Labour Markets
Relative skills

The UK labour market in the post-war period has witnessed substantial rises in female participation and part-time employment and a dramatic increase in the share of non-manual workers in the work force. In Discussion Paper No. 952, Stephen Machin focuses on the latter, noting that the percentage share of non-manual employment in UK manufacturing rose from 16.1% in 1948 to 32.7% by 1990, while the share of non-manual wage costs rose from 23.1% to 42%. The gap between highest- and lowest-paid workers widened dramatically in the 1980s, with a sharp rise in the relative pay of non-manual workers.

Machin considers possible explanations of this outward shift of the relative demand curve. The two most popular explanations are that increased international competition (between industries or firms) has dampened manual workers' wages and that technological improvements (within industries or firms) cause employers to hire more skilled workers. Machin computes the percentages of the variation in the share of non-manual employment due to inter- and intra-industry factors and finds that the latter were much more important for UK manufacturing during 1979-90.

Machin also uses data from Workplace Industrial Relations Surveys to examine whether this pattern of change also obtains at the establishment level. During 1984-90, the share of non-manual workers in total employment rose by about 0.4 percentage points per annum, and most of this shift took place within establishments and was heavily concentrated at the top end of the occupational spectrum. Industry- and establishment-level regressions to assess the impact of technological changes on the relative share of non-manual workers indicate that it rose more markedly in more R&D-intensive and innovative industries and in establishments that introduced micro-computers in the period. Technical changes that saved manual labour and boosted non-manual workers' wages may therefore have contributed to the shift towards non-manual employment.

Changes in the Relative Demand for Skills in the UK Labour Market
Stephen Machin

Discussion Paper No. 952, April 1994 (HR)