Minimum Wages and Cost-Push Inflation: Economy-Wide Evidence from Germany

We provide the first estimates of minimum wage effects on the aggregate price level using data on the near-full German consumer basket across four national reforms, 2015-2024. Drawing on a structural model of pricing under imperfect competition, we utilise minimum wage cost shocks rather than the commonly used firm-level ‘bite’ that we show to be biased under strategic complementarity. Labour cost pass-through is 83-94 percent, at the higher end of estimates for other cost shocks. The implied macro-price elasticity is 0.024. The largest increase in October 2022 to €12 raised the aggregate price level by 0.39 percent.