Understanding Midijobs - Renewal Proposal

• Applicant: Professorin Regina Therese Riphahn, Ph.D.
• Subject Area: Economic Policy, Applied Economics ; Statistics and Econometrics
• Term: since 2019
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 421989959

The international literature provides intense discussions of programs favoring low income earners. In this debate, the German Minijob and Midijob programs attract increasing attention. Minijobs are employment relationships with monthly earnings up to 450 Euro per month. Minijob employees are exempt from social insurance (SI) contributions and income taxes. Minijob employers pay lump sum contributions. Midijobs are employment relationships with monthly earnings of 450-1,300 Euro. Midijob employees benefit from reduced SI rates, which increase with earnings. Midijob employers pay regular SI contributions. Individual earnings are subject to income taxes if they exceed 450 Euro per month; if earnings exceed 1,300 Euros per month employees pay full SI contributions. The programs are of substantial magnitude. At the end of 2020, about 10 million individuals worked in Mini- and Midijobs. The next federal government plans to pursue further reforms of the Mini- and Midijob institutions even though reliable evidence on the effectiveness of prior measures is unavailable. This renewal proposal for the DFG project "Understanding Midijobs" applies for funding to complete the subprojects proposed initially and additionally to evaluate policy reforms that have been implemented since the initial proposal was submitted. This renewal proposal describes the research that has been done on subprojects 1 and 2, and outlines planned future work in two additional subprojects. In subproject 3, we add to the literature on the incidence of payroll tax subsidies. We take advantage of many changes in contribution rates for Mini- and Midijob employers and employees over time to identify their effects on wages. This allows us to answer the question whether wages respond to changes in contribution rates levied on employers and/or to payroll tax subsidies provided to employees. The results clarify who will benefit from future changes of the Mini- and Midijob programs and whether the programs succeed in supporting low earning workers, at all. Subproject 4 is based on the 2013 and 2019 reforms of the Midijob program. The reforms expanded the monthly Midijob earnings range from 400-800 Euro to 450-850 Euro (since 2013) and subsequently to 450-1,300 Euro (since 2019). The main reform objective was to improve the situation of low income earners. Subproject 4 evaluates whether the reform objective has been met. We apply difference-in-differences analyses to determine whether the expansion of Midijobs increased earnings, earnings growth, and the propensity to leave Minijob for regular employment. We compare the behavior of groups of individuals who benefited to different extents from the new earnings ceilings.

• DFG Programme: Research Grants