Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/280354 
Year of Publication: 
2023
Series/Report no.: 
SOEPpapers on Multidisciplinary Panel Data Research No. 1199
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
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.
Subjects: 
Co-determination
Labour Law
Minimum Wages
Socio-Economic Panel (SOEP)
Non-compliance
Works Councils
JEL: 
J30
J53
K31
K42
M54
Document Type: 
Working Paper

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