Growing Wage Inequality in Germany

In Germany, wage inequality has been rising since the late 1970s. Throughout the 1980s, all workers experienced a real wage growth, but wages grew substantially faster for workers at the top of the wage distribution. In contrast, in the 1990s and early 2000s, i.e. after reunification, real wages continued to rise at the top, but started to decline for low income groups. These are the findings of a recent study conducted by IZA Research Fellows Christian Dustmann and Uta Schönberg in cooperation with Johannes Ludsteck from the IAB, funded by the Anglo-German Foundation and the Deutsche Forschungsgemeinschaft. The study suggests that the rise in inequality among high wage earners is primarily due to technological change, whereas the real wage losses of low wage earners are partly due to a decline in union coverage. These findings are relevant in the light of the current debate on the minimum wage.

By AGF,UK and Germany.

Employment Policy Resource.