Minimum wage non-compliance: the role of co-determination
Abstract We analyse how co-determination is related to non-compliance with the German minimum wage, which was introduced in 2015. The Works Constitution Act (WCA), the law regulating co-determination at the plant level, provides works councils with indirect means to ensure compliance with the statut...
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| Published in: | European journal of law and economics |
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| Main Authors: | , |
| Format: | Journal Article |
| Language: | English |
| Published: |
14-09-2024
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| Online Access: | Get full text |
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| Summary: | Abstract We analyse how co-determination is related to non-compliance with the German minimum wage, which was introduced in 2015. The Works Constitution Act (WCA), the law regulating co-determination at the plant level, provides works councils with indirect means to ensure compliance with the statutory minimum wage. Based on this legal situation, our theoretical model predicts that non-compliance is less likely in co-determined firms because works councils enhance the enforcement of the law. The economic correlates of co-determination, such as higher productivity and wages, affect non-compliance in opposite directions. The empirical analysis, using data from the German Socio-economic Panel (SOEP) for the years 2016 and 2019, demonstrates that non-compliance occurs less often for employees in co-determined establishments, while there is no correlation between non-compliance and the difference between the minimum wage and the wage actually paid. |
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| ISSN: | 0929-1261 1572-9990 |
| DOI: | 10.1007/s10657-024-09811-1 |