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Skill imbalances in the UK labour market: 1979-99

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Pablo Burriel-Llombart
Jonathan Thomas

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Abstract

This paper investigates the evolution of skill imbalances in the UK labour market over the past two decades. Movements in the relative ease with which firms can recruit skilled workers can affect unemployment, inflation, and productivity. Any assessment of changes in the skill balance is complicated by the fact that different indicators often send conflicting messages. Such conflicts could reflect the underlying definitions of skilled and unskilled workers, as well as differences in the sensitivities of each measure to alternative market shocks. Our analysis casts doubt on the reliability of standard measures of unemployment dispersion across educational groups, and the Confederation of British Industry ratio of skilled and unskilled labour shortages, as measures of skill imbalance. The gap between the demand for, and the supply of, educated labour has in fact increased steadily over the past two decades, particularly for those workers with graduate-level qualifications. So the apparent decline in the NAIRU over the recent cyclical upswing cannot be attributed to an improvement in the relative ease with which firms can hire educated workers.

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Paper provided by Bank of England in its series Bank of England working papers with number 145.

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Handle: RePEc:boe:boeewp:145

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  1. Nickell, Stephen & Bell, Brian, 1995. "The Collapse in Demand for the Unskilled and Unemployment across the OECD," Oxford Review of Economic Policy, Oxford University Press, vol. 11(1), pages 40-62, Spring.
  2. Machin, Stephen & Manning, Alan, 1997. "Can supply create its own demand? Implications for rising skill differentials," European Economic Review, Elsevier, vol. 41(3-5), pages 507-516, April. [Downloadable!] (restricted)
  3. Paul Krugman, 1994. "Past and prospective causes of high unemployment," Proceedings, Federal Reserve Bank of Kansas City, issue Jan, pages 49-98.
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  4. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
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  5. Machin, Steve, 1994. "Changes in the Relative Demand for Skills in the UK Labour Market," CEPR Discussion Papers 952, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. Haskel, Jonathan & Heden, Ylva, 1999. "Computers and the Demand for Skilled Labour: Industry- and Establishment-Level Panel Evidence for the UK," Economic Journal, Royal Economic Society, vol. 109(454), pages C68-79, March. [Downloadable!] (restricted)
  7. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed The Labor Market?," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1169-1213, November. [Downloadable!] (restricted)
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  8. Haskel, Jonathan & Martin, Christopher, 1993. "The Causes of Skill Shortages in Britain," Oxford Economic Papers, Oxford University Press, vol. 45(4), pages 573-88, October. [Downloadable!] (restricted)
  9. Peter Robinson, 1997. "The Myth of Parity of Esteem: Earnings and Qualifications," CEP Discussion Papers dp0354, Centre for Economic Performance, LSE. [Downloadable!]
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  11. Manacorda, Marco & Petrongolo, Barbara, 1999. "Skill Mismatch and Unemployment in OECD Countries," Economica, London School of Economics and Political Science, vol. 66(262), pages 181-207, May. [Downloadable!] (restricted)
  12. Layard, R. & Nickell, S., . "Layard-Nickell," Instructional Stata datasets for econometrics layardnickell, Boston College Department of Economics. [Downloadable!]
  13. Blanchard, Olivier & Katz, Lawrence F, 1997. "What We Know and Do Not Know about the Natural Rate of Unemployment," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 51-72, Winter. [Downloadable!] (restricted)
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  14. F Green & Steven McIntosh & Anna Vignoles, 1999. "Overeducation and Skills - Clarifying the Concepts," CEP Discussion Papers dp0435, Centre for Economic Performance, LSE.
  15. Green, Francis & Machin, Stephen & Wilkinson, David, 1998. "The Meaning and Determinants of Skills Shortages," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 60(2), pages 165-87, May.
  16. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change And Wage Inequality," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1055-1089, November. [Downloadable!] (restricted)
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  17. Haskel, Jonathan & Martin, Christopher, 1993. "Do Skill Shortages Reduce Productivity? Theory and Evidence from the United Kingdom," Economic Journal, Royal Economic Society, vol. 103(417), pages 386-94, March. [Downloadable!] (restricted)
  18. Katharine G. Abraham, 1987. "Help-Wanted Advertising, Job Vacancies, and Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(1987-1), pages 207-248. [Downloadable!]
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