General equilibrium effects of your minimum wage in Germany

Real wage Employment Welfare Labour force

Welfare effect of
federal minimum wage

Welfare effect of
regional minimum wage

Notes: Maps show simulated short-run general equilibrium effects of the German minimum wage based on the quantitative spatial model in Ahlfeldt, Roth, Seidel (2021): Optimal minimum wages [LINK]. The mapped outcome welfare. Welfare incorporates incorporate effects on nominal wages, tradable goods prices, housing rents, employment probabilities, commuting costs, and worker-firm matching. The short-run effect is simulated in a counterfactual with residents that immobile across residences.

How to use: To explore the general equilibrium effects, simply 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.