The changing situation of labor market entrants in Germany

Reinhold, Mario; Thomsen, Stephan Article The changing situation of labor market entrants in Germany Journal for Labour Market Research Provided in Cooperation with: Institute for Employment Research (IAB) Suggested Citation: Reinhold, Mario; Thomsen, Stephan (2017) : The changing situation of labor market entrants in Germany, Journal for Labour Market Research, ISSN 2510-5027, Springer, Heidelberg, Vol. 50, Iss. 1, pp. 161-174, https://doi.org/10.1007/s12651-017-0227-3 This Version is available at: https://hdl.handle.net/10419/180119 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ ARTICLE DOI 10.1007/s12651-017-0227-3 J Labour Market Res (2017) 50:161–174 The changing situation of labor market entrants in Germany A long-run analysis of wages and occupational patterns Mario Reinhold1· Stephan Thomsen2 Accepted: 31 March 2017 / Published online: 25 April 2017 © The Author(s) 2017. This article is an open access publication. Abstract Concurrently with a steady increase of the supply of college educated workers, recent evidence for the U.S. indicated a decline in the demand for and the real wages of this group after 2000. We investigate empirically, whether there has been a similar trend in Germany. Based on comprehensive, long-run administrative data for the years 1975 to 2010, we use a set of employment indicators to analyze labor market patterns of job market entrants. Besides consideration of the developments of education attainment and wages over time, we put a particular focus on changes of the task composition, the chances of entering top-pay- ing jobs, entry wages and wage growth, and skill premia over time. To allow for a detailed analysis, we distinguish four education groups. The empirical picture shows that since the year 2000 job entrants with higher education have experienced decreasing employment shares in top-paying positions. Moreover, starting wages and wage growth have both decreased until the end of the observation period, too. A reason for this has been the substitution of jobs that were formerly executed by lower qualifications. Our findings reveal similarities between Germany and the U.S. in terms of some declining fortunes of the young. However, whereas in the U.S. college educated workers have been affected, the results indicate that in Germany the medium-skilled and low-skilled have been particularly impaired. Stephan Thomsen [email protected] 1Wirtschaftswissenschaftliche Fakultät, Leibniz Universität Hannover, Königsworther Platz 1, 30167 Hannover, Germany 2Institut für Wirtschaftspolitik, Leibniz Universität Hannover, Königsworther Platz 1, 30167 Hannover, Germany Keywords Labor demand · Labor supply · Occupational sorting · Wages · Education groups JEL-Classification J21 · J23 · J24 Die veränderliche Situation für Berufseinsteiger in Deutschland Eine Langzeitanalyse von Löhnen und Beschäftigungsmustern Zusammenfassung Jüngere empirische Evidenz für den US-amerikanischen Arbeitsmarkt zeigt, dass gleichzeitig mit dem stetigen Anstieg des Arbeitsangebots von Hochschulabsolventen die Nachfrage und die Reallöhne für diese Gruppe seit dem Jahr 2000 gesunken sind. Die vorliegende Studie untersucht, ob es einen vergleichbaren Trend auch in Deutschland gab. Auf der Grundlage umfangreicher administrativer Daten für die Jahre 1975 bis 2010 berechnen wir eine Reihe von Arbeitsmarktindikatoren, um die Beschäftigungsmuster von Berufseinsteigern zu untersuchen. Neben der Berücksichtigung der Entwicklungen in der Bildungsbeteiligung sowie den Löhnen gehen wir hierzu auf die Änderungen in den beruflichen Tätigkeiten, den Chancen auf eine höherbezahlte Tätigkeit, die Eintrittslöhne sowie das Lohnwachstum und die Bildungsprämien ein. Darüber hinaus betrachten wir vier unterschiedliche Qualifikationsgruppen. Die empirischen Ergebnisse zeigen, dass sich der Anteil von hochqualifizierten Berufseinsteigern in höherbezahlten Tätigkeiten seit dem Jahr 2000 verringert hat. Deutlich wird überdies, dass bis zum Jahr 2010 die Einstiegsgehälter gesunken sind und sich das individuelle Lohnwachstum in den ersten fünf Berufsjahren verringert hat. Ein Grund dafür liegt in der Beschäftigung von Absolventen in Tätigkeiten, die früher von Personen K 162 M. Reinhold, S. Thomsen mit geringeren Bildungsabschlüssen ausgeführt wurden. Unsere Ergebnisse bestätigen daher einige Ähnlichkeiten zwischen dem deutschen und dem US-amerikanischen Arbeitsmarkt bezüglich verschlechterter Arbeitsmarktchancen für Berufseinsteiger. Ein wesentlicher Unterschied liegt aber in den Bildungsniveaus: während im US-amerikani- schen Arbeitsmarkt vor allem College-Absolventen von diesen Änderungen betroffen sind, sind in Deutschland vor allem die mittel- und geringqualifizierten Berufseinsteiger hinsichtlich ihrer Arbeitsmarktchancen beeinträchtigt. 1 Introduction During the last decades, Germany and many other countries have experienced an upskilling of the workforce accompanied by a technological shift towards highly educated labor. Recent evidence for the U.S. labor market indicates declining wages for college graduates in the aftermath of the tech bust in 2000, while post-college workers (i. e., those with postbaccalaureate degree) face continuously high employment and wage opportunities (Beaudry et al. 2014,2016). If similar patterns had occurred in Germany, this would indicate, “declining fortunes of the young” (Beaudry et al. 2014) to be more than a phenomenon of the U.S. labor market. To investigate empirically, whether there has been a corresponding trend in Germany, we have selected a set of employment indicators to analyze the chances and performance of labor market entrants in Germany over time. We focus on young workers since general changes in the labor market are first apparent for them (Kambourov and Manovskii 2009). The empirical analysis uses long-run information of a comprehensive sample of registered employees in the German social security system for the years 1975 to 2010 with about 11.5 million observations. Besides consideration of education attainment and wages overall, we put a particular focus of our study on the developments of the task composition, the chances of receiving a top-paying job, entry wages and wage growth, and wage premia for job market entrants over three and a half decades. Moreover, to allow for a detailed picture we distinguish four different education levels in the analysis. These comprise two distinct types of higher qualification (university and university of applied sciences), medium qualification (persons with completed vocational training in the German apprenticeship system) and low qualification (persons lacking completed vocational education). The data allow conducting a detailed descriptive analysis comparing a large number of cohorts of job market entrants over time. Summarizing the empirical picture obtained from the indicators clearly indicates that there was a turning point of the labor market chances of young job market entrants around the year 2000: highly-educated workers have faced declining employment opportunities in top-paying jobs and, partly, in analytical jobs after 2000. Real entry wages have fallen for each new entry cohort since then until the end of the observation period. Moreover, wage growth after five years has substantially declined for cohorts entering the labor market in this period in Germany, too. In particular medium-skilled and higher-skilled labor market entrants have been affected by this development. Whereas the share of young high-skilled workers performing analytical jobs has declined only slightly after the tech bust (similar to the U.S.), our results indicate a general decline of wages for young workers. Falling wages are more profound for medium-skilled and low-skilled workers than for highskilled workers. Wage premia for higher education slightly rose relative to medium-skilled and low-skilled workers. Moreover, the displacement effects, shrinking wages, and flattening wage growth for medium-skilled and low-skilled workers further signify the impacts of the increase in graduation rates in higher education. The remainder of the paper is organized as follows. The next section gives a more detailed discussion of the related literature for the analysis at hand. Sect. 3 introduces the data used for the empirical analysis. The empirical results of the considered aspects are presented in Sect. 4. The final section provides the conclusions. 2 Background Wage inequality in the U.S. labor market increased during the 1980s, notably at the upper tail of the wage distribution (Katz and Murphy 1992). In particular, technological change complementing high-skilled workers and substituting low-skilled workers contributed as a major driving force to this process (Acemoglu 2002). Related to this, the skill-biased technological change hypothesis (SBTC) emphasized the exceeding growth in the demand for highskilled workers with respect to its supply, at the expense of less-skilled workers (Katz and Autor 1999). Despite the convincing characterization in explaining the labor market development during the 1970s and 1980s, the more recent literature puts stronger focus on the increasing concentration of employment at both tails of the wage distribution associated with a strong decline of medium-skilled occupations. This development has been called job polarization, e. g. Autor et al. (2003,2006,2008). Increasing wage inequality has long been thought of being a phenomenon solely present in Anglo-Saxon labor markets. From this perspective, wage inequality in Anglo-Saxon countries and high unemployment rates of lowskilled workers in Continental Europe appeared as ‘two sides of the same coin’, both stemming from the relative fall K The changing situation of labor market entrants in Germany 163 in the demand for low-skilled labor (Krugman 1994). Labor market adjustment in Germany occurred through an alteration of employment rather than wages (Antonczyk et al. 2010; Naticchioni et al. 2014). Despite the developments of the U.S. labor market until the early 2000s, a recent strand of the literature on inequality portrays the demand for high-skilled labor as a boom-bust cycle ceasing with the tech bust in 2000. Beaudry et al. (2016) argue that the reversal in the demand for high-skilled workers led to a cascade effect in which college workers perform jobs that have been previously performed by medium-skilled workers, who for their parts pushed low-skilled workers further down on the occupational ladder or even out of employment. Beaudry et al. (2014) underline the trend of an increasing share of the working-age population with a college degree but declining cognitive employment shares, i. e. a declining share of workers in jobs with high intensity of abstract thinking, and declining wages after 2000. In contrast to that, job entrants with a post-college degree faced stable cognitive employment shares and wage profiles. Starting in the 1990s, rising wage inequality has also occurred in Germany. The high and rising (long-term) unemployment after German reunification forced several fundamental reforms of the labor market. At the same time, wage setting in Germany began to erode due to a diminishing importance of collective bargaining between employer associations and unions (Ochel 2005). A sharp decline in union coverage, especially at the end of the 1990s, has accompanied this development and can explain a major part of the lower tail inequality (Dustmann et al. 2009). In the course of slow growth and persistent unemployment after 2000, the ‘sick man of Europe’ (The Economist 1999) reformed the labor market even further (the so-called ‘Agenda 2010’ reforms). These reforms lowered implicit minimum wages by reducing benefit entitlement with respect to level and duration. Overall, the reforms were particularly designed for decreasing wages and increasing employment at the lower tail of the wage distribution (Dustmann et al. 2014). In stark contrast with most European countries, unemployment in Germany was hardly affected neither by the 2008/2009 recession, despite a dramatic fall in gross domestic product, nor the recent Euro crisis. The relative strength of the labor market can be assigned to a number of reasons, including the extensive labor market reforms that have increased flexibility and allowing greater wage inequality, and declining unit labor costs for the past two decades, i. e. productivity growth exceeding wage growth (Dustmann et al. 2014). For that reason, Fitzenberger et al. (2011) note that the process of increasing lower tail wage inequality in Germany is characterized by episodic events, and not due to the lower tail polarization hypothesis suggested by Autor and Dorn (2013). Decomposing wage variance into transitory and permanent parts, Myck et al. (2011) found that permanent inequality peaked in 2001 and declined afterwards. However, a polarization of wages still occurred thereafter but seems to due to transitory factors only. In comparison, the influence of institutional factors upon upper tail wage inequality is limited in Germany. It slightly increased during the 1980s, mainly driven by the changing composition of the workforce (Dustmann et al. 2009). In contrast to the U.S., growth in supply and demand for highskilled workers moved in parallel resulting in less upper tail wage inequality (Acemoglu 2003). The share of highskilled workers increased at a roughly linear rate. Similarly to the U.S. in the 1970s (Katz and Murphy 1992), the expansion in the supply of high-skilled workers occurred at the pace of rising demand for these qualifications (Antonczyk et al. 2010). Autor et al. (2003) describe that the growth of information and communication technology (ICT) is the crucial trigger for job polarization. ICT has caused a rapid decline of costs due to increasing speed of performing codifiable tasks by computers, which has induced employers to substitute technology for labor. These tasks were characteristic for medium-skilled workers. Advanced communication technologies also support offshoring to foreign worksites for information-based tasks (Blinder 2009). At the same time, they may enhance the productivity of abstract tasks, such as managing or programming, at the top of the wage distribution where productivity strongly relies upon information as an input (Autor et al. 2003). Over the last decades, the impact of information technology can be supposed to have reached some kind of limit for jobs at the bottom of the wage distribution, where tasks are typically non-routine manual and require non-codifiable physical, verbal or visual activities. The increasing importance of ICT has thus be supposed to have intensified job polarization that complements high-paying jobs and substitutes medium-paying jobs, while only having a small impact on low-paying jobs. In the past decade, ICT became a general-purpose technology affecting the entire economy. The shrinking costs and simplification of usage led to a breakthrough in private households and firms. In 2014, 99% of German firms had access to the internet (Eurostat 2015b). Similarly, 89% of private households in Germany had access to a computer (Eurostat 2015c). In 2014, 72% of the individuals used the internet daily (Eurostat 2015d). In addition, computerization and digitalization found its broad way into employment. The share of workers using a computer increased from 45% in 2003 to 61% in 2013 (Eurostat 2015a). Thus, with the increasing coverage of ICT in the workplace, ICT might also gain importance for routine jobs resulting in complementarities rather than substitution, see, e. g., Autor et al. (2014). K 164 M. Reinhold, S. Thomsen However, evidence on the increasing importance of ICT in routine jobs is scarce. Using regional differences in broadband internet coverage, Akerman et al. (2015)show that access to high-speed internet further complements skilled workers in non-routine abstract jobs and impairs labor market outcomes of unskilled workers in routine jobs. Moreover, Forman et al. (2012) find that, despite vast internet investment across U.S. counties, only 6% of the counties that had the highest concentration in IT activities before the investment benefitted from it in terms of wages, while the remaining counties did not. Similarly, Acemoglu et al. (2014) conclude that increasing IT intensity across manufacturing industries does not increase productivity outside computer manufacturing. Hence, a potential reversal of the job polarization hypothesis in the recent decade through a higher adaptability of ICT skills among unskilled workers and higher IT intensity in manufacturing cannot be empirically affirmed (yet). To the contrary, the scarce available evidence indicates that the introduction of ICT in these sectors seems to have further amplified job polarization. 3Data The empirical analysis uses data for West Germany for the years 1975 to 2010, obtained from the Sample of Integrated Labor Market Biographies (SIAB). It is a 2% random sample of the German social security records provided by the Institute for Employment Research (IAB) containing more than 11.5 million observations. The social security records represent about 80% of the working population in Germany, excluding e.g. civil servants, soldiers, and self-employed. The data are highly reliable due to the mandatory and administrative nature, where misreporting on wages would cause severe penalties for the employer. Since the data stem from administrative processes, wages are right-censored at the social security contribution assessment ceiling. For male workers, the share of censored wages varies between 9% and 14% annually, for women censoring affects less than 5% of the observations. Right-censor- ing will, however, only marginally affect our analysis, since we mainly focus on median wages and on young workers receiving starting wages. For calculating wage premia in the analysis below, we impute wages above the censoring threshold according to Gartner (2005). In line with Dustmann et al. (2009), we further impose the restriction that the daily wage observation is at least 20 Deutschmark (in 1995 DM). In addition, we correct for a structural break of the wage variable from 1983 to 1984, when bonus payments have been included in the data. Thereby, we follow the approach by Dustmann et al. (2009) that extends the solution suggested by Fitzenberger (1999). Lastly, we adjust wages to inflation. To investigate the role of education level, we distinguish between four types of education with two types of higher education. Graduates from university are the highest skill group in this classification (high-uni-skilled), the second highest group consists of graduates from university of applied sciences (Fachhochschule, high-fh-skilled). It refers to graduation from a unique kind of tertiary schools in German-speaking countries. The major distinction between the two high-skilled groups is that university has a more theoretically based education and usually longer duration of education (at least until the implementation of the so-called Bologna reform, introducing bachelors’ degrees and masters’ degrees at all tertiary education institutions in Germany). The university of applied sciences is further characterized by a lower focus on abstract skills. Enrollment in university of applied sciences requires a technical diploma (Fachabitur) with lower admission criteria; for university, students generally need to possess a university entrance diploma (Abitur). In the 2011 International Standard Classification of Education (ISCED) (OECD, European Union, UNESCO Institute for Statistics 2015), university of applied sciences (Germany) is assigned level 6, i. e. programs designed to provide intermediate academic skills leading to a first degree with a typical duration of three to four years. The on average younger age of labor market entry reflects the shorter study duration. University (Germany) is defined as level 7, covering scientifically more complex studies designed to provide advanced academic skills leading to a second degree. In addition to these two groups, we regard medium-skilled workers who possess a university entrance diploma and/or a completed a vocational training in the German apprenticeship system, and low-skilled workers without any formal vocational qualification. To analyze the composition of tasks over time, jobs are assigned to tasks according to the classification by Dengler et al. (2014) for the year 2011 (annual variation of the task composition is low). It is comparable to the U.S. dictionary of occupational titles. Each occupation is composed of five tasks, the main task is determined by the largest task fraction: (1) Analytical non-routine (e. g. research, evaluation, planning, and interpret rules). (2) Interactive nonroutine (e. g. negotiate, teach, entertain, or manage personnel). (3) Cognitive routine (e. g. calculating, measuring, or bookkeeping). (4) Manual routine (e. g. operate, or control machines). (5) Manual non-routine (e. g. repair, renovate, restore, or nurse). Finally, we have imposed a number of restrictions on the analysis’ sample for consistency reasons. Since there is no exact information on working hours, we consider only fulltime employed persons. Moreover, the education variable is subject to missing values and inconsistencies as noted by Fitzenberger et al. (2006). We correct it using forward and backward extrapolation. The analysis sample contains K The changing situation of labor market entrants in Germany 165 ab Fig. 1 Education Distribution (Shares and Absolute Numbers, 25–35 Years, 1975–2010) (Source: 2% IABS Sample for full-time workers between 25 and 35 years of age. N= 3,489,383) only employees between 20 and 60 years of age; we will focus on the age group between 25 and 35 years in particular. Since labor market entry is not directly observable in the data, we approximate it by potential experience calculated as the difference between the individual age and the typical qualification-controlled starting age in the labor market. We assume that persons possess their final education attainment at age 35 and compute the fraction of observations for each education attainment and age group based on the number of observations at the reference age in the four education groups. We define the age of labor market entry, when the fraction exceeds 50%. It is 19 years for low-skilled, 20 years for medium-skilled, 26 years for high-fh-skilled and 28 years for high-uni-skilled workers. 4 Empirical results 4.1 A review of trends in education and wage development Germany faced a constant increase in educational attainment. The first panel of Fig. 1shows the distribution of the four education levels for young workers over time. The number of young workers without any vocational qualification has decreased considerably – from about one quarter in 1975 to about one tenth in 2010. Obviously, workers with vocational training (medium-skilled) are the backbone covering more than two thirds of the young labor force over the whole time span. The share of medium-skilled workers had grown until the mid-1990s at the expense of low skills. Its share has declined from then onwards at the expense of higher education. The share of young workers with higher education had doubled from the mid-1970s to the mid-1990s – but was still of smaller importance by the mid-1990s with 14% of the working population only. The growth of the share of high-skilled workers has gained pace thereafter, notably for high-uni-skilled workers. By 2010, more than one quarter of the young workforce has completed higher education; and the share high-uni-skilled workers has been larger than the share of workers without vocational training. This impression fully reverses, however, when regarding the absolute numbers displayed in the second panel. The proportional shift observed for shares of education attainment is not present anymore. Although the share of highskilled workers increased over time and doubled from 1995 to 2010, the absolute number has remained nearly constant. Beginning in the 1990s, the effects of demographic change in Germany have induced a sharp decrease in the number of young persons.1The number of 25-year-old persons had decreased from 1990 to 1999 by more than one third and has maintained this level during the 2000s (East and West Germany combined).2Due to that, even though the relative number of high-skilled workers has increased continually, it is important to note that the absolute number has hardly changed. How did these shifts of the skill distribution affect the wage structure? Fig. 2displays the development of log median daily wages separately for experienced workers between 36 and 60 years and for younger workers (25 to 35 years of age) with a further distinction by the four 1Until the mid-1960s, Germany grew strong due to a pronounced “baby boom” generation. However, the boom was followed by a lack of strong birth cohorts, and from 1964 to 1974 the number of births shrunk by roughly 41%. 2The decreases in other industrialized countries were much smaller, e. g. about 19.4% in the United Kingdom, 12.1% in the U.S., and 4.5% in metropolitan France, the part of France in Europe (Eurostat 2015e; U.S. Census Bureau 2012). K 166 M. Reinhold, S. Thomsen a de bc Fig. 2 Median Log Real Daily Wages of Experienced Workers and of Young Workers (1975–2010) (Source: 2% IABS Sample for full-time workers. N= 7,182,868 for experienced workers (36 to 60 years) and N= 3,752,250 for young workers (25 to 35 years)) education groups. For the whole groups, the median real wage had increased monotonously from 1975 to 1990 – with a short episode of negative growth between 1980 and 1982. A volatile but more or less stable development of wages characterizes the development during the 1990s. After 2003, real wages have started to decrease for all workers but more considerably for the group of young workers. More importantly, the figure indicates that the wages of experienced workers and that of young workers have started to diverge over time. In the beginning of the sample period, the wage gap between young and experienced workers was merely 3%. It has increased to 16% until 2010. The growing wage gap has occurred in two periods, namely until 1990, and after the year 2002/2003, coinciding with the tech bust and the implementation of the ‘Agenda 2010’ labor market reforms in 2003. This evidence may be interpreted as a rise in wage inequality, notably for the young (and) labor market entrants, see e. g. Gernandt and Pfeiffer (2007), Antonczyk et al. (2010) or Eichhorst and Tobsch (2015). Consideration of the four education groups shows some heterogeneity between groups. While the overall trends in the development can be seen – more or less – for all groups, the gaps between wages of experienced and young workers are clearly larger for the two high-skilled groups. On the other hand, the widening of the within-education-group wage gap is less emphasized for those groups over the 36 years of analysis. Since the turn of the century, however, the stronger decrease of median wages of the young compared to the experienced has nevertheless imposed more inequality.3The trends of median wages of the mediumskilled, who are the largest group (see above), are similar to the overall picture. Vice versa, the divergence between experienced and younger workers’ wages is stronger than in the two high-skilled groups. Finally, for the lowskilled, wages have risen more or less steadily from 1975 to around 1990, and have started to decrease slightly and 3According to the results of Klein (2016), this may not be explained by a change in composition of the graduates’ field of study. He analyzes the association between graduates’ field of study and occupational attainment in West Germany between 1980 and 2008 and shows that field of study differences in terms of risk of unemployment and of access to the service class did not increasingly diverge over time. K The changing situation of labor market entrants in Germany 167 Fig. 3 Shares of Performed Tasks (Education Groups, 25–35 Years) (Source: 2% IABS Sample for full-time workers between 25 and 35 years of age. N= 3,754,656. The kinks for the high-uni-skilled workers stem from an underrepresentation of doctors and pharmacists in the years 1996 and 1997 in the sample (see vom Berge et al. 2013)) ab cd monotonously thereafter. Also for this group, the decrease of median wages has been a bit stronger for the young than the experienced, which contributes to a widening wage gap pattern. There is some literature analyzing the relationship between education attainment and wages with particular focus on the role of cohort size (e. g. Freeman 1979;Welsh 1979;Berger1983; Fertig and Schmidt 2004;Morin2015; Moffat and Roth 2016). The key assumption of the studies is that workers of different ages or experiences are only imperfectly substitutable; therefore, an increase in the size of a specific experience-education group will mainly affect the wages of workers in this group. Empirical evidence in favor of this hypothesis is given by, e. g. Freeman (1979), Wright (1991)orMorin(2015) besides others. However, for Germany the effects may be less clear due to opposing effects of wage rigidities and the bargaining process between employer associations and unions as noted by Fertig and Schmidt (2004). While changes in cohort size may result in education-experience specific unemployment in face of rigid wages, larger cohorts may possess a greater bargaining power, which mitigates the expected negative effect of cohort size. The decreasing level of collective pay agreements in the German economy overall and particularly for higherskilled workers over the years of analysis may therefore point towards lower wages due to larger relative cohorts. 4.2 Are there declining fortunes of the young in Germany? 4.2.1 The task composition of young workers While the workforce has become more skilled due to the increasing share of high-skilled workers, the average employment share of non-routine analytical tasks has remained largely stable. This can imply some kind of occupational downgrading for high-skilled workers. A possible reason would be a shrinking average task share of non-routine analytical tasks in that group. Therefore, we decompose the average task performance by education groups to reveal a potential shift of high-skilled workers to jobs that do not require their expected analytical skills.4 Fig. 3displays these shifts in the performed tasks. The average employment share in analytical jobs sorts according to education attainment. Expectedly, it is highest for employees with a university degree and lowest for persons without vocational training. Overall, the average shares show a high persistence but there had been a small decline for high-skilled workers until 1985. For the high-fh- skilled workers, we further observe a decrease after 2000. However, the share of non-routine analytical tasks for each 4Related to that, Rohrbach-Schmidt and Tiemann (2016) analyze the educational match and skill utilization based on an employment survey for 2006. The results indicate that large shares of formally over- or under-educated workers in Germany have skills that correspond to the skill requirements of their jobs. K 168 M. Reinhold, S. Thomsen ab de c Fig. 4 Job Ordering (Four to Six Years of Experience) (Source: 2% IABS Sample for full-time workers between 25 and 35 years of age with information on job. N= 2,000,214 for all workers. Note: Jobs are ordered according to their mean wage and assigned to a percentile in the wage distribution. The calculation of mean wages is based on imputed wages following Gartner (2005). Top-jobs have a mean wage above the 70% percentile, bottom-jobs below the 30% percentile, the remaining jobs are medium-jobs. Lines represent annual shares of workers with four to six years of potential experience) education group has maintained a rather stable level over time, which can be interpreted as an equilibrium between the increasing demand for analytical tasks and the educational expansion in Germany. This is in line with findings of Beaudry and Green (2003). The non-routine interactive employment share (that has slightly increased for the young workforce overall) has decreased for high-uni-skilled until the mid-1990. For the high-fh-skilled workers, it has remained stable after 1990. Contrary to that, routine cognitive tasks have become more important for high-skilled workers until 1997. After that year, however, their fraction in the task composition has begun to fall slowly. For the high-fh-skilled, the share has risen similarly until the mid-1990s, and has maintained that level more or less since then. For high-skilled workers, routine manual and non-routine tasks have played a minor role only over the whole period of analysis. To summarize, the empirical figures indicate that the share of high-skilled workers performing non-routine analytical jobs has remained rather constant for long periods, but there is some heterogeneity between high-uni-skilled and high-fh-skilled employees. The increase of high-skilled workers in routine cognitive jobs may hint at an academization of these jobs. For the high-uni-skilled, the share of routine cognitive tasks has increased continuously at the expense of non-routine interactive tasks, whereas the remaining task shares have remained on rather constant levels over time. For the high-fh-skilled, the share of routine cognitive tasks has increased similarly at the expense of two groups: on the one hand, the shares of non-routine analytical tasks before 1985 and after 2003 have decreased, and on the other hand, non-routine interactive tasks had decreased between 1987 and 1992. Overall, besides these tendencies, a clear cascading pattern – as described in Beaudry et al. (2014) – cannot be confirmed for the two groups of high-skilled workers in Germany since the pattern of the task composition is too persistent to provide unambiguous indications for declining labor market chances of the young. K