In 1988, the wage distribution in East Germany was much more
compressed than in West Germany or the U.S. Since the
collapse of Communism and unification with West Germany,
however, the wage structure in eastern Germany has changed
considerably. In particular, wage variation has increased,
the payoff to education has decreased somewhat, industry
differentials have expanded, and the white collar premium has
increased. Although average wage growth has been remarkably
high in eastern Germany, individual variation in wage growth
is similar to typical western levels. The wage structure of
former East Germans who work in western Germany resembles the
wage structure of native West Germans in some respects, but
their experience-earnings profile is flat.