Revealing Dynamics: The Impact of Minimum Wage on Inequality Within Germany’s Regions

This paper examines the impact of the statutory minimum wage introduction in Germany on within-region inequality. Utilizing SOEP data, we estimate the effects across population subgroups disaggregated by sex. Macro-level findings show that while the interquartile ratio did not change significantly overall, the interdecile and P25/P10 ratios declined by -9% and -5%, respectively. However, disaggregation by groups reveals opposite trends for men and women. For women, the effect on hourly wages is about -5% and statistically significant only in the first year after the reform. On the contrary, for men, it appears later, increases over time, and reaches -10% in 2019–2022.Individual-level analysis reveals that for men the effect is concentrated in the first quartile of wage distribution, with no significant reduction in working hours, contributing to a cumulative and statistically significant decline in inequality. For women, however, there are not only significant spillover effects—with the top quartile experiencing real hourly wage decline —but also a statistically significant reduction in contracted hours, especially for lowwage earners. Both of these factors contribute to the limited effects of policy on women, despite an initial rise in hourly wages at the lower end of the distribution.