Inequality in Labour Markets
Creators: name: Laws, Athene Helen
Publisher: name: Apollo - University of Cambridge Repository
Year: 2020
Subjects: Labour markets
Inequality
Minimum wages
Job polarisation
Regional inequality

description: The thesis contains three chapters, each of which studies a separate dimension of inequality in modern labour markets. Each chapter analyses the individual-level behaviours of workers or firms that underpin regional and aggregate distributional features of labour markets. Together, they address cross-sectional wage inequality policy at the national level, the propagation of labour market inequalities between regions, and the impacts on employment inequalities of long term structural changes in the labour market. The first chapter considers the labour market propagation mechanisms of minimum wages, a policy commonly used to support low-wage workers. Extensive evaluations of minimum wages around the world typically find that higher minimum wages do not generate increased unemployment but are associated with substantial decreases in lower-tail wage inequality. The chapter provides the first empirical test of one explanation; a substantial search and labour supply response is behind the observed patterns. The chapter identifies the impact of minimum wages on search, distinguishing the decision of whether to search (extensive margin) from the decision of how hard to search (intensive margin) for both non-working and working individuals. The analysis combines data on UK workers' search behaviour with quasi-experimental analysis of the UK minimum wage policy structure. Results find an increase in the number of individuals searching, but a decline in search intensity, and a corresponding increase in the duration of unemployed search. There is no evidence that workers already employed in low-wage jobs are discouraged from searching for higher paying jobs. The chapter shows that these results are consistent with search explanations of minimum wage labour market consequences. The second chapter switches to addressing the spatial dimension of inequality, particularly the mechanisms that generate diverging outcomes between regions. The chapter models the individual firm employment responses to local shocks and the contributions these make to driving unequal employment rates between local regions. The chapter builds a spatial network of the universe of UK firms with near pinpoint location accuracy and estimates the response of the local network to adverse employment events. Results show that firms in close proximity to a large mass layoff in turn reduce their own employment and that these negative spillovers are highly localised. The strength of the negative spillovers approximately halves for every kilometre further away from the event. The spillovers are also very persistent, with further localised employment losses continuing for at least five years after the event. In effect, a negative spiral is triggered at the local firm level, through a combination of sluggish individual firm adjustment and local agglomeration forces, and this can be used to explain the persistence in local labour market outcomes. The chapter also develops a new method for analysing spatial variation, and outlines the large costs associate with using more traditional techniques. The third chapter, which is co-authored with Antonio Dias Da Silva and Filippos Petroulakis of the European Central Bank, is themed around the impact of long term, structural changes on employment inequality. Technological progress and deepening global integration have contributed to reduced middle-skill employment in a process commonly referred to as employment polarisation. Simultaneously, there has been a large decline in the number of hours worked per worker in European economies. The chapter investigates the relationship between hours per worker and employment polarisation, asking whether hours per worker follow similar polarisation patterns. The analysis categorises occupations based on their task content, in particular the type and degree of routinisation involved. Results find large relative declines in hours per worker in routine manual jobs – precisely the occupations most negatively affected by employment polarisation from routine-biased technical change. A lower relative decline in hours per worker is observed in higher skilled jobs growing through polarisation. The patterns affect all age, gender and education groups approximately equally. The chapter concludes by evaluating the contribution of the hours per worker margin to overall employment polarisation.
description: Woolf Fisher Trust and Cambridge Trust