Johannes Giesecke Roland Verwiebe University of Mannheim University Hamburg

1. Winners and Losers of the Income Dynamics in Germany between 1998 and 2005The Impact of Social Class on Inequality Johannes Giesecke Roland Verwiebe University of Mannheim University Hamburg

2. Structure of Presentation • Conceptional Background on Income Inequality, Hypothesis • Data Base and Methods • Empirical Results • Conclusion

3. I. Conceptional Background • Main Assumption I: After a period of relatively high stability social inequality is rising in Germany • Window of observation: 1998-2005, first social-democratic led government in Germany since the 1970’s • main political goals: modernization of welfare state; reduction of labour costs, taxes, and bureaucracy for corporations; reduction of unemployment

4. … Conceptional Background • Outcome of societal modernization: higher social inequality • Underlying mode of rising overall social inequality: average real labour income (of dependently employed persons) is decreasing; profits and rents are increasing • Main Assumption II: the dynamics of decreasing labour income and increasing profits/rents strengthens the importance of one’s individual class position

5. Hypothesis • Social class is an important explanatory factor for the increase in the inequality of labour income. Specifically, higher social classes were overly able to increase their income in the recent past, which corresponds to lower classes having experienced a relative decrease of their incomes and wages. • Argument I: technological change and the resulting demand for highly qualified labour increases income inequality (Atkinson 2000; DiPrete et al. 2002; Esping-Andersen 1993; Goldthorpe 2002) • Argument II: based on efficiency-theory one could argue (e.g. Breen 1997) that the growing labour market risks are not equally distributed across social classes (re-commodification)

6. II. Data Structure, Methods • Data from the German Socio-Economic Panel (GSOEP), longitudinal data structure 1998 – 2005 • Two time slots considered: 1998-2001 and 2002-2005 • Dependent variable: real (log) hourly wages • Results are based on growth curve models, specifying random effects for both the intercept and the rate of growth • Models allow to estimate average wage growth for different labour market groups as well as individual wage growth profiles • Models focus on EGP-class and control for age, family size, citizenship, former unemployment experience, education and various labour market variables (e.g. firm- size, industry, type of contract, firm tenure) • Separate analyses for men and women

7. III. Results: Distribution of Earnings for Men and Women between 1998-2005 Source: GSOEP 1998-2005

8. III. Results: Structures of Income Inequality in Germany (1998-2005) *p<0.05;**p<0.01;***p<0.01; Source: GSOEP 1998-2005, coefficients from growth-curve-models, dependent variable: log. hourly wages, various individual and labour market variables are controlled for

9. III. Results: Structures of Income Inequality in Germany (1998-2005) Source: GSOEP 1998-2005, class-specific standard deviations of the composite error (random intercept plus ideosyncratic error) at begin of each observational period, growth-curve-models, various individual and labour market variables are controlled for

10. IV. Conclusion • Societal modernisation of social-democratic led government produced increase in labour income inequality between 1998 and 2005 • Social class is a major force driving this increase • Polarisation between classes is increasing: “winner”: people from higher classes; ”loser”: lower classes • Heterogeneity within classes is by and large increasing (for men more than for women) • As to whether these results can be generalized for other European countries must be shown by future analyses