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Poverty and Worklessness in Britain

  • Stephen Nickell

Relative poverty in the UK has risen massively since 1979 mainly because of increasing worklessness, rising earnings dispersion and benefits indexed to prices, not wages. So poverty is now at a very high level. The economic forces underlying this are the significant shift in demand against the unskilled which has outpaced the shift in relative supply in the same direction. This has substantially weakened the low-skill labour market which has increased both pay dispersion and worklessness, particularly among low-skilled men. The whole situation has been exacerbated by the very long tail in the skill distribution, so that over 20 per cent of the working age population have very low skills indeed (close to illiterate). Practical policies discussed include improving education and overall well-being for children in the lower part of the ability range, raising wage floors, New Deal policies, tax credits and benefits for the workless. Overall, I would argue that without reducing the long tail in the skill distribution, there is no practical possibility of policy reducing relative poverty to 1979 levels.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0579.

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Date of creation: Jul 2003
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Handle: RePEc:cep:cepdps:dp0579
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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  1. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
  2. Julia Whitburn, 2002. "Mathematical Attainments in Primary Schooling: Raising Standards and Reducing Diversity," National Institute Economic Review, National Institute of Economic and Social Research, vol. 179(1), pages 64-75, January.
  3. Eric A. Hanushek, 2002. "The Failure of Input-based Schooling Policies," NBER Working Papers 9040, National Bureau of Economic Research, Inc.
  4. Richard Dickens & Alan Manning, 2002. "Has the national minimum wage reduced UK wage inequality?," LSE Research Online Documents on Economics 20079, London School of Economics and Political Science, LSE Library.
  5. repec:cup:cbooks:9780521556675 is not listed on IDEAS
  6. Stephen Nickell & Glenda Quintini, 2002. "The Consequences of The Decline in Public Sector Pay in Britain: A Little Bit of Evidence," Economic Journal, Royal Economic Society, vol. 112(477), pages F107-F118, February.
  7. Sheldon Danziger & Jane Waldfogel, 2000. "Investing in Children: What do we know? What should we do?," CASE Papers case34, Centre for Analysis of Social Exclusion, LSE.
  8. Richard Dickens & David Ellwood, 2001. "Whither Poverty in Great Britain and the United States? The Determinants of Changing Poverty and Whether Work Will Work," CEP Discussion Papers dp0506, Centre for Economic Performance, LSE.
  9. Adrian Wood, 1995. "How Trade Hurt Unskilled Workers," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 57-80, Summer.
  10. Nickell, Stephen & Bell, Brian, 1996. "Changes in the Distribution of Wages and Unemployment in OECD Countries," American Economic Review, American Economic Association, vol. 86(2), pages 302-08, May.
  11. Stewart, Mark B., 2002. "The Impact of the Introduction of the UK Minimum Wage on the Employment Probabilities of Low Wage Workers," Royal Economic Society Annual Conference 2002 169, Royal Economic Society.
  12. Wood Júnior, Thomaz, 1995. "Workers," RAE - Revista de Administração de Empresas, FGV-EAESP Escola de Administração de Empresas de São Paulo (Brazil), vol. 35(2), January.
  13. Alan B. Krueger, 2003. "Economic Considerations and Class Size," Economic Journal, Royal Economic Society, vol. 113(485), pages F34-F63, February.
  14. Stephen Nickell, 2003. "A picture of European unemployment: success and failure," LSE Research Online Documents on Economics 20039, London School of Economics and Political Science, LSE Library.
  15. Dan Devroye & Richard B. Freeman, 2002. "Does inequality in skills explain inequality of earnings across advanced countries?," LSE Research Online Documents on Economics 20058, London School of Economics and Political Science, LSE Library.
  16. Paul Krugman, 1994. "Past and prospective causes of high unemployment," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 23-43.
  17. Daron Acemoglu, 2002. "Cross-Country Inequality Trends," NBER Working Papers 8832, National Bureau of Economic Research, Inc.
  18. Stephen Machin & Alan Manning, 1992. "Minimum Wages," CEP Discussion Papers dp0080, Centre for Economic Performance, LSE.
  19. John Van Reenen, 2003. "Active Labour Market Policies and the British New Deal for the Young Unemployed in Context," NBER Working Papers 9576, National Bureau of Economic Research, Inc.
  20. Howard Glennerster, 2002. "United Kingdom Education 1997--2001," Oxford Review of Economic Policy, Oxford University Press, vol. 18(2), pages 120-136, June.
  21. Paul Gregg & Susan Harkness, 2003. "Welfare Reform and Lone Parents Employment in the UK," The Centre for Market and Public Organisation 03/072, Department of Economics, University of Bristol, UK.
  22. Stephen Machin & Alan Manning & Lupin Rahman, 2002. "Where the minimum wage bites hard: the introduction of the UK national minimum wage to a low wage sector," LSE Research Online Documents on Economics 20070, London School of Economics and Political Science, LSE Library.
  23. Desjonqueres, Thibaut & Machin, Stephen & Van Reenen, John, 1999. " Another Nail in the Coffin? Or Can the Trade Based Explanation of Changing Skill Structures Be Resurrected?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(4), pages 533-54, December.
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