Skill Compression, Wage Differentials and Employment: Germany vs. The Us
Richard B. Freeman
National Bureau of Economic Research (NBER); University of Edinburgh - School of Social and Political Studies; Harvard University; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)
University of Wuppertal - Department of Economics; University of Utrecht - Faculty of Social Sciences; Institute for the Study of Labor (IZA)
NBER Working Paper No. w7610
Germany's more compressed wage structure is taken by many analysts as the main cause of the German-US difference in job creation. We find that the US has a more dispersed level of skills than Germany but even adjusted for skills, Germany has a more compressed wage distribution than the US. The fact that jobless Germans have nearly the same skills as employed Germans and look more like average Americans than like low skilled Americans runs counter to the wage compression hypothesis. It suggests that the pay and employment experience of low skilled Americans is a poor counterfactual for assessing how reductions in pay might affect jobless Germans.
Number of Pages in PDF File: 31working papers series
Date posted: May 18, 2000
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