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

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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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8413.

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Date of creation: Aug 2001
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Publication status: published as Labor Market Reforms and Changes in Wage Inequality in the United Kingdom and the United States , Amanda Gosling, Thomas Lemieux. in Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000 , Card, Blundell, and Freeman. 2004
Handle: RePEc:nbr:nberwo:8413

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  1. Gosling, Amanda & Machin, Stephen & Meghir, Costas, 2000. "The Changing Distribution of Male Wages in the U.K," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 67(4), pages 635-66, October.
  2. Stewart, Mark B, 1983. "Relative Earnings and Individual Union Membership in the United Kingdom," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 50(198), pages 111-25, May.
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Cited by:
  1. repec:hal:wpaper:halshs-00564653 is not listed on IDEAS
  2. Kalwij, Adriaan & Alessie, Rob, 2003. "Permanent and Transitory Wage Inequality of British Men, 1975-2001: Year, Age and Cohort Effects," IZA Discussion Papers 686, Institute for the Study of Labor (IZA).
  3. Clément Imbert, 2011. "Decomposing wage inequality: Public and private sectors in Vietnam 1993-2006," PSE Working Papers halshs-00564653, HAL.
  4. 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).
  5. John T. Addison & Ralph W. Bailey & W. Stanley Siebert, 2009. "Wage Dispersion in a Partially Unionized Labor Force," GEMF Working Papers 2009-09, GEMF - Faculdade de Economia, Universidade de Coimbra.
  6. 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.
  7. John Schmitt, 2005. "Labor Markets and Economic Inequality in the United States Since the End of the 1970s," CEPR Reports and Issue Briefs, Center for Economic and Policy Research (CEPR) 2005-14, Center for Economic and Policy Research (CEPR).
  8. Peng, Fei & Kang, Lili, 2013. "Cyclical changes in the wage structure of the United Kingdom: a historical review of the GHS 1972-2002," MPRA Paper 47210, University Library of Munich, Germany.
  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. 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).
  11. Jens Rubart, 2006. "Dismissal Protection or Wage Flexibility," Computing in Economics and Finance 2006, Society for Computational Economics 406, Society for Computational Economics.
  12. Sara de la Rica, 2007. "Segregación ocupacional y diferencias salariales por género en España: 1995-2002," Working Papers 2007-35, FEDEA.
  13. Felipe Balmaceda, 2008. "Firm-Provided Training and Labor Market Policies," Documentos de Trabajo, Centro de Economía Aplicada, Universidad de Chile 252, Centro de Economía Aplicada, Universidad de Chile.
  14. 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., John Wiley & Sons, Ltd., vol. 22(6), pages 1063-1093.
  15. Abigail Mcknight & T. Tsang, 2013. "GINI Country Report: Growing Inequalities and their Impacts in the United Kingdom," GINI Country Reports, AIAS, Amsterdam Institute for Advanced Labour Studies united_kingdom, AIAS, Amsterdam Institute for Advanced Labour Studies.
  16. 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.

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