This paper challenges the widely held view that the wage structure in West Germany remained stable throughout the 1980s and 1990s. Using a 2% sample of social security records, the authors find that wage inequality increased in the 1980s, but only at the top of the distribution. In the early 1990s, wage inequality began to rise at the bottom as well. The authors investigate several explanations for these changes, including changes in workforce composition, skill prices, unemployment selection, and de-unionization. They find that changes in workforce composition, particularly skill upgrading, explain a significant portion of the increase in inequality at the top. However, these changes cannot fully account for the divergent patterns at the top and bottom of the distribution. The authors also argue that selection into unemployment cannot explain the stable wage structure at the bottom in the 1980s. Instead, about one-third of the increase in lower tail inequality in the 1990s can be attributed to de-unionization. Finally, they find that fluctuations in relative supply play a significant role in explaining trends in the skill premium. These findings suggest that technological change is responsible for the widening of the wage distribution at the top, while the widening at the bottom may be better explained by episodic events such as changes in labor market institutions and supply shocks.This paper challenges the widely held view that the wage structure in West Germany remained stable throughout the 1980s and 1990s. Using a 2% sample of social security records, the authors find that wage inequality increased in the 1980s, but only at the top of the distribution. In the early 1990s, wage inequality began to rise at the bottom as well. The authors investigate several explanations for these changes, including changes in workforce composition, skill prices, unemployment selection, and de-unionization. They find that changes in workforce composition, particularly skill upgrading, explain a significant portion of the increase in inequality at the top. However, these changes cannot fully account for the divergent patterns at the top and bottom of the distribution. The authors also argue that selection into unemployment cannot explain the stable wage structure at the bottom in the 1980s. Instead, about one-third of the increase in lower tail inequality in the 1990s can be attributed to de-unionization. Finally, they find that fluctuations in relative supply play a significant role in explaining trends in the skill premium. These findings suggest that technological change is responsible for the widening of the wage distribution at the top, while the widening at the bottom may be better explained by episodic events such as changes in labor market institutions and supply shocks.