The employment effect of industry-specific, collectively-bargained minimum wages

This paper estimates the employment effects of industry-specific, collectively-bargained minimum wages in Germany for three occupations associated with the construction sector using a difference-in-differences approach. I propose a truly exogenous control group in contrast to the control group design used in the literature. Additionally, an alternative indicator of the minimum wage bite is employed in addition to the Kaitz index, namely the proportion of workers earning exactly the minimum wage. I do not find a significantly negative employment effect, even though the minimum wage is binding in (East) Germany. This result can be explained by models of monopsonic competition.