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Low Wages and Welfare Policy Panel
Richard Blundell University College London and Institute for Fiscal Studies
Thanks to Rob Joyce, Agnes Norris Keiller and Jim Ziliak
and many other colleagues at IFS!
October 26th 2017
• Itisincreasinglytoughforfamilyearningsatthebo4om
– lowwagegrowthforloweducatedandlowlife3mewageprogression,
– lowreturnstoexperience,especiallyinpart-3mework,
– lowincidenceoftrainingforloweducated,– and,forloweducatedmen,increasinglylowerhours.
– womenincreasedearningsbutmaritalsor3nghasincreasedinequality.
• In-workbenefitsmakeupthedifference,especiallyforfamilieswithchildren-butemploymentisn’tenoughforlongerrunself-sufficiency.
• Minimumwage-helpsbutnotwell-targetedtolowfamilyincomes,partlyduetosecondaryworkersandthefallinghoursoflowwagemen.
• Somefirmspaylowskilledworkersbe4er-e.g.largerR&Dintensivefirms.Why?Butonlyaasmallshareoflowskilledworkers.Training?
Familyincomes,familyearningsandwagesattheboLom.
IntheUKtherehasbeenakeyroleforbenefitsandtax-credits:Householdincomegrowthforworkinghouseholds1994/5to2014/5
Notes:Includesselfemploymentincomeandselfemployedhouseholds.FamilyResourcesSurvey.Allincomemeasuresareequivalised.Source:Blundell,Joyce,NorrisKeillerandZiliak(2017)
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
Percen3lepoint
Workinghouseholds’post-taxtotalincome
Notes:Includesselfemploymentincomeandselfemployedhouseholds.FamilyResourcesSurvey.Allincomemeasuresareequivalised.Source:Blundell,Joyce,NorrisKeillerandZiliak(2017)
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
Percen3lepoint
Workinghouseholds’post-taxtotalincome
Workinghouseholds’pre-taxpay
IntheUKtherehasbeenakeyroleforbenefitsandtax-credits:Householdincomegrowthforworkinghouseholds1994/5to2014/5
Incomegrowthforworkinghouseholds07/08to14/15
-3.0
-2.0
-1.0
0.0
1.0
2.0
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
Aver
age
annu
alis
ed r
eal g
row
th (%
)
Percentile
Gross labour income Net income
Notes:Includesselfemploymentincomeandselfemployedhouseholds.FamilyResourcesSurvey.Allincomemeasuresareequivalised.Source:Blundell,Joyce,NorrisKeillerandZiliak(2017)
Lowhoursforlowskilledmen:Propor3onofmenworkinglesthan30hoursintheUKbyhourlywagequin3le–aged25-55
©Ins3tuteforFiscalStudies
Notes:LFS:Menaged25-55.Source:IFScalcula3onsusingLabourForceSurvey
0%
5%
10%
15%
20%
25%
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
%workinglessth
an30ho
ursa
week
Lowest 20%
AndaroleforhoursWeeklyearningsandhourlywagegrowth,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
Source: Blundell, Joyce, Norris Keiller and Ziliak (2017)
Note: assortative partnering implies this has not improved between family inequality
Long run distributional impact of planned personal tax and benefit measures
Notes:Incomeismeasuredastotalnetequivalisedhouseholdincome.Calcula3onsusetheIFStaxandbenefitmodel.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).Calcula3onsusetheIFStaxandbenefitmodel,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
BigExpansioninEduca3oninUKPropor3onof25-29yearoldswithfirstdegreesorabove
0%
5%
10%
15%
20%
25%
30%
35%
40%
1965–69 1970–74 1975–79 1980–84 1985–89 Birth cohort
Male Female
Source: Labour Force Survey 1992-2015
WagepremiumwasstableRa3oofBAmedianwagetothatofhigh-schoolgraduatesby5-yearbirthcohorts,UK
Source: Blundell, Green and Jin (2016) Notes: Labour Force Survey 1992-2014
Source: Blundell, Dias, Meghir and Shaw (2016), Notes: UK BHPS
but life-time wage profiles stayed flat – women in UK - returns to experience appear strongly complementary with education - part-time experience generates little return
Source: Blundell, Dias, Meghir and Webb (2017), Notes: UK BHPS
Training incidence is also very low for the low educated 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
Goodfirmsandbadfirms:loghourlywageandR&Dintensity
Source: Aghion, Bergeaud, Blundell and Griffith (2017)
Goodfirmsandbadfirms:loghourlywagebyskillgroup
Source: Aghion, Bergeaud, Blundell and Griffith (2017)
• Shownitisincreasinglytoughforfamilyearningsatthebo4om!– lowwagegrowthforloweducatedandlowlife3mewageprogression,
– lowreturnstoexperience,especiallyinpart-3mework,
– lowincidenceoftrainingforloweducated,– and,forloweducatedmen,increasinglylowerhours.
– womenincreasedhoursbutmaritalsor3nghasincreasedinequality.
• In-workbenefitsmakeupthedifference,especiallyforfamilieswithchildren-butemploymentisn’tenoughforlongerrunself-sufficiency.
• Minimumwagehelpsbutnotwell-targetedtolowfamilyincomes,duetosecondaryworkersandthefallinghoursoflowwagemen.
• Somefirmspaylowskilledworkersbe4er–largerR&Dintensivefirmsbuttheyemployonlyaasmallshareoflowskilledworkers.
• Keyroleforfirm-basedqualificaAontraining?
Summingup:Familyincomes,familyearningsandwagesatthebo4om.
Low Wages and Welfare Policy Panel
Richard Blundell University College London and Institute for Fiscal Studies
EXTRA SLIDES
October 26th 2017
©Ins3tuteforFiscalStudies
-6.3%
-10.5%
-6.2%
-3.0%
2.1%
-6.8%
-3.0%
1.6% 1.2%
2.6%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
22-29 30-39 40-49 50-59 60+
CumulaA
vecha
ngeinre
alm
edianho
urly
wagesfrom
200
8to201
6
Male Female
Younger age groups saw the largest falls in median hourly wages (UK)
Source: Blundell and Ziliak (2017), Notes: CPS.
Effectofthe‘Na3onalLivingWage’onindividualearningsandhouseholdincomebypercen3lepoint:2020–21
©Ins3tuteforFiscalStudies
-2%
0%
2%
4%
6%
8%
5 10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
95
Effe
ct o
n in
divi
dual
ear
ning
s /
hous
ehol
d in
com
e
Percentile point
Household income Individual earnings
Thedeclineintheshareofsemi-skilledoccupa3ons(UK)
©Ins3tuteforFiscalStudies
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
%jobsthatarehighlyskilled %jobsthataresemi-skilled
%jobsthatarelow-skilledhigh-skilled: "Managers and senior officials", "Professional occupations", "Associate professional and technical"; semi-skilled: "Administrative and secretarial", "Skilled trades", "Process, plant and machine operatives"; low-skilled: "Personal service", "Sales and customer service", "Elementary occupations";
Source: Blundell, Green Jin (2015), Notes: UK LFS.
©Ins3tuteforFiscalStudies
% estimated to gain Employee type
All working less
than 30 hours per
week
working 30 hours per week or
more All 21 37 16 Men 16 35 14 Women 25 37 19 Aged under 25 0 0 0 Aged 25 to 39 25 48 20 Aged 40 to 59 20 40 15 Aged 60 and over 26 35 19 In household with children 21 37 15 In household without children 21 37 17 Manufacturing, agriculture and construction 16 37 15 Service industries 34 51 27 IT, finance, professional and technology 10 26 8 Other 30 48 22 Public admin, education and health 15 24 12 Industry not classified 16 31 13
Per cent of employees estimated to potentially gain from the NLW
Source: IFS calculations using the 2013–14 Family Resources Survey and the 2013–14 Labour Force Survey.