The Impact of Minimum Wages on Well-Being: Evidence from a Quasi-experiment in Germany
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The Impact of Minimum Wages on Well‑Being: Evidence from a Quasi‑experiment in Germany Filiz Gülal1 · Adam Ayaita2
© Springer Nature B.V. 2019
Abstract We analyze well-being effects of minimum wages, using the introduction of the minimum wage in Germany as a quasi-experiment. Based on representative data, a difference-indifferences design compares the development of life, job, and pay satisfaction between employees who are affected by the reform according to their pre-intervention wages and those who have marginally higher wages at outset. We find significantly positive effects on all considered dimensions of well-being. The results hold for at least 1 year after the reform, are more pronounced in East Germany, and hold if those who are not employed anymore after the reform are included. Keywords Minimum wage · Natural experiments · Well-being · Satisfaction JEL Classification I31 · J28 · J30 · J31 · J38 · J60
For valuable ideas, comments, hints, and discussions we thank Liana Bomm, Mario Bossler, Alina Elrich, René Fahr, Urs Fischbacher, Bernd Frick, Gamze Görel, Daniel Kamhöfer, Martin Kocher, Holger Meyer, David Neumark, Christian Pfeifer, Kerstin Pull, Toralf Pusch, Valentin Schiele, Hendrik Schmitz, Carsten Schröder, Dirk van Straaten, Matthias Westphal, Svenja Winkler, and Philip Yang. We also thank participants of the 21st Colloquium on Personnel Economics (COPE), Munich 2018, and of the Conference on the Evaluation of Minimum Wages at the German Institute for Economic Research (DIW), Berlin 2018. Electronic supplementary material The online version of this article (https://doi.org/10.1007/s1090 2-019-00189-5) contains supplementary material, which is available to authorized users. * Filiz Gülal filiz.guelal@uni‑paderborn.de Adam Ayaita [email protected]‑aachen.de 1
Paderborn University, Warburger Straße 100, 33098 Paderborn, Germany
2
RWTH Aachen University, Templergraben 64, 52056 Aachen, Germany
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F. Gülal, A. Ayaita
1 Introduction Minimum wages aim at securing an income that allows for the satisfaction of basic needs. A main criticism is that minimum wages reduce employment. Consequently, a large body of literature has investigated the effects of minimum wage reforms on employment. The results are mixed, and until today it remains disputable whether minimum wages reduce employment.1 Minimum wages are associated with positive effects on redistribution in favor of low earners, in particular when hourly wages are considered (Caliendo et al. 2017b; Fedorets and Schroeder 2017). They have also been found to improve mental health outcomes (Reeves et al. 2017). Only few studies, however, have analyzed the effects of minimum wages on well-being (Bossler and Broszeit 2017; Pusch and Rehm 2017).2 The present study investigates how the introduction of a minimum wage influences different dimensions of well-being: life satisfaction, job satisfaction, and pay satisfaction of low earners who are affected by the reform according to their pre-intervention wages. The analysis o
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