Technology and regulation as determinants of employment rigidities and wage inequality
Chapter I, "Lousy and lovely jobs: the rising polarization of work in Britain", shows that the UK since 1975 has exhibited a pattern of job polarization with rises in employment shares in the highest- and lowest-wage occupations. This is not entirely consistent with the standard view of skill-biased technical change as a hypothesis about the impact of technology on the labor market. However, a more nuanced view of skill-biased technological change recently proposed by Autor, Levy and Murnane  (ALM) is a better explanation of job polarization. ALM argue persuasively that technology can replace human labor in routine tasks, be they manual or cognitive, but (as yet) cannot replace human labor in non-routine tasks. Since non-routine tasks are concentrated at both ends of the earnings distribution, it is shown that ALM's routinization hypothesis can explain one-third of the rise in the log(50/10) and one-half of the rise in the log(90/50) wage differential. Chapter II, "The impact of shop closing hours on labor and product markets", adds to a small but growing literature related to the idea that product market regulation affects employment. More specifically, it is argued that shop closing hours can affect the level and composition of employment in retail industries. First, this chapter exploits recent changes in US Sunday Closing Laws to find that total employment, total revenue and the number of shops increase in deregulating industries and possibly decrease in non-deregulating industries. Second, building on what we know about retail markets, a model is presented to show how consumer behavior and retail competition can explain the observed impact of deregulation on retail labor and product markets and therefore ultimately employment. Chapter III, "The recent expansion of higher education in Britain, college premiums and wage inequality", examines the impact of changes in the relative supply of college workers on college premiums and wage inequality between 1975 and 2003 in the UK. First, it provides a test for the hypothesis proposed by Card and Lemieux  (CL) that the inter-cohort slowdown in college attainment growth rates explains the higher college premiums for cohorts born between 1955 and 1970. More precisely, the chapter examines the expansion of Britain's higher education system between 1988 and 1994 to find lower relative earnings for college graduates born between 1970 and 1976, in line with the CL hypothesis. Second, accounting for a positive time trend in college attainment and a secular increase in the relative demand for college workers, it is shown that the slowdown in educational attainment for cohorts born between 1955 and 1970 can explain an important part of the increase in the average college premium and a significant part of the increase in wage inequality after 1980. Relative to the secular increase in the demand for and supply of college workers, the recent expansion of Britain's higher education system is thus expected to significantly reduce the average college premium and therefore wage inequality. Chapter IV, "Cyclicality and fixed effects in gross job flows: a European cross country analysis", uses information on manufacturing establishments during the 1990s in Belgium, France, Italy and the UK to examine whether time series of employment dynamics behave differently across countries and whether persistent differences exist in gross job flows that are country or industry specific. The results suggest job destruction is more cyclically volatile in the UK compared to Continental European countries. In the longer-run, a country fixed effect best captures the process of job reallocation whereas industry specific differences are not important. Symmetry of job creation and destruction over the business cycle and the existence of country specific differences in gross job flows most likely reflect the importance of different labor market regulations in Continental European countries.