Gender and Youth Employment Outcomes: The US and West Germany, 1984-91

This paper examines gender differences in labor market outcomes for hard-to-employ youth in the US and West Germany during the 1984-91 period. We find that young, less educated American men and especially women are far less likely to be employed than their German counterparts. Moreover, less educated young women and men in the United States have lower earnings relative to more highly educated youth in their own country, and also fare much worse than less educated German youth in absolute terms, correcting for purchasing power. The relatively high employment rates of less educated German youth combined with their relatively high wages raise the question of how they are successfully absorbed into the labor market. We present evidence that the large public sector in Germany in effect functions as an employer of last resort, absorbing some otherwise unemployable low skilled youth. Our findings also suggest that the US welfare system accounts for very little of the US-German difference in employment rates.