Author: Sandra Dettmer, Swansea University

Day One – Tuesday 25th June

Strand – Labour Markets

Session Three: 4.30pm – 6pm

Local labour markets across the UK vary extremely with respect to labour market activity and costs of living. Private organisations generally account for these differences by adjusting individual wages to local conditions. However, wages in the public sector are mainly a result of national wage bargaining procedures. Existing literature highlights potential problems linked to centralised pay settings such as ineffective labour markets and poor quality of public sector services.

This paper addresses the question of the extent to which public and private wages vary across local labour markets. In contrast to most previous papers which investigate the earnings differentials at Government Office Region level, this work analyses public-private sector pay gaps at a sub-regional level. Micro data from the Labour Force Survey which are available through the Secure Data Server provide individual information for 407 Unitary Authorities / Local Authority Districts and the analysed dataset covers a ten year time period from 2000 to 2009. Ordinary Least Squares regression analysis is applied to estimate individual wage equations which control for a rich set of standard human capital variables.

The results suggest that the pay differentials vary significantly both across and within regions. Whereas it is possible to identify patterns at regional level, the results at sub-regional level remain inconclusive. Furthermore, corresponding maps for male and female employees show different patterns across the UK.

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