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IZA
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Labor Market Segmentation and the Earnings of German Guestworkers
by
Amelie F. Constant, Douglas S. Massey
(May 2003)
published in: Population Research and Policy Review, 2005, 24 (6), 5-30
Abstract:
In this paper we study the occupational progress and earnings attainment of immigrants in
Germany over time and compare them to native Germans. Our analysis is guided by the
human capital and segmented labor market theories. To assess the separate effects of
occupational segmentation and discrimination in the allocation of occupations and wages we
conceptualize the process of earnings attainment as occurring in three stages: initial
occupational achievement, final occupational achievement after the accumulation of
experience, and contingent on the former, final earnings attainment. Using data from the
German Socioeconomic Panel, our results indicate a high degree of initial occupational
segmentation, with immigrants being less able to translate their human capital into a good
first job and being channeled into first occupations of significantly lower status than natives.
We also developed evidence to suggest that immigrants experienced significant
discrimination in the process of occupational attainment, yielding little job mobility over time,
and widening the status gap between Germans and guestworkers. Holding occupational
status constant, however, we found less evidence of direct discrimination in the process of
earnings attainment. Although immigrants achieved lower rates of return to technical or
vocational training than natives, their wage returns to experience, hours worked, years since
migration, and academic high school were greater, yielding significant earnings mobility over
time.
Text: See Discussion Paper No. 774
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