Low Wage Services: Interpreting the US - German Difference
Richard B. Freeman, Ronald Schettkat
NBER Working Paper No. 7611
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.
Published: Gregory, S. Bazen and W. Salverda (eds.) Labour Market Inequalities: Problems and Policies of Low-Wage Employment in International Perspective. Oxford University Press, 2000.