Characteristics Contributing to Low- And Minimum-Wage Labour in Germany

Abstract

In this article we examine the correlation between characteristics of individuals, companies, and industries involved in low-wage labour in Germany and the risks workers face of earning hourly wages that are below the minimum-wage or low-wage thresholds. To identify these characteristics, we use the Structure of Earnings Survey (SES) 2014. The SES is a mandatory survey of companies which provides information on wages and working hours from about 1 million jobs and nearly 70,000 companies from all industries. This data allows us to present the first systematic analysis of the interaction of individual-, company-, and industry-level factors on minimum- and low-wage working in Germany. Using a descriptive analysis, we first give an overview of typical low-paying jobs, companies, and industries. Second, we use random intercept-only models to estimate the explanatory power of the individual, company, and industry levels. One main finding is that the influence of individual characteristics on wage levels is often overstated: Less than 25 % of the differences in the employment situation regarding being employed in minimum-wage or low-wage jobs can be attributed to the individual level. Third, we performed logistic and linear regression estimations to assess the risks of having a minimum- or low-wage job and the distance between a worker's actual earnings and the minimum- or low-wage thresholds. Our findings allow us to conclude that several determinants related to individuals appear to suggest a high low-wage incidence, but in fact lose their explanatory power once controls are added for factors relating to the companies or industries that employ these individuals.