Empirical Essays on Wages

The bracket that connects the six conceptual chapters is the individual wage; the topics in detail are wage distribution, wage mobility and wages for two special groups: graduates in the humanities field and persons with migration background. For a long time the wage distribution in Germany was characterized as more or less stable. This changed, beginning with the economic downturn in 1992/93 when wage inequality started to increase in both parts of Germany – in West Germany wage inequality was mainly driven below the median and in East Germany above. This increase affected all groups: females and males, foreigners, self-employed and even the core workforce of prime-age dependent employed male workers, but was significantly higher for persons with lower tenure or, in other words, for persons with less job experience or those who just entered the labour market. Up to 40 percent of this group faced real hourly wage losses between 1994 and 2005 in West Germany. At the same time, wage mobility in Germany decreased. Thus, individuals faced a more stable wage distribution, with lower chances of moving upwards. However, mobility did exist for some groups: Younger workers, better educated workers and persons not working in blue-collar occupations had higher chances of moving upwards. Joint explanation of mobility and inequality make for a good description of the situation on the German labour market – higher inequality coupled with lower mobility. This means that while the wage gap in the German society widened, the chances of moving upwards decreased. Highly educated persons, defined as persons with a degree from a university or a technical college, earn the highest wages in Germany and also have higher chances of moving upwards in the wage distribution. However, this group is heterogeneous in the sense of labour market outcomes. The group in the weakest position are humanities graduates; they earn the lowest wages of all academics, face the highest unemployment rates and are more often in precarious employment. This situation is comparable to Great Britain. An important sub-group of the population living in Germany are persons with migration background. First of all, the definition of this group is inconclusive. While in traditional immigration countries like the U.S. a lot of studies use ethnic categories such as blacks, whites and Hispanics, it has been common practice to use nationality in Germany. Beginning with the large inflow of resettlers from Eastern Europe in the late 1980s and the early 1990s, as well as the new naturalization law in 2000, this definition does not suitably describe the whole group of interest. Nowadays about 19 percent of the population in Germany have a migration background, while only 9 percent are foreigners. This share will increase in the near future as about one third of the children below the age of six in Germany today have such a migration background. These are the future working (or unemployed) cohorts of the German labour market. With regard to their wage prospects, the group of German citizens with migration background is closer to foreigners than to native Germans – there are no significant wage differences between foreigners and the group encompassing all persons with migration background. Apart from this, there are significant wage differences between native Germans and foreigners and German citizens with migration background. These differences are mainly driven by price effects. Education has a strong influence on wages, persons with an apprenticeship degree earn higher wages than persons without any degree and persons with a university degree earn higher wages than persons with an apprenticeship degree. For persons with migration background, it is of particular importance in which country and in what form of education system the degree was achieved. Persons with a degree achieved in Germany can expect higher wages than persons with a degree from their home country. Another important prerequisite for participating successfully in the German labour market is the knowledge of the German language. Better language skills indirectly lead to higher wages through improved participation and employment opportunities in better paying industries and occupations.