Cyclical changes in the wage structure of the United Kingdom: a historical review of the GHS 1972-2002

This paper aims to investigate the cyclical changes in the wage structure of the United Kingdom over the period 1972-2002 using the General Household Survey (GHS). Wage structure of the UK shows a cyclical pattern, which may be from the different wage cyclicality of the top, middle and bottom percentile groups. Higher educated male workers have experienced a faster growth of the education premiums so that the wages of males have become more dispersed after the 1970s. However, female workers with only primary education have faster wage growth than higher educated ones. Moreover, the experience premiums of females have grown faster than males and become similar to males in recent years. Changes in the skill endowments and market valuation can account for the cyclical changes in female earnings structure over the entire period. The residual earnings inequality accounts for more than half changes in overall earnings inequality of males, which cannot be explained by changes in skill endowments and market returns. The evolution of the wage structure, including changes in gender gap, overall wage inequality, skill premiums as well as residual wage inequality are affected by business cycle.