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Labour markets

The Labour Markets programme studies the world of work. It looks at how social and economic changes, such as immigration and new technology affect jobs, wages, gender and regional inequality. It considers how policy-makers can and do respond to these changes.

Since most people depend on the labour market for their livelihood, how it functions is of crucial importance for wellbeing and for economic performance.

We study how labour market changes occurring as a result of social and economic changes are met by policy interventions and changes in labour market institutions and their effect on different employers and employees.

Our foundational work on unemployment and labour market search in the 1980s and 1990s established the way we think about the causes and cures for unemployment. Since the 1998, when the UK's Labour government introduced its New Deal policies, this framework has formed the basis of UK and European policymaking to combat unemployment. Our follow up evaluations tested the efficacy of these policies and showed that unemployment fell in countries which adopted them. Extensive work on the National Minimum Wage countered existing orthodoxy by demonstrating how a reasonably set wage could help increase low pay without having negative effects on employment.

Later research investigates why recent lower unemployment has paradoxically been accompanied by a sustained fall in real wages and living standards and widening wage inequality, with the highest wages pulling away dramatically from the lowest. One of the most enduring sources of labour market inequality, the pay gap between men and women, has been explored in a project of its own. Other causes of the widening of wage inequality have been explored including those due to skill-biased technological change, where workers in technologically centred jobs earn increasingly more than those in more routine employment. More recent work looks at whether robotics and software will reinforce the effect of automation in further displacing workers in the middle of the income distribution.

The labour market is changing in other ways too and we explore the impact of zero-hour contracts and the expansion of the "gig economy". Does this explain high employment levels despite the financial crisis? How will this affect work conditions, wages, and tax receipts and what are the implications for these workers in terms of retirement and unemployment? Our research will explore these issues in the same way it looked at the impact of unions on wages, conditions and contracts of employment.

We will also consider the impact of Brexit and other shocks on local labour markets and the consequences for spatial inequality. Why does unemployment persist in certain local labour markets even when neighbouring markets work well? The impact of the Brexit referendum decision will also involve continued work on immigration. While work to date focussed on the limited impact of increased migration flows on employment and wages of natives, future work will consider the effects of increased regulation of immigration from the EU on productivity, employment and sectoral labour shortages.

Labour markets publications

Timothy Besley, Aveek Bhattacharya, Jagjit Chadha, Paul Cheshire, Neil Lee, Alan Manning, Andrew McNeil, Margarida Bandeira Morais, Henry G. Overman, David Soskice, Anna Valero, Giles Wilkes and Alison Wolf

22 April 2024

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