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Education, occupations and wage inequality in the UK since the
1980s
Craig HolmesSKOPE and Oxford University
OUDE Research Day, October 9th 2013
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Introduction• Wage inequality in the UK has risen since the 1980s
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Introduction• Rising upper- and lower-tail inequality until mid 1990s• Small increases in upper-tail inequality since mid 1990s (except at very
top), coupled with falling inequality at bottom end
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.00.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
1987-2001
1994-2007
Percentile
Real
wag
e gr
owth
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Workforce composition• Education and earnings are strongly correlated• Increasing the size of the more educated groups drives up inequality
0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Total estimated composition
Education
Percentile
Real
wag
e gr
owth
, 198
7-20
01
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Workforce composition• Other compositional changes also have inequality-increasing effects• This is true for past decade too
0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Total estimated composition
Occupations
Education
Unions
Percentile
Real
wag
e gr
owth
, 198
7-20
01
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The wage structure• Overall effect on inequality depends on structure of wages associated with
these variables• For education:
– Increasing demand for skills widens earnings inequality between the more and less educated groups
– Increasing education attainment could reduce earnings inequalities as earnings benefits spread more widely
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The wage structure• We do see inequality reducing changes in the wage structure...
0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%Composition
Wage structure
0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Composition
Wage structure
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The wage structure• ...but these are not attributable to educational attainment
0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
Degree
Post compulsory
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Distribution of jobs• Seems to reflect ‘correction’ of compositional changes – not as many
people in high wage jobs as we’d predict
Year Jobs earning below 2/3 * median hourly
wage
Jobs earning above 1.5* median hourly
wageInitial (1987) 20.2% 23.4%Composition effects only 24.0% 27.1%Final (2001) 23.0% 25.6%Initial (1994) 22.6% 25.2%Composition effects only 25.2% 27.3%Final (2007) 21.3% 25.9%
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Distribution of jobs
• Result: increasingly heterogeneous occupational groups
Low pay Middle pay High pay
-5.00%
-4.00%
-3.00%
-2.00%
-1.00%
0.00%
1.00%
2.00%
3.00%
Professionals Managerial
Intermediate Manual routine
Admin routine Service
Chan
ge in
em
ploy
men
t sha
re, 1
994-
2007
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Distribution of jobs
• Graduates only:
Low pay Middle pay High pay
-5.00%
-4.00%
-3.00%
-2.00%
-1.00%
0.00%
1.00%
2.00%
Professionals Managerial
Intermediate Manual routine
Admin routine Service
Chan
ge in
em
ploy
men
t sha
re, 1
994-
2007
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Conclusion• Policymakers tend to work with a ‘room at the top’ mindset focus on
supply of skills through increasing educational attainment• Higher wage jobs are more scarce that this suggests – limits the ability of
education to reduce labour market inequalities• The problem may be a different sort of ‘demand for skill’ problem to the
one the UK has often faced – not a market failure or a problem of short-termism.
• In the mean time, should leads to a great concern about intergenerational inequalities
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Contact Details
Craig Holmes
ESRC Centre on Skills, Knowledge and Organisational Performance (SKOPE),
Email: [email protected]