Changes of the Structure of Wages and Employment with Respect to Qualifications in Germany: An Empirical Analysis.

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.