the uk labour market and labour market policies cribb beis slides.pdfjonathan cribb (ifs) department...

Jonathan Cribb (IFS)

Department for Business, Energy and Industrial Strategy’s

Labour markets “Mini conference”

30th March 2017

The UK labour market and labour market policies

Introduction: IFS labour markets research

IFS undertakes wide range of labour markets research

Focus on two questions

• How has employment at older ages changed and why?

‒ Increase in state pension age for women

‒ Changes in health and employment of older men

• Why have (or haven’t) labour market inequalities changed?

‒ Pay inequality and the role of hours of work

‒ The gender wage gap

‒ The graduate premium

© Institute for Fiscal Studies The UK labour market, labour market policies, and their impact

Large increases in employment for some groups e.g. Older women


0%

10%

20%

30%

40%

50%

60%

70% 20

05 Q

1 20

05 Q

3 20

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07 Q

3 20

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3 20

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3 20

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10 Q

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3 20

13 Q

1 20

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3 20

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14 Q

3 20

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16 Q

3

Empl

oym

ent r

ate

Age 59 Age 60 Age 61 Age 62 Age 63 Age 64

Source: Cribb, Emmerson and Tetlow (2016) “Signals matter? Large retirement responses to limited financial incentives” and author’s calculations using the Labour Force Survey

Increase in state pension age for women boosts employment


0%

10%

20%

30%

40%

50%

60%

70% 20

05 Q

1 20

05 Q

3 20

06 Q

1 20

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11 Q

3 20

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14 Q

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14 Q

3 20

15 Q

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15 Q

3 20

16 Q

1 20

16 Q

3

Empl

oym

ent r

ate

Age 59 Age 60 Age 61 Age 62 Age 63 Age 64

Source: Cribb, Emmerson and Tetlow (2016) “Signals matter? Large retirement responses to limited financial incentives” and author’s calculations using the Labour Force Survey

Employment of older men since 1975


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1975 1980 1985 1990 1995 2000 2005 2010 2015

Per c

ent e

mpl

oyed

or s

elf-

empl

oyed

Year

55 to 59

60 to 64

65 to 69

Source: IFS calculations using the Labour Force Survey

Improvements in mortality – men


0%

1%

2%

3%

4%

5%

6%

1975 1980 1985 1990 1995 2000 2005 2010 2015

1-ye

ar m

orta

lity

rate

Year

70

65

60

55

Source: Office for National Statistics

Employment rate by mortality - men


50 55

60 61 62

63 64

65 66 67

68 69

70 71 72 73 74

48 50 55

60 61

62 63

64

65 66 67 68

69

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0%

Empl

oym

ent r

ate

1-year mortality rate

2010 1977

Weekly and hourly pay growth for men and women, 1994 to 2014


-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

Aver

age

real

gro

wth

(%) f

rom

199

4 to

201

4

Percentile point

Female weekly pay Female hourly pay

Male weekly pay Male hourly pay

Notes and source: Figure 5 of Belfield et al (2017) “Two decades of income inequality in Britain: the role of wages, household earnings and redistribution”

Proportion of men aged 25-55 working part-time by hourly pay, 1994 to 2014

© Institute for Fiscal Studies To include the presentation title here in all slides in the presentation, go to Insert > Header & Footer

0%

5%

10%

15%

20%

25%

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

% w

orki

ng le

ss th

an 3

0 ho

urs

a w

eek

Lowest-paid 20%

Middle 20%

Notes and source: Figure A of summary annex

Highest-paid 20%

Real-terms path of earnings since 2007-08

85

90

95

100

105

110

115

120

125

Inde

xed

to le

vel i

n 20

07-0

8

99th percentile earnings

NMW/NLW

Mean earnings

© Institute for Fiscal Studies The outlook for living standards Sources: OBR Economic and Fiscal Outlook (various years) and IFS

calculations using Annual Survey of Hours and Earnings

Gender wage gap by age, for people born in different decades


0

5

10

15

20

25

30

35

20 25 30 35 40 45 50

Gap

(%)

Age 1950s 1960s 1970s 1980s

Source: Costa Dias, Elming and Joyce (2016) “The Gender Wage Gap”

Gender wage gap by age and birth cohort, for different education groups


Source: Costa Dias, Elming and Joyce (2016) “The Gender Wage Gap”

Drivers of the gender wage gap


Gender wage gap opens up in late 20s and continues to widen throughout 30s

Gender wage gap rises gradually after the birth of woman’s first child

Women’s employment rates fall after birth of first child

Particularly for women with lower education levels

Falls in employment for women are quite persistent

Also a (persistent) increase in part-time work for women after having first child

One reason for gender wage gap is the lower experience that women have in the labour market after having children, particularly as there has been found to be very little return to experience in part-time work

Graduate wage premium: a puzzle


0%

5%

10%

15%

20%

25%

30%

35%

40%

1965–69 1970–74 1975–79 1980–84 1985–89

Prop

orti

on w

ith

a fi

rst

degr

ee o

r ab

ove

Birth cohort

Male Female

Source: Blundell, Green and Jin (2016) “The UK Wage Premium Puizzle: How did a Large Increase in University Graduates leave the Education Premium Unchanged?”

Graduate wage premium: a puzzle


Source: Blundell, Green and Jin (2016) “The UK Wage Premium Puizzle: How did a Large Increase in University Graduates leave the Education Premium Unchanged?”

Why has the graduate wage premium remained so stable? Massive increase in supply of graduate labour

• Simple supply/demand analysis : expect a fall in graduate premium

Various potential explanations for this are ruled out:

• Changes in the observable composition of groups (immigrants, postgraduates, public sector)

• Unobserved quality changes to each education group

• Trade model or exogenous skill biased technical change

One potential answer: endogenous technological change

• Firms make organisational change in which decision making is spread through the workforce, and use more graduate labour (at same wage)

• Areas of the UK with higher % of grads are areas where individuals report having more autonomy over own work


Conclusion

The labour market is changing rapidly in many ways

• E.g. Increase in self-employment

• Increases in participation at older ages

‒ But potential for much further increase in work at older ages

Inequalities between different groups are important features of the labour market

• Detailed analysis needed to show both what is happening, and to understand why

• This is important in order to address the policy problems of today, rather than the policy problems of yesterday


the uk labour market and labour market policies cribb beis slides.pdfjonathan cribb (ifs) department...

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