A generally binding minimum wage was introduced in the roofing sector in 1997 and has been renewed and raised several times since then; in 2011, the roofer minimum wage amounted to 11.80€. The roofing sector was the first sector in Germany to introduce a national minimum wage in 2003. This specific situation led to a hard bite of the minimum wage in Eastern Germany; about 50% of all East German blue-collar workers earn a wage at minimum wage level. The minimum wage level as compared to the median wage of the sector is thus higher than in all other sectors in Germany.
Based on difference-in-differences estimations in comparison to an ancillary construction sector that is not affected by a minimum wage as well as based on a comparison of workers in the roofing sector who have been affected by the minimum wage introduction to different degrees, this paper investigates the causal effects with regard to employment, worker protection and competition. The administrative employee-employer data of the Federal Employment Agency, the Mannheim business panel of the ZEW, as well as the full-scale survey of all employees in the roofing sector conducted by the income supplement fund of the roofing trade provide a well-documented database for these analyses. In contrast to previous studies for other sectors, a minimum wage bite can be detected more precisely and can be used for causal effect analyses.
The results show that, particularly in East Germany, the minimum wage caused considerable increases in hourly wages for lower deciles of the wage distribution. These wage increases have only partially compiled into earnings increases because the working hours of those affected by minimum wages have decreased slightly at the same time. Furthermore, wage increases caused by the minimum wage introduction are opposed to wage decreases in the upper deciles. This might have contributed to the fact that employment opportunities for workers, who are now more expensive due to the minimum wage, have decreased, while the overall employment has presumably not changed. Distinct competitive impacts could not be detected, even though there is a slight tendency toward single-person companies in the East German corporate structure. Moreover, there is evidence that cost increases due to the minimum wage were, at least in part, transferred to the customers via increased prices.
To conclude, the results cannot be interpreted as probable effects of national statutory minimum wages, but they rather present the distinctiveness of the sector and the current market environment. Changing the framework conditions could also change the minimum wage effects shown above.