Empirical essays on recent patterns in the British labour market
Singleton, Carl Andrew
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This thesis presents three essays, which each address a salient recent pattern in the British labour market. The first essay concerns whether or not men and women experience the business cycle differently, through their labour market outcomes, and why this might be the case. The second essay seeks to explain the cyclical amplification of unemployment duration, in particular the substantial and persistent increase in UK long-term unemployment observed during and since the Great Recession. The final essay studies recent changes in British wage inequality. To shed light on the possible factors driving these changes, it asks simply whether they are mostly determined by increasing or decreasing wage dispersion within or between firms. Gender and the business cycle: an analysis of labour markets in the US and UK Starting from an improved understanding of the relationship between gender labour market stocks and the business cycle, we analyse the contributing role of flows in the US and UK. Focusing on the post-2008 recession period, the subsequent greater rise in male unemployment can mostly be explained by a less cyclical response of flows between employment and unemployment for women, especially the entry into unemployment. Across gender and country, the inactivity rate is generally not sensitive to the state of the economy. However, a flows based analysis reveals a greater importance of the participation margin over the cycle. Changes in the rates of flow between unemployment and inactivity can each account for around 0.8-1.1 percentage points of the rise in US male and female unemployment rates during the latest downturn. For the UK, although the participation flow to unemployment similarly contributed to the increase of the female unemployment rate, this was not the case for men. The countercyclical flow rate from inactivity to employment was also more significant for women, especially in the US, where it accounted for approximately all of the fall in employment, compared with only forty percent for men. Long-term unemployment and the Great Recession: evidence from UK stocks and flows Although modest by historical standards, long-term unemployment nonetheless more than doubled during the UK’s Great Recession. Only a small fraction of this persistent increase can be accounted for by the changing composition of unemployment across personal and work history characteristics. Through extending a well-known stocks-flows decomposition of labour market fluctuations, the cyclical behaviour of participation flows can account for over two-thirds of the high level of long-term unemployment following the financial crisis, especially the procyclical flow from unemployment to inactivity. The pattern of these flows and their changing composition suggest a general shift in the labour force attachment of the unemployed during the downturn. Recent changes in British wage inequality: evidence from firms and occupations Using a linked employer-employee dataset, we study the increasing trend in British wage inequality over the past two decades. The dispersion of wages within firms accounts for the majority of changes to wage variance. Approximately all of the contribution to inequality dynamics from firm-specific factors are absorbed by controlling for the changing occupational content of wages. The modest trend in between-firm wage inequality is explained by a combination of changes in between-occupation inequality and the occupational composition of firms and employment. These results are robust to using weekly, hourly or annual measures of employee pay.