Low-Wage Work in Germany

7. Summary and Conclusions

CHAPTER 7 Summary and Conclusions Gerhard Bosch and Claudia Weinkopf Germany has long been noted for its well-balanced income structure . Between the 1980s and the early 1990s, the share of lowpaid workers actually declined, albeit only slightly, against the general international trend. In most OECD countries, including the United States, income inequality increased, particularly in the 1980s (CBO 2006; OECD 1996, 1997). However, the trend has now reversed . Since the mid-1990s, low-wage work has been rising in Germany , whereas in most other EU-15 countries, and in the United States as well, the share of low-paid workers has fallen. In the year 2000, low-wage work in Germany actually exceeded the EU average for the first time (CBO 2006; European Commission 2004, 168). The object of this study has been to analyze the ways in which low-wage work is evolving in the economy as a whole and in certain industries and why it has increased in Germany. In summarizing the key findings, we begin by outlining the most important results of our data analysis of the evolution of low-wage work and of the economic and institutional causes of this evolution. We then compare the findings of the case studies in various industries. The heated debate triggered by the political reactions to the rapid increase in low-paid occupations in Germany is the subject of the final section. THE INCREASE IN LOW-WAGE EMPLOYMENT AND ITS CHANGING FACE Low-wage work in Germany has not only substantially increased in the last years but also has changed its structure. Wages have been differentiated in a downward direction, and within the low-wage sector a very low-wage sector is emerging. It is remarkable that the expansion of low-wage work in Germany has not improved the employment chances of the low-skilled. Three-quarters of the low-wage earners are skilled—a higher proportion than in the past and also 288 much higher than in most other countries. While low-wage work was more evenly distributed over the economy in the past, it is now more concentrated in some employment forms and in small and mediumsized companies with no works councils or collective agreements. Low-wage work is moving from the center to the periphery of the labor market. To reach these surprising results we analyzed two sets of data. The Federal Employment Services’ employee survey is by far the most extensive dataset available, and it can be used even for highly differentiated analyses (for example, of individual occupational groups). Any analyses based on it, however, are necessarily restricted to full-time workers, since the dataset contains no precise figures on part-timers’ working times. The Socio-Economic Panel (SOEP), on the other hand, makes it possible to include part-timers. Because of the considerably smaller number of cases, differentiated sector and occupation analyses are possible only to a limited extent. In accordance with international conventions, all wages below two-thirds of the median wage are designated low wages. Because of the considerable differences in wages between East and West Germany, we used the different median wages in the two parts of the country as a basis for calculating the shares of low-wage work. While the share of low-paid full-time employees in West Germany fell from 15.3 percent in 1980 to 13.8 percent in 1993, it increased rapidly after the mid-1990s, reaching 17.3 percent by 2003. Following reunification, the wage distribution in East Germany was considerably more egalitarian than in West Germany. Mainly owing to high unemployment and a significantly lower rate of coverage by collective agreements, since 1996 the share of low-wage work in East Germany has been higher than in West Germany, and the gap continues to grow. In 2003 the low-wage share accounted for 19.5 percent in East Germany and for 17.7 percent in Germany as a whole. In contrast to countries with a minimum wage or higher union density, the wage dispersion in Germany extends a long way downward. One and a half million workers (around 5 percent of the population) earn less than j5 (US$7.32) per hour—less than one-third of the median wage—and 876,000 workers earn less than j4 (US$5.85) per hour. If we include part-timers, the share of low-wage work, at 20.8 percent in 2004, was more than three percentage points higher than among full-timers. Part-timers...