Notes

Scratch Notes for the Seminar Paper

Sonneberg

Sonneberg: - Germany’s first AfD district administrator (Landrat) - Robert Sesselmann - prevails in run-off election against conservative CDU - 52.8% to 47.2%

shocking to political establishment, international coverage

Sonneberg also: district with the highest proportion of minimum wage earners in DE - 2022 increase in minimum wage to 12 euros - 44% of Sonneberg residents benefited from this - the highest in Germany

Research Question: What is the connection between minimum wage and populism?

additional about Sonneberg:

  • thüringenweit höchste Industriedichte
  • schon damals viele Arbeiter, die erst rot und dann NS gewählt haben (Wiki)
  • Thüringen erste NSDAP Regierungsbeteiligung
  • auch genannt SPielzeugstadt
  • Wahlergebnisse hsitorisch S.90
    • Stadt mit meisten NSDAP Stimmen 1929

Literature

Overview Papers Economic Drivers

Fischer and Meister (2023) (DIW)

  • trade exposure (globalization)
  • financial crises
    • austerity measures
    • unfair perception of bailouts
  • MIgration
    • economic fears (must not be rational)
    • sudden influxes of many = more right wing
  • inequality
    • perception of unfairness
    • low intergenerail mobility

another overview by Guriev and Papaioannou (2022)

  • trade
    • exposure to low wage industrial competition
    • especially in rural regions (cities could protect from impacts with service industry)
  • economic crisis
    • austerity
    • redistribution
  • cultural backlash
  • immigration
    • shock immigration of 2015 syrian refugee crisis
    • higher perception than reality
  • also emigration (esp. eastern europe)
    • good ground for populist vote of the remaining

Economic Drivers

Literature on economic drivers presented above, but on german / european district level

Gabriel, Klein, and Pessoa (2023)

regional Database on political costs of austerity

  • fiscal austeritiy =>
    • higher share for extreme parties
    • lower vote turnout
    • 1% reduction => 3% increase vote
  • austerity driven recession => even more
    • lower trust in government
    • special of just recession

Dippel et al. (2022) : Trade in Germany Populist

  • case study germany Effect of Trade on Workers and Votes
  • low skilled manufacturing workers = votes responsive to trade exposure
  • level of Landkreise in Germany
  • have interesting dataset on trade exposure in the counties

Alesina, Stantcheva, and Teso (2018)

  • lower intergenerational mobility
  • higher rpreference for redistributional policy
  • differences in perception

Sociodemographic Driver Populism

Pickel (2019): Sozialstrukturelle Analyse

  • self identify class: lower class & working class & middle class
    • real: mostly workers and Facharbeiter
    • also some lower state servants (Beamte)
  • no age / income differences to general population

Hövermann (2023): Sociodemografic Factors and Work

  • more temporary workers (befristet)
  • bad working conditions = lower esteem of work
  • uncontempt with current wage
  • lower share of workers council (Betriebsrat)

Cultural Drivers

  • not only economic explanations, also cultural / identity politics
  • activated by economic shocks

Cantoni, Hagemeister, and Westcott (2019)

  • municipalities with nazi history 1933 = stonger support today
  • AfD = party platofrm with low social stigma

position & status

Kurer and Staalduinen (2022) Status Discrodance

  • calculated expected status based on parents occupation
  • and difference to achieved status in reality
  • especially men and eastern german high discordance

also Brian Burgoon et al. (2019)

  • positional deprivation = income growth relative to other influences vote
  • slow = retreat from mainstream parties = feeling of losing out

Literature on Minimum Wage and Politics

Zavodny (2020)

  • political economy of minimum wages
  • focuses mostly on height of MW in different countries
    • influencing factors on it

focus more general on labor market policies in general and support for populist vote Bergman (2022)

  • loss of status as driver

Data

Vote Share AfD: Bundeswahlleiter

  • calculated for the different Landkreise, not Wahlbezirke
  • Parliament Election on 09/2021

Minimum Wage: Wirtschaft- und Sozialwissenschaftliches Institut (Hans Böckler Stiftung)

based on:

  • BA Arbeit
  • Destatis
  • SOEP

=> extrapolated by WSI

  • “sozialversicherungspflichtig beschäftigte” in district
  • part / full time, not MiniJob
  • projected for 01/10/2022

additional Data

  • Regionalstatistik des Bundes und der Länder
  • Regionatlas for Geodata

Method

Linear Regressio with OLS Estimator

\[ \text{afd}_k = \beta_0 + \beta_1 \times \text{min}_k + \epsilon \]

  • \(\text{afd}_k\) AfD Vote Share in Landkreis \(k\)
  • \(\text{min}_k\) Share of Minimum Wage Recipients in Landkreis \(k\)
  • \(\beta_0\) Intercept
  • \(\beta_1\) Slope
  • \(\epsilon\) Error

Results

basic Model

  • Estimated Coefficient = 0.7
  • statistically significant
  • R2 = 0.61

=> 1% increase in MW recipoients => 0.7% increase in AfD share

Model with Eastern German Dummy

  • as visible on electoral Maps = eastern Germany more right wing vote share
  • dummy for ost (1 = eastern, 0 = not)
  • coefficient lower = 0.3
  • but still significant
  • R2 increase = 0.74

additional controls

  • not significant in all specificiations
  • do not change R2 much
  • no real impact
  • unemployment rate,
  • log GPD per Cap
  • log pop. density
  • foreigners rate
  • age

Test for Wahlergebnis of left poplist party (Die LINKE)

  • some way yes
  • but not really significant
  • as described by Piketty = left today not really “abgehängte”

Discussion

Populism = multicausal, not only socioeconomic, but also sociodemographic, cultural, …

my argument:

Minimum Wage is one of the channels translating abstract phenonema to populist vote:

phenomena / factors (from literature):

  • financial crisis
  • austeritiy
  • trade exposure

lead to: Minimum Wage / Low Wage sector

equals: - lack of mobility - status discordance - general disappointment (inequality etc)

=> leads to populist voting

factors:

  • financial crisis
    • shwon by Nau and Soener (2019)
    • crisis hits low income and middle income
    • creates income precarity
    • higher risk for insecuritry for all groups
  • austerity
  • trade exposure
    • as shown by Utar (2018)
    • manufacturing workers => instable low wage service jobs

channels

  • lack of mobility
    • Dodin et al. (2021)] adn (Alesina, Stantcheva, and Teso 2018)
    • if high share of MW = not many higher paying jobs
    • esp. eastern germans = not many high earning positions
    • future pessimism = easier for populists
  • status discordancy Kurer and Staalduinen (2022)
    • MW = lowest status possible (except unemployed)
    • comparison to parent generation with higher status
      • either because east german = more middle class, compressed wage scale
      • pre financial crisis times = more job stability etc.
  • positional deprivation Brian Burgoon et al. (2019)
    • rising share of top 10% Bartels (2019)
    • but not fast rising MW (except for 12 increase, but not much more)
    • lower end of wage scale (feels like down)
    • disappointed by system
    • see inequality
    • inequality => populism
    • ! in (brian?), top income is good for left, while lower decie growth is good for right…
  • additional: instability of job, fear of losing joba nd being unemplyoed ling

Controls

why minimum wage, not general low wage sector

  • of course, MW kind of proxy for low wage sector
  • but is additional psychological (very far end of wage scale)
  • nobody below you (except unemployed)
  • far away from high pay jobs of “winners”

why vote for AfD, not Linke?

  • shown by Bergh and Kärnä (2022), that unemployment = left, insecure job = right
  • Linke = more for privileged voters (piketty)
  • AfD more effective, much attention on them in public discourse

why now, not earlier?

  • party changed attitude towards MW
    • earlier: jobkiller
    • now: important social policy (Grundsatzprogramm)
  • social acceptance of Afd: Exit (Abstention) –> Voice
    • following Hirschman (1972)
  • also: Inflation now hits very hard (2020f)
    • Tober (2022)
    • especially low wage in rural regions

endogeneity: Afd -> MW?

  • not in power anywhere except Sonneberg and small districts
    • MW rise was before
    • not long in power
  • no change in economic structure there

labor market hypothesis?

  • rejected (unemployment share not relevant)
  • but may still have a place as irrational fear

Visualization of Theory:

%%{init: {'theme': "neutral"}}%%
graph LR

A([Financial Crisis]) & B([Austerity]) & C([Trade exposure]) --> MW((Mininum Wage))

A & B & C -.- O[... other Channels]

MW --- D[Lack of mobility] & E[Status Discordance] & F[Positional Deprivation]
--> AfD((Populist voting))
O -.-> AfD

other channels:

eastern germany

  • hard hit by post-Wende turmoil, (Snower and Merkl 2006)
  • creation of Niedriglohnsektor due to TreuHand policy
  • cultural factors as well
  • Mau (2019) vast sociological study (shows difference)

inflation (Tober 2022)

  • hits lower wage workers harder
  • especially rural regions with high share of car dependency

Narrative Case Example: Sonneberg

Conclusion

not stop from higher MW!

Policy

  • union bargaining incerase for higher wages
  • increase social mobility + decrease east west inequality

future Research

  • characteristics of MW jobs
  • panel data set with more than one point in time

References

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Bartels, Charlotte. 2019. “Top Incomes in Germany, 18712014.” The Journal of Economic History 79 (3): 669–707. https://doi.org/10.1017/S0022050719000378.
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