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Poverty and Worklessness in Britain

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Author Info
Stephen Nickell

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Abstract

Relative poverty in the UK has risen massively since 1979 mainly because of increasing worklessness, rising earnings dispersion and benefits indexed to prices, not wages. So poverty is now at a very high level. The economic forces underlying this are the significant shift in demand against the unskilled which has outpaced the shift in relative supply in the same direction. This has substantially weakened the low-skill labour market which has increased both pay dispersion and worklessness, particularly among low-skilled men. The whole situation has been exacerbated by the very long tail in the skill distribution, so that over 20 per cent of the working age population have very low skills indeed (close to illiterate). Practical policies discussed include improving education and overall well-being for children in the lower part of the ability range, raising wage floors, New Deal policies, tax credits and benefits for the workless. Overall, I would argue that without reducing the long tail in the skill distribution, there is no practical possibility of policy reducing relative poverty to 1979 levels.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0579.

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Date of creation: Jul 2003
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Handle: RePEc:cep:cepdps:dp0579

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Related research
Keywords: Poverty; Worklessness; Wage dispersion; Disability;

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Find related papers by JEL classification:
I32 - Health, Education, and Welfare - - Welfare and Poverty - - - Measurement and Analysis of Poverty
I12 - Health, Education, and Welfare - - Health - - - Health Production

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Stephen Machin & Alan Manning & Lupin Rahman, 2002. "Where the Minimum Wage Bites Hard: the Introduction of the UK National Minimum Wage to a Low Wage Sector," CEP Discussion Papers dp0544, Centre for Economic Performance, LSE. [Downloadable!]
  2. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084 Elsevier. [Downloadable!] (restricted)
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  3. Richard Dickens & Alan Manning, 2002. "Has The National Minimum Wage Reduced UK Wage Inequality?," CEP Discussion Papers dp0533, Centre for Economic Performance, LSE. [Downloadable!]
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  4. Daron Acemoglu, 2003. "Cross-Country Inequality Trends," Economic Journal, Royal Economic Society, vol. 113(485), pages F121-F149, February. [Downloadable!] (restricted)
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  5. Paul Krugman, 1994. "Past and prospective causes of high unemployment," Proceedings, Federal Reserve Bank of Kansas City, issue Jan, pages 49-98.
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  6. Nickell, Stephen & Bell, Brian, 1996. "Changes in the Distribution of Wages and Unemployment in OECD Countries," American Economic Review, American Economic Association, vol. 86(2), pages 302-08, May. [Downloadable!] (restricted)
  7. repec:cep:sticas:034 is not listed on IDEAS
  8. Eric A. Hanushek, 2003. "The Failure of Input-Based Schooling Policies," Economic Journal, Royal Economic Society, vol. 113(485), pages F64-F98, February. [Downloadable!] (restricted)
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  9. Stephen Nickell, 2003. "A Picture of European Unemployment: Success and Failure," CEP Discussion Papers dp0577, Centre for Economic Performance, LSE. [Downloadable!]
  10. Paul Gregg & Susan Harkness, 2003. "Welfare Reform and Lone Parents Employment in the UK," The Centre for Market and Public Organisation 03/072, Department of Economics, University of Bristol, UK. [Downloadable!]
  11. John Van Reenen, 2003. "Active Labour Market Policies and the British New Deal for the Young Unemployed in Context," NBER Working Papers 9576, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Desjonqueres, Thibaut & Machin, Stephen & Van Reenen, John, 1999. " Another Nail in the Coffin? Or Can the Trade Based Explanation of Changing Skill Structures Be Resurrected?," Scandinavian Journal of Economics, Blackwell Publishing, vol. 101(4), pages 533-54, December. [Downloadable!] (restricted)
  13. Stewart, Mark B., 2002. "The Impact Of The Introduction Of The Uk Minimum Wage On The Employment Probabilities Of Low Wage Workers," The Warwick Economics Research Paper Series (TWERPS) 630, University of Warwick, Department of Economics. [Downloadable!]
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  14. Wood, Adrian, 1995. "How Trade Hurt Unskilled Workers," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 57-80, Summer. [Downloadable!] (restricted)
  15. Alan B. Krueger, 2003. "Economic Considerations and Class Size," Economic Journal, Royal Economic Society, vol. 113(485), pages F34-F63, February. [Downloadable!] (restricted)
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  16. Richard Dickens & David T. Ellwood, 2001. "Whither Poverty in Great Britain and the United States? The Determinants of Changing Poverty and Whether Work Will Work," NBER Working Papers 8253, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  17. Dan Devroye & Richard Freeman, 2002. "Does Inequality in Skills Explain Inequality of Earnings Across Advanced Countries?," CEP Discussion Papers dp0552, Centre for Economic Performance, LSE. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ambra Poggi & Xavier Ramos, 2007. "Empirical Modeling of Deprivation Contagion Among Social Exclusion Dimensions (Using MCMC Methods)," LABORatorio R. Revelli Working Papers Series 59, LABORatorio R. Revelli, Centre for Employment Studies. [Downloadable!]
    Other versions:
  2. Ken Clark & Joanne Lindley, 2009. "Immigrant assimilation pre and post labour market entry: evidence from the UK Labour Force Survey," Journal of Population Economics, Springer, vol. 22(1), pages 175-198, January. [Downloadable!] (restricted)
  3. Ludger Wößmann, 2008. "Efficiency and equity of European education and training policies," International Tax and Public Finance, Springer, vol. 15(2), pages 199-230, April. [Downloadable!] (restricted)
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  4. Das, Jishnu & Zajonc, Tristan, 2008. "India shining and Bharat drowning: comparing two Indian states to the worldwide distribution in mathematics achievement," Policy Research Working Paper Series 4644, The World Bank. [Downloadable!]
  5. Alena Bicakova, 2006. "Market vs. Institutions: The Trade-off Between Unemployment and Wage Inequality Revisited," Economics Working Papers ECO2006/31, European University Institute. [Downloadable!]
  6. Jorg, LINGENS & Klaus, WAELDE, 2005. "Pareto-Improving Unemployment Policies," Discussion Papers (ECON - Département des Sciences Economiques) 2005033, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
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  7. Matthias Weiss, 2004. "Skill-Biased Technological Change: Is there Hope for the Unskilled?," MEA discussion paper series 04045, Mannheim Research Institute for the Economics of Aging (MEA), University of Mannheim. [Downloadable!]
    Other versions:
  8. Gabriela Schütz & Heinrich W. Ursprung & Ludger Woessmann, 2005. "Education Policy and Equality of Opportunity," IZA Discussion Papers 1906, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
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