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Title:Would a legal minimum wage reduce poverty? A microsimulation study for Germany PDF Logo
Authors:Müller, Kai-Uwe
Steiner, Viktor
Issue Date:2008
Series/Report no.:IZA Discussion Papers 3491
Abstract:In view of rising wage inequality and increasing poverty, the introduction of a legal minimum wage has recently become an important policy issue in Germany. We analyze the distributional effects of the introduction of a nationwide legal minimum wage of € 7.5 per hour on the basis of a microsimulation model which accounts for the complex interactions between individual wages, the tax-benefit system and net household incomes. Simulation results show that the minimum wage would be rather ineffective in reducing poverty, even if it led to a substantial increase in hourly wages at the bottom of the wage distribution and had no negative employment effects. The ineffectiveness of a minimum wage in Germany is mainly due to the existing system of means-tested income support.
Subjects:Minimum wage
wage distribution
working poor
poverty reduction
micro-simulation
JEL:I32
Persistent Identifier of the first edition:urn:nbn:de:101:1-20080527118
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des DIW
IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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