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Introducing minimum wages in Germany employment effects in a post Keynesian perspective

  • Arne HeiseEmail author
  • Toralf Pusch
Regular Article
  • 7 Downloads

Abstract

The long ongoing discussion about the employment impact of minimum wages was recently reinvigorated with the introduction of an economy-wide, binding minimum wage in Germany in 2015. In the traditional line of reasoning, based on the allocational approach of modern labor market economics, it has been suggested that the impact is clearly negative on the assumption of a competitive labor market and clearly positive on the assumption of a monopsonistic labor market. Unfortunately, both predictions conflict with the empirical findings, which do not show a clear-cut impact of significant size in either direction. As an alternative, a Post Keynesian two-sector model including an employment market is presented here. Its most likely prediction of a negligible employment effect and a sectoral shift is tested against the German case of an introduction of a statutory minimum wage in 2015. Despite substantial wage increases in the low wage sector, our empirical analysis reveals very low overall employment loss, amounting to about 26,500 workers, as a result of a small sectoral shift from low wage industries to higher wage industries.

Keywords

Post Keynesianism Minimum wage Aggregate demand Aggregate supply 

JEL codes

B 50 E 12 E 23 J 31 

Notes

Compliance with ethical standards

The authors declare that they have no conflict of interest.

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of SocioeconomicsUniversity of HamburgHamburgGermany
  2. 2.Hans Böckler StiftungWSIDüsseldorfGermany

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