Tuesday, July 3, 2007

Skilled Employment Expansion Germany

The shift from an industrially driven economy to a knowledge-based services one is a associated with a secular rise in the proportion of higher skilled work who are needed in an economy. It is not a question of absolute numbers of skill intensive workers declining, but that in Germany these numbers have not been rising as rapidly as should have been the case. The following graph from Alexander Raubold (see link referenced below) perhaps helps make this clearer:

(Please click over graph to read clearly)

The above graph illustrates movements in the skill premium and the German labour market over the last 15 years or so. Essentially it shows the ratio of high-skilled to low-skilled wages and employment and the high skilled workers wage bill share in German manufacturing. What can be seen is that over the period from 1990 to 2004 the wages of high-skilled workers remain fairly constant relative to those of low-skilled workers. The right hand axis charts the evolution of the skill premium. What can also be seen is that, following a slight peak in 1993, followed by a decline until 1995, there was a slow and steady increase from 1995 to 2004, from an index reading of 160 to 164, but that all in all these changes remain marginal. When we come to look at employment,however, the employment of more highly skilled (or non-direct-production) workers increased by 27% over the period, moving from being 48% of the total workforce in 1991 to 64% in 2004.

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