David K.H. Begg, Gianluigi Vernasca-Economics-McGraw Hill Higher Education (2011)

10.8 UK wages and employment
Table 10.5
UK iobs and real earnings, males {0/o cumulative change)
Real earnings, 1997-2009 Jobs, 1997-2009
Whole economy +1 0 +8
financial services +1 4 +27
Construction +20 +22
Energy and water +1 0 -1 7
Source: ONS.
In financial services (such as banking and insurance), wages and employment both increased. Demand
increases were more than sufficient to offset any tendency for information technology or global outsourcing
to reduce the need for workers.
Technical progress and capital investment in the basic utilities - energy and water supply - meant that jobs
continued to contract sharply in the sector. With so much capital per worker, workers are very productive
and are highly paid. High energy prices - in part caused by global rises in the price of oil - meant that
energy companies declared record profits. The competition for workers meant that incomes in the industry
rose sharply.
Wage discrimination: wage differences between men and women
Wage discrimination refers to a situation whereby equally productive workers are paid differently. Few
women do manufacturing jobs; most have jobs in services. Yet the pattern of employment is not the major
cause of the fact that women on average earn 80 per cent as much as men. Sector by sector, women
systematically get paid substantially less than men. The main reason that women earn less is that they earn
less than men whatever job they do.
The percentage of women in professional or managerial occupations is comparable with that for men but
few women are on the boards of major companies. Why do firms promote or train women more slowly?
Suppose firms bear some of the cost of training. The firm makes a hard-nosed investment decision.
Assuming men and women are of inherently equal ability and educational attainment, it costs the firm the
same to train either sex.
Suppose firms believe women are more likely than men to interrupt, or even end, their careers at a young
age. As a matter of biology, women have babies. Firms may conclude that the extra productivity benefits in
the future are lower for women than men simply because many women work fewer years in the future. It
is more profitable to train and promote men.
Some women plan to have a full-time career, either remaining childless or returning to work almost
immediately after any children are born. It would make sense for firms to invest in such people. How is a
firm to tell which young women are planning to stay? Asking is pointless. There is no incentive for young
women to tell the truth.
Suppose firms offer young workers the choice between a relatively flat age-earnings profile and a steep
profile that begins at a lower wage but pays a much higher wage later in a worker's career. In this way, firms
can make the two profiles of equal value to someone planning a lifetime career. The early sacrifice (low
wages) is recouped with interest later (high wages). Someone planning to quit the labour force, say at the
age of 30, will never opt for the steeper profile.
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