On the introduction of minimum wages: empirical relevance of the low wage sector

The possible introduction of a minimum wage in Germany hat touched off a heated controversy on the economic effects of such an instrument. Some fear the complete abolition of the low-wage sector. Others see opportunities for wages increases without any significant consequences. Joachim Ragnitz, IWF Halle, and Marcel Thum, Ifo Dresden, examine how many people would be affected by a minimum wage and how many jobs could be lost. According to their estimates, the introduction of a minimum wage of €7.50 in Germany would lead to a reduction of low-skilled employment by 26.7 percent.