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

  • 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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File URL: http://www.nber.org/papers/w8413.pdf
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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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Publication status: published as Labor Market Reforms and Changes in Wage Inequality in the United Kingdom and the United States , Amanda Gosling, Thomas Lemieux. in Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000 , Card, Blundell, and Freeman. 2004
Handle: RePEc:nbr:nberwo:8413
Note: LS
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  1. Gosling, Amanda & Machin, Stephen & Meghir, Costas, 2000. "The Changing Distribution of Male Wages in the U.K," Review of Economic Studies, Wiley Blackwell, vol. 67(4), pages 635-66, October.
  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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