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The German Minimum Wage: Effects on Productivity, Profitability, and Investments

Mario Bossler, Nicole Gürtzgen, Benjamin Lochner, Ute Betzl and Lisa Feist

Abstract

In this article, we analyze the effects of the introduction of the German minimum wage using difference-in-differences estimations applied to the IAB Establishment Panel. The treatment effects on the treated establishments show a significant increase in personnel costs. When we analyze the effects of the minimum wage on the net sales of intermediates, we observe a reduction, which is fully explained by the increase in wage costs induced by the minimum wage. The results do not point to effects on establishment-level productivity or capital investments. Looking at investments in human capital, we do not observe any effects on apprenticeship offers or the placement of apprentices. If anything, the results point at a slight reduction in the provision of further training.

JEL Classification: C23; J38

Disclaimer

We gratefully acknowledge funding from the German Minimum Wage Commission. We would also like to thank Oliver Bruttel, Matthias Dütsch and Clemens Ohlert for helpful comments and suggestions. The usual disclaimer applies.

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Article note

This article is part of the special issue “Effects of the Introduction of the Statutory Minimum Wage in Germany” published in the Journal of Economics and Statistics. Access to further articles of this special issue can be obtained at www.degruyter.com/journals/jbnst.

A Appendix

Figure 8: Share of establishments that train workers (weighted control group).

Figure 8:

Share of establishments that train workers (weighted control group).

Table 11:

Difference-in-differences estimates on further training activities in establishments (weighted).

(1)(2)(3)
Share of trained employeesShare of trained employeesShare of trained employees
Treatment effect in 2015 and 2016−0.016
(0.007)
Treatment effect in 2015−0.022
(0.008)
Treatment effect in 2016−0.009
(0.009)
Placebo effect−0.000
(0.008)
Observations45,20345,20332,129
Average share of trained employees, … in unaffected establishments (2014)0.261
… in affected establishments (2014)0.344

  1. Notes: The coefficients are treatment effects on affected establishments from weighted difference-in-differences specifications with fixed effects, where weights are calculated in an entropy balancing algorithm that conditions on past outcomes of the years 2011–2014. The dependent variable is the share of workers that participate in further training. Clustered standard errors are in parentheses (cluster=establishment). Stars indicate standard significance levels: *** 1 %, ** 5 % and * 10 %. Control variables include dummies for works councils and collective agreements.

  2. Source: IAB Establishment Panel 2011–2016, analysis sample, weighted.

Received: 2018-09-26
Revised: 2019-03-28
Accepted: 2019-04-09
Published Online: 2019-06-19
Published in Print: 2020-02-25

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