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Job Insecurity and Wage Outcomes in Britain

  • David Campbell


  • Alan Carruth


  • Andrew Dickerson


  • Francis Green


In 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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Paper provided by School of Economics, University of Kent in its series Studies in Economics with number 0109.

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Date of creation: Apr 2001
Date of revision:
Handle: RePEc:ukc:ukcedp:0109
Contact details of provider: Postal: School of Economics, University of Kent, Canterbury, Kent, CT2 7NP
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  1. David G. Blanchflower, 1990. "Fear, Unemployment and Pay Flexibility," NBER Working Papers 3365, National Bureau of Economic Research, Inc.
  2. Stephen Nickell & Tracy Jones & Glenda Quintini, 2000. "A picture of job insecurity facing British men," LSE Research Online Documents on Economics 20141, London School of Economics and Political Science, LSE Library.
  3. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
  4. Bell, Brian & Nickell, Stephen & Quintini, Glenda, 2002. "Wage equations, wage curves and all that," Labour Economics, Elsevier, vol. 9(3), pages 341-360, July.
  5. Buchele, Robert & Christiansen, Jens, 1998. "Do Employment and Income Security Cause Unemployment? A Comparative Study of the US and the E-4," Cambridge Journal of Economics, Oxford University Press, vol. 22(1), pages 117-36, January.
  6. Clark, Andrew E., 2001. "What really matters in a job? Hedonic measurement using quit data," Labour Economics, Elsevier, vol. 8(2), pages 223-242, May.
  7. Green, Francis & Felstead, Alan & Burchell, Brendan, 2000. " Job Insecurity and the Difficulty of Regaining Employment: An Empirical Study of Unemployment Expectations," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(0), pages 855-83, Special I.
  8. Groenewold, Nicolaas, 1999. "Employment Protection and Aggregate Unemployment," Journal of Macroeconomics, Elsevier, vol. 21(3), pages 619-630, July.
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