Low Wage Services: Interpreting the Us - German Difference

27 Pages Posted: 17 May 2000 Last revised: 20 Apr 2022

See all articles by Richard B. Freeman

Richard B. Freeman

National Bureau of Economic Research (NBER); University of Edinburgh - School of Social and Political Studies; Harvard University; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)

Ronald Schettkat

University of Wuppertal - Department of Economics

Date Written: March 2000

Abstract

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.

Suggested Citation

Freeman, Richard B. and Schettkat, Ronald, Low Wage Services: Interpreting the Us - German Difference (March 2000). NBER Working Paper No. w7611, Available at SSRN: https://ssrn.com/abstract=228094

Richard B. Freeman (Contact Author)

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Ronald Schettkat

University of Wuppertal - Department of Economics ( email )

42097 Wuppertal
Germany

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