Human Capital, Inequality and Tax Reform: Recent Past and ... · Richard Blundell* University College London and Institute for Fiscal Studies** * Thanks to Monica Costa-Dias, Jonathan

Human Capital, Inequality and Tax Reform: Recent Past and Future Prospects

Richard Blundell*

University College London and Institute for Fiscal Studies**

* Thanks to Monica Costa-Dias, Jonathan Cribb, Ben Etheridge, Andy Hood, Michelle Jin, Rob Joyce, Helen Miller, and Cormac O’Dea for helpful discussions.

** This research is funded by the ERSC Centre for the Microeconomic Analysis of Public Policy at IFS.

Coase Lecture

LSE

March 10th 2015

• Even before the recent crisis, many governments around the developed world faced growing inequality and pressure to increase employment and earnings.

• The depth of the recent recession has added to pressure on government revenues.

• I focus here on the UK and ask three general questions:

1. What has happened to living standards and inequality?

2. Where might we expect tax/welfare reform to have most impact?

3. How has this changed in the light of the great recession?

Human Capital, Inequality and Tax Reform

• The emphasis will be on the labour market and on personal tax and welfare reforms.

• Many of the key determinants of trends in income inequality and in overall living standards over the past 25 years, including since the financial crisis, have been driven by changes in the labour market, including:

– huge increase in entry cohorts with at least a BA degree during the 1990s and early 2000s,

– large relative rise in top ‘earnings’ percentile since the early 1990s,

– dramatic fall in real wages since 2008, ….

• To which we can add changes in asset prices, in particular housing; immigration; and, of course, reforms to taxes and welfare benefits

Human Capital, Inequality and Tax Reform

1. What has happened to living standards and inequality?

To dig a little deeper into this and the other questions, I look at three measures that all have something important to say:

A. Earnings: Employment, Wages, Human Capital (and Productivity)

B. Incomes: Working-age mainly

C. Consumption: Durable and Non-durable Expenditures

Draw on four references from recent IFS research:

Living Standards, Poverty and Inequality in the UK. IFS Report Series

What Can Wages Tell Us about the Productivity Puzzle? Economic Journal

Household Consumption through Recent Recessions. Fiscal Studies

Female Labour Supply, Human Capital and Tax Reform, NBER WP

• I will conclude with some prospects for the UK economy and for reform…

Prospects preview….

• Younger workers and families are acting as if they expect a long-run fall in relative living standards

– the pattern of low real wages at the bottom is set to continue, but with buoyant employment,

– longer term earnings growth will mostly come from high-skilled occupations.

• With growing earnings inequality there is increasing pressure on the tax and welfare system.

– current tax systems raise revenue and redistribute inefficiently and unfairly.

– some potential big gains from tax/welfare reforms to enhance human capital and earnings, and address inequality.

• Productivity though is still the key.

• But first let’s look at some facts….

A. Earnings: wages, employment (and productivity)

• Average real hourly wages fell back strongly after the onset of the recession

– even though workforce composition has shifted towards more productive types.

• Real wage falls occurred within individuals:

– unprecedentedly high proportions of employees experienced effectively nominal wage freezes.

• The education premium survived the large increase in those with BAs

– but real wages have fallen for all groups since the recession.

• ‘Effective’ labour supply was higher than during previous recessions

– due partly welfare policy changes and partly to wealth and long run real wage declines.

© Institute for Fiscal Studies

Changes to total output, employment and hours worked since 2008Q1

90

95

100

105

Ind

exed

to

10

0 in

20

08

Q1

Output Employment Total hours

Source: Cribb and Joyce (IFS, 2015)

Changes to productivity since 2008 (2008Q2=100)

90

95

100

105

Ind

exed

to

10

0 in

20

08

Q1

Output per worker Output per hour worked


In contrast to previous recessions, real output per hour has at best been quite stagnant since 2008

90

95

100

105

110

115

120

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Quarter since the labelled one

Real output per hour

1979Q4 1990Q2 2008Q1

Mean weekly earnings since 2001 adjusted for RPIJ inflation (indexed to 100 in 2008Q1)

85

90

95

100

105

2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1

AWE LFS ASHE


Changes to real median hourly wages by age group

Notes: Results adjusted for methodological changes in 2011. Earnings observed in April of each year.

Source: Cribb and Joyce (2015), calculations using Annual Survey of Hours and Earnings.

85

90

95

100

105

110

2008 2009 2010 2011 2012 2013 2014

Re

al e

arn

ings

ind

exe

d t

o 1

00

in 2

00

8

22-29 30-39 40-49 50-59 60+

Change in real median hourly wages by age group since 2008

© Institute for Fiscal Studies Source: Figure 2.11b of Cribb and Joyce (2015) “Earnings since the recession”

-9.0%

-5.8%

-2.6% -2.7%

0.2%

-10%

-8%

-6%

-4%

-2%

0%

2%

22-29 30-39 40-49 50-59 60 +

Cu

mu

lati

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han

ge in

re

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ian

ho

url

y w

age

s fr

om

20

08

to

20

14

Change in real median hourly wages by sex since 2008


-7.3%

-2.5%

-10%

-8%

-6%

-4%

-2%

0%

2%

Men Women

Cu

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lati

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ian

ho

url

y w

age

s fr

om

20

08

to

20

14

Source: Figure 2.10 of Cribb and Joyce (2015) “Earnings since the recession”

% annual change to real hourly wage, by period

Falls in Real Earnings even greater after allowing for composition changes in mean real hourly earnings

1.1%

-0.4%

-0.6%

0.7% 0.6%

0.6%

0.5%

-1.0%

-1.2%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2002-2007 2007-2012 2012- 2014

Ave

rage

an

nu

alis

ed c

han

ge

Actual change Compositional effect Underlying change


Growth in proportion with degrees or above by age: all

Source: Blundell, Green and Jin (2014)

Ratio of BA (equiv.) median wage to that of A-level (equiv.)

Remarkably… no cohort effects!

BA premium stayed constant, even through the recession.

Excluding immigrants Including immigrants

Female Male

Source: Blundell, Dias, Meghir and Shaw (2014)

‘Experience’ wage profiles show strong complementarity between schooling and on the job human capital - UK Women

Employment and labour market participation

• Labour market participation held up better during this past recession than previous ones. For example:

– Employment rates fell less (and unemployment rates increased less)

Female employment stronger than male employment since the recession


60%

65%

70%

75%

80%2

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Emp

loym

en

t ra

te (

age

16

-64

) (%

)

Male Female

Source: Fig 2.1 of Cribb and Joyce (2015) “Earnings since the recession”

Employment and labour market participation

• Some increase of participation can be attributed policy changes, e.g. :

– Labour supply has increased among lone parents as a result of job search conditions attached to benefit claims

– Older workers are retiring later as a result of increased SPA for women

Change to lone mothers’ participation rate since policy change

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15Quarter since the last quarter before policy change

youngest kid 12-15, 2008Q3 youngest kid10-11, 2009Q3

youngest kid 7-9, 2010Q3 youngest kid 5-6, 2011Q3


Impact of SPA increase for women on employment

30%

35%

40%

45%

50%

55%

60%

Counterfactual male 60-64 employment rate

LFS employment rate 60-64 men

Counterfactual female 60-64 employment rate

LFS employment rate 60-64 year old women

Note: counterfactual employment rates are estimated. See Cribb et al (IFS, 2013) “Incentives, shocks or signals: labour

supply effects of increasing the female state pension age in the UK”

Focus on employment rates of older women, 2003 to 2014


0%

10%

20%

30%

40%

50%

60%

70%

80%

Em

plo

ym

en

t ra

te

Age 58

Age 60

Age 61

Age 62

Source: Fig 1 of Cribb, Emmerson and Tetlow (2014) “Labour supply effects of increasing the female state pension age in the UK from age 60 to 62” IFS Working Paper WP 14/19

Employment and self-employment rate of older people (wealth and wage effects?)

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

20

01

Q1

20

01

Q3

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20

12

Q3

20

07

Q4

= 0

employment rate 60-74 male self-employment rate 60-74 male

employment rate 60-74 female self-employment rate 60-74 female

Employment rate for older workers: women aged 60-64

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Euro area (13 countries)

Germany (until 1990 former territory of theFRG)

Spain

France

Italy

United Kingdom


Employment rate for older workers: men aged 65-69

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


Germany (until 1990 former territory ofthe FRG)

Spain

France

Italy

United Kingdom


For the young employment fell back.... Employment rate: men aged 25-29

60.0

65.0

70.0

75.0

80.0

85.0

90.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


Germany (until 1990 former territory of theFRG)

Spain

France

Italy

United Kingdom


B. Income Growth and Income Inequality: setting the scene

• Leading up the recession:

• income growth had slowed in early 2000s.

• pensioners/ working-age childless were doing relatively well/badly

• During recession and immediately afterwards:

• real earnings for those in work fell

• employment rates fell for low skilled young adults but not for older ones

• benefits/tax credit incomes were working harder

• As a result

• income inequality fell (despite rise in earnings inequality among workers)

• low educated young adults did worst; pensioners did best

• Average incomes have now stabilised

• but significant falls in previous years leave mean income 8.5% below peak

• reflects sharp drop in real earnings, large falls in pre-tax earned income of households between, despite higher employment

100

105

110

115

120

125

19

97

–98

=10

0

Mean income Median Income

© Institute for Fiscal Studies Source: Figure 2.3 of Living Standards, Poverty and Inequality: IFS 2014

Income growth slowed from the early 2000s...

Income growth slowed from the early 2000s...

100

105

110

115

120

125

19

97

–98

=10

0


© Institute for Fiscal Studies Source: Figure 2.3 of Living Standards, Poverty and Inequality: 2014

... followed by large falls in 2010–11 and 2011–12...

100

105

110

115

120

125

19

97

–98

=10

0



... before average incomes began to stabilise

100

105

110

115

120

125

19

97

–98

=10

0




Source: Table 2.3 of Living Standards, Poverty and Inequality: 2014 Notes: This is a very slightly different sample to the overall income statistics. Households with negative incomes are dropped. This makes a small difference to falls in income

Income sources, 2007–08 to 2009–10: steady income growth due to benefits/tax credits

-2 -1 0 1 2 3

Total income

Taxes and other deductions

Other

Self-employment income

Savings and private pension income

Benefits and tax credits

Earnings

Contribution to income growth between 2007–08 to 2009–10 (in percentage points)

0.1

0.4

0.2

0.2

2.4

2.2

-0.7



Income sources, 2009–10 to 2012–13: large income falls due to falling earnings

-10 -8 -6 -4 -2 0 2 4

Total income


Other




Earnings


-8.1

-1.7

-0.2

3.2

-8.6

-1.0

-0.8



Income sources: 2007–08 to 2012–13

-10 -8 -6 -4 -2 0 2 4 6

Total income


Other




Earnings


-8.2

-1.4

0.1

3.5

-6.4

1.2

-1.5

-14.0%

-13.0%

-12.0%

-11.0%

-10.0%

-9.0%

-8.0%

-7.0%

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

10 20 30 40 50 60 70 80 90

Cu

mu

lati

ve r

eal

ch

ange

Percentile point

Weekly earnings inequality (among workers) rose between 2007-08 to 2012-13...

Note: Excludes self-employment income

Source: Family Resources Survey, various years

...but net result was still a fall in income inequality


-12%

-8%

-4%

0%

4%

8%

10 20 30 40 50 60 70 80 90

Inco

me

ch

an

ge

2007–08 to 2009–10 2009–10 to 2012–13 2007–08 to 2012–13

Percentile point

Source: Family Resources Survey, various years

Transfer system doing more work: Real private and net income growth, 2007–08 to 2012–13

© Institute for Fiscal Studies Source: Living Standards, Poverty and Inequality: 2014

-18%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

Cu

mu

lati

ve

in

com

e c

ha

ng

e

Percentile

Net income Private income

Will it continue? Future benefit and tax changes are important drivers in income distribution, Simulations up to 2015–16:


-8%

-6%

-4%

-2%

0%

2%

4%

10 20 30 40 50 60 70 80 90

Inco

me

ch

an

ge

2007–08 to 2012–13

2012–13 to 2015–16

Percentile point

Note: Figure is an update of that in Brewer et. al. (2013), Fiscal Studies, Vol. 34, No. 2, pp. 179–201.

0%

10%

20%

30%

40%

50%

60%

70%

0 20 40 60 80 100 120 140 160 180 200

Ma

rgin

al in

com

e t

ax +

NIC

s ra

te

Employer cost (£000s)

Income tax + NICs

Income tax

Source: Mirrlees Review

Two aspects of the Tax System: 1. Effective taxes on Higher Incomes. Marginal tax rates by income level 2011

Two aspects of the Tax System: 1. Effective taxes on Higher Incomes. Marginal tax rates by income level, UK


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

$0 $10,000 $20,000 $30,000 $40,000 $50,000

Gross income

Earned income

Self employment income

Dividend income

Note: assumes dividend from company paying small companies’ rate. Includes

income tax, employee and self-employed NICs and corporation tax.

Bunching at the higher rate threshold, UK


0

50000

100000

150000

200000

250000

300000

Nu

mb

er

in e

ach

£1

00

bin

Distance from threshold

Composition of income around the higher rate tax threshold


-$1

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

Tota

l in

com

e p

er

£1

00

bin

(£

bill

ion

)

Distance from threshold

Interest

Property

Dividends

Other investmentincomeSelf employment

Other

Pensions

Benefits

Employment

Deductables

2. Effective Taxes at the Bottom: Complex but redistributive

Budget Constraint for Single Parent in UK in 2011

Notes: wage £6.50/hr, 2 children, no other income, £80/wk rent. Ignores council tax and rebates

Measures of inequality: 50/10, 90/50 ratios


1.500

1.600

1.700

1.800

1.900

2.000

2.100

2.200

2.300

19

61

19

63

19

65

19

67

19

69

19

71

19

73

19

75

19

77

19

79

19

81

19

83

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85

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93

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19

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20

01

20

03

20

05

20

07

20

09

20

11

Ra

tio

50/10 90/50

But top 1% share continued to grow dramatically 90/10 ratio and top 1% income share


0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0

1

2

3

4

5

Shar

e o

f h

ou

seh

old

inco

me

he

ld b

y th

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p 1

% o

f in

div

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Rat

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f in

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th

e 9

0th

an

d

10

th p

erce

nti

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(90

/10

rat

io)

90/10 ratio (LH axis) Top 1% share of income (RH axis)

Inequality in context • Since the mid 1990s over much of the income distribution, from the 10th

percentile to the 90th percentile, inequality is stable

– although this masks growing inequality for younger cohorts.

• At the same time the welfare benefit system has had to do more work to maintain the incomes of individuals and families with low earnings

– but will it continue to do so?

• Note too the remarkable increase in inequality at the very top of the income distribution

– in UK over two-thirds of the richest 0.1% of working-age adults work in ‘real estate, renting and other business activities’ or ‘financial intermediation’.

• Wealth transfers across generations accentuate inequality

– a growing proportion of younger individuals think they will receive inheritances, and are also those who already have the highest net wealth.

Income Inequality by Age and Birth Cohort – UK Younger cohorts facing increasing inequality:

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75

Age

1930s

1940s

1950s

1960s

1970s

Source: Blundell and O’Dea (2014).

Consumption Inequality by Age and Birth Cohort – UK Younger cohorts facing increasing inequality:

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75

Age

1930s

1940s

1950s

1960s

1970s

Notes: younger cohorts entering with much larger inequality than previous cohorts….

Source: Blundell and O’Dea (2014).

Source: Attanasio and Pistaferri (2014)

.1.1

5.2

.25

.3.3

5.4

var(

lnto

tco

ns)

20 25 30 35 40 45 50 55 60 65 70age

Born 1930s Born 1940s

Born 1950s Born 1960s

Consumption Inequality by Year and Birth Cohort - US

Recent cohorts are also less likely to own a home


0%

10%

20%

30%

40%

50%

60%

70%

80%

20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

Ho

me

ow

ne

rsh

ip r

ate

(%

)

Age

Born 1963–67 Born 1973–77 Born 1983–87

Source: Figure 3.13 of Living Standards, Poverty and Inequality: 2014

C. Consumption – the final piece of evidence

• Expenditure falls were deeper than in previous recessions.

– Note that the start of the fall is coincident with the fall in GDP (not income).

– Saving rate rises.

• Unusually expenditure on consumer nondurables fell most

– Especially among the young and to some extent among the middle aged, less for the old.

– Temporary VAT reduction?


Non- and semi-durables


90

95

100

105

110

115

120

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Qu

arte

r b

efo

re r

ece

ssio

n =

10

0

Quarters since start of recession

1980

1990

2008

Non- and semi-durables per head


90

95

100

105

110

115

120

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Qu

arte

r b

efo

re r

eces

sio

n =

10

0

Quarters since pre-recession peak in GDP

1980 1990 2008

Durables


80

90

100

110

120

130

140

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Qu

arte

r b

efo

re r

ece

ssio

n =

10

0

Quarters since start of recession

1980

1990

2008


Percentage Change in Food Expenditure by centile: UK

Notes: Understanding Society

Source: Blundell and Etheridge, 2014

-0.1

-0.08

-0.06

-0.04

-0.02

0

0.02

0.04

0.06

0.08

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 972012-2009

2012-2010

2010-2009


Percentage Change in Food Expenditure: 2010-2012 UK

-0.12

-0.1

-0.08

-0.06

-0.04

-0.02

0

0.02

0.04

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 97

Change in Food Expenditure by Centile and HH type: 2010 to 2012

All HHs

Pensioners

w/o children

with children

Notes: Understanding Society

Source: Blundell and Etheridge, 2014

Prospects for the Economy

• Younger workers and families are acting as if they expect a long-run fall in relative living standards

– evidence from consumption and saving.

• Real wages, productivity (and investment) have been slow to pick up

– we can expect the pattern of lower real wages at the bottom to continue, but with fairly buoyant employment due to increased supply.

• Most actual falls in real earnings have happened

– but fiscal contraction implies large benefit cuts

• Appears the number of routine jobs near the middle of the earnings distribution has declined steadily

– more jobs are now professional or managerial. In the 90s and 2000s wages grew fastest for high (and mid-skilled) occupations, and BA premium maintained.

• Suggests longer term earnings growth will mostly come from high-skilled occupations, with perhaps some at the very bottom.

Employment shares of occupation groups



Prospects for the Economy II

• Still much to do in focussing on older workers in general, on return to work for parents/mothers, and on entry into work.

• There are still some potential big gains here,

– for example, as (higher skilled) women age in the workforce.

• Growing complementarity between human capital and ‘on the job’ wage/productivity

– little evidence of earnings progression for lower skilled and part-time workers.

• Productivity and wages are closely related

– but note the growing importance of pensions in the UK.

• Productivity (and education) is still the key.

Prospects for Reform

• With growing earnings inequality there is increasing pressure on the tax and welfare system.

– current systems raise revenue and redistribute inefficiently and unfairly

• Some potential big gains here with tax/welfare reforms to enhance earnings and address inequality (from Mirrlees)

– focus incentives on transition to work, return to work for women with children and on enhancing incentives among older workers,

– reduce disincentives at key margins for the educated - enhancing working lifetime and the career earnings profile,

– align tax rates at the margin across income sources to make taxation at the top more effective; e.g. dividends and capital gains

– reform taxation of housing and wealth transfers.

• But reform will not be easy! To quote Tim Besley, ‘high levels of inequality can skew the priorities of the state by limiting its capacity to act effectively’.

Human Capital, Inequality and Tax Reform: Recent Past and Future Prospects

Richard Blundell*

University College London and Institute for Fiscal Studies**

Slides on my website http://www.ucl.ac.uk/~uctp39a/

Coase Lecture 2015

But that’s all for now!

Extra Slides

Business investment has been very slow to pick up


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20

14

Q1

20

14

Q2

20

14

Q3

20

14

Q4

Ch

ange

sin

ce 2

00

8 Q

1, £

bill

ion

Business investment

Household consumption:durable goods

Household consumption:non-durablegoods

Earnings in line with productivity growth, particularly when using LFS measures of earnings


90

95

100

1052

00

8Q

1

20

08

Q3

20

09

Q1

20

09

Q3

20

10

Q1

20

10

Q3

20

11

Q1

20

11

Q3

20

12

Q1

20

12

Q3

20

13

Q1

20

13

Q3

20

14

Q1

20

14

Q3

Ind

exe

d t

o 1

00

in 2

00

8Q

2

Output per worker Output per hour worked

Mean weekly earnings Mean hourly earnings


Output per hour and worker compared to mean earnings in LFS (GDP deflated) since 2008Q2

Self employment as a share of total employment


11%

12%

13%

14%

15%

16%

20

04

Q1

20

04

Q3

20

05

Q1

20

05

Q3

20

06

Q1

20

06

Q3

20

07

Q1

20

07

Q3

20

08

Q1

20

08

Q3

20

09

Q1

20

09

Q3

20

10

Q1

20

10

Q3

20

11

Q1

20

11

Q3

20

12

Q1

20

12

Q3

20

13

Q1

20

13

Q3

20

14

Q1

20

14

Q3

Self

-em

plo

yme

nt

as a

sh

are

of

tota

l e

mp

loym

en

t

Source: Authors’ calculations using Labour Force Survey (ONS series MGRQ and MGRZ).

Earnings for employees and the self employed


0%

5%

10%

15%

20%

25%

Pe

rce

nta

ge o

f e

mp

loye

es

/

self

-em

plo

yed

ind

ivid

ual

s

Earnings (per week, April 2014 prices)

Self-employed Employees

Source: Figure 2.14 of Cribb and Joyce (2015) “Earnings since the recession”

Employment and unemployment rates since 2007


4%

5%

6%

7%

8%

9%

70%

71%

72%

73%

74%

75%

20

07

Q2

20

07

Q4

20

08

Q2

20

08

Q4

20

09

Q2

20

09

Q4

20

10

Q2

20

10

Q4

20

11

Q2

20

11

Q4

20

12

Q2

20

12

Q4

20

13

Q2

20

13

Q4

20

14

Q2

20

14

Q4

Un

emp

loym

ent

rate

(ag

e 1

6-6

4)

(%

)

Emp

loym

ent

rate

(ag

e 1

6-6

4)

(%)

Employment rate (LH axis) Unemployment rate (RH axis)


Changes to real median weekly and hourly wages by sex

Notes: Results adjusted for methodological changes in 2011. Earnings observed in April of each year.

Source: Cribb and Joyce (2015), calculations using Annual Survey of Hours and Earnings.

90

95

100

105

110

2008 2009 2010 2011 2012 2013 2014

Re

al e

arn

ings

ind

exe

d t

o 1

00

in 2

00

8

Male weekly earnings Male hourly earnings

Female weekly earnings Female hourly earnings

Average EMTRs for different family types 40

%50

%60

%70

%80

%

0 100 200 300 400 500 600 700 800 900 1000 1100 1200

Employer cost (£/week)

Single, no children Lone parent

Partner not working, no children Partner not working, children

Partner working, no children Partner working, children

Mirrlees Review (2011)

Employer contributions to pension funds – in constant prices terms

Source: Office for National Statistics

Notes: Data for Q4 2012 is not yet published so has been estimated based on Q4 2011 to Q3 2012 data

But recent falling membership of pensions schemes


0

10

20

30

40

50

60

70

80

90

100

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12Pe

rce

nta

ge

of

em

plo

ye

es

in a

pe

nsi

on

sc

he

me

Public sector – any Public sector – defined benefit

Private sector – any Private sector – defined benefit

Source: Fig 1 of Cribb and Emmerson (2014) “Workplace pensions and remuneration in the public and private sectors in the UK”

Particularly strong growth in private sector


5.0

5.5

6.0

6.5

7.0

7.5

8.0

23.0

23.5

24.0

24.5

25.0

25.5

26.0

Pu

bli

c s

ecto

r e

mp

loy

me

nt

(mil

lio

n)

Pri

va

te s

ecto

r e

mp

loy

me

nt

(mil

lio

n)

Private (LH axis) Public (RH axis)


NEET rate among young people


0%

10%

20%

30%

40%

50%

60%1

99

3

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

18-21 GCSEs or above

18-21 without GCSE

22-24 Degree level or above

22-24 GCSEs, A-levels, FE

22-24 without GCSE

Documents

Human Capital, Inequality and Tax Reform: Recent Past and ... · Richard Blundell* University College London and Institute for Fiscal Studies** * Thanks to Monica Costa-Dias, Jonathan