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Low Wage Services: Interpreting the US - German Difference

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  • Richard B. Freeman
  • Ronald Schettkat

Abstract

Is the expansion of jobs in low-wage services in Europe restricted by high wages? With services now the main sector source of employment growth this question becomes crucial and we examine it through a detailed comparison of the role of low-wage services in the US and Germany. We find a clear low-wage service jobs deficit' in Germany but this is not due to excessively high German wages. Relative wages in low-wage sectors are extremely similar in the two countries. This is a striking finding given the much wider wage distribution in the US. The explanation for this phenomenon is the much greater intra-industry wage dispersion in the US producing similar industry mean wages as the much narrower German distribution.

Suggested Citation

  • Richard B. Freeman & Ronald Schettkat, 2000. "Low Wage Services: Interpreting the US - German Difference," NBER Working Papers 7611, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:7611
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    References listed on IDEAS

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    1. Oecd, 1998. "Key Employment Policy Challenges Faced by OECD Countries," OECD Labour Market and Social Policy Occasional Papers 31, OECD Publishing.
    2. Linda Bell & Richard Freeman, 1994. "Why Do Americans and Germans Work Different Hours?," NBER Working Papers 4808, National Bureau of Economic Research, Inc.
    3. Siebert, Horst, 1997. "Labor market rigidities and unemployment in Europe," Kiel Working Papers 787, Kiel Institute for the World Economy (IfW Kiel).
    4. Horst Siebert, 1997. "Labor Market Rigidities: At the Root of Unemployment in Europe," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 37-54, Summer.
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    Cited by:

    1. Kemmerling, Achim, 2002. "The employment effects of different regimes of welfare state taxation: An empirical analysis of core OECD countries," MPIfG Discussion Paper 02/8, Max Planck Institute for the Study of Societies.
    2. Norbert Berthold, 2001. "Das Bündnis für Arbeit – Ein Weg aus der institutionellen Verflechtungsfalle?," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 2(4), pages 383-406, November.
    3. Alois Guger & Thomas Leoni, 2006. "Teilstudie 15: Arbeitsmarktflexibilität und soziale Absicherung," WIFO Studies, WIFO, number 27454, April.
    4. Kenworthy, Lane, 2002. "Do affluent countries face an income-jobs tradeoff?," MPIfG Discussion Paper 01/10, Max Planck Institute for the Study of Societies.
    5. Marcel Erlinghagen, 2006. "Job Stability, Mobility and Labour Market Restructuring. Evidence from German Microdata," management revue - Socio-Economic Studies, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 17(4), pages 372-394.
    6. Lechthaler, Wolfgang & Snower, Dennis J., 2006. "Minimum wages and firm training," Kiel Working Papers 1298, Kiel Institute for the World Economy (IfW Kiel).
    7. Carsten Ochsen, 2006. "Zukunft der Arbeit und Arbeit der Zukunft in Deutschland," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 7(2), pages 173-193, May.
    8. Messina, Julian, 2006. "The role of product market regulations in the process of structural change," European Economic Review, Elsevier, vol. 50(7), pages 1863-1890, October.
    9. Richard B. Freeman & Ronald Schettkat, 2000. "The Role of Wage and Skill Differences in US-German Employment Differences," NBER Working Papers 7474, National Bureau of Economic Research, Inc.
    10. Lechthaler, Wolfgang & Snower, Dennis J., 2008. "Minimum wages and training," Labour Economics, Elsevier, vol. 15(6), pages 1223-1237, December.
    11. Fagan, Colette & O'Reilly, Jacqueline & Halpin, Brendan, 2005. "Job opportunities for whom? Labour market dynamics and service sector employment growth in Germany and Britain," Discussion Papers, Research Unit: Labor Market Policy and Employment SP I 2005-110, WZB Berlin Social Science Center.

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