Sex and Sector Differences in the Dynamics of Wage Growth in the Federal Republic of Germany

Abstract

Research on wage differentials for men and women and for labor market sectors has relied largely on cross-sectional analysis. Using data on three cohorts of West German men and women, we bring a dynamic perspective to these issues by analyzing wage changes for three aspects of work histories: (1) wage rate at time offirst entry into the labor market, (2) wage changes when workers change jobs, and (3) wage growth within jobs. Education affects first wages for men and women, but the effect weakens sharply over time. Education also has a significant positive impact on wage growth within jobs over the entire period for men and a positive, but not significant, effect for women. Highly educated women do less well than other women when changing jobs, consistent with the view that advancement for such women is impeded by a glass ceiling. Labor market segment affects initial wages and wage gains due to a job change. However, movement into internal labor markets (skilled jobs in large firms) does not confer an initial payoff in wages. Workers in sectors characterized by internal labor markets do not experience higher than average wage growth within jobs, a result that runs counter to theories of segmented labor markets. Finally, wages grow at a decreasing rate with duration of job for both men and women. However, wage growth is initially more rapid for women but also declines more sharply over time.