EconStor >
ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/26539
  
Title:Minimum wages and their alternatives: a critical assessment PDF Logo
Authors:Knabe, Andreas
Schöb, Ronnie
Issue Date:2008
Series/Report no.:CESifo working paper 2494
Abstract:Do minimum wages reduce in-work-poverty and wage inequality? Or can alternative policies do better? We evaluate theses issues for the exemplary case of Germany that suffers from high unemployment among low-skilled workers and rising wage dispersion at the bottom of the wage distribution. We analyze the impact of three different policy options, currently discussed in Germany, on employment, wage inequality, public expenditures, and incomes of poor households: 1) a statutory minimum wage, 2) a combination of minimum wages and wage subsidies as e.g. in France and the Netherlands, and 3) pure wage subsidies to low-paid workers. We find that a minimum wage of EUR 7.50 would cost 840,000 low-paid jobs and increase the fiscal burden by about EUR 4 billion per year, while poor households' income rises only by EUR 1.1 billion per year. With pure wage subsidies, the government can ensure more favorable employment and income effects. Combining a minimum wage with a wage subsidy turns out to be extremely costly and inferior to wage subsidies in all respects.
Subjects:Statutory minimum wage
working poor
welfare system
wage subsidy
JEL:H2
I3
J3
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

Files in This Item:
File Description SizeFormat
592000028.PDF356.19 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/26539

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.