Wage Differentials in the Manufacturing Sector

Wage differentials in Austria's manufacturing sector exhibit wide fluctuations. The main determinants are the state of the labour market and the number of foreign workers in Austria. A decrease in unemployment reduces wage differentials, an increase in the number of foreign workers widens the wage gap. After 1975 wage differentials narrowed as a result of a substantial reduction in the number of foreign workers, even though unemployment was on the increase. As the share of foreign workers stabilized at around 5 percent to 6 percent during the beginning of the eighties this equalizing effect weakened and the dramatic deterioration in the labour market made itself felt. Wage inequality in manufacturing increased rapidly and surpassed even the record high of 1976. The rise in the number of foreign workers over the last few years accelerated this development.