Wage inequality in the Labour years

This paper studies changes in labour market inequality in the UK, with particular reference to what happened to wage inequality during the years of Labour government. The analysis uses micro-data through time to document what happened to overall wage inequality, as well as upper- and lower-tail wage inequality, relative to what went before. Simple supply and demand models of changing wage differentials by education group are used, so as to consider the drivers of relative demand shifts in favour of the more educated that underpin rising wage inequality. The changing role of labour market institutions is also discussed, and in particular the decline of unionization and the importance of the introduction of the national minimum wage in 1999 for the evolution of lower-tail wage inequality.