Decreasing Wage Mobility in Germany

Abstract

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp09044.pdf Non-technical summaryCross-section inequality increased in the last decade in Germany. Wage mobility can at least partly offset the increase in cross-section inequality and thus leads to a better understanding of inequality and poverty in a society. If wages are immobile, rising cross-section inequality is associated with a rising inequality of lifetime earnings. On the other hand, the extreme case of total mobility would resemble a lottery re-starting at the beginning of every time period and repositioning the individual at random in the wage distribution. The study at hand analyses the development of the wage mobility in Germany over the last 25 years.The data base of this empirical study is the German Socio-economic Panel (SOEP) for the time period 1984 to 2007, focusing on West Germans. The SOEP is a representative panel data set, which surveys about 11,000 households with 20,000 persons. Wage mobility in terms of the paper at hand is measured by the degree to which ranks are reversed over a 4-year time period where each rank represents one of 100 percentiles of the overall hourly wage distribution. The goal is to look at the individual turnover of persons within the wage distribution at the micro level to identify properties affecting wage mobility.The main findings show that wage mobility has decreased over time, while inequality has increased. Mobility is highest in the middle section of the distribution and highest for persons aged 30-39 years. Individual upgrades in the wage distribution are more likely to occur for university graduates, younger workers, employees in larger firms and for persons working in the public sector, as well as for white-collar workers and less likely for persons who faced an unemployment period in the time of observation. Wages are more volatile in the low-wage sector and for individuals moving downwards in the wage distribution. Das Wichtigste in KürzeSeit Mitte der 1990er Jahre ist die Lohnungleichheit in Deutschland im Querschnitt gestiegen.

Wage Inequality and Wage Mobility in Turkey

“…The mobility measures discussed in the previous section do not give information about We observe that the probability of remaining in the same quintile increases over time in both two and four-year transitions indicating a decline in mobility over time. Similar observations are found by Dickens (2000) in the UK, Hofer and Weber (2002) in Austria, Cardoso (2006) in Portugal and the UK, Gernandt (2009), Riphahn and Schnitzlein (2011) and Aretz (2013) in East and West Germany. On the other hand, a comparison of Tables 12 and 13 shows that the probability of remaining in the same quintile has decreased.…”

Gender Differences in German Wage Mobility

“…This was likely due to labor market institutions, such as unions, and was consistent with the hypothesis of skill-biased technological change especially in the upper part of the wage distribution (Fitzenberger, 1999). Since the mid 1990s, the lower-tail wage inequality has distinctly risen (Dustmann et Second, Gernandt (2009) shows in one of the very few studies on wage mobility in Germany that earnings mobility declined over the last decades using household panel data from the German Socio-Economic Panel (GSOEP). This finding is confirmed by Riphahn and Schnitzlein (2011), which is to the best of my knowledge the only study that analyzes both the evolution of wage inequality and wage mobility using German administrative data.…”

“…Moreover, more explanatory variables than those covered by this study may influence the development of wage inequality and mobility, as is suggested by, e.g., Gernandt (2009) Nevertheless, the simultaneous observation of increasing wage inequality and decreasing wage mobility clearly calls for a closer consideration of workers earning a low wage as this development gives rise to a larger persistence of low-wage employment. However, the determinants underlying the evolution of low-wage mobility are hardly documented in the literature so far.…”

Wage Mobility in East and West Germany

“…In their comparison of East and West German income mobility early after unification Hauser and Fabig (1999) find that mobility was initially much higher in East Germany but declined already by 1995. Gernandt (2009) and Bayaz-Ozturk et al (2011) apply SOEP data (1984-2007 for West Germany and find declining mobility, while Bartels and Bönke (2010) find rising earnings volatility among West German males.…”