[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/zbw/zewdip/12041.html
   My bibliography  Save this paper

What explains the decline in wage mobility in the German low-wage sector?

Author

Listed:
  • Aretz, Bodo
  • Gürtzgen, Nicole
Abstract
In this paper, we study how wage mobility in the low-wage sector has changed in western Germany between 1984 and 2004. Using German individual register data, we document a clear upward trend in the persistence of low-wage employment for both men and women. Next to compositional shifts of the low-wage sector relative to the high-wage sector, this trend may be explained by an increase in genuinestate dependence, which occurs if low-wage employment today causes lowwage employment in the future for reasons of, e.g., stigmatization or human capital depreciation. To isolate the latter, we model low-pay transitions by estimating a series of multivariate probit models. We address the initial conditions problem and the endogeneity of earnings attrition in our estimation approach by accounting for the selection into low-wage employment and earnings retention. Our findings for men and women point to an upward trend of genuine state dependence among low paid workers especially since the beginning of the 1990s. Using decomposition techniques, we show that between 35 and 54 per cent of the increase in genuine state dependence during the 1990s is accounted for by compositional effects.

Suggested Citation

  • Aretz, Bodo & Gürtzgen, Nicole, 2012. "What explains the decline in wage mobility in the German low-wage sector?," ZEW Discussion Papers 12-041, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:12041
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/60101/1/719845386.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Eswar S. Prasad, 2004. "The Unbearable Stability of the German Wage Structure: Evidence and Interpretation," IMF Staff Papers, Palgrave Macmillan, vol. 51(2), pages 354-385.
    2. Jean‐Marc Robin, 2011. "On the Dynamics of Unemployment and Wage Distributions," Econometrica, Econometric Society, vol. 79(5), pages 1327-1355, September.
    3. Daron Acemoglu, 2003. "Cross-Country Inequality Trends," Economic Journal, Royal Economic Society, vol. 113(485), pages 121-149, February.
    4. repec:hal:spmain:info:hdl:2441/eu4vqp9ompqllr09j003nctkn is not listed on IDEAS
    5. Mark B. Stewart & Joanna K. Swaffield, 1999. "Low Pay Dynamics and Transition Probabilities," Economica, London School of Economics and Political Science, vol. 66(261), pages 23-42, February.
    6. Lorenzo Cappellari & Stephen P. Jenkins, 2006. "Calculation of multivariate normal probabilities by simulation, with applications to maximum simulated likelihood estimation," Stata Journal, StataCorp LP, vol. 6(2), pages 156-189, June.
    7. Lorenzo Cappellari & Stephen P. Jenkins, 2004. "Modelling low income transitions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(5), pages 593-610.
    8. repec:hal:wpspec:info:hdl:2441/eu4vqp9ompqllr09j003nctkn is not listed on IDEAS
    9. Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 39-54, January.
    10. Martin Biewen, 2009. "Measuring state dependence in individual poverty histories when there is feedback to employment status and household composition," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(7), pages 1095-1116, November.
    11. Riphahn, Regina T. & Schnitzlein, Daniel D., 2016. "Wage mobility in East and West Germany," Labour Economics, Elsevier, vol. 39(C), pages 11-34.
    12. Peter Gottschalk, 1997. "Inequality, Income Growth, and Mobility: The Basic Facts," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 21-40, Spring.
    13. repec:bla:econom:v:67:y:2000:i:268:p:477-97 is not listed on IDEAS
    14. Lorenzo Cappellari & Stephen P. Jenkins, 2008. "Estimating low pay transition probabilities accounting for endogenous selection mechanisms," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 57(2), pages 165-186, April.
    15. Moshe Buchinsky & Jennifer Hunt, 1999. "Wage Mobility In The United States," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 351-368, August.
    16. Lorenzo Cappellari, 2007. "Earnings mobility among Italian low-paid workers," Journal of Population Economics, Springer;European Society for Population Economics, vol. 20(2), pages 465-482, April.
    17. Rhein, Thomas & Gartner, Hermann & Krug, Gerhard, 2005. "Niedriglohnsektor: Aufstiegschancen für Geringverdiener verschlechtert," IAB-Kurzbericht 200503, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    18. Uhlendorff, Arne, 2006. "From No Pay to Low Pay and Back Again? A Multi-State Model of Low Pay Dynamics," IZA Discussion Papers 2482, Institute of Labor Economics (IZA).
    19. Lee, Sokbae & Wilke, Ralf A., 2009. "Reform of Unemployment Compensation in Germany: A Nonparametric Bounds Analysis Using Register Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 27(2), pages 193-205.
    20. Omori, Yoshiaki, 1997. "Stigma Effects of Nonemployment," Economic Inquiry, Western Economic Association International, vol. 35(2), pages 394-416, April.
    21. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
    22. Timm Bönke & Giacomo Corneo & Holger Lüthen, 2015. "Lifetime Earnings Inequality in Germany," Journal of Labor Economics, University of Chicago Press, vol. 33(1), pages 171-208.
    23. Biewen, Martin & Steffes, Susanne, 2010. "Unemployment persistence: Is there evidence for stigma effects?," Economics Letters, Elsevier, vol. 106(3), pages 188-190, March.
    24. Paul J. Devereux & Robert A. Hart, 2006. "Real Wage Cyclicality of Job Stayers, Within-Company Job Movers, and Between-Company Job Movers," ILR Review, Cornell University, ILR School, vol. 60(1), pages 105-119, October.
    25. Amanda Gosling & Stephen Machin & Costas Meghir, 2000. "The Changing Distribution of Male Wages in the U.K," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(4), pages 635-666.
    26. Christian Dustmann & Johannes Ludsteck & Uta Schönberg, 2009. "Revisiting the German Wage Structure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(2), pages 843-881.
    27. Lorenzo Cappellari, 2002. "Do the `working poor' stay poor? An analysis of low pay transitions in Italy," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(2), pages 87-110, May.
    28. Kohn, Karsten, 2006. "Rising Wage Dispersion, After All! The German Wage Structure at the Turn of the Century," IZA Discussion Papers 2098, Institute of Labor Economics (IZA).
    29. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-990, October.
    30. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-1381, September.
    31. Gernandt, Johannes, 2009. "Decreasing wage mobility in Germany," ZEW Discussion Papers 09-044, ZEW - Leibniz Centre for European Economic Research.
    32. Ben Lockwood, 1991. "Information Externalities in the Labour Market and the Duration of Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(4), pages 733-753.
    33. Lorenzo Cappellari & Stephen P. Jenkins, 2003. "Multivariate probit regression using simulated maximum likelihood," Stata Journal, StataCorp LP, vol. 3(3), pages 278-294, September.
    34. Cardoso, Ana Rute, 2006. "Wage mobility: do institutions make a difference?," Labour Economics, Elsevier, vol. 13(3), pages 387-404, June.
    35. Wojciech Kopczuk & Emmanuel Saez & Jae Song, 2010. "Earnings Inequality and Mobility in the United States: Evidence from Social Security Data Since 1937," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(1), pages 91-128.
    36. Bauer, Thomas K. & Zimmermann, Klaus F., 1999. "Assessment of Possible Migration Pressure and its Labour Market Impact Following EU Enlargement to Central and Eastern Europe," IZA Research Reports 3, Institute of Labor Economics (IZA).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alexander Mosthaf & Thorsten Schank & Claus Schnabel, 2014. "Low-wage employment versus unemployment: Which one provides better prospects for women?," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-17, December.
    2. Coban, Mustafa, 2017. "Wage mobility, wage inequality, and tasks: Empirical evidence from Germany, 1984-2014," Discussion Paper Series 139, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    3. Aretz, Bodo, 2013. "Gender Differences in German Wage Mobility," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80003, Verein für Socialpolitik / German Economic Association.
    4. Schnitzlein, Daniel D. & Stephani, Jens, 2016. "Locus of Control and low-wage mobility," Journal of Economic Psychology, Elsevier, vol. 53(C), pages 164-177.
    5. Franz, Wolfgang, 2013. "Die Arbeitsmarktanalyse in der wirtschaftspolitischen Beratung des Sachverständigenrates," ZEW Discussion Papers 13-074, ZEW - Leibniz Centre for European Economic Research.
    6. Stephani, Jens, 2013. "Does it matter where you work? : employer characteristics and the wage growth of low-wage workers and higher-wage workers," IAB-Discussion Paper 201304, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    7. Feld, Lars P. & Schmidt, Christoph M. & Schnabel, Isabel & Truger, Achim & Wieland, Volker, 2019. "Den Strukturwandel meistern. Jahresgutachten 2019/20 [Dealing with Structural Change. Annual Report 2019/20]," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201920.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Aretz, Bodo & Gürtzgen, Nicole, 2012. "The Evolution of Wage Mobility in the German Low-Wage Sector - Is There Evidence for Increasing State Dependence?," VfS Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62049, Verein für Socialpolitik / German Economic Association.
    2. Aretz, Bodo, 2013. "Gender Differences in German Wage Mobility," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80003, Verein für Socialpolitik / German Economic Association.
    3. Alexander Plum, 2018. "Stochastic Expected Utility for Binary Choice: New Representations," Working Papers 2018-08, Auckland University of Technology, Department of Economics.
    4. Stephani, Jens, 2013. "Does it matter where you work? : employer characteristics and the wage growth of low-wage workers and higher-wage workers," IAB-Discussion Paper 201304, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    5. Manudeep Bhuller & Christian N. Brinch & Sebastian Königs, 2017. "Time Aggregation and State Dependence in Welfare Receipt," Economic Journal, Royal Economic Society, vol. 127(604), pages 1833-1873, September.
    6. Lixin Cai, 2014. "State-Dependence and Stepping-Stone Effects of Low-Pay Employment in Australia," The Economic Record, The Economic Society of Australia, vol. 90(291), pages 486-506, December.
    7. Kanabar, Ricky, 2017. "In or out? Poverty dynamics among older individuals in the UK," Journal of Pension Economics and Finance, Cambridge University Press, vol. 16(4), pages 509-553, October.
    8. Sara Ayllón, 2013. "Understanding poverty persistence in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 4(2), pages 201-233, June.
    9. Schnitzlein, Daniel D. & Stephani, Jens, 2016. "Locus of Control and low-wage mobility," Journal of Economic Psychology, Elsevier, vol. 53(C), pages 164-177.
    10. Alexander Plum & Gail Pacheco & Kabir Dasgupta, 2021. "When There is No Way Up: Reconsidering Low‐paid Jobs as Stepping‐stones," The Economic Record, The Economic Society of Australia, vol. 97(318), pages 387-409, September.
    11. Mosthaf, Alexander, 2011. "Low-wage jobs - stepping stones or just bad signals?," IAB-Discussion Paper 201111, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    12. Nicole Gürtzgen & André Diegmann (né Nolte), 2020. "Does low‐pay persist across different regimes? Evidence from German Unification," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 28(3), pages 413-440, July.
    13. Hielke Buddelmeyer & Wang‐Sheng Lee & Mark Wooden, 2010. "Low‐Paid Employment and Unemployment Dynamics in Australia," The Economic Record, The Economic Society of Australia, vol. 86(272), pages 28-48, March.
    14. Koomen, Miriam & Backes-Gellner, Uschi, 2022. "Occupational tasks and wage inequality in West Germany: A decomposition analysis," Labour Economics, Elsevier, vol. 79(C).
    15. Riphahn, Regina T. & Schnitzlein, Daniel D., 2016. "Wage mobility in East and West Germany," Labour Economics, Elsevier, vol. 39(C), pages 11-34.
    16. Dickens, Richard, 1996. "The evolution of individual male earnings in Great Britain 1974-1994," LSE Research Online Documents on Economics 20647, London School of Economics and Political Science, LSE Library.
    17. Alexander Mosthaf, 2014. "Do Scarring Effects of Low-Wage Employment and Non-Employment Differ BETWEEN Levels of Qualification?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 61(2), pages 154-177, May.
    18. Mattia Filomena, 2021. "Unemployment Scarring Effects: A Symposium On Empirical Literature," Working Papers 453, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    19. Aysit Tansel & Başak Dalgıç & Aytekin Güven, 2019. "Wage Inequality and Wage Mobility in Turkey," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 142(1), pages 107-129, February.
    20. Grün, Carola & Mahringer, Helmut & Rhein, Thomas, 2011. "Low-wage jobs: a means for employment integration of the unemployed? : evidence from administrative data in Germany and Austria," IAB-Discussion Paper 201101, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

    More about this item

    Keywords

    Wage Mobility; Trivariate Probit; Administrative Data;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:zewdip:12041. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/zemande.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.