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

In: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000

  • Amanda Gosling
  • Thomas Lemieux

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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This chapter was published in:
  • David Card & Richard Blundell & Richard B. Freeman, 2004. "Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000," NBER Books, National Bureau of Economic Research, Inc, number card04-1, October.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 6750.
    Handle: RePEc:nbr:nberch:6750
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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    1. Amanda Gosling & Stephen Machin & Costas Meghir, 1994. "The changing distribution of male wages in the UK," IFS Working Papers W94/13, Institute for Fiscal Studies.
    2. 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.
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