Abstract

Since the mid-1990s, employees in Germany at the lower end of the wage distribution have suffered considerable wage losses - especially compared to employees at the median and upper end of the wage distribution (Dustmann et al., 2009; Dustmann et al., 2014). In addition, the quality of jobs increasingly deteriorated, as they were more frequently located in lower-paying companies (Card, Heinig, Kline, 2013). After the economic crisis of 2008, however, there was a drastic trend reversal. As early as 2012, three years before the introduction of the statutory minimum wage, wages began to rise not only on average, but especially at the lower end of the wage distribution. This research project examines this remarkable trend reversal and its causes. Using IAB data, we analyze the extent to which an increasing relative demand for labor has influenced wage inequality and the mechanisms underlying this development. We distinguish between three time periods: 1995-2008, 2009-2018 and 2018-2023.