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General equilibrium effects of your minimum wage in Germany

Real wage Employment Welfare Labour force

This page provides an interactive graphical presentation of the general equilibrium effects of the German minimum wage based on the quantitative spatial model in Ahlfeldt, Roth, Seidel (2021): Optimal minimum wages [LINK]. Real wages incorporate effects on tradable goods prices and housing rents. Welfare, in addition incorporates effects on employment probabilities, commuting costs, and worker-firm matching in the short run when workers are immobile across residences. In the long run, these welfare effects are equalized and through net migration and the effects on labour force. 

To explore the general equilibrium effects, simply select your outcome and browse through the relative federal or regional minimum wage levels. To obtain the abolute minimum wage level, multiply the relative minimum wage in percentage terms by the mean wage per hour. In 2020, the national mean wage per hour was €19.38. You can use the minimum wage calculator to compute the relative minimum wage for a given absolute value (in €/h) and year of introduction.