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The German National Minimum Wage Raised Employment Prospects of Unemployed Welfare Recipients

Year: 2025

Type: article

Abstract: This paper investigates the effects of the German national minimum wage introduction and its subsequent up-rating on job finding rates of unemployed welfare recipients. While the literature is inconclusive on the sign of overall employment effects of the minimum wage, the range of estimates suggests that if effects are negative, they are likely to be rather small. However, such overall effects may mask negative effects on employment prospects of unemployed welfare recipients, who tend to be only loosely attached to the labour market. For the analysis, this paper uses a sample of unemployed welfare recipients based on high-quality administrative data and employs a difference-in-differences strategy by exploiting regional variation in the bite of the minimum wage in order to estimate the effects of the minimum wage. While theoretically ambiguous, estimates show that minimum wages had a beneficial and rather homogeneous impact on job finding rates of unemployed welfare recipients. Sensitivity analyses highlight the robustness of these findings.

Source: Social Policy and Society

DOI: 10.1017/s1474746425101115

Author: Stefan Tübbicke

Institution: Institut für Arbeitsmarkt und Berufsforschung

Language: English

Topic: Labor market dynamics and wage inequality

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Decent work and economic growth, No poverty, Reduced inequalities

Open Access status: hybrid

Estimated APC paid: $3,550