Inequality and the Labour Marke - University College Londonuctp39a/Blundell Atkinson Slides February 16... · 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 90-10 ratio (left-hand axis)

© Institute for Fiscal Studies

Inequality and the Labour Market Some evidence and some proposals

Richard Blundell University College London and Institute for Fiscal Studies

Slide Presentation

Tony Atkinson Memorial Conference LSE, February 16th 2018

PhDgraduationSeptember2016

Remembering Tony… thanks for everything

Theme:can’taddressexcessiveincomeinequalitythroughthetaxandwelfaresystemalone….

Sowhatisthebalanceofpolicies?

1.  Howfarcan/shouldredistributiongotocompensatelowwagesandrentsinthelabourmarket?

2.  Technology:alwaysbadforlowskilledworkers?Whogetstherents?

•  Firstafewrelatedfacts....•  Table1.1inthe≠bookisagoodplacetostart….thislinkswhathasbeen

goingoninthelabourmarkettofamilyincomeinequality.Itookthisasakeyideatoinvestigateforthisdiscussion….

Inequality and the Labour Market: What can be Done?

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

90-10ratio(left-handaxis)

Source: Blundell, Joyce, Norris Keiller and Ziliak (2017)

Tony’sTable1.1ontrendsinUKandUSincomeandearningsinequalityTrendsinthe90:10ratioforfamilyincomeinUK

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2

3

4

5

6

7

8

9

10

Top1%

shareofincome

90-10ratio(left-handaxis)

top1%share(right-handaxis)


Tony’sTable1.1ontrendsinUKandUSincomeandearningsinequalityTrendsinthe90:10ratioforfamilyincomeinUKandthetop1%share

Tony’sTable1.1ontrendsinUKandUSincomeandearningsinequalityTrendsinthe90:10ratioforincomeandformaleearnings

Notes:Includesselfemploymentincomeandselfemployedhouseholds.FamilyResourcesSurvey.Allincomemeasuresareequivalised.Source:Blundell,Joyce,NorrisKeillerandZiliak(2017)

IntheUKtherehasbeenakeyroleforbenefitsandtax-credits:Householdincomegrowthforworkinghouseholds1994/5to2014/5


0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

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

Averagerealgrowth(%

)from1994to2014

Percentilepoint

Workinghouseholds’post-taxtotalincome


0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

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

Averagerealgrowth(%

)from1994to2014

Percentilepoint

Workinghouseholds’post-taxtotalincome

Workinghouseholds’pre-taxpay

IntheUKtherehasbeenakeyroleforbenefitsandtax-credits:Householdincomegrowthforworkinghouseholds1994/5to2014/5

Long run distributional impact of planned personal tax and benefit measures in the UK

Notes:Incomeismeasuredastotalnetequivalisedhouseholdincome.CalculationsusetheIFStaxandbenefitmodel.Source:TaxandBenefitPolicies,IFS(2017)

-£1,400

-£1,200

-£1,000

-£800

-£600

-£400

-£200

£0

Poorest 2 3 4 5 6 7 8 9 Richest All

Aver

age

chan

ge in

ann

ual n

et in

com

e

Income Decile Group

Rises in minimum wage between now and 2020: share of uplift to net household income going to each decile

Notes:Incomeismeasuredastotalnetequivalisedhouseholdincome(bhc).CalculationsusetheIFStaxandbenefitmodel,TAXBEN,runonthe2015–16FamilyResourcesSurveyandthe2015–16LFS.Source:Cribb,JoyceandNorrisKeiller(2017)

0%

2%

4%

6%

8%

10%

12%

14%

16%

Poorest 2 3 4 5 6 7 8 9 Richest

Sha

re o

f mec

hani

cal n

et in

com

e in

crea

se

Incomedecile

IndividualearningsandtheroleofhoursofworkWeeklyearningsandhourlywagegrowth,menandwomen,1994–95to2014–15

-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

annu

alis

ed re

al g

row

th (%

)

Percentile

Female weekly earnings Female hourly wages

Male weekly earnings Male hourly wages


Note: assortative partnering implies this has not improved between family inequality

Lowhoursforlowskilledmen:Proportionofmenworkinglesthan30hoursintheUKbyhourlywagequintile–aged25-55

©InstituteforFiscalStudies

Notes:LFS:Menaged25-55.Source:IFScalculationsusingLabourForceSurvey

0%

5%

10%

15%

20%

25%

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

%workinglessth

an30ho

ursa

week

Lowest 20%

Percent Change in Median Real Earnings for Men and Women from 1979-2014, for US by Education

Note: assortative partnering implies this has not improved ‘between family inequality’.

−20

020

4060

Perc

ent

Male Female

Percent Change in Real Median Earnings from 1976−2014All Workers Ages 25−55

Less than High School High School OnlySome College CollegeGraduate School


Source: Blundell, Dias, Meghir and Shaw (2016), Notes: UK Women BHPS

Returns to experience are strongly complementary with education

Source: Blundell, Dias, Meghir and Webb (2017), Notes: UK BHPS

Training is also strongly complementary with education 0

.05

.1.1

5.2

.25

prop

ortio

n tra

ining

20 30 40 50 60age

Secondary

0.0

5.1

.15

.2.2

5

prop

ortio

n tra

ining

20 30 40 50 60age

High School

0.0

5.1

.15

.2.2

5

prop

ortio

n tra

ining

20 30 40 50 60age

University

All training, 50+ hoursPrevalence of training over past year

Women Men

‘Good’firmsandR&Dintensity:loghourlywagebyskillgroup

Source: Aghion, Bergeaud, Blundell and Griffith (2017)

Not all selection, some abilities of low educated are complementary with technology, they get training and the jobs are not outsourced....

•  Theme:can’taddressexcessiveincomeinequalitythroughthetaxandwelfaresystemalone.

1.  Howfarcan/shouldredistributiongotocompensatelowwagesinthelabourmarket?

Ø  Adepressing,butrobustfinding-littlewageprogressionforloweducated,&part-time.Employmentisnolongerenoughformovingoutofpovertyorlongerrunself-sufficiency.Femaleemploymenthasnotovercomegrowthinfamilyearningsinequality.

Ø  Earnedincometaxcreditsbringinlotsoflowwagefemaleworkers,asexpected.Off-settingmeans-testingattheextensivemargin–whereincentivesarelarge.Theyboostincomesoflowearningfamiliesandarewell-targeted.Butincidenceandequilibriumeffects?Roleforminimumwage–butalonenotwell-targeted,partlyduetosecondaryworkersandfallingmalehours.RelatetoTaxableParticipationIncomeandChildBenefitwithEarnedIncomeDiscountandMinWage–Tony’sproposals.

Ø  Stigma-oneofTony’stwoargumentsagainst(toomuch)means-testing.UniversalCreditintheUKcouldhavebeenasuccessbutcutcoincidentbacktherealvalueofbenefitsystem.

Ø  Non-poachingagreementsareextensiveintheUS,especiallyinlow-wageandhighturn-overindustries.Policytowardanti-competitivepractises.AnotherofTony’sproposals.NoteUKtaxsystemisskewedtowardsself-employedandthegigeconomy.


•  Theme:can’taddressexcessiveincomeinequalitythroughthetaxandwelfaresystemalone.

1.  Howfarcan/shouldredistributiongotocompensatelowwagesinthelabourmarket?

2.  Technology:alwaysbadforlowskilledworkers?Whogetstherents?Ø  ‘R&Dintensivefirmspayallworkersbetter–eventhelowereducated.

Ø  Whatskillsdowellamongloweducatedarevaluedbygoodfirms?Whatskillscomplementinnovation?–ifmorevaluable,strongerbargainingposition,lesslikelytobeout-sourced.Itseemsreliabilityandothernon-cognitiveskills.Incentivisetechnology(andskills)thathelpatthebottom–oneofTony’sproposals.

Ø  Whatabouttechnologyandtopearners?Innovationsaccountforaround20%oftop1%incomes(inUS).Butmaybeincreasinglyonthewrongsideofthe“invertedU”?–whereincumbentsfacetoolittlecompetitionandslowdowninnovation,growthandsocialmobility.Thegoodfirmshavehighrentstoo.Needcompetitionpolicytocomplementtaxpolicy–aTonyproposal.

Ø  Can’taddressexcessiveincomeinequalitythroughthetaxandwelfaresystemalone!


Inequality and the Labour Marke - University College Londonuctp39a/Blundell Atkinson Slides February 16... · 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 90-10 ratio (left-hand axis)

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