Human Capital, Inequality and Tax Reform:
Recent Past and Future Prospects
Coase Lecture
LSE
March 10th 2015
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.
Human Capital, Inequality and Tax Reform
• Even before the recent crisis, many economies and their
governments around the developed world faced growing
inequality and pressure to increase employment and
earnings.
• The depth of the recent recession has added to this and
brought further 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 will tax/welfare reform to have most impact?
3. How has this changed in the light of the great recession?
 I will conclude with some prospects for the UK economy
and for reform…
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.
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
wages => earnings => joint earnings => income => consumption
To investigate the links between them I draw on some recent 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/IFS WP
 Family Labour Supply and Consumption Inequality, NBER/IFS WP
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 looks set to continue,
but with buoyant employment,
– low skilled workers will increasingly rely on the benefit/tax credit
system and family labour supply,
– 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/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.
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, particularly female 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
Indexed to 100 in 2008Q1
105
100
95
Output
90
Source: Cribb and Joyce (IFS, 2015)
Employment
Total hours
Changes to productivity since 2008 (2008Q2=100)
Indexed to 100 in 2008Q1
105
100
95
Output per worker
90
Source: Cribb and Joyce (IFS, 2015)
Output per hour worked
In contrast to previous recessions, real output per hour
has at best been quite stagnant since 2008
Real output per hour
120
115
110
105
100
95
90
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
1979Q4
1990Q2
2008Q1
Mean weekly earnings since 2001 adjusted for RPIJ
inflation (indexed to 100 in 2008Q1)
105
100
95
90
AWE
85
Source: Cribb and Joyce (IFS, 2015)
LFS
ASHE
Changes to real median hourly wages by age group
110
Real earnings indexed to 100 in 2008
22-29
30-39
40-49
50-59
60+
105
100
95
90
85
2008
2009
2010
2011
2012
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.
2013
2014
Change in real median hourly wages by age group
since 2008
Cumulative change in real median hourly
wages from 2008 to 2014
2%
0.2%
0%
-2%
-2.7%
40-49
50-59
-4%
-6%
-5.8%
-8%
-10%
-9.0%
22-29
© Institute for Fiscal Studies
-2.6%
30-39
Source: Figure 2.11b of Cribb and Joyce (2015) “Earnings since the recession”
60 +
Change in real median hourly wages by sex since 2008
Cumulative change in real median hourly
wages from 2008 to 2014
2%
0%
-2%
-2.5%
-4%
-6%
-8%
-7.3%
-10%
Men
© Institute for Fiscal Studies
Women
Source: Figure 2.10 of Cribb and Joyce (2015) “Earnings since the recession”
% annual change to real hourly wage, by period
Falls even greater after allowing for composition
changes in mean real hourly earnings
1.5%
Average annualised change
1.1%
1.0%
0.7%
0.6%
0.6%
0.5%
0.5%
0.0%
-0.5%
-0.4%
-0.6%
-1.0%
-1.0%
-1.2%
-1.5%
2002-2007
Actual change
Source: Cribb and Joyce (IFS, 2015)
2007-2012
Compositional effect
2012- 2014
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 largely constant, even through the recession.
Excluding immigrants
Including immigrants
Male
Female
‘Experience’ wage profiles show strong complementarity
between schooling and on the job human capital - UK Women
Source: Blundell, Dias, Meghir and Shaw (2014)
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)
Employment rate (age 16-64) (%)
Female employment stronger than male
employment since the recession
80%
75%
70%
65%
Male
Female
© Institute for Fiscal Studies
Source: Fig 2.1 of Cribb and Joyce (2015) “Earnings since the recession”
2014Q3
2014Q1
2013Q3
2013Q1
2012Q3
2012Q1
2011Q3
2011Q1
2010Q3
2010Q1
2009Q3
2009Q1
2008Q3
2008Q1
2007Q3
2007Q1
2006Q3
2006Q1
2005Q3
2005Q1
60%
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
14%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
0
1
2
3
4
5
6
7
8
9
10 11 12 13 14
Quarter since the last quarter before policy change
youngest kid 12-15, 2008Q3
youngest kid10-11, 2009Q3
youngest kid 7-9, 2010Q3
Source: Blundell, Green and Jin (2014)
youngest kid 5-6, 2011Q3
15
Impact of SPA increase for women on employment
60%
55%
50%
Counterfactual male 60-64 employment rate
LFS employment rate 60-64 men
45%
Counterfactual female 60-64 employment rate
40%
LFS employment rate 60-64 year old women
35%
30%
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
80%
70%
Employment rate
60%
50%
40%
Age 58
Age 60
30%
20%
10%
0%
© Institute for Fiscal Studies
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
Age 61
Age 62
Employment and self-employment rate of older
people (wealth and wage effects?)
4%
2%
-2%
-4%
-6%
-8%
employment rate 60-74 male
self-employment rate 60-74 male
employment rate 60-74 female
self-employment rate 60-74 female
2012Q3
2012Q1
2011Q3
2011Q1
2010Q3
2010Q1
2009Q3
2009Q1
2008Q3
2008Q1
2007Q3
2007Q1
2006Q3
2006Q1
2005Q3
2005Q1
2004Q3
2004Q1
2003Q3
2003Q1
2002Q3
2002Q1
2001Q3
-10%
2001Q1
2007Q4 = 0
0%
Employment rate for older workers: women aged 60-64
45.0
40.0
35.0
Euro area (13 countries)
30.0
Germany (until 1990 former territory of the
FRG)
25.0
Spain
France
20.0
Italy
15.0
United Kingdom
10.0
5.0
0.0
2003
2004
2005
2006
2007
Source: Blundell, Green and Jin (2014)
2008
2009
2010
2011
2012
Employment rate for older workers: men aged 65-69
30.0
25.0
Euro area (13 countries)
20.0
Germany (until 1990 former territory of
the FRG)
Spain
15.0
France
Italy
10.0
United Kingdom
5.0
0.0
2003
2004
2005
2006
Source: Blundell, Green and Jin (2014)
2007
2008
2009
2010
2011
2012
For the young employment fell back....
Employment rate: men aged 25-29
90.0
85.0
Euro area (13 countries)
80.0
Germany (until 1990 former territory of the
FRG)
Spain
75.0
France
Italy
70.0
United Kingdom
65.0
60.0
2003
2004
2005
2006
Source: Blundell, Green and Jin (2014)
2007
2008
2009
2010
2011
2012
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
Income growth slowed from the early 2000s...
125
Mean income
Median Income
1997–98=100
120
115
110
105
100
© Institute for Fiscal Studies
Source: Figure 2.3 of Living Standards, Poverty and Inequality: IFS 2014
Income growth slowed from the early 2000s...
125
Mean income
Median Income
1997–98=100
120
115
110
105
100
© 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...
125
Mean income
Median Income
1997–98=100
120
115
110
105
100
© Institute for Fiscal Studies
Source: Figure 2.3 of Living Standards, Poverty and Inequality: 2014
... before average incomes began to stabilise
125
Mean income
Median Income
1997–98=100
120
115
110
105
100
© Institute for Fiscal Studies
Source: Figure 2.3 of Living Standards, Poverty and Inequality: 2014
Income sources, 2007–08 to 2009–10: steady income
growth due to benefits/tax credits
Earnings
0.1
Benefits and tax credits
2.2
Savings and private pension income
-0.7
Self-employment income
0.4
Other
0.2
Taxes and other deductions
0.2
Total income
2.4
-2
-1
0
1
Contribution to income growth between 2007–08 to 2009–10
(in percentage points)
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
© Institute for Fiscal Studies
2
3
Income sources, 2009–10 to 2012–13: large income falls
due to falling earnings
Earnings
-8.1
Benefits and tax credits
-1.0
Savings and private pension income
-0.8
Self-employment income
-1.7
Other
-0.2
Taxes and other deductions
3.2
Total income -8.6
-10
-8
-6
-4
-2
Contribution to income growth between 2009–10 to 2012–13
(in percentage points)
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
© Institute for Fiscal Studies
0
2
4
Income sources: 2007–08 to 2012–13
Earnings
-8.2
Benefits and tax credits
1.2
Savings and private pension income
-1.5
Self-employment income
-1.4
Other
0.1
Taxes and other deductions
3.5
Total income
-6.4
-10
-8
-6
-4
-2
0
Contribution to income growth between 2007–08 to 2011–13
(in percentage points)
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
© Institute for Fiscal Studies
2
4
6
Cumulative real change
Weekly earnings inequality (among workers) rose between
2007-08 to 2012-13...
0.0%
-1.0%
-2.0%
-3.0%
-4.0%
-5.0%
-6.0%
-7.0%
-8.0%
-9.0%
-10.0%
-11.0%
-12.0%
-13.0%
-14.0%
10
Note: Excludes self-employment income
Source: Family Resources Survey, various years
20
30
40
50
60
Percentile point
70
80
90
...but net result was still a fall in income inequality
8%
Income change
4%
0%
-4%
-8%
2007–08 to 2009–10
2009–10 to 2012–13
2007–08 to 2012–13
-12%
10
20
30
40
50
60
Percentile point
Source: Family Resources Survey, various years
© Institute for Fiscal Studies
70
80
90
Transfer system doing more work: Real private and net
income growth, 2007–08 to 2012–13
4%
2%
Cumulative income change
0%
-2%
-4%
-6%
-8%
-10%
-12%
-14%
Net income
Private income
-16%
-18%
25
30
35
40
45
50
55
60
65
Percentile
© Institute for Fiscal Studies
Source: Living Standards, Poverty and Inequality: 2014
70
75
80
85
90
95
Will it continue?
Future benefit and tax changes are important drivers in income
distribution, Simulations up to 2015–16:
4%
Income change
2%
0%
-2%
-4%
2007–08 to 2012–13
-6%
2012–13 to 2015–16
-8%
10
20
30
40
50
60
Percentile point
70
80
Note: Figure is an update of that in Brewer et. al. (2013), Fiscal Studies, Vol. 34, No. 2, pp. 179–201.
© Institute for Fiscal Studies
90
Marginal income tax + NICs rate
Two aspects of the Tax System: 1. Effective taxes on
Higher Incomes. Marginal tax rates by income level 2011
70%
60%
50%
40%
30%
Income tax + NICs
20%
Income tax
10%
0%
0
20
40
60
80
100
120
140
Employer cost (£000s)
Source: Mirrlees Review
160
180
200
Two aspects of the Tax System: 1. Effective taxes on
Higher Incomes. Marginal tax rates by income level, UK
45%
40%
35%
30%
25%
20%
15%
Earned income
Self employment income
Dividend income
10%
5%
0%
$0
$10,000
$20,000
$30,000
$40,000
$50,000
Gross income
Note: assumes dividend from company paying small companies’ rate. Includes
income tax, employee and self-employed NICs and corporation tax.
© Institute for Fiscal Studies
Bunching at the higher rate threshold, UK
Number in each £100 bin
300000
250000
200000
150000
100000
50000
0
Distance from threshold
© Institute for Fiscal Studies
Composition of income around the higher rate tax threshold
Total income per £100 bin (£ billion)
Interest
$9
$8
$7
$6
$5
$4
$3
$2
$1
$0
-$1
Property
Dividends
Other investment
income
Self employment
Other
Pensions
Benefits
Employment
Deductables
Distance from threshold
© Institute for Fiscal Studies
2. Effective Taxes for families at the Bottom: Complex but
redistributive, budget constraint for single parent 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
2.300
2.200
2.100
Ratio
2.000
1.900
1.800
1.700
1.600
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
1.500
50/10
© Institute for Fiscal Studies
90/50
Source: Living Standards, Poverty and Inequality: 2014
But top 1% share continued to grow dramatically
90/10 ratio and top 1% income share
10%
9%
4
8%
7%
3
6%
5%
2
4%
3%
1
2%
90/10 ratio (LH axis)
Top 1% share of income (RH axis)
0
© Institute for Fiscal Studies
1%
0%
Source: Living Standards, Poverty and Inequality: 2014
Share of household income held by the
top 1% of individuals
Ratio of income at the 90th and
10th percentiles (90/10 ratio)
5
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:
0.70
0.60
0.50
0.40
1930s
1940s
1950s
0.30
1960s
1970s
0.20
0.10
0.00
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
Source: Blundell and O’Dea (2014).
Consumption Inequality by Age and Birth Cohort – UK
Younger cohorts facing increasing inequality:
0.45
0.40
0.35
0.30
0.25
1930s
1940s
1950s
0.20
1960s
1970s
0.15
0.10
0.05
0.00
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
Notes: younger cohorts entering with much larger inequality than previous cohorts….
Source: Blundell and O’Dea (2014).
.1
.15
.2
.25
.3
.35
.4
Consumption Inequality by Year and Birth Cohort - US
20
25
30
35
40
Born 1930s
Born 1950s
Source: Attanasio and Pistaferri (2014)
45
age
50
55
60
Born 1940s
Born 1960s
65
70
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 rates rise.
• 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?
© Institute for Fiscal Studies
Non- and semi-durables
120
1980
Quarter before recession = 100
115
1990
110
2008
105
100
95
90
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
Quarters since start of recession
© Institute for Fiscal Studies
Non- and semi-durables per head
120
Quarter before recession = 100
1980
1990
2008
115
110
105
100
95
90
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Quarters since pre-recession peak in GDP
© Institute for Fiscal Studies
15
16
17
18
19
20
21
22
23
24
25
26
Durables
140
1980
Quarter before recession = 100
130
1990
120
2008
110
100
90
80
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
Quarters since start of recession
© Institute for Fiscal Studies
Percentage Change in Food Expenditure by centile: UK
0.08
0.06
0.04
0.02
0
2012-2009
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
-0.02
-0.04
-0.06
-0.08
-0.1
Notes: Understanding Society
Source: Blundell and Etheridge, 2014
© Institute for Fiscal Studies
2012-2010
2010-2009
Percentage Change in Food Expenditure: 2010-2012 UK
Change in Food Expenditure by Centile and HH type: 2010 to 2012
0.04
0.02
0
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
-0.02
All HHs
Pensioners
-0.04
w/o children
with children
-0.06
-0.08
-0.1
-0.12
Notes: Understanding Society
Source: Blundell and Etheridge, 2014
© Institute for Fiscal Studies
Prospects for the Economy
• Younger workers and families are acting as if they expect a long-run,
persistent 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 highskilled occupations, with perhaps some at the very bottom.
Employment shares of occupation groups
Source: Blundell, Green and Jin (2014)
© Institute for Fiscal Studies
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,
– Families with low skilled workers increasingly relying on the tax
credit/benefit system and family labour supply.
• 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 (many from Mirrlees Review)
– 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 these reforms 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’.
But that’s all for now!
Human Capital, Inequality and Tax Reform:
Recent Past and Future Prospects
Coase Lecture 2015
Richard Blundell*
University College London and Institute for Fiscal Studies**
Slides on my website http://www.ucl.ac.uk/~uctp39a/
Extra Slides
2008 Q1
2008 Q2
2008 Q3
2008 Q4
2009 Q1
2009 Q2
2009 Q3
2009 Q4
2010 Q1
2010 Q2
2010 Q3
2010 Q4
2011 Q1
2011 Q2
2011 Q3
2011 Q4
2012 Q1
2012 Q2
2012 Q3
2012 Q4
2013 Q1
2013 Q2
2013 Q3
2013 Q4
2014 Q1
2014 Q2
2014 Q3
2014 Q4
Change since 2008 Q1, £ billion
Business investment has been very slow to pick up
15
10
Business investment
5
Household consumption:
durable goods
0
-5
Household consumption:
non-durable
goods
-10
© Institute for Fiscal Studies
Earnings in line with productivity growth, particularly when
using LFS measures of earnings
Output per hour and worker compared to mean earnings in LFS (GDP deflated) since 2008Q2
Indexed to 100 in 2008Q2
105
100
95
Output per worker
Output per hour worked
Mean weekly earnings
Mean hourly earnings
© Institute for Fiscal Studies
Source: Fig 2.7 of Cribb and Joyce (2015) “Earnings since the recession”
2014Q3
2014Q1
2013Q3
2013Q1
2012Q3
2012Q1
2011Q3
2011Q1
2010Q3
2010Q1
2009Q3
2009Q1
2008Q3
2008Q1
90
© Institute for Fiscal Studies
Source: Authors’ calculations using Labour Force Survey (ONS series MGRQ and
MGRZ).
2014 Q3
2014 Q1
2013 Q3
2013 Q1
2012 Q3
2012 Q1
2011 Q3
2011 Q1
2010 Q3
2010 Q1
2009 Q3
2009 Q1
2008 Q3
2008 Q1
2007 Q3
2007 Q1
2006 Q3
2006 Q1
2005 Q3
2005 Q1
2004 Q3
2004 Q1
Self-employment as a share of total
employment
Self employment as a share of total employment
16%
15%
14%
13%
12%
11%
Earnings for employees and the self employed
25%
Percentage of employees /
self-employed individuals
Self-employed
Employees
20%
15%
10%
5%
0%
Earnings (per week, April 2014 prices)
© Institute for Fiscal Studies
Source: Figure 2.14 of Cribb and Joyce (2015) “Earnings since the recession”
Employment and unemployment rates since 2007
© Institute for Fiscal Studies
Source: Fig 2.1 of Cribb and Joyce (2015) “Earnings since the recession”
2014 Q4
2014 Q2
2013 Q4
2013 Q2
2012 Q4
4%
2012 Q2
70%
2011 Q4
5%
2011 Q2
71%
2010 Q4
6%
2010 Q2
72%
2009 Q4
7%
2009 Q2
73%
2008 Q4
8%
2008 Q2
74%
2007 Q4
9%
Unemployment rate (age 16-64) (%)
Unemployment rate (RH axis)
75%
2007 Q2
Employment rate (age 16-64) (%)
Employment rate (LH axis)
Real earnings indexed to 100 in 2008
Changes to real median weekly and hourly wages by sex
110
105
Male weekly earnings
Male hourly earnings
Female weekly earnings
Female hourly earnings
100
95
90
2008
2009
2010
2011
2012
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.
2013
2014
40%
50%
60%
70%
80%
Average EMTRs for different family types
0
100
200
300
400
500
600
700
800
900 1000 1100 1200
Employer cost (£/week)
Single, no children
Partner not working, no children
Partner working, no children
Lone parent
Partner not working, 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
© Institute for Fiscal Studies
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”
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
100
90
80
70
60
50
40
30
20
10
0
1997
Percentage of employees in a pension
scheme
But recent falling membership of pensions schemes
Particularly strong growth in private sector
8.0
Private (LH axis)
Public (RH axis)
25.5
7.5
25.0
7.0
24.5
6.5
24.0
6.0
23.5
5.5
23.0
5.0
© Institute for Fiscal Studies
Source: Fig 2.2 of Cribb and Joyce (2015) “Earnings since the recession”
Public sector employment (million)
Private sector employment (million)
26.0
NEET rate among young people
60%
50%
40%
18-21 GCSEs or above
18-21 without GCSE
30%
22-24 Degree level or above
22-24 GCSEs, A-levels, FE
20%
22-24 without GCSE
10%
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
0%
Source: Blundell, Green and Jin (2014)
Recent cohorts are also less likely to own a home
Born 1963–67
Born 1973–77
Born 1983–87
Homeownership rate (%)
80%
70%
60%
50%
40%
30%
20%
10%
0%
20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
Age
Source: Figure 3.13 of Living Standards, Poverty and Inequality: 2014
© Institute for Fiscal Studies