a result of the introduction of the minimum wage. For example, the minimum wage caused some small businesses to exit the market. Moreover, the reallocation of low-wage workers to higher paying establishments came at the expense of increased commuting time, which might have left some workers worse off despite earning a higher wage. Nevertheless, even though there might be some losers from the minimum wage policy, we conclude that the overall welfare of low-wage workers likely increased in response to the introduction of the minimum wage." (Text excerpt, IAB-Doku) ((en))

Cite article

Dustmann, C., Lindner, A., Schönberg, U., Umkehrer, M. & Vom Berge, P. (2021): Reallocation effects of the minimum wage. In: VOX No. 07.10.2021, o. Sz.