Fair Enough? Minimum Wage Effects on Fair Wages
Work satisfaction and productivity depends on workers feeling they are paid fairly. Minimum wage laws aim to raise wages for low-income workers. However, we do not know how minimum wage laws affect workers' fairness perceptions. Using survey data from the German Socio-Economic Panel, we show that the introduction of a minimum wage law in Germany increased the stated fair wage of affected workers. We then experimentally investigate whether the rise in fair wages is only a mechanical response to obligatory wage increases or whether the designated minimum wage serves as a reference point for fair wages. We do not find that the minimum wage acts as a reference point. Our experimental results suggest that the existence of a minimum wage does not change how individuals evaluate the fairness of wages.