When the minimum wage bites back : quantile treatment effects of a sectoral minimum wage in Germany

Gregory, Terry

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URL: https://ub-madoc.bib.uni-mannheim.de/37566
URN: urn:nbn:de:bsz:180-madoc-375668
Document Type: Working paper
Year of publication: 2014
The title of a journal, publication series: ZEW Discussion Papers
Volume: 14-133
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: J31 , J38 , C21,
Keywords (English): Unconditional quantile regression , minimum wages , wage effects , wage moderation , labour shortages
Abstract: 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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