Minimum wage non-compliance: The role of co-determination

Arbeitspapier

We analyse in what way co-determination affects non-compliance with the German minimum wage, which was introduced in 2015. The Works Constitution Act (WCA), the law regulating co-determination at the plant level, provides works councils with indirect means to ensure compliance with the statutory minimum wage. Based on this legal situation, our theoretical model predicts that non-compliance is less likely in co-determined firms because works councils enhance the enforcement of the law. The economic correlates of co-determination, such as higher productivity and wages, affect non-compliance in opposite directions. The empirical analysis, using data from the German Socio-economic Panel (SOEP) for the years 2016 and 2019, demonstrates that non-compliance occurs less often for employees in co-determined establishments, while there is no impact on the difference between the minimum wage and the amount, which was actually paid. Therefore, co-determination helps to secure the payment of minimum wages.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IAAEU Discussion Paper Series in Economics ; No. 04/2023

Classification and Topics

• Classification: Wirtschaft ; Wages, Compensation, and Labor Costs: General ; Labor-Management Relations; Industrial Jurisprudence ; Labor Law ; Illegal Behavior and the Enforcement of Law ; Personnel Economics: Labor Management
• Subject: Co-determination ; Labour Law ; Minimum Wages ; Socio-Economic Panel (SOEP) ; Non-compliance ; Works Councils

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Goerke, Laszlo ; Pannenberg, Markus
• Event: Veröffentlichung
• (who): University of Trier, Institute for Labour Law and Industrial Relations in the European Union (IAAEU)
• (where): Trier
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/279872
• Last update: 10.03.2025, 11:46 AM CET