Effects of the scheduled minimum wage act on employment and unemployment in the districts of Saxony
Client: Saxon State Ministry of Economic Affairs, Labour and Transport, Dresden •
Project period: May 2014 - July 2014 •
Department: Dresden Branch •
|Project team:||Prof. Marcel Thum |
Prof. Andreas Knabe (Otto-von-Guericke Universität Magdeburg)
Christine Lücke (Otto-von-Guericke Universität Magdeburg)
|Research Professor:||Prof. Ronnie Schöb (Freie Universität Berlin) |
|Client:||Saxon State Ministry of Economic Affairs, Labour and Transport, Dresden |
|Project period:||May 2014 - July 2014|
On July 3rd, 2014, the German Bundestag enacted a nationwide statutory minimum wage of Euro 8.50 per hour. The minimum wage became effective on January 1st, 2015. The German government argues that a general minimum wage protects workers from unreasonably low wages. Opponents of the regulation emphasize that such an intervention will reduce employment. In this project, the researchers therefore quantify the potential effects of the minimum wage act on employment in the districts of the Free State of Saxony.
In a first step the district-specific wage distributions for the year 2015 are determined. The primary data base is the Structure of Earnings Survey 2010. Since this data set does not provide information for enterprises with less than ten employees, the simulation of complete wage distributions is based additionally on the German Socio-Economic Panel as well as the IAB Establishment History Panel. The wage data are then extrapolated to the year 2015. Using these extrapolated district-specific wage distributions one can subsequently determine the fraction of employees for whom the minimum wage will be binding and finally the potential employment effects.
The calculations show that employment losses in Saxony are larger than the national average and that districts with unfavorable labor market conditions are particularly affected.