Fiscal Effects of Minimum Wages: An Analysis for Germany
Against the background of the current discussion of statutory minimum wages in Germany, this paper analyzes the potential employment and fiscal effects of such a policy. Based on estimated labor demand elasticities obtained from a structural labor demand model, the empirical results imply that minimum wages in Germany will be associated with significant employment losses among marginal and low‐ and semi‐skilled full‐time workers. Even though minimum wages will lead to increased public revenues from income taxes and social security benefits, they will result in a significant fiscal burden, due to increased unemployment benefits and decreased revenues from corporate taxes.
Bauer, T., J. Kluve, S. Schaffner and C. Schmidt (2009), Fiscal Effects of Minimum Wages: An Analysis for Germany. German Economic Review, 10, 2, 224-242