DP13158 Which Ladder to Climb? Wages of workers by job, plant, and education

Author(s): Christian Bayer, Moritz Kuhn
Publication Date: September 2018
Keyword(s): careers, Human Capital, life-cycle wage growth, Wage inequality
JEL(s): D33, E24, J31
Programme Areas: Labour Economics, Monetary Economics and Fluctuations, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13158

Wages grow but also become more unequal as workers age. Using German administrative data, we largely attribute both life-cycle facts to one driving force: some workers progress in hierarchy to jobs with more responsibility, complexity, and independence. In short, they climb the career ladder. Climbing the career ladder explains 50% of wage growth and virtually all of rising wage dispersion. The increasing gender wage gap by age parallels a rising hierarchy gap. Our findings suggest that wage dynamics are shaped by the organization of production, which itself likely depends on technology, the skill set of the workforce, and labor market institutions.