IDEAS home Printed from https://ideas.repec.org/a/spr/empeco/v52y2017i4d10.1007_s00181-016-1122-4.html
   My bibliography  Save this article

Real wages, wage inequality and the regional cost-of-living in the UK

Author

Listed:
  • Cinzia Rienzo

    (National Institute of Economic and Social Research)

Abstract

This paper reassesses how estimates of wage inequality from 1997 to 2008 change when regional variations in the cost of housing in the UK are taken into consideration. In order to do so, the real wage is deflated by a specially constructed regional retail price index (RPI). Results show that although regional differences in the cost of living exist, they do not affect significantly the wage difference between workers with a graduate education and workers with a high school degree, and the change of this differential over time, while they affect regional differences in real wage growth. The regional RPI reveals that the national RPI underestimates the cost-of-living of workers in London, and the South East and overestimates the cost-of-living for the majority of the other regions.

Suggested Citation

  • Cinzia Rienzo, 2017. "Real wages, wage inequality and the regional cost-of-living in the UK," Empirical Economics, Springer, vol. 52(4), pages 1309-1335, June.
    • Handle: RePEc:spr:empeco:v:52:y:2017:i:4:d:10.1007_s00181-016-1122-4
    DOI: 10.1007/s00181-016-1122-4
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00181-016-1122-4
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s00181-016-1122-4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ian Walker & Yu Zhu, 2008. "The College Wage Premium and the Expansion of Higher Education in the UK," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(4), pages 695-709, December.
    2. Francis Green & Yu Zhu, 2010. "Overqualification, job dissatisfaction, and increasing dispersion in the returns to graduate education," Oxford Economic Papers, Oxford University Press, vol. 62(4), pages 740-763, October.
    3. David Card & Thomas Lemieux, 2001. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(2), pages 705-746.
    4. Nigel O'leary & Peter Sloane, 2008. "Rates of Return to Degrees across British Regions," Regional Studies, Taylor & Francis Journals, vol. 42(2), pages 199-213.
    5. Jonathan Wadsworth, 2010. "The Uk Labour Market And Immigration," National Institute Economic Review, National Institute of Economic and Social Research, vol. 213(1), pages 35-42, July.
    6. Dan Black & Natalia Kolesnikova & Lowell Taylor, 2009. "Earnings Functions When Wages and Prices Vary by Location," Journal of Labor Economics, University of Chicago Press, vol. 27(1), pages 21-47, January.
    7. Enrico Moretti, 2013. "Real Wage Inequality," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 65-103, January.
    8. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott & Helen Simpson, 2008. "Relative Wage Variation and Industry Location in the United Kingdom," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(4), pages 431-459, August.
    9. Marco Manacorda & Alan Manning & Jonathan Wadsworth, 2012. "The Impact Of Immigration On The Structure Of Wages: Theory And Evidence From Britain," Journal of the European Economic Association, European Economic Association, vol. 10(1), pages 120-151, February.
    10. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4, National Bureau of Economic Research, Inc.
    11. Andrew Henley, 2005. "On regional growth convergence in Great Britain," Regional Studies, Taylor & Francis Journals, vol. 39(9), pages 1245-1260.
    12. Peter Hayes, 2005. "Estimating UK regional price indices, 1974-96," Regional Studies, Taylor & Francis Journals, vol. 39(3), pages 333-344.
    13. Stephen Machin, 2003. "Wage Inequality Since 1975," Palgrave Macmillan Books, in: Richard Dickens & Paul Gregg & Jonathan Wadsworth (ed.), The Labour Market Under New Labour, chapter 12, pages 191-200, Palgrave Macmillan.
    14. John Muellbauer & Anthony Murphy, 2008. "Housing markets and the economy: the assessment," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 24(1), pages 1-33, spring.
    15. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555, Elsevier.
    16. Amanda Gosling & Stephen Machin & Costas Meghir, 2000. "The Changing Distribution of Male Wages in the U.K," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(4), pages 635-666.
    17. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, March.
    18. Tim Leunig & Henry Overman, 2008. "Spatial patterns of development and the British housing market," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 24(1), pages 59-78, spring.
    19. Blow, Laura & Crawford, Ian, 2001. "The Cost of Living with the RPI: Substitution Bias in the UK Retail Prices Index," Economic Journal, Royal Economic Society, vol. 111(472), pages 357-382, June.
    20. Jacob A. Mincer, 1974. "Schooling and Earnings," NBER Chapters, in: Schooling, Experience, and Earnings, pages 41-63, National Bureau of Economic Research, Inc.
    21. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, March.
    22. John Schmitt, 1995. "The Changing Structure of Male Earnings in Britain, 1974-1988," NBER Chapters, in: Differences and Changes in Wage Structures, pages 177-204, National Bureau of Economic Research, Inc.
    23. Felix Büchel & Andries de Grip & Antje Mertens (ed.), 2003. "Overeducation in Europe," Books, Edward Elgar Publishing, number 3054.
    24. Stephen Machin, 2008. "Big ideas: rising wage inequality," CentrePiece - The magazine for economic performance 260, Centre for Economic Performance, LSE.
    25. David G. Blanchflower & Andrew J. Oswald, 2005. "Regional Wages and the Need for a Better Area Cost Adjustment," Public Money & Management, Taylor & Francis Journals, vol. 25(2), pages 86-88, April.
    26. Jerry Hausman, 2003. "Sources of Bias and Solutions to Bias in the Consumer Price Index," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 23-44, Winter.
    27. Cinzia Rienzo, 2014. "Residual Wage Inequality and Immigration in the USA and the UK," LABOUR, CEIS, vol. 28(3), pages 288-308, September.
    28. Gilles Duranton & Vassilis Monastiriotis, 2002. "Mind the Gaps: The Evolution of Regional Earnings Inequalities in the U.K., 1982–1997," Journal of Regional Science, Wiley Blackwell, vol. 42(2), pages 219-256, May.
    29. Freeman, Richard B. & Katz, Lawrence F. (ed.), 1995. "Differences and Changes in Wage Structures," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226261607, December.
    30. Richard Dickens & Paul Gregg & Jonathan Wadsworth (ed.), 2003. "The Labour Market Under New Labour," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-59845-4.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Laurel J. Fish & Dennis Halcoussis & G. Michael Phillips, 2021. "Price‐Parity Adjustments Shouldn'T Be A Trade Secret: State‐Level Price Parity And Assessment Of Covenants Not To Compete Enforceability," Contemporary Economic Policy, Western Economic Association International, vol. 39(1), pages 220-235, January.
    2. Dawber James & Smith Paul A. & Tzavidis Nikos & Würz Nora & Flower Tanya & Thomas Heledd & Schmid Timo, 2022. "Experimental UK Regional Consumer Price Inflation with Model-Based Expenditure Weights," Journal of Official Statistics, Sciendo, vol. 38(1), pages 213-237, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Angel de la Fuente & Antonio Ciccone, 2003. "Human capital in a global and knowledge-based economy," UFAE and IAE Working Papers 562.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    2. Rienzo, Cinzia, 2008. "Residual Wage Inequality and Immigration in the UK and the US," MPRA Paper 30279, University Library of Munich, Germany, revised Mar 2011.
    3. Ken Yamada & Daiji Kawaguchi, 2012. "Changing Unchanged Inequality: Higher Education, Youth Population, and the Japan's Seniority Wages," Global COE Hi-Stat Discussion Paper Series gd12-243, Institute of Economic Research, Hitotsubashi University.
    4. Cinzia Rienzo, 2014. "Residual Wage Inequality and Immigration in the USA and the UK," LABOUR, CEIS, vol. 28(3), pages 288-308, September.
    5. Flávio Cunha & James Heckman, 2016. "Decomposing Trends in Inequality in Earnings into Forecastable and Uncertain Components," Journal of Labor Economics, University of Chicago Press, vol. 34(S2), pages 31-65.
    6. David Weisstanner & Klaus Armingeon, 2018. "How Redistributive Policies Reduce Market Inequality: Education Premiums in 22 OECD Countries," LIS Working papers 735, LIS Cross-National Data Center in Luxembourg.
    7. Elena Crivellaro, 2012. "Returns To College Over Time: Trends In Europe In The Last 15 Years. Stuck On The Puzzle," "Marco Fanno" Working Papers 0146, Dipartimento di Scienze Economiche "Marco Fanno".
    8. Ken Yamada & Daiji Kawaguchi, 2015. "The changing and unchanged nature of inequality and seniority in Japan," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(1), pages 129-153, March.
    9. Diego Battistón & Carolina García-Domench & Leonardo Gasparini, 2014. "Could an Increase in Education Raise Income Inequality? Evidence for Latin America," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 51(1), pages 1-39, May.
    10. Anja Heinze & Elke Wolf, 2010. "The intra-firm gender wage gap: a new view on wage differentials based on linked employer–employee data," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(3), pages 851-879, June.
    11. Anthony Edo & Farid Toubal, 2015. "Selective Immigration Policies and Wages Inequality," Review of International Economics, Wiley Blackwell, vol. 23(1), pages 160-187, February.
    12. Hermannsson, Kristinn & Lisenkova, Katerina & Lecca, Patrizio & McGregor, Peter G & Swales, J Kim, 2010. "The Importance of Graduates for the Scottish Economy: A Micro-to-Macro Approach," SIRE Discussion Papers 2010-80, Scottish Institute for Research in Economics (SIRE).
    13. Edo Anthony, 2015. "The Impact of Immigration on Native Wages and Employment," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(3), pages 1151-1196, July.
    14. Solomon W. Polachek & Jun Xiang, 2009. "The Gender Pay Gap across Countries: A Human Capital Approach," SOEPpapers on Multidisciplinary Panel Data Research 227, DIW Berlin, The German Socio-Economic Panel (SOEP).
    15. Green, David A. & Worswick, Christopher, 2012. "Immigrant earnings profiles in the presence of human capital investment: Measuring cohort and macro effects," Labour Economics, Elsevier, vol. 19(2), pages 241-259.
    16. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Trends in U. S. Wage Inequality: Re-Assessing the Revisionists," Harvard Institute of Economic Research Working Papers 2095, Harvard - Institute of Economic Research.
    17. Serge Atherwood & Corey S Sparks, 2019. "Early-career trajectories of young workers in the U.S. in the context of the 2008–09 recession: The effect of labor market entry timing," PLOS ONE, Public Library of Science, vol. 14(3), pages 1-30, March.
    18. Thomas Lemieux, 2008. "The changing nature of wage inequality," Journal of Population Economics, Springer;European Society for Population Economics, vol. 21(1), pages 21-48, January.
    19. Todd Schoellman & Lutz Hendricks, 2009. "Student Abilities During the Expansion of U.S. Education, 1950-2000," 2009 Meeting Papers 162, Society for Economic Dynamics.
    20. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Rising Wage Inequality: The Role of Composition and Prices," Harvard Institute of Economic Research Working Papers 2096, Harvard - Institute of Economic Research.

    More about this item

    Keywords

    Cost-of-living; Wages; Wage inequality; RPI;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:empeco:v:52:y:2017:i:4:d:10.1007_s00181-016-1122-4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.