DP4045 | The Changing Distribution of Male and Female Wages, 1978-2000: Can the Simple Skills Story be Rejected?


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This Paper attempts to reconcile two apparently contradictory trends in the UK labour market over the 1980s and 1990s. While wage differentials based on observed skill have risen for men, wage differentials between men and women have fallen. If women earn less than men because they are less skilled, then one would expect differences across genders to follow the same trends as differences across skills. The simplest explanation of the data is that the labour market has become more competitive, resulting in a fall in discrimination and an increase in the return to skill. As this explanation is not directly and easily testable, this Paper examines its plausibility by assessing other explanations for these results.