Job Insecurity and Wage Outcomes in Britain
AbstractIn 1996 and 1997, approximately 1 in 10 British workers thought that it was either likely or very likely that they would lose their job within 12 months. Increased job insecurity has been touted as a possible cause for the decline of equilibrium unemployment in Britain and the United States during the 1990s. We investigate whether perceptions of job insecurity contribute to lowering wages. First, we examine the validity of subjective questions about unemployment expectations, using longitudinal data. We find that workers' fears of unemployment are increased by their previous unemployment experience and by other household members' unemployment experiences, and are associated with other objective indicators of insecure jobs. The measure of unemployment fear also helps to predict future unemployment, above and beyond conventional objective variables. We then show that high fear of unemployment is associated with significantly lower wage levels. OLS estimates of the downward impact on average wages of an increase in this expectation by just one half of a standard deviation are approximately 1½ percent. Instrumental variable estimates suggest that 1½ percent is likely to be an underestimate. We conclude that increased job insecurity, relative to aggregate unemployment, has contributed in part to wage restraint in Britain.
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Bibliographic InfoPaper provided by Department of Economics, University of Kent in its series Studies in Economics with number 0109.
Date of creation: Apr 2001
Date of revision:
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Postal: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP
Phone: +44 (0)1227 764000
Fax: +44 (0)1227 827850
Web page: http://www.ukc.ac.uk/economics/
Find related papers by JEL classification:
- J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
This paper has been announced in the following NEP Reports:
- NEP-LAB-2001-07-17 (Labour Economics)
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