low wages and welfare - ifs low...low wages and welfare policy pane l richard blundell university...

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.