When the Minimum Wage Really Bites Hard: Impact on Top Earners and Skill Supply

Arbeitspapier

We investigate minimum wage spillovers by exploiting the first-time introduction of a minimum wage within a quasi-experiment in a context with an extraordinary large bite: the German roofing industry. We find positive wage spillovers for medium-skilled workers with wages just above the minimum wage, but negative effects for high-skilled top earners in East Germany, where the bite was particularly pronounced. There, the minimum wage lowered both returns to skills and skill supply. We propose a theoretical model according to which negative spillovers occur whenever a negative scale effect dominates a positive substitution effect and provide empirical support for our theory.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 8540

Classification and Topics

• Classification: Wirtschaft ; Wage Level and Structure; Wage Differentials ; Wages, Compensation, and Labor Costs: Public Policy ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Single Equation Models; Single Variables: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions ; Labor Demand
• Subject: minimum wages ; wage effects ; spillover effects ; wage restraints ; returns to skills ; unconditional quantile regression ; scale effect ; substitution effect ; skill supply

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gregory, Terry ; Zierahn, Ulrich
• Event: Veröffentlichung
• (who): Center for Economic Studies and Ifo Institute (CESifo)
• (where): Munich
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/226242
• Last update: 10.03.2025, 11:42 AM CET