The "German job miracle" and its impact on income inequality: A decomposition study

Arbeitspapier

In the last 15 years before the COVID-19 crisis, Germany has experienced a strong and continuous increase in employment - the 'German job miracle'. During this period, income inequality, which had previously increased sharply, remained relatively stable. This paper analyzes the impact of employment changes on disposable income inequality between 2004 and 2015 and gives an answer to the question why inequality remained constant despite the dramatic increase in employment. It is the first study to examine the effect of changing labor supply patterns due to changes in policies, wages and preferences, as well as the role that labor market constraints have played for inequality of disposable income. It finds that inequality would have increased further due to a transforming population structure, but increasing employment and policy changes almost completely offset this development. The results show that employment growth due to the reduction of labor market constraints has been more important in slowing down the increase in inequality than changes in labor supply.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IAB-Discussion Paper ; No. 16/2022

Classification and Topics

• Classification: Wirtschaft ; Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs ; Fiscal Policies and Behavior of Economic Agents: Household ; Statistical Simulation Methods: General ; Time Allocation and Labor Supply
• Subject: inequality ; decomposition ; employment ; static microsimulation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mühlhan, Jannek
• Event: Veröffentlichung
• (who): Institut für Arbeitsmarkt- und Berufsforschung (IAB)
• (where): Nürnberg
• (when): 2022

Further information

• DOI: doi:10.48720/IAB.DP.2216
• Handle: http://hdl.handle.net/10419/262196
• Last update: 10.03.2025, 11:43 AM CET