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The Low-Wage Sector in Germany Is Larger Than Previously Assumed

Author

Listed:
  • Markus M. Grabka
  • Carsten Schröder

Abstract

The total number of dependent employees in Germany has increased by more than four million since the financial crisis. Part of this growth took place in the low-wage sector. Analyses based on data from the Socio-Economic Panel, which in 2017 for the first time include detailed information on secondary employment, show that there were around nine million low-wage employment contracts in Germany that year, around one quarter of all contracts. Women, young adults and employees in Eastern Germany are particularly likely to receive low wages. The legal minimum wage introduced in 2015 is below the low-wage threshold, and thus did not decrease the proportion of low-wage employees, although wages at the bottom-end of the distribution did markedly increase. Wage mobility has hardly changed since the mid-1990s: almost two thirds of employees in the lowest wage category were still there three years later. In order to curtail the low-wage sector, a better and broader qualification of workers, as well as a more proactive wage policy are called for. A reform of the mini-job rules would also be helpful.

Suggested Citation

  • Markus M. Grabka & Carsten Schröder, 2019. "The Low-Wage Sector in Germany Is Larger Than Previously Assumed," DIW Weekly Report, DIW Berlin, German Institute for Economic Research, vol. 9(14), pages 117-124.
    • Handle: RePEc:diw:diwdwr:dwr9-14-1
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.618323.de/dwr-19-14-1.pdf
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    Citations

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    Cited by:

    1. Schmid, Ramona, 2022. "Mind the gap: Effects of the national minimum wage on the gender wage gap in Germany," Hohenheim Discussion Papers in Business, Economics and Social Sciences 06-2022, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    2. Schmid, Ramona, 2023. "Mind the Gap: Effects of the National Minimum Wage on the Gender Wage Gap in Germany," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277646, Verein für Socialpolitik / German Economic Association.
    3. Bonaccolto-Töpfer, Marina & Castagnetti, Carolina & Prümer, Stephanie, 2022. "Understanding the public-private sector wage gap in Germany: New evidence from a Fixed Effects quantile Approach∗," Economic Modelling, Elsevier, vol. 116(C).
    4. Nicole Oetke & Maria Norkus & Jan Goebel, 2023. "Assessing the Effects of District-Level Segregation on Meritocratic Beliefs in Germany," Social Sciences, MDPI, vol. 12(7), pages 1-29, June.
    5. Bonaccolto-Töpfer, Marina & Castagnetti, Carolina & Prümer, Stephanie, 2021. "Does it pay to go public? Understanding the public-private sector wage gap in Germany," Discussion Papers 116, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    6. Ingwersen, Kai & Thomsen, Stephan L., 2022. "Minimum Wage in Germany: Countering the Wage and Employment Gap between Migrants and Natives?," IZA Discussion Papers 15823, Institute of Labor Economics (IZA).
    7. Landwehr, Jannik J., 2020. "The case for a job guarantee policy in Germany: A political-economic analysis of the potential benefits and obstacles," IPE Working Papers 150/2020, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    8. Charlotte Bartels & Carsten Schroeder, 2020. "Income, consumption and wealth inequality in Germany: Three concepts, three stories?," Basic Papers 2, Forum New Economy.

    More about this item

    Keywords

    Wages; inequality; working-poor; mobility; SOEP;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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