Seminar in Empirical Microeconomics - Optimal Minimum wages
Time
Thursday, 7. July 2022
13:30 - 15:00
Location
H309
Organizer
Chair of Political Economy
Speaker:
Gabriel Ahlfeldt (London School of Economics)
Optimal Minimum wages
(joint with Duncan Roth and Tobias Seidel)
Abstract: We develop a quantitative spatial model with heterogeneous firms and a monopsonistic labour market to derive minimum wages that maximize employment or welfare. Quantifying the model for German micro regions, we find that the German minimum wage, set at 48% of the national mean wage, has increased aggregate worker welfare by about 2.1% at the cost or reducing employment by about 0.3%. The welfare-maximizing federal minimum wage, at 60% of the national mean wage, would increase aggregate worker welfare by 4%, but reduce employment by 5.6%. An employment-maximizing regional wage, set at 50% of the regional mean wage, would achieve a similar aggregate welfare effect and increase employment by 1.1%.