Abstract
The incidence of employment interruptions and temporary part-time work has grown strongly among full-time workers, yet little is known about the impact on wage inequality. This is the first study showing that such episodes play a substantial role for the rise in inequality of full-time wages, considering the case of Germany. While there are also strong composition effects of education for males and of age and experience for females, changes in industry and occupation explain fairly little of the inequality rise. Extending the analysis to total employment reveals substantial negative selection into part-time work.JEL-Classification: J31, J20, J60
Highlights
The incidence of employment interruptions and temporary part-time work has grown strongly, raising concerns about the stability of employment and low wages among parttime workers (OECD 2010)
Re-examining the development of the wage distribution in Germany, we use administrative panel data to investigate the role of composition changes, in particular changes in recent labor market experience, for the rise in wage inequality1
As the key novel aspects, our study accounts explicitly for previous part-time work and employment interruptions among full-time employees, and we extend the analysis to total employment
Summary
The incidence of employment interruptions and temporary part-time work has grown strongly, raising concerns about the stability of employment and low wages among parttime workers (OECD 2010). In our decomposition of the rise in wage inequality among full-timers, we add the previous labor market history involving part-time and nonemployment experience This plays an important role in explaining the rise in wage inequality both among males and females. None of the aforementioned studies investigates to what extent the rise in interruptions of full-time work is driving the increase in wage inequality, there is ample evidence of a negative effect of previous nonemployment and part-time experience on wages in full-time employment. Shares for the 63 two-digit occupations in 1985 and 2010 is .91 for males and .96 for females
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