Sorting within and across establishments: The immigrant-native wage differential in Germany

Using new and unique linked employer-employee data from Germany, I examine the extent to which immigrants sort into worse-paying establishments and worse job positions within establishments. The results demonstrate that recent immigrants are particularly likely to work at low-paying workplaces. Similarly, when examining job positions within establishments, I find that immigrants are employed in lower hierarchical positions. Both the non-random sorting across establishments and the hierarchical sorting within establishments explain much of the immigrant-native wage differential. Policy measures designed to address the wage differential should therefore address immigrants' access to well-paying workplaces and job positions. With respect to career development, immigrant participation in performance assessments is low, and immigrants feel disadvantaged in personnel decisions, which in turn might be relevant channels that explain immigrants' under-representation in well-paid positions.