Real Wages, Wage Inequality and the Regional Cost-of-living in the UK
AbstractUniversity graduates in the UK are more concentrated in regions where the cost of housing is higher, implying that they face a higher cost-of-living that could possibly reduce the graduate real wage relative to other groups and carry implications for measures of wage dispersion. This paper reassesses how estimates of wage inequality from 1997 to 2008 vary when regional differences 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); this is a new measure of the cost-of-living that partially updates the national RPI with a regional housing index, therefore allowing the RPI to vary by regions. Results show that the national RPI underestimates the cost-of-living of workers living in the most expensive regions (London, South East) and overestimates the cost-of-living for “cheaper” regions (Northern Ireland, Scotland). When deflating hourly wages by the regional RPI, the average level of wages is lower from 8% to 11% an hour for all workers in London and the South East, but is higher (from 2% to 9%) in the remaining regions; similarly the college –high school wage gap decreases form 6 to 13% in levels when deflating wages by the real regional RPI.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 36390.
Date of creation: Feb 2010
Date of revision: Oct 2010
cost-of-living; wages; wage inequality; RPI;
Find related papers by JEL classification:
- R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
- C0 - Mathematical and Quantitative Methods - - General
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
- J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
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.:
- Tim Leunig & Henry Overman, 2008. "Spatial patterns of development and the British housing market," Oxford Review of Economic Policy, Oxford University Press, vol. 24(1), pages 59-78, spring.
- 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.
- 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.
- 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, 01.
- Dan Black & Natalia Kolesnikova & Lowell J. Taylor, 2007. "Earnings functions when wages and prices vary by location," Working Papers 2007-031, Federal Reserve Bank of St. Louis.
- John Muellbauer & Anthony Murphy, 2008. "Housing markets and the economy: the assessment," Oxford Review of Economic Policy, Oxford University Press, vol. 24(1), pages 1-33, spring.
- 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.
- David G. Blanchflower & Andrew J. Oswald, 2005. "Regional Wages and the Need for a Better Area Cost Adjustment," Public Money & Management, Chartered Institute of Public Finance and Accountancy, vol. 25(2), pages 86-88, 04.
- 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 F357-82, June.
- Andrew Henley, 2005. "On regional growth convergence in Great Britain," Regional Studies, Taylor & Francis Journals, vol. 39(9), pages 1245-1260.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.