Joachim Möller

Impacts of minimum wages: a microdata analysis for the German construction sector

Purpose - In 1997 minimum wages were introduced in the West and East German construction sector. The purpose of this paper is to analyze their impact on wage growth and employment retention probability of affected workers. Design/methodology/approach - Following a difference-in-differences approach the paper proposes a method to identify the effects of this quasi-experiment despite the lack of information on working hours in the large panel microdata. The method determines the size of the treatment and control group by the maximum likelihood criterion. Findings - All results show positive wage growth effects of the minimum wage regulation in both parts of the country. When it comes to employment effects, the results clearly differ between the two parts of the country. The employment effects are negative for East Germany and positive for West Germany, although the latter are not always statistically significant. Research limitations/implications - Although there is a limit to the simple transferability of the results for the construction sector to other industries, the study provides some useful insights for this country concerning reactions to the minimum wage. This is the first paper analyzing the effect of minimum wages in Germany using microeconometric methods. Practical implications - As the minimum wage in the East German construction sector was much higher in relation to the median wage than in West Germany, a tentative conclusion of the different employment results might be that the trade-off between increasing wages for low-paid workers and the danger of job losses does not exist in this case if minimum wages are moderate. Originality/value - This paper provides valuable information on the impact of wage growth and employment retention probability in Germany.

The agglomeration wage differential reconsidered - an investigation with German micro data 1984-1997

The paper analyzes the agglomeration wage differerential using panel micro data with regional information for the time period 1984-1997. Referring to new contributions to regional economics, several theoretical explanations for spatial wage differentials are discussed. The empirical approach differentiates between two sectors of the economy (Manufacturing and Services), three skill groups and the position in the wage hierarchy. After presenting some descriptive evidence we use Chamberlain´s (1996) method of quantile regressons for the estimatons. According to our findings an agglomeration differential does exist except for low-skilled service workers. The agglomeration wage differential depends positively on the skill level, is typically higher in the manufacturing than in the service sector and tends to increase with the decile of the wage distribution. Our results indicate that a doubling of employment density leads to gross wage increase of 2.5 percent in the average.

Labor Market Effects of Trade and FDI: Recent Advances and Research Gaps

Summary The last decade has been shaped by dramatic developments in international trade, international investment and production, both in terms of the scale of events and in terms of their qualitative nature. Intriguing questions have been thrown up concerning the labor market impact of these developments, notably welfare issues (the evolution of real wages, employment and unemployment), the distribution of income (the wage structure) and employment volatility. Path-breaking innovations in the theories of trade, location and the multinational firm allow a fresh look at these labor market effects. This paper takes stock of these theoretical innovations and contrasts these with the recent empirical research efforts to uncover the labor market implications of trade and FDI. We identify research gaps and highlight promising avenues for future research.

Wage Inequality, Reservation Wages and Labor Market Participation

This article presents an analysis of the variation of gender-specific labor-market participation rates across regions. A search-theoretical model with intertemporal optimization behavior of agents suggests that a higher regional wage level fosters participation, whereas higher unemployment discourages workers. The authors extend the standard model by introducing two measures of dispersion, one for the spread below and one for the spread above the median. It is shown that wage dispersion in the lower tail of the distribution decreases the value of search and leads to lower participation rates, although the reverse is true for wage dispersion in the upper tail. These implications of the model are tested using spatial econometrics.

Are there long-term earnings scars from youth unemployment in Germany?

We analyze the relationship between early-career unemployment and prime-age earnings with German administrative linked employer-employee data. The careers of more than 720,000 male apprenticeship graduates from the cohorts of 1978 to 1980 are followed over 24 years. On average, early-career unemployment has substantial negative effects on earnings accumulated later in life. An identification strategy based on plant closure of the training firm at the time of graduation suggests that the revealed correlation is not the result of unobserved heterogeneity. Scarring effects also vary considerably across the earnings distribution. Workers with a high earnings potential are able to offset adverse consequences of early-career unemployment to a large extent. Workers who are located at the bottom of the prime-age earnings distribution, in contrast, suffer substantial and persistent losses. Our findings imply that a policy with the aim of preventing early-career unemployment would have long-lasting beneficial effects on future earnings.

The Creative Class, Bohemians and Local Labor Market Performance

Summary The paper aims at testing Florida’s concept of the Creative Class using panel data for 323West German regions for the time period 1975-2004. Applying a dynamic system approach based on GMM, we find that the local concentration of the Creative Class has predictive power for the economic development of a region and tends to outperform traditional indicators of human capital. However, our results do not support Florida’s assertion that the creative workers flock where the Bohemians are. According to our findings, the Creative Class is attracted by favorable economic conditions as indicated by employment growth or an increasing wage bill.

Wie wichtig ist Zeitarbeit für den deutschen Arbeitsmarkt

Die Zeitarbeit boomt, in Deutschland noch mehr als in anderen Landern. Allein in der vergangenen Dekade hat sich die Zahl der Leiharbeiternehmer fast verdreifacht. Die wachsende Bedeutung des Zeitarbeitssektors wird offentlich auserst kontrovers diskutiert. Fur die Protagonisten der Zeitarbeit hat sich die umfassende Deregulierung im Zuge der Hartz-Reformen gelohnt. In einer globalisierten Welt, in der es immer mehr darauf ankommt, schnell auf Nachfrageimpulse oder Produktionsanderungen reagieren zu konnen, hat sie den Betrieben ein Instrument an die Hand gegeben, das hohe Flexibilitat beim Personaleinsatz erlaubt. Damit konnen Wettbewerbspositionen verbessert und Marktanteile ausgebaut werden. Zeitarbeit verringert die Such- und Fluktuationskosten. Zugleich ermoglicht sie die Heranfuhrung auch wettbewerbsschwacher oder stigmatisierter Gruppen und schafft einen Zugang zum Arbeitsmarkt. Fur die Gegner ist Zeitarbeit Teufelswerk. Sie sei ein Einfallstor fur eine Verschlechterung der Arbeitsbedingungen und fur „Lohndumping“. Zeitarbeit trage zur Prekarisierung der Beschaftigung bei und verdrange „gute“ Arbeit, also unbefristete Jobs mit annehmbaren Arbeitsbedingungen und stabiler Perspektive. Anstatt zur Integration fuhre sie auf dem Arbeitsmarkt zu Drehtureffekten und in der Gesellschaft zur Exklusion. Zudem werde durch die Zeitarbeit Beschaftigung in den Entleihbetrieben ersetzt. Vermutlich wurde ein neutraler auserirdischer Beobachter nach einer kuhlen Analyse zu dem Urteil kommen, dass beide Seiten ein Stuck weit recht haben.

Teilhabe für arbeitsmarktferne Arbeitslose durch einen Sozialen Arbeitsmarkt – Chancen und Risiken eines notwendigen Instruments

Abstract We discuss a new scheme of subsidized jobs for unemployed people with extremely low job finding prospects. This scheme, referred to as Social Labour Market, primarily intends to promote their social inclusion. Research on public employment schemes has shown that it is of utmost importance to define very narrow criteria for participation in order to avoid lock-in-effects. Due to health issues and other severe employment impediments of the participants, the design of a social labour market should allow for flexible work arrangements and include some kind of mentoring (“job coaches”). We conclude that the scheme planned by the German government basically meets many criteria recommended by labour market researchers but still bears some risk of “creaming”. We recommend to start with a small number of participants. This should help to test the process of assigning participants and assess the effectiveness of different designs of the scheme before boosting the number of participants to the ultimate size.

Cluster Identification, Firm Culture and Cooperation Activities in a European Metropolitan Region: The Case of Nuremberg

As definitions of the term ‘cluster’ are fuzzy, there is a range of possibilities to use in approaching the phenomenon - from highly formalized models in regional economic theory to practical training units for business development institutions. Still, the concept offers the possibility to pick some features out of different well-established methods of economic theory to shape a comprehensive picture of individual clusters.

Die Entwicklung der qualifikatorischen Lohnund Beschäftigungsstruktur in Deutschland / Changes of the Structure of Wages and Employment with Respect to Qualifications in Germany

Zusammenfassung Der Beitrag untersucht die Entwicklung der qualifikatorischen Lohn- und Beschäftigungsstruktur vollerwerbstätiger männlicher Arbeitnehmer auf Basis der IAB-Beschäftigtenstichprobe im Zeitraum 1975 bis 1995. Die Analyse führt zu drei Hauptergebnissen. Erstens wird anhand von zwei alternativen Indikatoren ein für die Hauptsektoren der Wirtschaft parallel verlaufender Trend zur Höherqualifizierung nachgewiesen. Zweitens haben im Unterschied insbesondere zu der US-amerikanischen Entwicklung auch Arbeitnehmer in den unteren Rängen der Lohnverteilung deutliche Reallohnerhöhungen zu verzeichnen gehabt. Drittens ist in der Entwicklung der deutschen Lohnstruktur eine den weltweiten Trends entsprechende verstärkte Differenzierung beobachtbar, auch wenn die Veränderungen nicht dramatisch sind. So hat sich bei den Ungelernten die für die späten siebziger und frühen achtziger Jahre im unteren Bereich nachweisbare Kompressionstendenz danach wieder umgekehrt. Generell nimmt insbesondere rechts vom Median die Lohnspreizung erkennbar zu. Im Bereich der höheren Dezile ist diese Entwicklung bei den Facharbeitern noch ausgeprägter als bei den Ungelernten. Dies impliziert, daß das qualifikatorische Lohndifferential der Facharbeiter gegenüber den Ungelernten im oberen Bereich der Lohnverteilung ansteigt. Berechnungen auf der Grundlage von Lohnfunktionsschätzungen, die eine Dekomposition in einen Struktur-, Bewertungs- und Varianzeffekt erlauben, führen zu weiteren Erkenntnissen. Beispielsweise zeigt sich, daß das qualifikatorische Lohndifferential für die Fachhochschul- und Universitätsabsolventen unter Berücksichtigung des Struktureffekts nicht gesunken ist. Summary 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.