A 22 Percent Increase in the German Minimum Wage: Nothing Crazy!

Abstract

Abstract We present empirical evidence on the 22 percent increase in the German minimum wage, implemented in 2022, raising it from €9.82 to €10.45 in July and to €12 in October. Our study is the first to leverage monthly data from the Earnings Survey, a large and novel data source comprising around 8 million employee-level observations reported by employers each month. We apply a difference-in-differences-in-differences approach to analyze the policy’s impact on hourly wages, monthly wages, employment, and working hours. Our findings reveal significant positive effects on wages, affirming the policy’s intended benefits for low-wage workers. Interestingly, we identify a negative effect on working hours mainly driven by minijobs, which partially offsets the monthly wage gains. We observe neither a negative short-run effect on individual employment retention nor on county-level employment.