NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Skill Compression, Wage Differentials and Employment: Germany vs. the US

Richard B. Freeman, Ronald Schettkat

NBER Working Paper No. 7610
Issued in March 2000
NBER Program(s):   LS

Germany's more compressed wage structure is taken by many analysts as the main cause of the German-US difference in job creation. We find that the US has a more dispersed level of skills than Germany but even adjusted for skills, Germany has a more compressed wage distribution than the US. The fact that jobless Germans have nearly the same skills as employed Germans and look more like average Americans than like low skilled Americans runs counter to the wage compression hypothesis. It suggests that the pay and employment experience of low skilled Americans is a poor counterfactual for assessing how reductions in pay might affect jobless Germans.

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Document Object Identifier (DOI): 10.3386/w7610

Published: Oxford Economic Papers, Vol. 53, no. 3 (July 2001): 582-603 citation courtesy of

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