Workforce Composition and Individual Wages — An Employer–Employee Data Analysis

The study analyses the impact of workforce composition and employee isolation — based on age, gender and citizenship — on entry wages of new employment relationships in German firms using employer–employee data. We allow for heterogeneous effects across distinct groups of workers and include worker and firm fixed effects to account for selection effects and unobserved heterogeneity. The results point to a negative impact of gender and age diversity for males and females, natives and foreigners and workers across the skill spectrum. Only for high‐skilled workers, the negative effect of gender diversity is not statistically significant. Females receive, in addition, relatively low entry wages in establishments with a rather old workforce. With regard to the relative position, mainly gender isolation tends to exert an important influence on entry wages. The effect is positive only for females. In contrast, we estimate significant negative wage effects for males, natives, medium‐ and high‐skilled workers. An international background of a firm's workforce and cultural isolation do not appear to generally affect entry wages.