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The Impact of the Minimum Wage on Working Hours

Patrick Burauel, Marco Caliendo, Markus M. Grabka, Cosima Obst, Malte Preuss and Carsten Schröder

Abstract

The present paper analyzes how the statutory minimum wage introduced on January 1, 2015, has affected working hours in Germany up to 2016. The data used come from the Socio-Economic Panel (SOEP), which provides not only contractual working hours but also actual hours worked. Using a difference-in-differences estimation approach, we find a significant and robust reduction in contractual working hours among employees who are subject to social security contributions and earned less than the minimum wage before the introduction. The effect in 2015 is about −5 % and corresponds to a 1.7 hours reduction in average weekly working hours. The effect on actual hours is smaller and estimated less precisely. Extending the analysis until 2016 does not yield significant effects on contractual or actual working hours, while some specifications reject the common trend assumption.

JEL Classification: J23; J38; J81

Acknowledgements

This paper is based on Chapter 4 of the research report „Auswirkungen des gesetzlichen Mindestlohns auf Beschäftigung, Arbeitszeit und Arbeitslosigkeit” by Bonin et al. (2018) which was delivered to the German Minimum Wage Commission in January 2018. The paper was prepared for the special issue on „Effects of the Introduction of the Statutory Minimum Wage in Germany“ in the Journal of Economics and Statistics (Jahrbücher für Nationalökonomie und Statistik). The authors thank Deborah A. Bowen for editorial assistance.

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A Appendix

Table 10:

DiD regressions – effect of the minimum wage on the increase in contractual working hours by subgroups.

DiD 2014–2015DiD 2013–2014Observations
Total sample−5,12***(1.44)−1.55(1.34)1,848
Full-time employees−5.49***(1.44)−2.08(1.37)1,401
Part-time employees−6.27(4.10)0.19(3.73)447
18 Age < 25−1.46(4.94)−7.41*(4.00)160
25 Age < 55−5.46***(1.66)−0.59(1.61)1,427
55 Age−5.59(3.69)−4.66(2.89)261
No voc. training or univ. education−6.22*(3.31)−4.44(3.27)411
Vocational training−5.48***(1.64)−0.69(1.47)1,258
University education1.54(6.31)−1.97(6.63)179
Living in West Germany−6.04***(2.19)−2.64(1.91)1,083
Living in East Germany−4.13***(1.54)0.02(1.82)765
Men−4.08*(2.35)−4.73***(1.77)623
Women−5.59***(1.75)−0.44(1.83)1,225
German citizens−5.01***(1.53)−0.97(1.45)1,541
Foreign citizens−6.02(4.44)−4.25(3.68)307
Wage increase to comply with Minimum Wage Act−8.21***(2.00)−1.70(1.35)1,586

  1. Source: SOEPv33, Survey years 2013–2015.

    Notes: Robust standard errors in parentheses, clustered at the individual level with * p < 0.1, ** p < 0.05, *** p < 0.01. No weighting factors are used. Each line is an independent specification and reduces the representation to two coefficients. All regressions include the year dummy for 2014 and all control variables. The reference group for the estimation of the total sample is male, married and has no children below the age of 16 in the household, works full-time with a permanent contract in a medium-sized company in the manufacturing sector, graduated from an intermediate secondary school, is a German national, lives in the federal states of the former East Germany, and did not report a change of job. The reference year in all specifications is 2013. All coefficients are given in %. Coefficients of the specification “total sample” are based on column (4) in Table 5, including the years 2013 and 2014 in the estimation. Calculations based on the longitudinal sample.

Table 11:

DiD regression for workers in marginal employment – minimum wage effect on the increase in working hours – two-year analysis.

Contractual working hoursActual hours worked
(1)(2)(3)(4)
One-year difference
DiD 2014–2015−3.051.46
(6.89)(7.58)
DiD 2013–2014−8.21−8.06
(5.41)(6.29)
Two-year difference
DiD 2014–2016−13.47−13.42
(8.17)(8.49)
DiD 2012–2014−11.98−5.23
(7.69)(8.26)
Constant87.79***54.68*73.03***60.85*
(22.70)(28.81)(24.55)(31.05)
Control variables
Year dummy for 2014yesyesyesyes
Sociodemographic informationyesyesyesyes
Job characteristicsyesyesyesyes
Change of jobyesyesyesyes
Observations348345348342
Adj. R20.0830.1020.0860.131

  1. Source: SOEPv33, Survey years 2012–2016.

    Notes: Robust standard errors in parentheses, clustered at the individual level with * p < 0.1, ** p < 0.05, *** p < 0.01. No weighting factors are used. The reference group in columns (4) and (6) is male, married and has no children below the age of 16 in the household, works full-time with a permanent contract in a medium-sized company in the manufacturing sector, graduated from an intermediate secondary school, has German citizenship, lives in the federal states of the former East Germany, and did not report a change of job. The reference year in Column (1) and (3) is 2013; in Column (2) and (4) it is 2012. All coefficients are given in %. To determine hourly wages, we used contractual working hours. Calculations based on the longitudinal sample.

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.

Received: 2018-09-29
Revised: 2019-03-22
Accepted: 2019-04-29
Published Online: 2019-07-04
Published in Print: 2020-02-25

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