Tuesday, 11 October 2011

Is the middle being squeezed in the UK?

Tyler Cowan has got a lot of traction from his penetrating observation that real median household wages in the US have hardly grown for almost 30 years (top wages have of course). The great Russ Roberts blogs  on a TUC report about median wages in the UK, which shows a 57% improvement in the male full time median real wage over the last 30 years.

One thing that really matters is comparing males, females, households etc. This is done by the Resolution Foundation "Growth Without Gain".  Here's the US data showing the stagnation, lower line clearly:

and here is the UK data:.

What do we see from this?  I don't know the answer but
  1. It's remakable how well women are doing in both countries (BTW, 40% of our starting MBA students this year are women).  
  2. There are some signs of (male) stagnation in the UK in recent years.  But not what we have seen in the US. And not for women.
  3. These does seem, in the UK, like in the US to have been a decoupling from GDP growth perhaps in recent years.  These are median wages and one has to be careful with deflators etc. but that should show up in reduced share of labour compensation in GDP. The data on this are set out below:

Here, from EUKLMS are the UK and US labour shares of total GDP

Source: EUKLEMS data

The US labour share has been falling steadily, the UK falling only perhaps in the latest years.  So what we really need, for the most recent years, is an explanation of how returns to capital are rising, and returns to women and superstar labour is rising.  I am working on this with Lawrence, Slaughter and Leamer, work out soon.