The Introduction of a Minimum Wage in Germany : Background and Potential Employment Effects

1 Introduction 4
2 A legal, nationwide minimum wage for Germany 5
2.1 A two-sided coin: The German labour market before the minimum wage introduction 5
2.1.1 The "German job miracle": High performance in terms of key indicators 5
2.1.2 The other side of the "German job miracle": Problematic developments and the new
social debate 7
2.2 The new minimum wage legislation 10
2.3 Level of the minimum wage 11
2.4 Conclusions regarding the legal, nationwide minimum wage 14

3 Predictions based on economic theory 16
3.1 Employment effects under perfect competition 16
3.2 Employment effects in the monopsony model 17
3.3 Evidence of employer market power in the German labour market 19
3.4 Conclusions regarding economic theory 22

4 Empirical evidence 24
4.1 International empirical evidence 24
4.1.1 Evidence from international empirical studies 24
4.1.2 Evidence from reviews and meta-studies 26
4.2 Empirical evidence for Germany 27
4.2.1 Simulation studies on Germany 27
4.2.2 Studies on branch-specific minimum wages in Germany 28
4.3 A potential role model: Insights from the UK minimum wage 31
4.3.1 Minimum wage design 32
4.3.2 Employment effects of the UK minimum wage 32
4.3.3 A possible different route for the minimum wage in Germany 32
4.4 Conclusions on empirical evidence 33

5 Conclusions 34
Bibliography 37