Eyes Down for a Full House: Labour Market Polarisation and the Housing Market in Britain
| DOI | http://doi.org/10.1111/1467-9485.00104 |
| Author | Jonathan Wadsworth |
| Date | 01 September 1998 |
| Published date | 01 September 1998 |
II
NTRODUCTION
Two significant trends have shaped the British labour market over the past
twenty years. First, the relative economic position of men has declined,
manifested in persistently high levels of unemployment and a significant fall in
participation rates from 95% in 1975 to around 78% in 1995, (see also Schmitt
and Wadsworth, 1994). The corollary to this is the rise in the economic fortunes
of women, for whom employment rates have risen f rom 58% in 1975 to 66% in
1995 and the gender earnings gap narrowed from 65% in 1975 to 80%,
(Harkness, 1996). The second development is widening pay inequality
(Schmitt, 1994; Machin, 1996 ), which, prompted in part by growing numbers
of part time and temporary contract jobs, has meant that the earnings gap
between the top 10% and bottom 10% of employees in Britain has grown by
around 40% since 1979.
Gregg and Wadsworth (1995, 1996a , 1996b) have argued that the conjunc-
tion of these trends has polarised the distribution of work across households.
Rising pay inequality has meant that wages in new jobs have fallen increasingly
behind the level of earnings received by the rest of the working population. This
has meant that vacancies are more likely to be filled by those with the security
of an additional earned income, so that most of the rise in f emale participation
has come from households where the partner was already in work. Hindered, in
part, by a means tested benefit system that imposes high marginal tax rates on
the earnings of anyone who takes a low paid job, individuals have not found
work in those households where others have lost work. The result is that 20% of
all working age households now have no access to earned income, up from 7%
in 1975, whilst more households than ever, (around 60%), contain adults all of
whom are in employment.
In what follows we examine how these labour market developments have
affected different sectors of the housing market. It is well known (see Nickell,
1980; McCormick, 1983; Pissarides and Wadsworth, 1989 ), that individual
376
Scottish Journal of Political Economy, Vol. 45, No. 4, September 1998
© Scottish Economic Society 1998. Published by Blackwell Publishers Ltd, 108 Cowley Road, Oxf ord OX4 1JF, UK and
350 Main Street, Malden, MA 02148, USA
EYES DOWN FOR A FULL HOUSE: LABOUR
MARKET POLARISATION AND THE HOUSING
MARKET IN BRITAIN1
Jonathan Wadsworth*
*Royal Holloway College University of London and Centre for Economic Performance
London School of Economics
1This article is based on a talk given at a seminar on Economic Flexibility and Housing held at
the Centre for Housing Research and Urban Studies, University o f Glasgow, December 1995.
characteristics which determine labour market experience often help predict
housing tenure. Oswald (1996) has mooted that rising owner occupation may
even be responsible for the continued persistence in high aggregate unemploy-
ment rates across Europe. This paper contrasts the labour market fortunes of
workers in different housing tenures over the past twenty years, focusing on
how the two major developments outlined above, rising inequality and the
declining economic position of men, have affected various housing types. We
concentrate on just three housing types: owner occupation, local authority
housing together with the housing associations which have taken over much of
former council accommodation, and the private rental sector. In section II,
using information f rom the Labour Force Survey (LFS), we document
therelative employment performance of the non-student working age popula-
tion (men aged 16 to 64, women aged 16 to 59 ), across these household
types.Section III does a similar analysis of earnings using data f rom the
General Household Survey (GHS). Section IV brings the two features together
in examining to what extent employment polarisation has affected each hous-
ing type. The net outcome o f these events is that one in two council house-
holdscontaining working age occupants now has no-one in work. Section V
concludes with a discussion of the implications of these events for the housing
market.
II EMPLOYMENT PERFORMANCE BY HOUSING TYPE
How is employment, unemployment and economic inactivity distributed across
housing types and how has this changed over time? Table 1 outlines the pattern
of labour market perf ormance since 1979. The data affirm that owner occupiers
do better than those in private rental accommodation who in turn experience
better employment prospects than those in council housing. In 1995, more
thaneight of every ten individuals of working age living in owner occupied
housing were in work. In contrast less than half (45·6%), o f those living
in council accommodation had jobs. The unemployment rate for council
tenants, at 13·2%, is four times that of owner occupiers and the inactivity rate at
41·2% is almost three times as high. Further, the relative perf ormance of those
in local authority housing has deteriorated over the past fifteen years. Back
in1979, the employment rate differential was just six and a half percentage
points. By 1995, the gap had risen to 35 points. For those living in the private
rental sector the employment position lies consistently between the other two
sectors.
Reflecting the relatively poor employment performance, the share of
unemployment and non-employment accounted for by the council housing
sector is also disproportionately high. If unemployment and non-employment
were distributed equally across housing types, then the proportion of unemploy-
ment accounted for by each housing type would be equal to the share of each
housing type in the total housing stock. However, by 1995, 39% o f the
unemployed were council tenants. This is more than twice as high as the share
of council housing in the total housing stock and represents a relative deterior-
© Scottish Economic Society 1998
THE BRITISH LABOUR AND HOUSING MARKETS 377
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