Can a Task-Based Approach Explain the Recent Changes in the German Wage Structure?

This paper investigates the changes in the German wage structure for full– time working males from 1999 to 2006. Our analysis builds on the task–based approach introduced by Autor et al. (2003), as implemented by Spitz-Oener (2006) for Germany, and also accounts for job complexity. We perform a Blinder–Oaxaca type decomposition of the changes in the entire wage distribution between 1999 and 2006 into the separate effects of personal characteristics and task assignments. In line with the literature, we find a noticeable increase of wage inequality between 1999 and 2006. The decomposition results show that the changes in personal characteristics explain some of the increase in wage inequality whereas the changes in task assignments strongly work towards reducing wage inequality. The coefficient effect for personal characteristics works towards an increase in wage inequality at the top of the wage distribution. The coefficient effect for the task assignments on the contrary shows an inverted U–shaped pattern. We conclude that altogether the task–based approach can not explain the recent increase of wage inequality in Germany.