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Industrial change, stability of relative earnings, and substitution of unskilled labor in West-Germany

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  • Steiner, Viktor
  • Mohr, Robert
Abstract
We analyze the dramatic decline of the employment share of unskilled labor in the West German economy, in particular its relation to the relatively rigid earnings structure. We find that the substitution elasticity between unskilled and skilled labor is rather low in most sectors of the economy. However, the substitution elasticity is relatively high for males in the construction sector and for females in personal services. In these sectors, earnings of unskilled workers have even increased relative to skilled workers in the observation period. Hence, in these sectors reductions in the relative earnings of unskilled workers could have contributed to the stabilization of their relative employment level. In other sectors of the economy, the decline in the skills ratio, i.e. the employment share of unskilled relative to skilled workers, attributable to an inflexible earnings structure seems to have been modest compared to the trend decline in the skills ratio. The skills ratio has declined by about 3% (6%) per year for men (women). This decline has been relatively uniform across sectors of the economy. Potential effects of intensified international competition and skill?biased technological change on the relative employment and earnings position of unskilled workers are also discussed. We find some modest effects from international competition and technological change on the employment share of unskilled labor in the manufacturing sector.

Suggested Citation

  • Steiner, Viktor & Mohr, Robert, 1998. "Industrial change, stability of relative earnings, and substitution of unskilled labor in West-Germany," ZEW Discussion Papers 98-22, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:5201
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    References listed on IDEAS

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    Cited by:

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    2. Koebel, Bertrand M. & Falk, Martin, 1999. "Curvature conditions and substitution pattern among capital, energy, materials and heterogeneous labour," ZEW Discussion Papers 99-06, ZEW - Leibniz Centre for European Economic Research.
    3. Franz, Wolfgang, 1999. "Real and monetary challenges to wage policy in Germany at the turn of the millennium: technical progress, globalization and European Monetary Union," ZEW Discussion Papers 99-48, ZEW - Leibniz Centre for European Economic Research.
    4. Schröder, Christoph, 2000. "Spreizung westdeutscher Arbeitseinkommen: Messung, Trends und Einflussfaktoren," IW-Trends – Vierteljahresschrift zur empirischen Wirtschaftsforschung, Institut der deutschen Wirtschaft (IW) / German Economic Institute, vol. 27(2), pages 5-23.
    5. Ömer Şahin, 2021. "Regional Analysis of Skills-Mismatch in Turkish Labor Markets," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 8(1), pages 1-27, January.
    6. Puhani, Patrick A., 2002. "Relative wage and unemployment changes in Poland: microeconometric evidence," Economic Systems, Elsevier, vol. 26(2), pages 99-126, June.
    7. Schimmelpfennig, Axel, 1999. "Whodunnit? Changes in the relative demand for unskilled and skilled labor," Kiel Working Papers 914, Kiel Institute for the World Economy (IfW Kiel).
    8. Falk, Martin & Koebel, Bertrand M., 2000. "Outsourcing of services, imported materials and the demand for heterogeneous labour : an application of a generalised box-cox function," ZEW Discussion Papers 00-51, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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