Low-Wage Work in Germany

In recent years, the German government has intentionally expanded the low-wage work sector in an effort to reduce exceptionally high levels of unemployment. As a result, the share of the German workforce employed in low-paying jobs now rivals that of the United States. Low Wage Work in Germany examines both the federal policies and changing economic conditions that have driven this increase in low-wage work. The new "mini-job" reflects the federal government's attempt to make certain low-paying jobs attractive to both employers and employees. Employers pay a low flat rate for benefits, and employees, who work a limited number of hours per week, are exempt from social security and tax contributions. Other factors, including slow economic growth, a declining collective bargaining system, and the influx of foreign workers, also contribute to the growing incidence of low-wage work. Yet while both Germany and the United States have large shares of low-wage workers, German workers receive health insurance, four weeks of paid vacation, and generous old age support—benefits most low-wage workers in the United States can only dream of. The German experience offers an important opportunity to explore difficult trade-offs between unemployment and low-wage work. A Volume in the Russell Sage Foundation Case Studies of Job Quality in Advanced Economies