Labor markets in Germany are generally considered to be less flexible than those in the USA and Great Britain. When labor income mobility in these economies is analyzed with panel data some qualifications to this wide-spread notion become necessary. When measuring labor income mobility at the aggregate level, it turns out that labor income mobility is roughly the same in Great Britain as in the western states of Germany. Moreover, labor income mobility is lower in the USA than in West Germany. These results can be seen as an indication of an unexpectedly high labor market flexibility in Germany compared to Great Britain and the USA. Comparing the markets in the eastern and western states of Germany yields that labor income mobility is initially much higher in East Germany but converges to the West German level over time. A more detailed analysis shows that escaping unemployment is harder in West Germany than in Great Britain and the USA, where the unemployed find new jobs quickly. This points to higher labor market flexibility in the Anglo-Saxon countries, in so far contradicting the above results. However, the analysis also shows that in the USA and Great Britain a much larger fraction of the formerly unemployed manage to find only low paid jobs. In both East and West Germany, there is a much more even spread of the formerly unemployed across income brackets. One reason for this phenomenon could be the different unemployment insurance institutions in these countries. In contrast to Germany, the US-American and British institutions provide a strong incentive to accept a job offer even if the qualifications required for it and the corresponding wage or salary are much below those of the former job. The analysis of the determinants of income mobility shows a negative relation between future income growth and current income, thereby confirming the hypothesis of regression towards the mean. The number of years of education is an important and positive determinant of income growth in all economies. This positive influence is stronger in Great Britain and East Germany than in West Germany and the USA. The influence of female sex on future labor income growth is more negative in West Germany than. in East Germany, Great Britain and the USA. The pattern and extent of income mobility also influences the conjectures about the implications of a given extent of income inequality. Inequality represents a less serious social problem when high income mobility is observed. The analysis of gross individual labor income distributions yields that income inequality is by far the highest in the USA, followed by Great Britain. Labor income inequality in West Germany is only slightly lower than in Great Britain. Finally, it rose rapidly in East Germany since 1990, but in 1995 was still much lower than in West Germany. Combining the results on labor income mobility and labor income inequality one can conclude that permanent labor income inequality is highest in the USA, while it is,roughly the same in Great Britain and the western states of Germany. It is lowest in East Germany.
