Hostname: page-component-848d4c4894-ndmmz Total loading time: 0 Render date: 2024-05-06T09:54:10.162Z Has data issue: false hasContentIssue false
  • English
  • Français

Recent shifts in wage inequality and the wage returns to education in Britain

Published online by Cambridge University Press:  26 March 2020

Stephen Machin
Get access Rights & Permissions [Opens in a new window]

Abstract

In this article I consider shifts in the structure of wages in Britain between the mid-1970s and mid-1990s. In the 1990s the rising gap between the highest and lowest paid was either stable or rose a little, but by nowhere near as much as in the 1980s. This seems to be, at least partially, due to the fact that faster educational upgrading has dampened down some of the rising wage differentials experienced by the more educated. However, demand still seems to be shifting in favour of the more highly educated and skilled because, despite the fact that there are many more workers with higher educational qualifications, their wages relative to other groups have not fallen. Finally, I argue that relative demand shifts in favour of the more educated and skilled are still more pronounced in more technologically advanced industries. This is in line with the notion, like much of the evidence based on industry demand shifts in the 1970s and 1980s, that technology is key to changes in labour market inequality.

Type
Articles
Information
National Institute Economic Review , Volume 166 , October 1998 , pp. 87 - 96
Copyright
Copyright © 1998 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

This work draws on some DfEE funded work (joint with Susan Harkness) on ‘Graduate Earnings in Britain, 1974-95’ and on some of my joint work with John Van Reenen (Machin and Van Reenen, 1998). I would also like to thank Richard Dickens, Paul Gregg and Julian Steer for their help with some of the data.

References

Autor, D., Katz, L. and Krueger, A. (1997), ‘Computing inequality: have computers changed the labor market’, NBER Working Paper 5956.CrossRefGoogle Scholar
Berman, E., Bound, J. and Machin, S. (1998), ‘Implications of skill biased technological change: international evidence’, forthcoming in Quarterly Journal of Economics.CrossRefGoogle Scholar
Bound, J. and Johnson, G. (1992), ‘Changes in the structure of wages in the 1980s: an evaluation of alternative explanations’, American Economic Review, 92, pp. 371–392.Google Scholar
Desjonqueres, T., Machin, S. and Van Reenen, J. (1998), ‘Another nail in the coffin? Or can the trade based explanation of changing skill structures be resurrected?’, mimeo.CrossRefGoogle Scholar
Gosling, A., Machin, S. and Meghir, C. (1995), ‘The changing distribution of male wages in the UK’, Centre for Economic Performance, LSE, Discussion Paper 271.Google Scholar
Hamermesh, D. (1993), Labor Demand, Princeton University Press.Google Scholar
Harkness, S. (1996). ‘The gender earnings gap: evidence from the UK’, Fiscal Studies, 17, pp. 1–36.CrossRefGoogle Scholar
Harkness, S. and Machin, S. (1998), ‘Changes in the wage returns to education in Britain: supply changes and the evolution of wage differentials by sex and subject of study’, mimeo.Google Scholar
Heckman, J. (1979), ‘Sample selection bias as a specification error’, Econometrica, 47, pp. 153–61.CrossRefGoogle Scholar
Johnson, G. (1997), ‘Changes in earnings inequality: the role of demand shifts’, Journal of Economic Perspectives, 11 (Spring), pp. 41–54.CrossRefGoogle Scholar
Katz, L. and Murphy, K.M. (1992), ‘Changes in relative wages, 1963-1987: supply and demand factors’, Quarterly Journal of Economics, 108, pp. 35–78.CrossRefGoogle Scholar
Machin, S. (1996a), ‘Wage inequality in the UK’, Oxford Review of Economic Policy, 7, pp. 49–62.Google Scholar
Machin, S. (1996b), ‘Changes in the relative demand for skills in the UK labor market’, in Booth, A. and Snower, D. (eds.), Acquiring Skills: Market Failures, Their Symptoms and Policy Responses, Cambridge : Cambridge University Press.Google Scholar
Machin, S. and Van Reenen, J. (1998), ‘Technology and changes in skill structure: evidence from seven countries’, forthcoming in Quarterly Journal of Economics.CrossRefGoogle Scholar
Schmitt, J. (1995), ‘The changing structure of male earnings in Britain, 1974-88’, in Freeman, R. and Katz, L. (eds.), Changes and Differences in Wage Structures, University of Chicago Press.Google Scholar