Would a Legal Minimum Wage Reduce Poverty?: A Microsimulation Study for Germany

In view of rising wage inequality and increasing poverty, the introduction of a legal minimum wage has recently become an important policy issue in Germany. We analyze the distributional effects of the introduction of a nationwide legal minimum wage of EUR 7.5 per hour on the basis of a microsimulation model which accounts for the complex interactions between individual wages, the tax-benefit system and net household incomes. Simulation results show that the minimum wage would be ratherineffective in reducing poverty, even if it led to a substantial increase in hourly wages at the bottom of the wage distribution and had no negative employment effects. The ineffectiveness of a minimum wage in Germany is mainly due to the existing system of meanstested income support.minimum wage, wage distribution, working poor, poverty reduction, microsimulation

Imposed Benefit Sanctions and the Unemployment-to-Employment Transition: The German Experience

We analyze the effect of imposed benefit sanctions on the unemployment-to-employment transition of unemployed people entitled to unemployment compensation on the basis of register data from the German Federal Employment Agency. We combine propensity score matching with a discrete-time hazard rate model which accounts for the dynamic nature of the treatment. We find positive short- and long-term effects of benefit sanctions which are robust for men and women in East and West Germany. The effects diminish with the elapsed unemployment duration until a sanction is imposed. The limited use of benefit sanctions can thus be an effective activation tool if they take place not too late in an individual's unemployment spell.benefit sanctions, unemployment transitions, German labor market reform, ex-post evaluation, propensity score matching, hazard rate model, unobserved heterogeneity

Labor market and income effects of a legal minimum wage in Germany

In view of rising wage and income inequality, the introduction of a legal minimum wage has recently become an important policy issue in Germany. We analyze the distributional effects of a nationwide legal minimum wage of 7.50 € per hour on the basis of a microsimulation model which accounts for the complex interactions between individual wages, the tax-benefit system and net household incomes, also taking into account potential employment effects as well as indirect effects on consumption. Simulation results show that the minimum wage would be rather ineffective in raising net household incomes and reducing income inequality, even if it led to a substantial increase in hourly wages at the bottom of the wage distribution. The ineffectiveness of a minimum wage in Germany is mainly due to the existing system of means-tested income support and the position of minimum wage earners in the income distribution. --minimum wage,wage distribution,employment effects,income distribution,inequality,microsimulation

Would a Legal Minimum Wage Reduce Poverty? A Microsimulation Study for Germany

In view of rising wage inequality and increasing poverty, the introduction of a legal minimum wage has recently become an important policy issue in Germany. We analyze the distributional effects of the introduction of a nationwide legal minimum wage of € 7.5 per hour on the basis of a microsimulation model which accounts for the complex interactions between individual wages, the tax-benefit system and net household incomes. Simulation results show that the minimum wage would be rather ineffective in reducing poverty, even if it led to a substantial increase in hourly wages at the bottom of the wage distribution and had no negative employment effects. The ineffectiveness of a minimum wage in Germany is mainly due to the existing system of means-tested income support.minimum wage, wage distribution, working poor, poverty reduction, micro-simulation

Labor Market and Income Effects of a Legal Minimum Wage in Germany

In view of rising wage and income inequality, the introduction of a legal minimum wage has recently become an important policy issue in Germany. We analyze the distributional effects of a nationwide legal minimum wage of 7.50 € per hour on the basis of a microsimulation model which accounts for the complex interactions between individual wages, the tax-benefit system and net household incomes, also taking into account potential employment effects as well as indirect effects on consumption. Simulation results show that the minimum wage would be rather ineffective in raising net household incomes and reducing income inequality, even if it led to a substantial increase in hourly wages at the bottom of the wage distribution. The ineffectiveness of a minimum wage in Germany is mainly due to the existing system of means-tested income support and the position of minimum wage earners in the income distribution.minimum wage, wage distribution, employment effects, income distribution, inequality, microsimulation

Labor Market and Income Effects of a Legal Minimum Wage in Germany

In view of rising wage and income inequality, the introduction of a legal minimum wage has recently become an important policy issue in Germany. We analyze the distributional effects of a nationwide legal minimum wage of 7.50 EUR per hour on the basis of a microsimulation model which accounts for the complex interactions between individual wages, the tax-benefit system and net household incomes, also taking into account potential employment effects as well as indirect effects on consumption. Simulation results show that the minimum wage would be rather ineffective in raising net household incomes and reducing income inequality, even if it ledto a substantial increase in hourly wages at the bottom of the wage distribution. The ineffectiveness of a minimum wage in Germany is mainly due to the existing system of means-tested income support and the position of minimum wage earners in the income distribution.minimum wage, wage distribution, employment effects, income distribution, inequality, microsimulation

Analyzing economic policies that affect supply and demand: a structural model of productivity, labor supply and rationing

In this paper a labor supply model with demand side rationing is estimated to analyze the economic policies that directly affect incentives to work as well as labor costs. The framework is applied to evaluate the employment effects of a federal minimum wage in Germany and the impact of employer- vs. employee-oriented wage subsidies under a statutory minimum. We extend Laroque and Salani (2002) by modeling the extensive and intensive margin of labor supply on the basis of desired working hours. While previous studies for Germany Bargain et al. (2010) identify the rationing risk primarily from exogenous demand side factors, this paper structurally relates it to individual productivity which is determined in a jointly estimated wage/productivity equation. Unobserved individual factors are allowed to influence preferences and constraints. The variation needed to identify labor supply and demand is generated by the tax and transfer system and labor market regulations defining minimum standards of pay. Simulation exercises prove the value of the model for policy analysis. Differing adjustments at the extensive and intensive margin are revealed that are related to heterogeneous productivities

Mindestlohn im Bauhauptgewerbe: Beschäftigungseffekte nicht nachweisbar

Die Debatte um einen allgemeinen gesetzlichen Mindestlohn in Deutschland hält an. Mittlerweile sind die branchenbezogenen Mindestlöhne umfassend evaluiert worden. In diesem Beitrag werden die empirischen Untersuchungen zu den Lohn- und Beschäftigungswirkungen des Mindestlohnes im deutschen Bauhauptgewerbe diskutiert. Insgesamt konnten kaum Beschäftigungseffekte nachgewiesen werden. Schwierigkeiten bei Evaluationsstudien bereiten die Datenlage sowie die generelle Beschäftigungsentwicklung der Branche; seit Mitte der 90er Jahre ist die Zahl der Arbeitsplätze im Bauhauptgewerbe um die Hälfte zurückgegangen. Aus den bisher vorliegenden Ergebnissen von Evaluationen branchenspezifischer Mindestlöhne lassen sich keine zuverlässigen Einschätzungen über die Beschäftigungswirkungen eines allgemeinen Mindestlohns ableiten.The debate on a general statutory minimum wage in Germany prevails. Meanwhile, there have been comprehensive evaluations of minimum wages for specific industries. The present paper discusses the empirical studies on the wage and employment effects of the minimum wage in the German construction industry. These studies were unable to provide substantial evidence of employment effects. Both the limited available data and general employment trends in this sector make such evaluation studies difficult; since the mid-1990s, the number of jobs in the construction industry has halved. No reliable estimates regarding the employment effects of introducing a general minimum wage can be derived from the results of evaluations of sector-specific minimum wages to date

Observed and unobserved determinants of unemployment insurance benefit sanctions in Germany: evidence from matched individual and regional administrative data

"The paper analyzes the individual and regional determinants of unemployment benefit sanctions in Germany. On the basis of an administrative data set a multilevel hazard rate model in discrete time for the transitions into a sanction is estimated, controlling for unobserved heterogeneity on the individual and regional level. It is shown that certain benefit recipients, e.g. younger people, are more likely to receive sanctions than e.g. older, disabled, or skilled individuals. Moreover, the risk of being sanctioned not only depends on individual characteristics but is also influenced by the sanction policies of the employment agencies." (author's abstract)"Der Beitrag untersucht individuelle und regionale Determinanten von Sanktionen, die Unterstützungsleistungen arbeitsloser Leistungsempfänger in Deutschland mindern. Auf Basis von neu verfügbaren Geschäftsdaten der Bundesagentur für Arbeit werden sanktionierte und unsanktionierte Leistungsempfänger verglichen. Zudem wird ein multivariates Abgangsratenmodell in diskreter Zeit spezifiziert, das unbeobachtete Heterogenität auf individueller und regionaler Ebene kontrolliert. Dabei zeigt sich, dass Arbeitslose in ganz unterschiedlichem Maße von Sanktionen betroffen sind: Beispielsweise erhalten jüngere Menschen unter 25 Jahren Sanktionen mit höherer Wahrscheinlichkeit als Ältere über 50 Jahre, Schwerbehinderte oder hoch qualifizierte Leistungsempfänger. Das individuelle Sanktionsrisiko ist nicht ausschließlich vom Verhalten des Arbeitslosen, sondern ebenso von der Sanktionierungspolitik der regionalen Arbeitsagenturen abhängig." (Autorenreferat

Wie groß sind die Beschäftigungsverluste aufgrund eines allgemeinen Mindestlohns?

In den letzten Jahren sind verschiedene empirische Studien zu den Beschäftigungswirkungen eines gesetzlichen Mindestlohns in Deutschland erschienen. Die Bandbreite der simulierten Job-Verluste reicht von 140 000 bis 1,2 Millionen. Eine neue Studie des DIW Berlin auf der Basis von Daten des Sozio-oekonomischen Panels und der Verdienststrukturerhebung 2006 zeigt, dass die simulierten Nachfrageeffekte sehr sensitiv auf Messfehler bei den Stundenlöhnen, Eingrenzungen der verwendeten Stichprobe und die unterstellten Elastizitäten der Arbeitsnachfrage reagieren. Ein allgemeiner Mindestlohn von 7,50 Euro hätte nach dieser Untersuchung eher moderate Arbeitsplatzverluste in Höhe von rund 290 000 zur Folge.Minimum wage, Wage distribution, Employment effects, Labor demand