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Low Wage Services: Interpreting the US - German Difference

  • Richard B. Freeman
  • Ronald Schettkat

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7611.

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Date of creation: Mar 2000
Date of revision:
Publication status: published as Gregory, S. Bazen and W. Salverda (eds.) Labour Market Inequalities: Problems and Policies of Low-Wage Employment in International Perspective. Oxford University Press, 2000.
Handle: RePEc:nbr:nberwo:7611
Note: LS
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  1. 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.
  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. Oecd, 1998. "Key Employment Policy Challenges Faced by OECD Countries," OECD Labour Market and Social Policy Occasional Papers 31, OECD Publishing.
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