Reservation wages in Germany
German Economic Institute (IW)
The wage expectations of the unemployed come into particular focus when attempts are made to identify the causes of persistent unemployment. It is frequently pointed out that excessive reservation wages prevent (re)integration into the labour market. In 2010 the average net hourly reservation wage in Germany was € 8.17. This corresponds to a gross hourly wage of some € 12. Those seeking part-time jobs have higher net reservation wages than those seeking a full-time position. However, the same is not true for the gross reservation wage. The empirical estimates thus confirm that reservation wages have a potentially negative effect on employment prospects. Furthermore, even prolonged unemployment does not lead the unemployed to lower their demands. Finally, more detailed econometric estimates show that the most recent actual wage and household income influence the level of reservation wages more strongly than, for example, a person’s perception of his or her chances of being (re)employed.
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Reservation wages in Germany
German Economic Institute (IW)
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