Extended Essay IB Economics Effect Minimum Wage On German Taxi Business

IB Economics Extended Essay UWC Atlantic College, May 2016 Candidate no.
What were the short-term effects of the introduction of a minimum

wage in Germany on labor market and employment in the taxi
business in the northern part of the Rhine Neckar Metropolitan
Region?
Candidate session: May 2016
Candidate no.:
Extended Essay Subject: Economics
Supervisor: Julian Jones
Word Count: 3990
1
Abstract
In this essay, the following research question is investigated:
What were the short-term effects of the introduction of a minimum wage in Germany on labor market
and employment in the taxi business in the northern part of the Rhine Neckar Metropolitan Region?
The essay examines how the labor market and the employment situation in the taxi business have
changed as a consequence of the minimum wage. It is investigated whether the minimum wage has
increased endogenous worker effort. Also, it is evaluated whether companies have increased efficiency
to offset higher wage costs (=Shock effect). Additionally, it is assessed whether the labor market has
reacted with leading or lagging adjustment. Moreover, it is determined whether employment has
increased or decreased.
The investigation is conducted by using economic models and already published minimum wage studies
to build up a hypothesis. Then, official employment data is analyzed. Also, information that was
collected from taxi employers and employees using a questionnaire and information from self-employed
drivers is analyzed.
Overall conclusion
It is concluded that there was a slight decrease in endogenous worker effort. Also, taxi companies who
didnt already pay the minimum wage increased efficiency. Consequently, they experienced a Shock
effect. Also, it is suggested that there was leading adjustment in the taxi business, even though the
results from the questionnaire are slightly ambiguous. Finally, there was a negative employment effect.
However, the negative employment effect is limited and affects only marginally employed drivers
(=employees with monthly income of no more than 450, exempt from insurances).
During the investigation, it was found out that the taxi business has a significant problem with illicit
business. For example, some taxi drivers dont get the minimum wage. This will have affected the labor
market and the employment development in the taxi business.
Word Count: 296
2
Table of Contents
Section Page
1. Introduction 4
2. Theory & background information 5
2.1. Relevant economic models 5
2.1.1. Competitive labor market 5
2.1.2. Model with Endogenous Effort 7
2.1.3. Shock Effects 7
2.1.4. Lagged/ Leaded Adjustment 7
2.2. Research regarding employment effects of minimum wages 8
2.3. 2.3. Labor market in Germany 8
3. Hypothesis 9
4. Primary data 10
4.1. Methodology 10
4.2. Employment data 13
4.2.1. Data 13
4.2.2. Analysis 14
4.3. Questionnaire 15
4.3.1. Summary significant findings questionnaire 15
4.3.2. Analysis 19
5. Problems and Limitations 20
6. Conclusion 21
7. Bibliography 23
Appendices 25
I. Questionnaire 25
II. Results questionnaire 28
III. Employment data cab business original in German 30
IV. Email trade union expert 31
V. Email taxi driver 33
3
1. Introduction
Since January 1, 2015, Germany has a statuary minimum wage of 8.50 per hour. Excluded from the
minimum wage are interns, apprentices, long term unemployed for the first 6 months of their re-
employment and minors1. Also, certain industries have transitory subminimum wage agreements2.
Minimum wage enforcement is controlled by the customs authority3. There are also new documentation
duties4. Companies have to report the exact working hours of every worker who makes less than 2,000
a month5. All those changes are enacted as part of the minimum wage law, MiLoG6. The minimum wage
has caused great controversy in Germany. There has been huge criticism. Especially employers from low
wage sectors, such as the taxi business have complained. They say a minimum wage is unbearable. It will
cause inflation or unemployment7. In the taxi business, employers say they would be unable to pay their
employees the minimum wage. They say revenues arent high enough to pay a driver 8.50/hour8. Also,
they complain about new regulations. Before the minimum wage, flexible payment models were
normal. Now, drivers have to be paid 8.50 an hour. The Association of German taxis and rental cars
(BZP) expects that up to a quarter of all taxi drivers in Germany might lose their job because of the
minimum wage9.
There are two major reasons why I decided to investigate the effect of the minimum wage. Firstly, the
taxi business is heavily affected10 by the minimum wage and has no transitory agreement. Consequently,
there could be some significant employment effects after six months already. Secondly, many economic
models describe minimum wage effects. However, there is disagreement among economists about the
actual effects. For Germany, no studies on that issue had been published when the investigation was
conducted. I thought it would be interesting to investigate into this unexplored topic of great relevance.
I decided to investigate:
What were the short term effects of the introduction of a minimum wage in Germany on labor market
1
Stefan van Borstel, Das sind die Ausnahmen vom Mindestlohn, Die Welt, December 31, 2015, accessed July 1,
2015, http://www.welt.de/politik/deutschland/article135886199/Das-sind-die-Ausnahmen-vom-
Mindestlohn.html.
2
Bundesministerium fr Arbeit und Soziales (BMAS), Fragen zum gesetzlichen Mindestlohn, Berlin: 2015, 8-9.
3
Ibid., 22.
4
Dokumentatiospflicht: Was ist zu tun?, BMAS, accessed July 1, 2015, http://www.der-mindestlohn-
wirkt.de/ml/DE/Service/Dokumentationspflicht/inhalt.html.
5
Weitere Klarstellungen und Vereinfachungen bei der Umsetzung des Mindestlohns, BMAS, accessed July 1,
2015, http://www.der-mindestlohn-wirkt.de/ml/DE/Service/Meldungen/2015/Weitere-Klarstellungen-
Vereinfachungen-Umsetzung-Mindestlohn.html?nn=159050.
6
Gesetz zur Regelung eines allgemeinen Mindestlohns, Bundesministerium fr Justiz und Verbaucherschutz,
accessed July 1, 2015, http://www.gesetze-im-internet.de/bundesrecht/milog/gesamt.pdf.
7
Cynthia Kroet, Conflict over Germanys minimum wage plans, Politico, March 19, 2014, accessed July 1, 2015,
http://www.politico.eu/article/conflict-over-germanys-minimum-wage-plans/.
8
Stefan Sauer, Taxis droht ein schneller Tod, Frankfurter Rundschau, December 22, 2014, accessed July 21, 2015,
http://www.fr-online.de/arbeit---soziales/mindestlohn-taxis-droht-ein-schneller-tod,1473632,29402536.html.
9
Rasmus Buchsteiner, Bis zu 70000 Stellen bedroht, Nordwest Zeitung, September 25, 2014, accessed July 2,
2015, http://www.nwzonline.de/interview/bis-zu-70000-stellen-bedroht_a_19,0,311528599.html.
10
Barbara Dribbusch, Schnell noch ein Tarifvertrag, TAZ, June 20, 2014, Accessed July 19, 2015,
http://www.taz.de/!5039660/.
4
2. Theory and background information
2.1. Relevant economic models
2.1.1. Competitive labor market:
In a competitive labor market, homogenous firms compete against each other. They are confronted with
a homogenous worker force. The firms strive to maximize profits. The workers, however, try to find the
optimal combination between work effort and hours worked and the wage level, also known as
maximizing utility. In a competitive labor market, each firm is a wage taker. That means that an
individual firm doesnt have enough market power to influence wages. It has to take the wage level that
is determined by the industry.
Fig. 1: Competitive labor market model with equilibrium wage11
In Fig. 1, the Supply curve and the demand curve D meet at [W/QL]. This point is the market-clearing
wage, where as much labor is demanded as is supplied. Consequently, the market is in equilibrium at
this point. In a free labor market without regulations, the equilibrium wage is set by the market.
Individual firms will stick to the wage, because labor demand and supply are perfectly elastic. Thus, at a
wage level above w, more workers would be willing to offer their labor than firms demand labor. Below
w, not enough labor would be supplied for firms to cover their demand.
11
Created using: https://www.draw.io/
5
A minimum wage would set a wage ceiling above the equilibrium wage.
Fig. 2: Competitive labor market model with minimum wage ceiling12
Fig. 2 illustrates the effect of a minimum wage. If a minimum wage is set above the equilibrium wage
level w*, there will be more labor supply because more people will be willing to offer their workforce.
However, there will be less demand for labor by firms to avoid increases in wage costs. If the wage level
is raised from w* to wmin, labor demand falls from q* to qD and labor supply increases from q* to qS. As a
result, there will be excess supply of labor. This excess supply of labor is known as unemployment.
We can assume the cab market to be a labor competitive market. Most companies have only two to
three cars and a limited number of employees, restricting their market power. In Mannheim for
example, a city in the Rhein-Neckar metropolitan area, there are 190 companies with 320 cars in total13.
Also, all taxi drivers have to get the same certificates to be allowed to drive in Germany. As a result,
drivers have the same education and we can speak about them as a homogeneous labor force.
12
LABOR DEMAND, Sparknotes, accessed July 2, 2015,
http://www.sparknotes.com/economics/micro/labormarkets/labordemand/section1/page/3/.
13
Mathias Kros, Knftig weniger Taxen im Einsatz, Mannheimer Morgen, February 19, 2015, accessed July 2,
2015, http://www.morgenweb.de/nachrichten/wirtschaft/regionale-wirtschaft/kunftig-weniger-taxen-im-einsatz-
1.2117066.
6
2.1.2. Model with Endogenous Effort14:
This model introduces another factor into the competitive labor market: perfectly observable worker
effort. It means that, if workers effort can be observed, they can be assessed and paid based on their
effort. Consequently, more effort should lead to higher wages. Less effort leads to lower wages or to
getting fired. The assumption is that a minimum wage sets a limit for worker effort. It is assumed that
workers who originally make less than the minimum wage increase their work effort to a minimum wage
level to keep their job. Workers who originally made more are not affected, because they dont have to
increase work effort.
This model applies to the cab business. First of all, it was usual to pay cab drivers a part of the revenue
they make over the day. Consequently, the higher the revenue, the higher the wage. Also, it is
observable how much revenue a cab driver makes an hour. Hence, the effort of a taxi driver is perfectly
observable.
2.1.3. Shock Effects:
According to Brown, a minimum wage can shock employers into higher productivity15. They might try
to offset increases in wage costs by higher productivity of labor. George J. Stigler16 describes the two
ways this might happen. Firstly, their employees might work harder, because they fear to lose their job
otherwise, as described in the Model with Endogenous effort. Secondly, employers might use different
production technologies. The consequences would be rationalization and a loss of employees, because
new technologies and machines make workers obsolete.
2.1.4. Lagging/ Leading Adjustment:
Brown17 also mentions the idea of leading and lagging adjustment. In some cases, markets experience a
lagging adjustment to a minimum wage, what means that the minimum wage needs time to have a
significant effect on employment. Leading adjustment means that the minimum wage has an effect soon
after the minimum wage takes effect, e.g. because the law is enacted months before. The minimum
wage law was enacted August 11, 201418, four months before it took effect. Additionally, the minimum
wage first came up in election races prior to the Bundestagswahl 2013. Accordingly, industries had time
to prepare for a minimum wage.
14
Peter Schmidt, Minimum Wages and Employment Theory and Empirical Evidence with a special emphasis on
Germany (Masters Thesis, University of Milwaukee Wisconsin, 2008).
15
Charles Brown et al., The effect of the minimum wage on employment and unemployment, Journal of
Economic Literature 20, no.2 (1982): 489.
16
George J. Stigler, The Economics of Minimum Wage Legislation, The American Economic Review 36, no.3
(1946): 359.
17
Brown et al., The effect of the minimum wage on employment and unemployment, 495-496.
18
Gesetz zur Regelung eines allgemeinen Mindestlohns, Bundesverband Gterkraftverkehr Logistik und
Entsorgung, Frankfurt am Main, 2015.
7
2.2. Research regarding employment effects of minimum wages
Studies and books offer a wide range of results, from significant negative to significant positive
employment effects.
One relevant book on the employment effects of minimum wages is Myth & Measurement by David
Card and Alan B. Krueger (1995). Card & Krueger analyzed selected minimum wage studies for the US
and other countries. They conclude that minimum wages dont have a large negative impact on
employment19. This is backed by another study, a meta-analysis of 64 previously conducted US minimum
wage studies which comes to the conclusion that there would be no significant negative employment
effect if a minimum wage takes effect20. Meanwhile, there is Minimum Wages by David Neumark and
William L. Wascher (2008). The authors reanalyze some of the studies that were first analyzed by Card &
Krueger. However, they criticize the methodology, i.e. saying the timeframe of the studies conducted
was too short21. They say the impact on employment of minimum wages is fairly unambiguous, with a
majority of the analyzed studies indicating a significant negative effect22.
Beside those Meta studies, there are also studies who focus specifically on low wage industries. Card &
Krueger analyzed Puerto Rico in Myth & Measurement. Puerto Rico is bound to the US federal
minimum wage legislation, but has a lower average wage than the United States ($24.9523 to $13.2324).
With regard to Puerto Rico, Card & Krueger point out that at sufficiently high levels, the minimum wage
probably does reduce employment.25 Another study dealt with the effect of the introduction of a
nationwide minimum wage on the UK residential care home industry, which was severely affected. With
adjusted data, there was a significant negative employment effect of the minimum wage26.
2.3. Labor market in Germany
Unemployment rate in Germany in July 2015 was at 6.3%, 0.3% lower than in July 201427. Also, the
economy is supposed to grow by 1.8% in 201528. That implies that there should be no significant
negative external influences on the cab business except the minimum wage.
19
David Card and Alan B. Krueger, Myth and Measurement: The New Economics of the Minimum Wage (Princeton:
Princeton University Press, 1997), 8-9.
20
Hristos Doucouliagos and T.D. Stanley, Publication Selection Bias in Minimum-Wage Research? A Meta-
Regression Analysis, British Journal of Industrial Relations 47, no. 2 (2009): 406-428.
A Meta-Regression Analysis, British Journal of Industrial Relations 47, no. 2 (2009): 18.
21
David Neumark and William L. Wascher, Minimum Wages (Boston: The MIT press, 2008), 59.
22
Neumark and Wascher, Minimum Wages, 287.
23
Economic News Release, Bureau of Labor Statistics, July 2, 2015, accessed July 2, 2015,
http://www.bls.gov/news.release/empsit.t19.htm.
24
Occupational Employment Statistics, Bureau of Labor Statistics, March 25, 2015, accessed July 2, 2015,
http://www.bls.gov/oes/current/oes_pr.htm#00-0000.
25
Card and Krueger, Myth and Measurement, 265.
26
Stephen Machin et al., Where the Minimum Wage Bites Hard: Introduction of Minimum Wages to a Low Wage
Sector, Journal of the European Economic Association 1, no.1 (2003): 173.
27
Ade/dpa, Zahlen der Bundesagentur: 2,77 Millionen Menschen suchen Arbeit, Spiegel Online, July 30, 2015,
accessed August 26, 2015, http://www.spiegel.de/wirtschaft/soziales/arbeitslosenzahlen-bundesagentur-mit-juli-
zahlen-a-1045975.html.
28
Die Vorhersagen der Wirtschaftsschtzer, Tagesschau, July 27, 2015, accessed August 26, 2015,
http://www.tagesschau.de/wirtschaft/konjunkturprognose114.html.
8
3. Hypothesis
Based on the theories and studies mentioned, there are the following expectations:
1. Many employers will experience a Shock effect. The research suggests that many taxi
companies were far from paying the minimum wage29. Therefore, as described under Shock
effect, businesses will have taken actions to increase efficiency, such as providing less cars
during low revenue times.
2. Endogenous worker effort is expected to increase. Employers can observe worker effort,
because they see how much revenue a driver makes, enabling them to fire underperforming
drivers. This fear will motivate drivers to get more rides.
3. There will be leading adjustment. The taxi companies had four months to prepare for the
minimum wage. Because wages in the cab business were often lower than the minimum wage,
we expect that companies adjusted as soon as the law was enacted. There will be no lagging
adjustments, because now, more than half a year after its implementation, the minimum wage
effects are offset by price rises, thus companies dont have to fire more drivers.
4. The minimum wage will have negative employment effects on the taxi business in the Northern
part of the Rhine-Neckar Metropolitan Region. This inferred from evidence from low wage
sector minimum wage studies and from the competitive labor market model. Unemployment
will increase because the wage level was below minimum wage level.
29
Thomas chsner, berleben am Steuer, Sddeutsche Zeitung, January 23, 2015, accessed August 26, 2015,
http://www.sueddeutsche.de/wirtschaft/mindestlohn-fuer-taxifahrer-ueberleben-am-steuer-1.1869740.
9
4. Primary data
4.1. Methodology
To deduce the impact the minimum wage had on labor market and employment in the taxi business in
the northern Rhine-Neckar Metropolitan Region, two forms of primary data were collected:
1. Employment data:
The Statistic service of the federal agency for work30 sent information on the employment development
in the German taxi business. It sent data for the employment development in the taxi business in
Germany. We expect the set to be representative for the Rhine-Neckar Metropolitan Region.
2. Questionnaire:
Data was collected in three cities in the northern Rhine-Neckar Metropolitan Region in the state of
Baden-Wuerttemberg, Germany:
1. Weinheim (40,000 inhabitants), district Rhein-Neckar Kreis

2. Heidelberg (150,000 inhabitants), district Heidelberg
3. Mannheim (295,000 inhabitants), district Mannheim
The questionnaire should help to deduce the impact of the minimum wage on employment.
Also, it was hoped that the interviewees might have some other useful input.
30
Kontakt, Bundesagentur fr Arbeit Statistik, accessed July 21, 2015,
http://statistik.arbeitsagentur.de/Navigation/Servicebereich/Kontakt/Kontakt-Nav.html.
10
Fig.3: Map of the Rhine-Neckar Metropolitan Region31
31
Metropolregion Rhein-Neckar, Wikipedia, accessed July 19, 2015,
https://de.wikipedia.org/wiki/Metropolregion_Rhein-Neckar.
11
A questionnaire32 with 17 questions was used. Topics were:
Whether businesses have prepared for the minimum wage or adapted afterwards
Whether and if yes how the minimum wage has affected their wage costs
Whether and if yes why they have fired employees due to the minimum wage
I went directly to taxi stops in the three cities.
There, I asked:
1. Taxi drivers employed at a taxi company employees = workers

2. Employers of taxi companies with at least 1 taxi driver employed - employers
Employees and employers were analyzed together. There, 31 questionnaires were collected. Also, self-
employed taxi drivers were asked. Here, 8 entrepreneurs were asked. Self-employed were only asked
one question: Whether they had fired workers as a consequence of the minimum wage. The self-
employed-employed/employees ratio is not representative. There is a big amount of self-employed.
However, those were little affected, so only a very small sample was collected from self-employed taxi
drivers.
32
See Appendices: I. Questionnaire
12
4.2. Employment data
4.2.1. Data
The employment statistic distinguishes between employees who make less than 450/month and those
who make more than that33. Those who make 450 or less are marginally employed. The statistic
distinguishes marginally employed who are only marginally employed and marginally employed who
drive cabs as a second job. The last month recorded is April 2015. The employment data covers drivers
who are employed at taxi companies. It doesnt cover self-employed taxi drivers.
Below the national employment data for the German taxi business from July 2014 until May 2015.
August 2014, when the minimum wage was approved by the parliament and January 2015, when the
minimum wage was introduced, are highlighted.
Fig. 4: Employment development in the taxi business July 2014 April 201534
4932 Driving of cabs

of those marginally employed:
Salary over 450/month without Marginally employed (=salary
apprentices 450/month or less) only marginally employed
Taxi Driver as second
Month job
Compared
Compared to last year absolute Compared to last year absolute Compared to last year absolute
absolute to last year
in % in % in % in %
Jul-14 67,614 1.6 74,006 -0.3 49,162 -0.3 24,844 -0.2
Aug-
67,463 1.1 74,036 -0.1 49,110 -0.1 24,926 -0.1
14
Sep-
68,080 1.2 74,877 -0.5 49,624 -0.6 25,253 -0.4
14
Oct-
68,176 0.9 74,795 -0.7 49,579 -1.0 25,216 -0.3
14
Nov-
68,391 0.9 74,930 -1.0 49,704 -1.2 25,226 -0.7
14
Dec-
68,349 0.9 74,619 -1.5 49,661 -1.6 24,958 -1.1
14
Jan-
69,991 3.6 70,202 -6.1 45,995 -8.4 24,196 -1.6
15
Feb-
71,109 5.1 69,882 -6.9 45,510 -9.6 24,357 -1.5
15
Mar-
71,234 5.1 69,534 -7.4 45,080 -10.2 24,434 -1.7
15
Apr-
71,573 5.5 69,327 -7.6 44,775 -10.6 24,533 -1.6
15
33
Methodische Hinweise zu sozialversicherungspflichtig und geringfgig Beschftigten, Bundesagentur fr Arbeit
Statistik, May 21, 2015, accessed July 18, 2015, https://statistik.arbeitsagentur.de/nn_280848/Statischer-
Content/Grundlagen/Methodische-Hinweise/BST-MethHinweise/SvB-und-GB-meth-Hinweise.html.
34
Adapted, for original chart, see Appendices: III. Employment data cab business original in German
13
4.2.2. Analysis
In April 15, the number of taxi drivers employed with a salary of over 450, the regular employed, was
5.5% higher than the same month a year before. However, the number of marginally employed fell by
7.6% in the same period. Especially dramatic was the decrease in marginally employed who were only
marginally employed as taxi drivers. Their employment fell by 10.6%.
The data indicates that total employment, i.e. marginally employment and regular employment taken
together, has decreased from 142,968 in December 2014 to 140,900 in April 2015, by 1.45%.
Fig. 5: Employment development marginally employed in the taxi business January 2011 April 201535
Marginally employed taxi business Jan11 - April15

77000
Total amount marginally employed
76000
75000
74000
73000
72000
71000
70000
69000
68000
May-11
Jul-11
Nov-11
Jul-12
Jul-13
Jul-14
May-12
Nov-12
May-13
Nov-13
May-14
Nov-14
Jan-11
Mar-11
Sep-11
Jan-12
Mar-12
Sep-12
Jan-13
Mar-13
Sep-13
Jan-14
Mar-14
Sep-14
Jan-15
Mar-15
Month - Year
Orange markers indicate the months July and December 2014, who preceded important minimum wage
events. The chart shows that there had been a downward trend of marginal employment from 2011
onwards. The number of marginally employed workers had fallen by 3,000 to 74,000 in July 2014. From
August until November 2014, there was an upward trend, which was probably seasonal, since a similar
move happened the year before. But from December 2014 to January 2015, there is a radical
adjustment. In one month, employment plunges by about 4,500. In one month, employment decreased
more than over all three years before taken together. That the radical plunge happened directly prior to
the minimum wage implementation suggests that it is linked to the minimum wage.
35
Adapted; for original chart see Appendices: III. Employment data cab business original in German
14
4.3. Questionnaire
4.3.1. Summary significant findings questionnaire36:
Results self-employed taxi drivers:
Of the 8 interviewed self-employed taxi drivers, only 1 had fired taxi drivers as a consequence of the
minimum wage. All other self-employed taxi drivers had driven alone even before the minimum wage
came. They also said they wouldnt be affected by the minimum wage at all, only by price rises.
Results taxi drivers/ employers of firms with drivers employed:
Fig. 6
Chart
Total number of all taxi drivers

employed at company interviewed
16% 1 2
45%
23% 3-5 6+
16%
In Mannheim and Heidelberg, taximeter tariffs had been raised in 2015 due to the minimum wage. In
Mannheim by 20%, in Heidelberg by 7% with another 7% price rise in 2016. This shows that taxi
businesses pass on the costs of the minimum wage and drive up inflation. In Weinheim, which belongs
to the district Rhein-Neckar Kreis, a price rise of 20% was in discussion.
It is important to say that in Germany, price rises are determined by district councils. Also, every
taximeter in that district has to be gauged to use exactly those tariffs.
36
Only some questions are analyzed. For the results for all questions, see Appendices: II. Results questionnaire
15
Fig.7
Asking whether the companies made

Did your company make any preparations for the minimum wage,
preparations? e.g. setting up new contracts for their
Yes, workers.
preparation
3% No
preparation
No answer
45% 52%
Fig.8
Investigating whether there was a

Did your company make any Shock effect in companies, causing
efficiency adjustments? them to work more efficiently. E.g. by
offering less cabs during low-volume
Yes times.
10%
No
32%
No
answer
58%
Fig.9
Are the drivers in your company more Examining whether drivers are more
motivated to get rides. The aim is to
motivated now/ trying harder to get determine whether endogenous worker
rides? effort changed.
10% More
16% motivated
Less
motivated
26%
48% No
change/Same
16
Fig.10
Examining whether employers already

Did your employees already get the paid their drivers at least 8.50/hour
minimum wage before it came? before the minimum wage was officially
enacted.
Yes
3%
No
No answer
45% 52%
Fig. 11
Investigating whether less drivers are

How has the employment in your employed than before the
company changed? implementation of the minimum wage,
More i.e. whether employers had fired
employed workers.
Fired
3%3%
13%
23% No change
Drivers left
58% No answer
Fig.12
Examining whether employers plan to

Are you planning to fire more fire workers in the next months.
workers in the next months?
Yes
16% 13%
No
19% Don't know
52% No answer
17
Other observations:
Many taxi drivers reported that in their companies illicit business is going on. Employers would officially
pay their workers 8.50 an hour, but unofficially, workers would get less. For example, they would have
to work more hours than included in their contract.
Illicit business can explain the decrease in marginal employment. Many marginally employed were
involved in illicit business. It was lucrative for them and for their employer, because marginally
employed still receive government benefits. Thus, if they unofficially work more, they receive benefits
and the employer saves non-wage labor costs. Also, workers can keep the extra they make from
unofficial extra work hours. However, with the minimum wage, it was announced that there would be
more controls37 and tough penalties for abuses38. Entrepreneurs probably feared that and fired
marginally employed while giving some of them regular contracts with a salary of more than
450/month. That could explain the slight increase in regular contracts.
37
Lother Volkelt, Mindestlohn-Kontrollen: Die Prfer kommen ohne Vorwarnung, Lexware, accessed July 18,
2015, http://www.lexware.de/gmbh/mindestlohn-kontrollen-die-pruefer-kommen-ohne-vorwarnung.
38
Folgen bei Nichtbeachtung, Zoll, accessed July 18, 2015,
http://www.zoll.de/DE/Fachthemen/Arbeit/Mindestarbeitsbedingungen/Folgen-bei-Nichtbeachtung/folgen-bei-
nichtbeachtung_node.html.
18
4.3.2. Analysis
Fig.7 showed that half of all companies made preparations for the minimum wage. Additionally, one
third of all companies made efficiency adjustments to offset cost increases due to the minimum wage39.
Regarding those figures, we have to consider that over half of all companies already paid their
employees the minimum wage40. It can be assumed that the companies who already paid the minimum
werent affected by it. Only the companies who didnt pay it would be expected to make adjustments.
As a consequence, it can be assumed that the 50% who already paid the minimum wage voted no for
efficiency adjustments. If only those who didnt pay the minimum wage voted yes, than 70% of those
who didnt pay the minimum wage made efficiency adjustments. Also, Fig.7 and Fig.10 appear almost
congruent. Thus, it can be inferred that affected companies made preparations and a majority of them
efficiency adjustments.
Moreover, the minimum wage seems to have negatively affected motivation of drivers. This can be
inferred, because even though half of the interviewees reported no change, more interviewees reported
a decline in motivation than an improvement41.
Additionally, there has been a negative employment development. Even though in 58% of all cases,
employment hasnt changed, in 36% of all companies drivers either left or were fired, thus resulting in
less employees in those companies42.
Fig.12 shows that more than half of all companies didnt plan to fire more workers. 13% had decided to
do so, 19% didnt know and 16% didnt want to answer. This question leaves high ambiguity. It could
mean that the main consolidation is over, because in the best case, only 13% more companies would
fire employees, compared to 36% where employment has already decreased. However, it could also
mean that 48% would fire employees, if we incorporate dont know and no answer as well. That
would mean that there would be another wave of dismissals. Nevertheless, realistically speaking, there
are always companies who consider to fire workers, thus the dont know. Also, the no answer fraction
might be equally split between firing and not firing or even, like the general trend, slightly in favor of not
firing. That would imply that, indeed, the main consolidation is over and we have leading adjustment.
39
See Fig. 8
40
See Fig. 10
41
See Fig. 9
42
See Fig. 11
19
5. Problems and Limitations
It was difficult to get many cab companies to answer my questionnaire. Firstly, few cab companies had
an office I could go to or an email I could write to. Also, they didnt answer to emails. When asked on the
street, many of them refused to fill out the questionnaire or to answer individual questions. Therefore,
the amount of usable questionnaires was limited. Also, it could be that some employers and employees
lied, because they feared I might otherwise report them. That could have distorted my results. Taxi
companies fear controls, because many are involved in illicit business. Moreover, some questions were
useless: For example, I asked employers how many employees they had fired, what most interviewees
didnt want to answer. Finally, I only found out about the illicit business when I interviewed drivers, after
my preliminary research. None of the webpages, articles, journals or books that I had consulted had
mention this problem, probably because it is specific to the German cab industry.
If I had to conduct a similar investigation again, I would seek the contact of someone from the industry. I
would ask him about the conditions in the industry examined and whether there are any other factors or
obstacles to consider. Also, there are certain improvements I would make to the questionnaire. Firstly,
useless questions should be deleted. Secondly, however, other questions should have been added: It
would have been interesting to know whether employers think they were affected by the minimum
wage and whether price rises had resulted in less customers.
20
6. Conclusion
The research question was:
What were the short term effects of the introduction of a minimum wage in Germany on labor market
The question was broken down into 4 hypotheses, which will now be evaluated.
Hypothesis 1 states that employers would experience a Shock effect, causing them to increase
efficiency. Consequently, hypothesis 1 based on the Shock effect theory by Brown43 proved correct for
companies who didnt already pay the minimum wage.
Hypothesis 2 states that endogenous worker effort would increase. This hypothesis has proved wrong,
as there was a slightly negative trend concerning the motivation to get rides, the factor we tried to
measure the worker effort with. One explanation would be that drivers are unhappy with the new
minimum wage, because for many of them it means that they are now paid by the hour, whereas
before, they got a part of the revenue they made. That meant they received less, but how much they
made was up to them, what gave them independence. This probably offsets any increase in motivation
caused by the fear of getting fired and explains why the endogenous worker effort model failed to
predict the outcome.
Hypothesis 3 states that there would be leading adjustment. This hypothesis is supported by the
employment data. For the questionnaire, there is ambiguity. However, taking into consideration that
there is always uncertainty in a business, that over 50% dont want to fire anyone and that only 13%
firmly decided to fire someone, we can argue that there was leading adjustment.
Hypothesis 4 states that there would be a negative employment effect. This is supported by the
employment data, which indicates a total employment loss of 1.45% between December 2014 and April
2015. Also, it is supported by the questionnaire, which shows a negative employment impact. Even
though the questionnaire paints a very negative picture, the impact in Germany generally is less severe
as expected. Employment of employees with a salary of over 450/month has increased. Also, an
employment loss of 1.45% is far from the loss of 25%, which was expected by the German taxi and
rental car organization44. The loss is mainly due to the decrease in marginal employment, which is
closely linked to illicit business. Still, the competitive labor market model correctly predicted a negative
employment and the result is in accordance with evidence from other low-wage sector minimum wage
studies.
The investigation also revealed that the consequences of the minimum wage outlined by the BZP were
exaggerated. Half of all companies asked werent affected by the minimum wage, because they already
paid it. That implied that it was indeed possible to be economical while paying the minimum wage.
Finally, one question remains:
What can explain that there were some unexpected/ambiguous results, when the economic models
suggested clear outcomes?
43
Brown et al., The effect of the minimum wage on employment and unemployment, 489.
44
Buchsteiner, Bis zu 70000 Stellen bedroht.
21
In evaluating, it became obvious to me that the taxi business has fundamental problems that will have
influenced my results. As mentioned, there is a lot of illicit business going on. Many cab drivers officially
get the minimum wage, but actually dont45. The problem is, according to a German trade union46 expert
and a blogging cab driver47 that there are not enough controls. One reason is a staff shortage of the
customs authority that wont be filled before 201948. It is difficult to predict outcomes with economic
models for an industry with unfair competition, i.e. where some companies dont obey regulations. This
could explain why some results in the conclusion where unexpected, such as the decreased driver
motivation.
45
Dribbusch, Schnell noch ein Tarifvertrag.
46
See Appendices: IV. Email trade union expert
47
See Appendices: V. Email taxi driver
48
Yasmin El-Sharif, Mindestlohn ab 2015: Schwarzarbeitsfahndern fehlt Personal, Spiegel Online, October 20,
2014, accessed July 19, 2015, http://www.spiegel.de/wirtschaft/soziales/mindestlohn-finanzkontrolle-
schwarzarbeit-fehlt-massiv-personal-a-998118.html.
22
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July 30, 2015. Accessed August 26, 2015.
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1045975.html.
Buchsteiner, Rasmus. Bis zu 70000 Stellen bedroht. Nordwest Zeitung, September 25, 2014.
Accessed July 2, 2015. http://www.nwzonline.de/interview/bis-zu-70000-stellen-
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wirkt.de/ml/DE/Service/Dokumentationspflicht/inhalt.html.
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Bundesministerium fr Arbeit und Soziales. Weitere Klarstellungen und Vereinfachungen bei
der Umsetzung des Mindestlohns. Accessed July 1, 2015. http://www.der-mindestlohn-
wirkt.de/ml/DE/Service/Meldungen/2015/Weitere-Klarstellungen-Vereinfachungen-Umsetzung-
Mindestlohn.html?nn=159050.
Bundesministerium fr Justiz und Verbaucherschutz. Gesetz zur Regelung eines allgemeinen
Mindestlohns. Accessed July 1, 2015. http://www.gesetze-im-
internet.de/bundesrecht/milog/gesamt.pdf.
Bundesverband Gterkraftverkehr Logistik und Entsorgung. Gesetz zur Regelung eines
allgemeinen Mindestlohns. Frankfurt am Main, 2015.
Bureau of Labor Statistics. Economic News Release. July 2, 2015. Accessed July 2, 2015.
http://www.bls.gov/news.release/empsit.t19.htm.
Bureau of Labor Statistics. Occupational Employment Statistics. March 25, 2015. Accessed July
2, 2015. http://www.bls.gov/oes/current/oes_pr.htm#00-0000.
Card, David and Alan B. Krueger. Myth and Measurement: The New Economics of the Minimum
Wage. Princeton: Princeton University Press, 1997.
Charles Brown et al., The effect of the minimum wage on employment and unemployment,
Journal of Economic Literature 20, no.2 (1982): 487-527.
Doucouliagos, Hristos and T.D. Stanley. Publication Selection Bias in Minimum-Wage Research?
A Meta-Regression Analysis. British Journal of Industrial Relations 47, no. 2 (2009): 406-428.
Dribbusch, Barbara. Schnell noch ein Tarifvertrag. TAZ, June 20, 2014. Accessed July 19, 2015.
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Economics Online. Competitive labour markets. Accessed July 2, 2015.
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El-Sharif, Yasmin. Mindestlohn ab 2015: Schwarzarbeitsfahndern fehlt Personal. Spiegel
Online, October 20, 2014. Accessed July 19, 2015.
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massiv-personal-a-998118.html.
Kroet, Cynthia. Conflict over Germanys minimum wage plans. Politico, March 19, 2014.
Accessed July 1, 2015. http://www.politico.eu/article/conflict-over-germanys-minimum-wage-
plans/.
23
Kros, Mathias. Knftig weniger Taxen im Einsatz. Mannheimer Morgen, February 19, 2015.
Accessed July 2, 2015. http://www.morgenweb.de/nachrichten/wirtschaft/regionale-
wirtschaft/kunftig-weniger-taxen-im-einsatz-1.2117066.
Machin, Stephen et al. Where the Minimum Wage Bites Hard: Introduction of Minimum Wages
to a Low Wage Sector. Journal of the European Economic Association 1, no.1 (2003): 154-180.
Neumark, David and William L. Wascher. Minimum Wages. Boston: The MIT press, 2008.
chsner, Thomas. berleben am Steuer. Sddeutsche Zeitung. January 23, 2015. Accessed
August 26, 2015. http://www.sueddeutsche.de/wirtschaft/mindestlohn-fuer-taxifahrer-
ueberleben-am-steuer-1.1869740.
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special emphasis on Germany (Masters Thesis, University of Milwaukee Wisconsin, 2008).
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schneller-tod,1473632,29402536.html.
Schfer, Holger. Der Niedriglohnsektor in Deutschland: Entwicklung, Struktur und individuelle
Erwerbsverlufe. Institut der deutschen Wirtschaft Kln. Berlin, 2011.
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Hinweise/BST-MethHinweise/SvB-und-GB-meth-Hinweise.html.
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Taxis nach der Wirtschaftszweigklassifikation WZ 08).
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Tobias Plog, Eine grundlegende und kritische Darstellung des Mindestlohns in Deutschland
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Nichtbeachtung/folgen-bei-nichtbeachtung_node.html.
24
Appendices
I.Questionnaire
Translated from German (=the cab drivers were asked the questions in German)
This is the questionnaire for employers and employees.
Self-employed were only asked one question and the results are fully stated in the investigation.
Which short term effects had the introduction of a minimum wage in Germany on labor market and
employment in the taxi business in the northern part of the Rhine Neckar Metropolitan Region?
1. Please indicate your district:

Rhein-Neckar Kreis
Mannheim
Heidelberg
Other
2. Please indicate the number of employed taxi drivers in your company:
0
1
2
3-5
6+
3. Please indicate your rank:
Boss/employer
Employed taxi driver
4. Have taximeter prices in your district been raised since the implementation of the minimum
wage?
Yes
Not/ Not already
5. Did your company make any preparations regarding the minimum wage?
Yes
No concrete preparation
6. Did your company make any efficiency adjustments? E.g. by offering less cabs during low
revenue times of the day?
Yes
No
25
7. Are the drivers in your company more motivated now/ trying harder to get rides?
Yes, more motivated
No, less motivated
No change
8. How has the employment in your company changed? Did you fire/hire more people since the
minimum wage came?
Yes, more hired
Yes, more fired
No
9. Do you think that further price increases are necessary so that the minimum wage becomes
bearable?
Yes
No
Dont know
10. Do you have further thoughts/notes on the minimum wage?
11. Do you pay your employees per hour or do you give them a share of the hourly revenue they
make?
Pay by the hour
Pay them share of the hourly revenue they make
12. Did your employees already get the minimum wage before it came (at least 8.50 per hour)?
Yes
No
13. How much did you have to increase the wage of your employees in average?
Not at all
Less than 10%
10 30%
More than 30%
14. How has the minimum wage influenced your wage costs?
Great increase ++
Great decrease --
No/minor change 0
15. If Yes in question 8 for fired:

How much percent of your employed drivers have you fired?
Less than 10%
10 30%
More than 30%
16. What was the main reason for firing employees?
To high labor costs
Less demand (=Less cab rides)
Other:
26
17. Are you planning to fire more workers in the next months?
Yes
No
Dont know
27
II.Results questionnaire
For each question, the answer options are shown with capitalized letters. E.g., A is option 1, B is option 2
etc.
1. Please indicate your district

A 3
B 15
C 13
D 0
2. Please indicate the number of employed taxi drivers in your company
A /
B 5
C 7
D 5
E 14
3. Please indicate your rank
A 12
B 19
4. Have taximeter prices in your district been raised since the implementation of the minimum
wage?
A 28
B 3
5. Did your company make any preparations regarding the minimum wage?
A 16
B 14
No answer 1
6. Did your company make any efficiency adjustments? E.g. by offering less cabs during low
revenue times of the day?
A 10
B 18
No answer 3
7. Are the drivers in your company more motivated now/ trying harder to get rides?
A 5
B 8
C 15
No answer 3
8. How has the employment in your company changed? Did you fire/hire more people since the
minimum wage came?
A 1
B 7
C 18
No answer 1
Drivers left voluntarily 4
28
9. Do you think that further price increases are necessary so that the minimum wage becomes
bearable?
A 8
B 19
C 1
No answer 3
10. Do you have further thoughts/notes on the minimum wage?
Results under other observations in investigation
11. Do you pay your employees per hour or do you give them a share of the hourly revenue they
make?
A 8
B 5
No answer 18
12. Did your employees already get the minimum wage before it came (at least 8.50 per hour)?
A 16
B 14
No answer 1
13. How much did you have to increase the wage of your employees in average?
A 11
B 5
C 9
D 0
No answer 9
14. How has the minimum wage influenced your wage costs?
A 8
B 0
C 11
No answer 12
15. If Yes in question 8 for fired:
How much percent of your employed drivers have you fired?
A 0
B 4
C 1
No answer 2
16. What was the main reason for firing employees?
A 3
B 1
C 1
No answer 2
17. Are you planning to fire more workers in the next months?
A 4
B 16
C 6
D 5
29
III.Employment data taxi business Germany

Tabelle: Beschftigte nach Branchen (4932 Betrieb von Taxis nach der Wirtschaftszweigklassifikation WZ 08)
Deutschland
Zeitreihe
4932 Be trie b von Taxis

Sozialversicherungspf lichtig davon:
Geringf gig Beschf tigte
Monat Beschf tigte ohne Auszubildende ausschlielich Geringf gig Nebenjob Geringf gig
Vernderung Vorjahr Vernderung Vorjahr Vernderung Vorjahr Vernderung Vorjahr
absolut absolut absolut absolut
absolut in % absolut in % absolut in % absolut in %
Jan-11 63,986 3,159 5.2 76,401 885 1.2 52,412 -159 -0.3 23,989 1,044 4.6
Feb-11 64,319 3,079 5.0 76,994 1,257 1.7 52,704 -71 -0.1 24,290 1,328 5.8
Mar-11 64,472 2,875 4.7 76,881 983 1.3 52,431 -239 -0.5 24,450 1,222 5.3
Apr-11 64,646 2,739 4.4 76,339 461 0.6 51,915 -444 -0.8 24,424 905 3.8
May-11 64,726 2,596 4.2 76,110 169 0.2 51,634 -549 -1.1 24,476 718 3.0
Jun-11 64,576 2,340 3.8 75,962 357 0.5 51,396 -436 -0.8 24,566 793 3.3
Jul-11 64,281 2,191 3.5 75,440 797 1.1 50,934 -156 -0.3 24,506 953 4.0
Aug-11 64,461 2,072 3.3 75,445 521 0.7 50,897 -386 -0.8 24,548 907 3.8
Sep-11 65,072 2,109 3.3 76,548 405 0.5 51,642 -442 -0.8 24,906 847 3.5
Oct-11 65,311 2,010 3.2 76,239 -26 0.0 51,230 -839 -1.6 25,009 813 3.4
Nov-11 65,503 1,898 3.0 76,479 33 0.0 51,348 -723 -1.4 25,131 756 3.1
Dec-11 65,563 1,745 2.7 76,870 163 0.2 51,788 -625 -1.2 25,082 788 3.2
Jan-12 65,345 1,359 2.1 76,121 -280 -0.4 51,535 -877 -1.7 24,586 597 2.5
Feb-12 65,541 1,222 1.9 75,945 -1,049 -1.4 51,487 -1,217 -2.3 24,458 168 0.7
Mar-12 65,826 1,354 2.1 76,058 -823 -1.1 51,434 -997 -1.9 24,624 174 0.7
Apr-12 66,057 1,411 2.2 75,969 -370 -0.5 51,142 -773 -1.5 24,827 403 1.7
May-12 66,179 1,453 2.2 76,014 -96 -0.1 51,083 -551 -1.1 24,931 455 1.9
Jun-12 66,167 1,591 2.5 76,066 104 0.1 51,018 -378 -0.7 25,048 482 2.0
Jul-12 65,916 1,635 2.5 75,630 190 0.3 50,633 -301 -0.6 24,997 491 2.0
Aug-12 65,988 1,527 2.4 75,590 145 0.2 50,547 -350 -0.7 25,043 495 2.0
Sep-12 66,584 1,512 2.3 76,830 282 0.4 51,418 -224 -0.4 25,412 506 2.0
Oct-12 66,575 1,264 1.9 75,035 -1,204 -1.6 49,699 -1,531 -3.0 25,336 327 1.3
Nov-12 66,851 1,348 2.1 75,246 -1,233 -1.6 49,768 -1,580 -3.1 25,478 347 1.4
Dec-12 66,880 1,317 2.0 75,494 -1,376 -1.8 50,007 -1,781 -3.4 25,487 405 1.6
Jan-13 66,720 1,375 2.1 75,132 -989 -1.3 50,057 -1,478 -2.9 25,075 489 2.0
Feb-13 66,790 1,249 1.9 75,327 -618 -0.8 50,287 -1,200 -2.3 25,040 582 2.4
Mar-13 66,848 1,022 1.6 75,089 -969 -1.3 50,081 -1,353 -2.6 25,008 384 1.6
Apr-13 66,966 909 1.4 74,929 -1,040 -1.4 49,875 -1,267 -2.5 25,054 227 0.9
May-13 67,058 879 1.3 74,764 -1,250 -1.6 49,711 -1,372 -2.7 25,053 122 0.5
Jun-13 66,693 526 0.8 74,501 -1,565 -2.1 49,575 -1,443 -2.8 24,926 -122 -0.5
Jul-13 66,552 636 1.0 74,198 -1,432 -1.9 49,300 -1,333 -2.6 24,898 -99 -0.4
Aug-13 66,733 745 1.1 74,127 -1,463 -1.9 49,180 -1,367 -2.7 24,947 -96 -0.4
Sep-13 67,295 711 1.1 75,260 -1,570 -2.0 49,910 -1,508 -2.9 25,350 -62 -0.2
Oct-13 67,538 963 1.4 75,358 323 0.4 50,067 368 0.7 25,291 -45 -0.2
Nov-13 67,808 957 1.4 75,701 455 0.6 50,306 538 1.1 25,395 -83 -0.3
Dec-13 67,742 862 1.3 75,717 223 0.3 50,488 481 1.0 25,229 -258 -1.0
Jan-14 67,576 856 1.3 74,802 -330 -0.4 50,207 150 0.3 24,595 -480 -1.9
Feb-14 67,671 881 1.3 75,064 -263 -0.3 50,331 44 0.1 24,733 -307 -1.2
Mar-14 67,748 900 1.3 75,088 -1 0.0 50,224 143 0.3 24,864 -144 -0.6
Apr-14 67,850 884 1.3 75,027 98 0.1 50,094 219 0.4 24,933 -121 -0.5
May-14 67,986 928 1.4 74,787 23 0.0 49,837 126 0.3 24,950 -103 -0.4
Jun-14 67,989 1,296 1.9 74,562 61 0.1 49,598 23 0.0 24,964 38 0.2
Jul-14 67,614 1,062 1.6 74,006 -192 -0.3 49,162 -138 -0.3 24,844 -54 -0.2
Aug-14 67,463 730 1.1 74,036 -91 -0.1 49,110 -70 -0.1 24,926 -21 -0.1
Sep-14 68,080 785 1.2 74,877 -383 -0.5 49,624 -286 -0.6 25,253 -97 -0.4
Oct-14 68,176 638 0.9 74,795 -563 -0.7 49,579 -488 -1.0 25,216 -75 -0.3
Nov-14 68,391 583 0.9 74,930 -771 -1.0 49,704 -602 -1.2 25,226 -169 -0.7
Dec-14 68,349 607 0.9 74,619 -1,098 -1.5 49,661 -827 -1.6 24,958 -271 -1.1
Jan-15 69,991 2,415 3.6 70,202 -4,600 -6.1 45,995 -4,212 -8.4 24,196 -399 -1.6
Feb-15 71,109 3,438 5.1 69,882 -5,182 -6.9 45,510 -4,821 -9.6 24,357 -376 -1.5
Mar-15 71,234 3,486 5.1 69,534 -5,554 -7.4 45,080 -5,144 -10.2 24,434 -430 -1.7
Apr-15 71,573 3,723 5.5 69,327 -5,700 -7.6 44,775 -5,319 -10.6 24,533 -400 -1.6
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Statistik der B undesagentur fr A rbeit
30
IV.Email trade union expert
Email translated from German.
This email is a response by a trade union expert. It is a response to an email sent by me where I asked
whether the trade union thinks a survey result from a taxi union in the city of Bremen is realistic, that
90% of all cab drivers in Bremen dont get the minimum wage49.
Mr. Ole Scheuermann,
I am sorry for coming back to you so late,
From our point of view as a trade union, we can confirm the survey results in Bremen, even though
there are of course exceptions among the companies. Our evaluation is based on complaints and
Feedback for workers employed in this business. The Rhine-Neckar-Region is within the nationwide
trend.
The strategies used to avoid the minimum wage are diverse. In most cases, the official workers hours
are cut and drivers have to do unpaid standby hours at home. They have to stay alert for the case that
someone needs a cab. They are then only paid when they drive a customer. Because the regular working
hours got cut, such a driver is required to rely on this standby mode to make a decent monthly living.
Another alternative is that employers dont pay standing times where the driver waits for customers.
Here, the standing times are declared breaks, even though this practice is illegal. Also, in this case, the
employee is only paid when he transports somebody. The idea that this practice is illicit is also
supported by the Association of German taxis and rental cars.
Also, there are cases where special benefits like holyday allowances are credited as regular wage
payments, thus lowering hourly wages. This practice is not possible to the extent it is done and often, it
is also illegal.
Many employers, even after we advised them , dont do anything against those practices, because they
fear to lose their job otherwise. The institution who should control that there are no illicit practices in
the taxi business is the customs. However, it lacks enough staff to do so. Already in the past, the cab
business should have been controlled better, because it requires special control since it is mention in the
law against illicit businesses.
49
Umfrage zum Mindestlohn, IG Bremer Taxifahrer, accessed July 31, 2015, http://www.ig-bremer-
taxifahrer.de/unsere-themen/mindestlohn-1/umfrage-zum-mindestlohn/
31
Unfortunately, there are no official reports on that issue and there is no official data. We hope this
problem will be solved in the near future.
Yours Sincerely
Mira Ball
ver.di (name of the trade union) Transport department
National department boss
Street public transport
and rail traffic
32
V.Email taxi driver
Translated from German. This email is a response to an email written by me. In the original email, I asked
whether the minimum wage is now doable for the taxi business. The taxi driver comes from Berlin and
has a blog50.
Hello Ole,
Principally, since prices have been raised, the minimum should now be bearable. Actually, that was the
reason for increasing the prices. However, that always depends on the shift, because there are times
where it is not possible to make enough revenue to justify a minimum wage.
It is really difficult to say whether the cab market consolidated. That also highly depends on the region.
It is also dependent on whether local authorities allow for many taxi licenses.
Here in Berlin, the minimum wage has brought quite some momentum. Some employers now pay by the
hour, others still dont pay the minimum wage (e.g. declaring standing times as breaks), others just
require a minimum revenue per hour.
To say it quite frankly: Because no one controls us, everyone just does what he wants, unfortunately.
I hope I could help you.
Yours Sincerely
Sash
50
Startseite, Gestern Nacht im Taxi, accessed July 31, 2015, http://gestern-nacht-im-taxi.de/wordpress/
33

Extended Essay IB Economics Effect Minimum Wage On German Taxi Business

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Extended Essay IB Economics Effect Minimum Wage On German Taxi Business

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IB Economics Extended Essay UWC Atlantic College, May 2016 Candidate no.

What were the short-term effects of the introduction of a minimum

Candidate session: May 2016

Extended Essay Subject: Economics

Supervisor: Julian Jones

Word Count: 3990

In this essay, the following research question is investigated:

Word Count: 296

2. Theory and background information

2.1. Relevant economic models

2.1.1. Competitive labor market:

Fig. 1: Competitive labor market model with equilibrium wage11

Fig. 2: Competitive labor market model with minimum wage ceiling12

2.1.2. Model with Endogenous Effort14:

2.1.3. Shock Effects:

2.1.4. Lagging/ Leading Adjustment:

2.2. Research regarding employment effects of minimum wages

2.3. Labor market in Germany

1. Weinheim (40,000 inhabitants), district Rhein-Neckar Kreis

Fig.3: Map of the Rhine-Neckar Metropolitan Region31

A questionnaire32 with 17 questions was used. Topics were:

I went directly to taxi stops in the three cities.

1. Taxi drivers employed at a taxi company employees = workers

4.2. Employment data

4932 Driving of cabs

Marginally employed taxi business Jan11 - April15

4.3.1. Summary significant findings questionnaire36:

Results self-employed taxi drivers:

Results taxi drivers/ employers of firms with drivers employed:

Total number of all taxi drivers

Asking whether the companies made

Investigating whether there was a

Examining whether employers already

Investigating whether less drivers are

Examining whether employers plan to

19% Don't know

5. Problems and Limitations

The research question was:

Finally, one question remains:

This is the questionnaire for employers and employees.

1. Please indicate your district:

15. If Yes in question 8 for fired:

1. Please indicate your district

III.Employment data taxi business Germany

4932 Be trie b von Taxis

IV.Email trade union expert

Email translated from German.

Mr. Ole Scheuermann,

I am sorry for coming back to you so late,

ver.di (name of the trade union) Transport department

National department boss

Street public transport

and rail traffic

V.Email taxi driver

I hope I could help you.

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