Band 219, Heft 1-2

The paper investigates the development of the skill-specific wage and employment structure for male full-time workers in Germany using a large micro data set for the time period 1975 to 1995. There are three main results of the analysis: First, employing two alternative measures for skill-intensity, a uniform trend towards a more qualified workforce prevails across sectors. Second, in contrast especially to the U.S. experience, also the lower deciles of the wage distribution profited from significant real wage growth. Third, although observed changes in the wage structure are not dramatic, the German economy is not a perfect bulwark against the world-wide trend of a more differentiated wage structure. More specifically, the tendency to more wage compression in the lower tail of the distribution during the late seventies and early eighties has been reversed since then. In the upper tail of the distribution, log percentile ratios have been increasing for all workers, especially for the more skilled. A decomposition analysis confirms most of the descriptive results. In contrast to these, however, it turns out that the skill premium for graduates from a university or polytechnics did not fall when corrected for a negative structural effect.

The existence and development of internal labor markets has a strong impact on the structure of wages and employment. The paper discusses three important aspects of internal labor markets. Firstly, segregation due to qualification has been growing between establishments during the last years, accompanying the growing wage inequality between skills. Recent theoretical work trying to explain these combined facts refers to the properties of the production function. This leads to the following question: When do establishments choose a high wage strategy combined with a highly trained workforce and when do they opt for a low wage strategy employing a poorly trained workforce? Secondly, the measurement of qualification can be improved by using more establishment oriented variables that capture the interaction of qualification, information technologies and organization of work. The investment in information technologies has the strongest positive impact on productivity in firms with a high human capital endowment and a decentralized organization of work. Thirdly, some important restrictions for the adjustment of wage and employment structures are due to the existence of internal labor markets, and they are very similar across countries. Under specific conditions these restrictions can create incentives for firms to invest in the human capital of less qualified workers improving their wage and employment opportunities.

The most popular explanation for greater job creation in the US than in Germany is that greater dispersion of wages coupled with less regulations governing the labour market and the product market in the US has induced firms to employ many less skilled workers. While popular, these explanations turn out to be difficult to prove empirically. Based on the Comparative German American Structural Database and the International Adult Literacy Survey we find that: 1. Employment rates differ more than unemployment rates by skill levels and overall. 2. German and US relative pay by level of skill was similar in 1970 but diverged in the 1980s. 3. The German work force is more skilled than the US work force especially at the lower skill levels. 4. The employment of skilled to unskilled labour within industries is unrelated to country differences in skill premium but changes in relatives wages are related to changes in relative employment. 5. The differing dispersion of wages is not a major contributor to differences in employment rates between Germany and the US. The jobs problem in Germany is not primarily one of relative labor demand but of demand for labor in general. Zusammenfassung Die populärste Erklärung für die amerikanische Beschäftigungsexpansion ist die größere Lohnungleichheit in Verbindung mit deregulierten Arbeits- und Produktmärkten, die die amerikanischen Unternehmen zur Beschäftigung auch gering qualifizierter Arbeitnehmer veranlaßt hat. Obwohl sehr populär, ist diese These schwierig empirisch nachzuweisen. Basierend auf der Comparative German American Structural Database und dem International Adult Literacy Survey kommen wir zu dem Ergebnis, daß: 1. Beschäftigtenquoten stärker als die Arbeitslosenquoten abweichen. 2. Relative qualifikationsspezifische Löhne in Deutschland und den USA 1970 etwa gleich waren, sich aber in den 80er Jahren auseinanderentwickelt haben. 3. Die deutschen Erwerbspersonen insbesondere im unteren Bereich qualifizierter als die amerikanischen Erwerbspersonen sind. 4. Die Beschäftigungsrelationen von qualifizierten und geringer qualifizierten Arbeitnehmern nicht auf unterschiedliche Lohnstrukturen zurückzuführen sind, daß aber Änderungen der Lohnstruktur die Beschäftigungsstruktur beeinflussen. 5. Die unterschiedlichen Lohnverteilungen keinen wirklich bedeutenden Beitrag für die Unterschiede in den Beschäftigungsquoten der USA und Deutschland leisten. Das Job-Problem in Deutschland ist vor allem auf eine generell zu geringe Arbeitsnachfrage zurückzuführen.

Building on a Heckscher-Ohlin-Samuelson framework with factor price rigidities, this paper provides an empirical analysis of the relationship between trade, technical progress, and the labor market in West Germany for the period from 1970 until 1990. The analysis builds on relative product prices as the major transmission channel of trade effects on the labor market and allows for three skill types of labor. The major findings are that, relative to skilled labor, wages were increasing disproportionately both for low- and high-skilled labor whereas employment trends were favoring higher skill levels monotonically. Import competition as well as total factor productivity were increasing disproportionately in those industries using low- or high-skilled labor intensively. These results are consistent with trade effects dominating for low-skilled labor and technology effects for high-skilled labor while wage bargaining institutions were holding up relative wages of low-skilled labor. The combined effect accounts for the disproportionate increase of unemployment for low-skilled workers. Zusammenfassung Basierend auf relativen Outputpreisveränderungen als Transmissionsmechanismus untersucht diese Arbeit empirisch die Zusammenhänge zwischen Außenhandel und westdeutschem Arbeitsmarkt von 1970 bis 1990. Die Analyse unterscheidet drei Qualifikationsstufen des Faktors Arbeit. Es zeigt sich, daß einerseits die Entlohnung sowohl für niedrig- und hochqualifizierte Arbeit stärker anstieg als für die mittlere Qualifikationsstufe und daß andererseits die Beschäftigungsentwicklung positiv mit dem Qualifikationsniveau korreliert ist. Importkonkurrenz und totale Faktorproduktivität stiegen vergleichsweise stark in den Industrien, die niedrig- und hochqualifizierte Arbeitnehmer intensiv beschäftigten. Wenn man Lohnrigiditäten und daraus resultierende Arbeitslosigkeit berücksichtigt, sind die Ergebnisse damit konsistent, daß Handelseffekte für niedrigqualifizierte Arbeitnehmer und Technologieeffekte für hochqualifizierte Arbeitnehmer dominieren.

In Germany, the skill structure of wages remained stable in the last two decades while employment of the low skilled deteriorated considerably relative to employment of the high skilled. This paper analyses the impact of technical progress on the skill structure of employment and wages by means of an insider-outsider-variant of a right-to-manage model. While wages of high skilled employees is determined on a competitive labor market, wages for all other skill groups are subject to a Nash bargaining between unions and the firms. The econometric evidence presented is based on West German manufacturing data at the one-digit level. A semi-structural model is estimated which is sufficiently flexible to be regarded as a second order approximation of a general union preference function. The approach enables us to identify the indirect effects of technical progress on employment resulting from the bargaining process. These indirect effects prove to be quantitatively important. In some industries job losses due to technical progress for the low skilled relative to the high skilled are generated through counter acting wage policies. The findings support the view that insider-outsider mechanisms are operating on the German labor market.

Based on merged data from the IAB-establishment panel survey and the historic files of the employment statistics register, a translog cost system was estimated for six qualification groups (blue and white collar workers stratified into unskilled, skilled and highly-skilled employees) for West German production industries for the year 1995. Substitution possibilities between differently qualified employees are investigated at the establishment level. The derived substitutional relationships within the blue collar workers were very similar to those within the white collar workers. Skilled employees and, to a lesser extent, highly skilled employees are substitutes for the unskilled. This could at least partly explain the rise in unemployment amongst the unskilled. In contrast, the demand for skilled workers does not depend on the wage of the highly skilled employees and vice versa. The frequently cited results that the own-wage demand elasticity decreases with skill, can be confirmed between skilled and highly skilled employees, but not between skilled and unskilled employees. The elasticities of substitution between blue collar and white collar workers are relatively low; unskilled, skilled and highly skilled blue collar workers are found to be complements to the analogue group of white collar workers. Finally, the evidence does not favor the capital-skill complementarity hypothesis.

The German labour market performance is falling behind that of other European countries. Portugal, for instance, has decreasing unemployment rates, leading to a share of only 4.6 % unemployed persons in 1998 (Germany: 9.5 %). This paper sheds some light on the divergent development from a matching point of view. I present matching functions based on comparable panel data on hires, vacancies and unemployment at the occupational level for Portugal and Germany. Both countries reveal low matching elasticities with respect to unemployment. In Portugal, however, there is a strong upward trend of the matching efficiency, whereas Germany’s labour market has become less flexible over time. The analysis of the reasons is eased by availability of panel data. Because of high degrees of freedom, aggregate mismatch indicators are implemented as covariates of the matching trend. It turns out that the evolution of real wages is a significant factor of mismatch in Germany. There seems to be growing mismatch because the (demanded) feasible wage of firms does not coincide with reservation wages of labour supply. Moreover, the slow expansion of the service sector and the failing reintegration of women coming from out of the labour force are obstacles of more efficient matching in Germany. In Portugal, on the other hand, the reduction of minimum wages has significantly contributed to increased matching activities.

This econometric study deals with the question as to what extent apprentices after successfully completing their training stay with the firm where they have received their training and, if so, how long that job tenure holds. Determinants of both decisions can be seen from both the employer's and the employee's viewpoint. The firm is interested to employ these former apprentices in order to collect the returns from its investment in their training which frequently is associated with net costs. On the other hand, the firm dismisses apprentices if training is viewed by the firm as a screening device or if apprentices are engaged in work for which, in terms of wages, they are too expensive afterwards. The young trained worker bases his or her decision to stay or to leave on considerations such as experimenting with several jobs (“job shopping”). The realization of such an experimenting may depend on the situation on the labour market. The empirical part uses individual employee data covering the time period 1980 to 1991 in West Germany and is based on a hazard rate model.

The paper analyses the following questions: Does on the job training tie employees to the firm or increase the propensity to change the job? Can significant differences be observed between skill or labor force groups? Are external effects induced by on the job training, namely, does the pro-pensity to leave the firm change for non-trained employees? These topics are investigated based on generalized additive models which make use of nonparametric methods to determine unspecified nonlinear effects. The investigation is carried out using German data on individuals (GSOEP) and establishments (The Hannover Panel). The major results are: On the job training usually reduces the probability to quit the job. Especially in the short run, the propensity to stay in a firm after additional training is increased for high skilled workers. Firm-paid training increases this propensity to a higher degree than worker-financed courses. Unskilled workers can improve their working conditions only by training for which they pay on their own and only if they change the employer after the course. Furthermore, employers often use training to start or to accelerate replacement processes. Crowding out of unskilled by skilled workers is the consequence. The higher the firm’s expenditures for training the higher is the propensity to fill vacancies by external recruitment.

In Germany, the number of low-wage jobs is relatively small. The paper examines why this is so and which institutional reforms of the welfare state could help to expand the labour demand for low-wage work to give persons with a relatively low productivity a better chance to reintegrate into the labour market. The author proposes a reform of the German welfare state: away from granting unconditional unemployment and social aid towards providing aid for reemployment. The main elements of the reform are (i) subsidies to low-wage employment to foster a genuine market for labour with low productivity and (ii) setting a high priority by the relevant social and employment agencies on re-integration aims. The author extensively discusses a number of potential arguments against his reform proposal.

We analyze the effectiveness of publicly financed training and retraining programs in east Germany as measured by their effects on individual re-employment probabilities after training. These are estimated by discrete hazard rate models on the basis of individual-level panel data. We account for unobserved individual heterogeneity in both the training participation and outcome equation. The latter differentiates between transitions into “stable” and “unstable” employment after the completion of a training program. Our findings are that in the first phase of the east German transition process, when the institutions delivering the training programs were being set up, there are no positive effects of training on the probability to find stable employment. For the period of September 1992 to November 1994, when the institutional structure for the programs was in place, we find positive effects of both on-the-job and off-the-job training for women, and positive effects of off-the-job training for men. Zusammenfassung Die individuellen Beschäftigungseffekte öffentlich finanzierter Fortbildungs- und Umschulungsmaßnahmen (FuU) in Ostdeutschland werden mit Hilfe individueller Panel-Daten anhand diskreter Abgangsratenmodelle geschätzt. Für unbeobachtete individuelle Heterogenität wird sowohl in der Selektions- als auch in den Ergebnisgleichungen kontrolliert. Letztere unterscheiden zwischen Übergängen in „stabile“ und „instabile“ Beschäftigung nach Abschluß der FuU-Maßnahme. Es zeigt sich, daß während der Aufbauphase der FuU-Maßnahmen keine positiven Effekte auf die Wahrscheinlichkeit, eine stabile Beschäftigung zu finden, zu verzeichnen sind. Nach der Aufbauphase, d.h. für den Zeitraum September 1992 bis November 1994, werden positive Effekte sowohl inner- als auch außerbetrieblicher FuU-Maßnahmen für Frauen und positive Effekte außerbetrieblicher FuU-Maßnahmen für Männer geschätzt.