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Lower pay - a better world?

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  • Claus Schäfer

    (WSI)

Abstract

This article considers the clam that low wages or a greater degree of wage differentiation is a way to achieve higher employment and other desired outcomes. The empirical evidence for both Germany and the USA indicates that this is not the case. Taking Germany as an example, it is shown, among other things, that no 'employment miracle'has occurred even though wage differentials have increased in many forms, including within full-time work. The example of the USA illustrates very well that highly differentiated wages, in the context of a very unequal distribution of income, can even cause economic damage in the longer run - not to mention the social harm it inflicts. Thus the empirical evidence suggests that, on the contrary, flat income hierarchies are conducive to economic efficiency.

Suggested Citation

  • Claus Schäfer, 2000. "Lower pay - a better world?," Transfer: European Review of Labour and Research, , vol. 6(4), pages 687-716, November.
    • Handle: RePEc:sae:treure:v:6:y:2000:i:4:p:687-716
    DOI: 10.1177/102425890000600410
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    References listed on IDEAS

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    1. Wolfgang Scheremet, 1999. "Arbeitskosten im internationalen Vergleich: eine Auseinandersetzung mit bestehenden Konzepten," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 66(38), pages 681-688.
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