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Labor Market Reforms and Changes in Wage Inequality in the United Kingdom and the United States

In: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000

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  • Amanda Gosling
  • Thomas Lemieux

Abstract

This paper compares trends in male and female hourly wage inequality in the United Kingdom and the United States between 1979 and 1998. Our main finding is that the extent and pattern of wage inequality became increasingly similar in the two countries during this period. We attribute this convergence to 'U.S. style' reforms in the U.K. labour market. In particular, we argue that the much steeper decline in unionisation in the United Kingdom explains why inequality increased faster than in the United States. For women, we conclude that the fall and subsequent recovery in the real value of the U.S. minimum wage explains why wage inequality increased faster in the United States than in the United Kingdom during the 1980s, while the opposite happened during the 1990s. Interestingly, the introduction of the National Minimum Wage in the U.K. in 1999 also contributed to the convergence in labour market institutions and wage inequality between the two countries.

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This chapter was published in:

  • David Card & Richard Blundell & Richard B. Freeman, 2004. "Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000," NBER Books, National Bureau of Economic Research, Inc, number card04-1, October.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 6750.

    Handle: RePEc:nbr:nberch:6750

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    References

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    1. A Gosling & Stephen Machin, 1995. "The Changing Distribution of Male Wages in the UK," CEP Discussion Papers dp0271, Centre for Economic Performance, LSE.
    2. Stewart, Mark B, 1983. "Relative Earnings and Individual Union Membership in the United Kingdom," Economica, London School of Economics and Political Science, vol. 50(198), pages 111-25, May.
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    Cited by:
    1. Amuedo Dorantes, Catalina & De la Rica Goiricelaya, Sara, 2005. "The Impact of Gender Segregation on Male-Female Wage Differentials," DFAEII Working Papers 2005-16, University of the Basque Country - Department of Foundations of Economic Analysis II.
    2. John Schmitt, 2005. "Labor Markets and Economic Inequality in the United States Since the End of the 1970s," CEPR Reports and Issue Briefs 2005-14, Center for Economic and Policy Research (CEPR).
    3. Adriaan Kalwij & Alessie, R., 2003. "WP 18 - Permanent and transitory wage inequality of British men, 1975-2001: Year, age and cohort effects," AIAS Working Papers wp18, AIAS, Amsterdam Institute for Advanced Labour Studies.
    4. Clément Imbert, 2011. "Decomposing wage inequality: Public and private sectors in Vietnam 1993-2006," PSE Working Papers halshs-00564653, HAL.
    5. John T. Addison & Ralph W. Bailey & W. Stanley Siebert, 2009. "Wage Dispersion in a Partially Unionized Labor Force," Discussion Papers 09-04, Department of Economics, University of Birmingham.
    6. Clément Imbert, 2011. "Decomposing wage inequality: Public and private sectors in Vietnam 1993-2006," Working Papers halshs-00564653, HAL.
    7. R. Alessie & A.S. Kalwij, 2003. "Permanent and transitory wage inequality of British men, 1975-2001: year, age and cohort effects," Working Papers 03-04, Utrecht School of Economics.
    8. Addison, John T. & Siebert, W. Stanley, 2002. "Changes in Collective Bargaining in the U.K," IZA Discussion Papers 562, Institute for the Study of Labor (IZA).
    9. Addison, John T. & Bailey, Ralph & Siebert, W. Stanley, 2003. "The Impact of Deunionisation on Earnings Dispersion Revisited," IZA Discussion Papers 724, Institute for the Study of Labor (IZA).
    10. Abigail Mcknight & T. Tsang, 2013. "GINI Country Report: Growing Inequalities and their Impacts in the United Kingdom," GINI Country Reports united_kingdom, AIAS, Amsterdam Institute for Advanced Labour Studies.
    11. Jens Rubart, 2006. "Dismissal Protection or Wage Flexibility," Computing in Economics and Finance 2006 406, Society for Computational Economics.
    12. David Card & Thomas Lemieux & W. Craig Riddell, 2003. "Unionization and Wage Inequality: A Comparative Study of the U.S, the U.K., and Canada," NBER Working Papers 9473, National Bureau of Economic Research, Inc.
    13. Sara de la Rica, 2007. "Segregación ocupacional y diferencias salariales por género en España: 1995-2002," Working Papers 2007-35, FEDEA.
    14. Felipe Balmaceda, 2008. "Firm-Provided Training and Labor Market Policies," Documentos de Trabajo 252, Centro de Economía Aplicada, Universidad de Chile.
    15. Amuedo-Dorantes, Catalina & de la Rica, Sara, 2005. "The Impact of Gender Segregation on Male-Female Wage Differentials: Evidence from Matched Employer-Employee Data for Spain," IZA Discussion Papers 1742, Institute for the Study of Labor (IZA).
    16. Adriaan S. Kalwij & Rob Alessie, 2007. "Permanent and transitory wages of British men, 1975-2001: year, age and cohort effects," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(6), pages 1063-1093.

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