PhD Researcher in Economics and Finance, Department of Economics and Finance, College of Business Arts and Social Sciences, Brunel University London, UK
This paper presents the results of an empirical analysis on the issue of wage differentials occurring within education levels. The main purpose of the research is to investigate the extent to which job profiles, classified as routine and non-routine tasks can explain wage differentials within educational levels in Germany. Systematization of the literary sources and approaches for solving the problem of wage differentials indicates that in line with technological advancement witnessed over the past decades, earnings are largely determined by the nature of tasks carried out within the workplace. The relevance of this scientific problem decision is that educational systems have to keep up with advancing digitization and the rapidly changing labour market requirements. Investigation of the impact job profiles have on earnings, in the paper is carried out in the following logical sequence: firstly, a brief overview on previous research in the field is given, followed by an outline of the dataset analysed, proposed hypotheses, applied methodology and results concluding with a discussion. Methodological tools of the research methods were descriptive statistics along with OLS regression techniques. Based on German cross-sectional employee survey data from 2018 two hypotheses are tested by classifying 23 selected work activities into routine and non-routine tasks linked to the highest education level attained. In accordance with the German education system four educational levels are specified: no occupational degree, in-company or school-based vocational training, advanced vocational training degree and university degree. The results indicate that non-routine activities are on average remunerated at a higher rate compared to routine activities and non-routine analytical work is paid at a higher rate than non-routine craftmanship. Additionally, higher wages for computer assisted work activities is found. The OLS regression model results confirm both hypotheses implying increasing returns to educational attainments resulting in larger hourly pay and higher pay for those performing non-routine tasks. Pursuant to the traditional Mincer human capital approach on returns to schooling the research empirically confirms higher wages for employees completing advanced vocational training and those holding a university degree. The results of the research can be useful for policymakers in the education sector, fostering and improving analytical, data literacy and organizational skills.
Keywords: education system, Germany, skill-biased technical change, tasks, wage gap.
JEL Classification: J24; J31.
Cite as: Popova, M. (2021). Wage Differentials And Educational Attainment In Germany. How Do Job Profiles Affect Earnings?. SocioEconomic Challenges, 5(2), 15-25. https://doi.org/10.21272/sec.5(2).15-25.2021
This work is licensed under a Creative Commons Attribution 4.0 International License
- Antonczyk, D., Fitzenberger B., & Leuschner, U. (2009). Can a Task-Based Approach Explain the Recent Changes in (n.d.). Available at: [Link]
- Ashenfelter, O., & Card, D. E. (eds). (2011). Handbook of Labor Economics, 4A: ed. Handbooks in economics 5. Amsterdam: North-Holland. Available at: [Link]
- Autor, D. H., Levy, F & Murnane, R. J. (2003). The Skill Content of Recent Technological Change: An Empirical Exploration. The Quarterly Journal of Economics, 118(4), 1279–1333. [CrossRef].
- Autor, D. H., Katz, L. F., & Kearney, M. S. (2006). The Polarization of the U.S. Labor Market. American Economic Review, 96 (2), 189-194. [CrossRef].
- Autor, D. H., Katz, L. F., & Kearney, M. S. (2008). Trends in U.S. Wage Inequality: Revising the Revisionists. The Review of Economics and Statistics, 90 (2), 300–323. [CrossRef].
- Autor, D. H. & Dorn, D. (2013). The Growth of Low-Skill Service Jobs and the Polarization of the US Labor Market. American Economic Review, 103 (5), 1553-97. [CrossRef].
- Beck, U. (1986). Auf dem Weg in eine andere Moderne [Risk management company. On the road in a modern style]. Frankfurt/Main: Suhrkamp Verlag. [Google Scholar]
- Becker, G. S. (1964). Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education. 1st ed. University of Illinois at Urbana-Champaign’s Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship. Available at: [Link]
- Bellmann, L., & Gartner, H. (2004). Fakten zur Entwicklung der qualifikatorischen und sektoralen Lohnstruktur ( n.d.). Available at: [Link]
- Card, D. (1999). The Causal Effect of Education on Earnings. In: Handbook of Labor Economics. Elsevier, pp. 1801–1863. [CrossRef].
- Goos, M., Manning, A. & Salomons, A. (2014). Explaining Job Polarization: Routine-Biased Technological Change and Offshoring. American Economic Review, 104(8), 2509–2526. [CrossRef].
- Hall, A., Hünefeld, L., Rohrbach-Schmidt, D., et al. (2020) BIBB/BAuA Employment Survey of the Working Population on Qualification and Working Conditions in Germany 2018 (SUF)BIBB/BAuA-Erwerbstätigenbefragung 2018 – Arbeit und Beruf im Wandel. Erwerb und Verwertung beruflicher Qualifikationen (SUF). BIBB – Federal Institute for Vocational Education and Training. [CrossRef].
- Juhn, C., Murphy, K. M. & Pierce, B. (1993). Wage Inequality and the Rise in Returns to Skill. Journal of Political Economy, 101(3), 410–442. [CrossRef].
- Katz, L. F., & Autor, D. H. (1999). Changes in the Wage Structure and Earnings Inequality, in Orley Ashenfelter and David Card, Handbook of labor economics. Vol. 3A. Amsterdam: Elsevier Science, North-Holland, pp. 1463–1555. Available at: [Link]
- Lemieux, T. (2006). Postsecondary Education and Increasing Wage Inequality. American Economic Review, 96(2), 195–199. [CrossRef].
- Pereira, P. T, & Martins, S. M. (2000). Does education reduce wage inequality? Quantile regressions evidence (n.d.). Available at: [Link]
- Prasad, E. (2004). The Unbearable Stability of the German Wage Structure: Evidence and Interpretation. IMF Staff Papers, (n.d.). Available at: [Link]
- Schelsky, H. (1961). Der Mensch in der wissenschaftlichen Zivilisation [The man in the scientific civilization]. Wiesbaden: VS Verlag für Sozialwissenschaften. [CrossRef].
- Schnabel, R., & Schnabel, I. (2002). Family and gender still matter: the heterogeneity of returns to education (n.d.). Available at: [Link]
- Spence, M. (1973). Job Market Signaling. The Quarterly Journal of Economics, 87(3), 355. [CrossRef].
- Spitz‐Oener, A. (2006). Technical Change, Job Tasks, and Rising Educational Demands: Looking outside the Wage Structure. Journal of Labor Economics, 24(2), 235–270. [CrossRef].
- Wagner GG., Frick, JR. & Schupp, J. (2007). The German Socio-Economic Panel Study (SOEP): Scope, Evolution and Enhancements. SOEPpapers on Multidisciplinary Panel Data Research 1, DIW Berlin, The German Socio-Economic Panel (SOEP). (n.d.). Available at: [Link]