This thesis presents three essays, which each address a salient recent pattern in
the British labour market. The first essay concerns whether or not men and women
experience the business cycle differently, through their labour market outcomes, and
why this might be the case. The second essay seeks to explain the cyclical amplification
of unemployment duration, in particular the substantial and persistent increase in UK
long-term unemployment observed during and since the Great Recession. The final
essay studies recent changes in British wage inequality. To shed light on the possible
factors driving these changes, it asks simply whether they are mostly determined by
increasing or decreasing wage dispersion within or between firms.
Gender and the business cycle: an analysis of labour markets in the US and UK
Starting from an improved understanding of the relationship between gender labour
market stocks and the business cycle, we analyse the contributing role of flows in
the US and UK. Focusing on the post-2008 recession period, the subsequent greater
rise in male unemployment can mostly be explained by a less cyclical response of
flows between employment and unemployment for women, especially the entry into
unemployment. Across gender and country, the inactivity rate is generally not sensitive
to the state of the economy. However, a flows based analysis reveals a greater
importance of the participation margin over the cycle. Changes in the rates of flow
between unemployment and inactivity can each account for around 0.8-1.1 percentage
points of the rise in US male and female unemployment rates during the latest
downturn. For the UK, although the participation flow to unemployment similarly
contributed to the increase of the female unemployment rate, this was not the case
for men. The countercyclical flow rate from inactivity to employment was also more
significant for women, especially in the US, where it accounted for approximately all
of the fall in employment, compared with only forty percent for men.
Long-term unemployment and the Great Recession: evidence from UK stocks and
flows
Although modest by historical standards, long-term unemployment nonetheless more
than doubled during the UK’s Great Recession. Only a small fraction of this persistent
increase can be accounted for by the changing composition of unemployment
across personal and work history characteristics. Through extending a well-known
stocks-flows decomposition of labour market fluctuations, the cyclical behaviour of
participation flows can account for over two-thirds of the high level of long-term
unemployment following the financial crisis, especially the procyclical flow from
unemployment to inactivity. The pattern of these flows and their changing composition
suggest a general shift in the labour force attachment of the unemployed during the
downturn.
Recent changes in British wage inequality: evidence from firms and occupations
Using a linked employer-employee dataset, we study the increasing trend in British
wage inequality over the past two decades. The dispersion of wages within
firms accounts for the majority of changes to wage variance. Approximately all
of the contribution to inequality dynamics from firm-specific factors are absorbed
by controlling for the changing occupational content of wages. The modest
trend in between-firm wage inequality is explained by a combination of changes
in between-occupation inequality and the occupational composition of firms and
employment. These results are robust to using weekly, hourly or annual measures
of employee pay