Is There an Ethnic Pay Gap in Germany? Evidence from a Representative Sample of the Adult Population

This study investigates a disparity in hourly wages (i.e., a pay gap) between employees with an ethnic minority vs. ethnic majority background in Germany. To this aim, a Blinder-Oaxaca decomposition based on a representative survey of the adult population in Germany is used. The analysis is restricted to employees who completed secondary schooling in Germany (N = 9,304). The results show that, overall, ethnic minority employees receive significantly lower gross hourly wages than ethnic majority employees, and this difference amounts to 13.8%. The larger part of this gap is explained by group differences in demographic, human capital, and occupational characteristics—in particular, education level, work experience, job tenure, the precise employment status, and occupational status. However, there is also a significant unexplained pay gap that amounts to 2.7% lower wages for ethnic minority (vs. ethnic majority) employees, indicating potential wage discrimination against ethnic minority employees. The total, explained, and unexplained ethnic pay gaps appear to be somewhat larger among men than among women. Finally, an exploratory analysis suggests that the part of the ethnic pay gap that has remained unexplained might be largely explained by whether employees hold the German citizenship and whether they were born in Germany.