The Interplay of Minimum Wages and Collective Bargaining in Germany – How and Why Does It Vary Across Sectors?

Minimum wages and collective bargaining systems affect wage inequality in different ways and their interaction depends strongly on the overall architecture of national pay setting institutions. Recent research suggests that statutory minimum wages particularly influence the wage distribution in the lower segment, while collectively negotiated wages also have an impact on the distribution in the middle segment. However, depending on the ‘inclusiveness’ of national pay setting institutions, the patterns of the interplay between minimum wages and collective bargaining and their impact on wage levels may also vary across sectors. Drawing on experiences with collectively negotiated minimum wages in several German sectors and the new statutory minimum wage which has been introduced in January 2015, we illustrate that the variation across sectors is particularly pronounced in Germany and explore systematic reasons and relevant factors for the diverging patterns and outcomes.