Similarly , wage differentials in the UK fell in the 1990s, in contrast to the 1980s when these rose substantially. In short, recent research suggests that traditional trade models are not useful and that the basic premise regarding a decline in the demand for unskilled labour cannot empirically be sustained for the 1990s. It also suggests that the principal explanations put forward for this ostensible fall in demand, that is, technological change and trade, are not sufficient to account for the broader observed facts regarding increased inequality in incomes in general. For example, they point out that what is observed in many countries in the 1990s is not a decline in wages at the bottom end of the scale but rather a rise at the very top. This, it is suggested, is in part a reflection of changing public perceptions of what is socially acceptable and the associated changes in policies, rather than being entirely a result of economic factors, such as technological change or trade.
Economists nowadays tend to overlook the fact that labour markets are unlike product markets.
In the real world, even the most flexible labour markets require social agreement on the fairness of wage and income differentials. How these norms are arrived at is a complex social and political process. Limitations of the theoretical framework of mainstream models on the subject are further highlighted by considering the effects of the Asian economic crisis on unemployment in advanced countries. Two years ago it was widely thought that the considerable fall in the price of manufactured exports from the Asian crisis countries consequent on devaluation would lead to a further net loss in US jobs. This, however, has not materialized, as indicated by rising levels of employment, particularly among the unskilled.