The Minimum Wage : An Effective Means to Regain the Electorate's Confidence?

In this paper, we analyse the policy feedback on the minimum wage in Germany. We find a negative effect on the electorate’s preference for ruling parties in regions with lower median wages. Especially workers directly affected by the minimum wage give a negative policy feedback in the year after the minimum wage introduction. The Difference-in-Differences estimations use data from a large household panel and exploit regional differences in the bite of the minimum wage using the Kaitz index. With a mediation analysis, we show that decreasing working hours partly explain the negative policy feedback effect. Individuals with increasing hourly wages on average do not experience a significant increase in their monthly wages because of reduced working hours. This result is robust to different model specifications