Has UK Labour Market Performance Changed?
11 Pages Posted: 29 Jul 2005
In this speech, Professor Stephen Nickell, asks at why wage inflation has remained stable despite the fact that unemployment is at its lowest level for a generation. The answer is that the level of unemployment consistent with stable inflation (the NAIRU) has fallen substantially since the 1980s. Professor Nickell argues that the main factors underlying the fall in the NAIRU over the past 20 years have been the decline in the role of trade unions and the tightening of the benefits system. The small fall in unemployment taxes, changes in product market competition and the introduction of the National Minimum Wage have not played an important role. Professor Nickell also looks at changes in activity rates over the same period. The proportion of inactive men has risen by around 10 percentage points, concentrated on the unskilled and those living in high-unemployment regions, and this has been offset by an almost equivalent increase in activity among women. Professor Nickell concludes that the benefits to the economy as more women are working have been more or less cancelled out, at least in numerical terms, by the steady withdrawal of men from the labour force.
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