Minimum Wages and Employment - Theory and Empirical Evidence with a special emphasis on Germany

Master's Thesis from the year 2008 in the subject Business economics - Economic Policy, grade: 1,0 (A), University of Wisconsin-Milwaukee (Department of Economics), course: Labor Economics II, language: English, abstract: One of the most important issues that was in the center of the political debate in Germany in the last few months is the introduction of minimum wages. It was caused by the politically forced imposition of a minimum wage in the sector for postal services which, in the view of many experts, provides a competitive advantage for the major postal service company 'Deutsche Post World Net'1 compared to its competitors. Then it happened that the 'PIN - Group AG' one of the most important domestic competitors of the 'Deutsche Post World Net' was threatened by insolvency as its largest shareholder the publisher 'Axel Springer AG' was no longer willing to invest money in the 'PIN - Group AG'. Additionally, many newspapers published by Axel Springer AG wrote articles against the imposition of a minimum wage for many weeks and published many interviews with economic experts warning about the negative effects of a minimum wage on the overall German labor market. Furthermore, political considerations, e.g. by the secretary of labor, to introduce a federal minimum wage in Germany even caused the chairmen of the eight leading economic research institutes in Germany to publish a letter in the newspaper 'Das Handelsblatt'2 where they advise politicians against the introduction of a federal minimum wage if (large) employment losses should be avoided. On the other hand, a few other researchers, experts and politicians like the 'IAB'3 as a specific labor market research institute believe that minimum wages even could create jobs and must not necessarily destroy them. This paper is motivated by this ongoing debate between economists and policymakers in the whole world. That is why in the first part of the paper the major theoretical framework which is used by economists to analyze and empirically assess the impacts of minimum wages on employment should be presented.