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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

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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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Handle: RePEc:nbr:nberwo:8413

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Find related papers by JEL classification:
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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. [Downloadable!] (restricted)
  2. Gosling, Amanda & Machin, Stephen & Meghir, Costas, 2000. "The Changing Distribution of Male Wages in the U.K," Review of Economic Studies, Blackwell Publishing, vol. 67(4), pages 635-66, October.
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  1. Adriaan S. Kalwij & Rob Alessie, 2003. "Permanent and Transitory Wage Inequality of British Men, 1975-2001: Year, Age and Cohort Effects," Working Papers 03-04, Utrecht School of Economics. [Downloadable!]
    Other versions:
  2. Felipe Balmaceda, 2008. "Firm-Provided Training and Labor Market Policies," Documentos de Trabajo 252, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
  3. 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. [Downloadable!] (restricted)
  4. Catalina Amuedo-Dorantes & Sara de la Rica Goiricelaya, 2005. "The Impact of Gender Segregation on Male-Female Wage Differentials," DFAEII Working Papers 200516, University of the Basque Country - Department of Foundations of Economic Analysis II. [Downloadable!]
  5. 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). [Downloadable!]
  6. Jens Rubart, 2006. "Dismissal Protection or Wage Flexibility," Computing in Economics and Finance 2006 406, Society for Computational Economics. [Downloadable!]
  7. 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). [Downloadable!]
  8. Catalina Amuedo-Dorantes & Sara de la Rica, 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). [Downloadable!]
  9. 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. [Downloadable!]
  10. Sara de la Rica, 2007. "Segregación ocupacional y diferencias salariales por género en España: 1995-2002," Working Papers 2007-35, FEDEA. [Downloadable!]
  11. Catalina Amuedo-Dorantes & Sara De la Rica, 2006. "The Role of Segregation and Pay Structure on the Gender Wage Gap: Evidence from Matched Employer-Employee Data for Spain," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
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