The Organizational Production of Earnings Inequalities in Germany, 1994-2010

What drives workplace inequality levels and trends? We investigate this question with 1994- 2010 German private sector linked employer-employee panel data. We find that between workplace inequalities have risen faster than reported in previous work. Similar to studies in Sweden and the U.S. we find that most earnings inequalities are within workplaces, but much of the growth in earnings inequalities is between workplaces. Fixed effect models suggest that mean workplace wages – the between workplace component of growing national inequality – are primarily driven by changes in the skill composition of the workplace, although the rise of part-time employment has increased the aggregate wages of full-time workers and increased female employment depresses mean workplace wages. Within workplace inequality estimates highlight the central role of categorical distinctions – e.g. gender, education, part-time composition, and skill variance – in driving within workplace inequalities. Within workplace inequality is rising steeply in low wage workplaces. Gender heterogeneity and gender segregation are both associated with higher within workplace inequality, although these mechanisms seem to be weakening over time. Both high skill and part-time intensive workplaces generate high within workplace inequality, suggesting that high inequality is consistent with both low and high road production strategies.