Side Effects of the Introduction of the German Minimum Wage on Employment and Unemployment: Evidence from Regional Data

Using both the variation across space, age and sex and the variation across space and sectors, we analyze the relationship between the approximate bite of the minimum wage for full-time employed individuals and employment/ unemployment growth with data of the Federal Employment Agency. We use difference-in-differences type of specifications and instrument the bite of the minimum wage by the hypothetic past bite.
The results for both space and age/sex and space and sector provide evidence in favor of a slightly increasing growth of regular employment due to the minimum wage. We also find a decreasing growth of marginal employment due to the introduction of the minimum wage. The effect on total employment is slightly negative in our preferred specification (-30.000 jobs).
Results for the spatial variation alone, however, differ somewhat and are in line with Schmitz (2017) and Caliendo et al. (2018). Our results in this case show a (moderate) negative effects on regular employment growth. We argue below, that using the regional variation alone might be dominated by regional dynamics that is unrelated to the minimum wage.