What Caused Rising Earnings Inequality in Britain? Evidence from Time Series, 1970–1993

The paper reviews some of the competing explanations for the rising levels of earnings inequality in Britain, such as skill shortages, rising unemployment, globalization, demographic factors and inflation. These explanations are rejected in favour of the idea that it was the major changes in the institutional pay-setting arrangements that were largely responsible for rising inequality. Union density figures and strike data are explored in support of this thesis.