Uk gender pay gap reporting: a crude but effective policy?

Forcing employers to reveal their gender pay gap has been effective in its main goal of narrowing the gap. The difference between women’s and men’s pay has shrunk by just under a fifth at affected employers. Jack Blundell writes that female workers show a strong aversion to high pay-gap employers, suggesting that organisations have felt compelled to make changes in order to attract and retain workers

Wage responses to gender pay gap reporting requirements

In this paper I study a policy in which employers are required to publicly report gender pay gap statistics. Proponents argue that increasing the information available to workers and consumers places pressure on firms to close pay gaps, but opponents argue that such policies are poorly targeted and ineffective. This paper contributes to the debate by analyzing the UK’s recent reporting policy, in which employers are mandated to publicly report simple measures of their gender pay gap each year. Exploiting a discontinuous size threshold in the policy’s coverage, I apply a difference-in-difference strategy to linked employer-employee payroll data. I find that the introduction of reporting requirements led to a 1.6 percentage-point narrowing of the gender pay gap at affected employers. This large-magnitude effect is primarily due to a decline in male wages within affected employers, and is not caused by a change in the composition of the workforce. To explain this effect, I propose that a worker preference against high pay gap employers induces the closing of pay gaps upon information revelation. Newly-gathered survey evidence shows that female workers in particular exhibit a significant preference for low pay gap employers. In a hypothetical choice experiment, over half of women accept a 2.5% lower salary to avoid a high pay gap employer. I also demonstrate substantial heterogeneity in the interpretation of pay gap statistics across workers, and show that this affect

Self-employment eight months into the pandemic

The growth of self-employment has been one of the key features of the UK labour market for the past two decades. At the end of 2019, there were more than 5 million self-employed people in the UK, representing 15.3% of total employment. Together with Stephen Machin, we are running a series of surveys to capture how these workers fare throughout [...

Self-employment in the Covid-19 crisis: a CEP Covid-19 analysis

We report results from the LSE-CEP Survey of UK Self-employment May 2020.1 The self-employed have been hit particularly hard by the Covid-19 crisis, with approximately three quarters reporting less work in April 2020 than usual. The largest reductions in self-employment hours and income are among lower-income, older individuals without employees. There are no gender differences in the aggregate, however this is due to self-employed women being more likely to be able to work from home. Comparing men who can work from home against women who can work from home, women are more negatively affected than men. A third of self-employed workers have felt that their health was at risk while working during the coronavirus crisis, and this was significantly higher among those who work in app-based jobs. On average, higher-income workers are more likely to apply for the Coronavirus Self-employment Income Support Scheme. Over 40% of those who had not applied are unsure whether they are eligible. On average, the self-employed expect their work to return to normal in September 2020. A fifth think it will take until 2021 and 1 in 20 expect that their work will never return back to normal. The self-employed value income support highly. On average they are prepared to sacrifice 10% of their regular income to be guaranteed similar support for future shocks. Solo self-employed individuals value income support by twice as much as the self-employed with employees

Income effects and labour supply: evidence from a child benefits reform

In this paper, we exploit a unique and unexpected reform to the child benefit system in Denmark to assess the effects of child benefits on parental labour supply. A cap on child benefit payments in 2011 led to a non-negligible reduction in child benefits for larger families with young children while leaving child benefits for smaller families unchanged. The differential impact of this policy represents an opportunity to assess the causal impact of child benefit programmes on the labour supply of mothers and fathers. Using a difference-in-differences strategy, we find that the reduction in benefits leads to a substantial increase in the labour supply of mothers. Mothers respond to the policy at both the intensive and extensive margins, with the latter outweighing the former, and the effect persists after controlling for fertility-related family characteristics. To fix preferences for additional children across treatment and control groups, we use data on parents’ medical consultations on sterilisation, a common procedure in Denmark

Income dynamics in the United Kingdom and the impact of the Covid-19 recession

In this paper, we use an employer-based survey of earnings and hours to set out the key patterns in UK earnings dynamics from 1975 to 2020, with a particular focus on the most recent recession. We demonstrate that (log) earnings changes exhibit strongly procyclical skewness and have become increasingly leptokurtic, and thus less well approximated by a log-normal distribution, over the period of study. This holds across genders and sectors. Exploiting the long duration of our panel, we then explore the responsiveness of earnings and hours to aggregate and firm-level shocks, finding ample heterogeneity in the exposure of different types of workers to aggregate shocks. Exposure is falling in age, firm size, skill level, and permanent earnings, and is lower for unionized and public sector workers. The qualitative patterns of earnings changes across workers observed in the Covid-19 recession of 2020 are broadly as predicted using the previously estimated exposures and size of the shock. Firm-specific shocks are important for wages given the variation in within-firm productivity and the patterns of heterogeneity are markedly different than for aggregate shocks

The Covid-19 recession is creating a crisis of inequality

Earnings may be affected differently by age, gender, and firm size, with large cuts for the young in small firms, write Brian Bell, Nick Bloom, Jack Blundell, and Luigi Pistaferr

This time is not so different: income dynamics during the Covid-19 recession

We use a UK employer-employee administrative earnings dataset to investigate the response of earnings and hours to business cycles. Exploiting our long panel of data from 1975 to 2020 we find wide heterogeneity in the exposure of different types of workers to aggregate shocks. Employees who are younger, male, lower-skilled, non-union, and working in smaller private sector firms show the largest earnings response to recessions. The qualitative patterns of earnings changes across workers observed in the COVID-19 recession are broadly as predicted using the previously estimated exposures and size of the GDP shock. This suggests the COVID-19 recession in terms of its impact responses was relatively similar to those that have gone before, but the GDP shock was far larger in absolute size. Compared to aggregate shocks, we find a relatively small role of firm-specific shocks, suggesting macro shocks play an outsized role in individual earnings dynamics

Where is the Land of Hope and Glory? The geography of intergenerational mobility in England and Wales

We present a new analysis of intergenerational mobility across three cohorts in England and Wales using linked decennial census microdata, focusing on occupation, homeownership, and education. Four main results emerge. First, area-level differences in upward occupational mobility are highly persistent over time. Second, measures of absolute and relative mobility tend to be spatially positively correlated. Third, there is a robust relationship between upward educational and upward occupational mobility. Last, there is a small negative relationship between upward homeownership mobility and upward occupational mobility, revealing that social mobility comparisons based on different outcomes can have different trends

Heterogeneity of Consumption Responses to Income Shocks in the Presence of Nonlinear Persistence

In this paper we use the enhanced consumption data in the Panel Survey of Income Dynamics (PSID) from 2005–2017 to explore the transmission of income shocks to consumption. We build on the nonlinear quantile framework introduced in Arellano et al. (2017). Our focus is on the estimation of consumption responses to persistent nonlinear income shocks in the presence of unobserved heterogeneity. To reliably estimate heterogeneous responses in our unbalanced panel, we develop Sequential Monte Carlo computational methods. We find substantial heterogeneity in consumption responses, and uncover latent types of households with different life-cycle consumption behavior. Ordering types according to their average log-consumption, we find that low-consumption types respond more strongly to income shocks at the beginning of the life cycle and when their assets are low, as standard life-cycle theory would predict. In contrast, high-consumption types respond less on average, and in a way that changes little with age or assets. We examine various mechanisms that might explain this heterogeneity