In this study we investigate the minimum wage (MW) effects for a German sub-construction
sector where the MW bites extraordinary hard by international standards. Within a quasiexperiment
we estimate the Quantile Treatment Effects of the MW on the conditional and
unconditional distribution of earnings. For Eastern Germany, the results indicate significant
real (nominal) wage increases that ripple up to about the 0.6th quantile. However, the MW
also led to declining real wages (stagnating nominal wages) among upper-decile workers, thus
reducing the average pay reward for high-skilled labour in the sector. We provide evidence
that a rising labour cost burden for firms together with an increased bargaining power of
employers over workers still employed in the sector led to wage moderation at the upper
decile, particularly among smaller East German firms. Overall this paper demonstrates how
a MW geared towards the lower rank may render unexpected side effects for other workers
located higher up in the wage distribution and who are mostly assumed to be unaffected by
such policy interventions.
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