Introduction

In 1999-2000, the average level of pay and the dispersion of pay in Scotland was lower than in London but virtually identical to the rest of England. However, these similarities between Scotland and the rest of England mask substantial differences in wage dynamics between the two. The principal focus of this chapter is to report these features of the Scottish and English labour markets and to explore some of the labour market dynamics that help explain the picture that had emerged by the end of the 1990s.

The average level of pay in Scotland would be expected to differ from that in England. The industrial and occupational structure of employment and the skill composition of the workforce are different in the two countries. Different proportions of the working population are employed in the public sector and the incidence of trade unionism differs between Scotland and England. Once we control for all these differences in the characteristics of the workforce in the two countries and are able to compare like-with-like, are Scots, on average, less well paid than their counterparts in England? And even if we find that average levels of pay are the same in Scotland and England, there may still be differences between them in the distribution of pay. Is pay inequality greater or smaller in Scotland than in England?

The long boom of the 1990s saw pay levels grow steadily throughout the UK. Did this growth in pay mean that pay in Scotland became more similar to that in England or did pay levels diverge? Recognising that some people will be poorly paid in both countries, is it easier to escape low pay in Scotland than in England?

Even when pay is growing, not all individuals necessarily gain. Some experience pay reductions, others experience periods of unemployment and some even leave the labour force altogether. During the 1990s, the unemployment differential between Scotland and England grew. The Scottish unemployment rate, measured on the International Labour Organisation (ILO) definition and expressed as an index of the rate in the rest of England, was 106 on average during 1991and 1992.