The Role of Working Hours: Heterogeneous Effects of the Minimum Wage

Title: The Role of Working Hours: Heterogeneous Effects of the Minimum Wage

Abstract: In 2015, a national minimum wage was introduced in Germany. While the literature agrees on the absence of significant employment effects in the number of employees, evidence on employment adjustments at the intensive margin is scarce. Using the German Structure on Earnings Survey, we focus on working hours adjustments in course of the minimum wage. We also comprehensively analyze other three dimensions include hourly wages, monthly wages, and extensive employment. We corroborate significant minimum wage effects on reducing inequality of hourly and monthly wages. Although several theoretical mechanisms suggest a reduction in working hours, we do not detect a significant change in hours of work. However, working hours among the group of minijobbers decrease as a result of the specific institutional setting. We further investigate the employment effects. While there were no employment effects for regular jobs, we found a significant reduction in minijobbers which can be explained by upgrading to regular jobs and transitioning to non-employment. Our results suggest the importance of institutional setting that causes heterogeneous effects of minimum wage.