Real Wages, Wage Inequality and the Regional Cost-of-living in the UK
University 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.
|Date of creation:||Feb 2010|
|Date of revision:||Oct 2010|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
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.:
- 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.
- Francis Green & Yu Zhu, 2010.
"Overqualification, job dissatisfaction, and increasing dispersion in the returns to graduate education,"
Oxford Economic Papers,
Oxford University Press, vol. 62(4), pages 740-763, October.
- Francis Green & Yu Zhu, 2008. "Overqualification, Job Dissatisfaction, and Increasing Dispersion in the Returns to Graduate Education," Studies in Economics 0803, School of Economics, University of Kent.
- 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.
- Moretti, Enrico, 2008.
"Real Wage Inequality,"
CEPR Discussion Papers
6997, C.E.P.R. Discussion Papers.
- Moretti, Enrico, 2008. "Real Wage Inequality," IZA Discussion Papers 3706, Institute for the Study of Labor (IZA).
- Enrico Moretti, 2008. "Real Wage Inequality," Working Paper Series 34_08, The Rimini Centre for Economic Analysis.
- Enrico Moretti, 2008. "Real Wage Inequality," NBER Working Papers 14370, National Bureau of Economic Research, Inc.
- 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.
- Peter Hayes, 2005. "Estimating UK regional price indices, 1974-96," Regional Studies, Taylor & Francis Journals, vol. 39(3), pages 333-344.
- Dan A. Black & Natalia A. Kolesnikova & Lowell J. Taylor, 2007.
"Earnings functions when wages and prices vary by location,"
2007-031, Federal Reserve Bank of St. Louis.
- 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.
- Andrew Henley, 2005. "On regional growth convergence in Great Britain," Regional Studies, Taylor & Francis Journals, vol. 39(9), pages 1245-1260.
- Jerry Hausman, 2003. "Sources of Bias and Solutions to Bias in the Consumer Price Index," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 23-44, Winter.
- 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 357-382, June.
- 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.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:36390. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.