Data research aims to understand wage inequality

ADR UK (Administrative Data Research UK) has today (18 May 2020) announced a partnership with researchers led by the University of the West of England (UWE), to explore trends in wages and employment in Britain. Data on hours, earnings and businesses held by the Office for National Statistics (ONS) will be linked to better understand how pay progresses in different groups in society, and how wage inequality occurs. 

This data linking project, Wage & Employment Dynamics (WED), will help us understand changes in the labour market and the make-up of the British workforce over time. Key questions it will help answer include: 

• How do people’s earnings progress through their career? 

• How does this differ depending on characteristics such as gender, disability, or ethnicity? 

• Who does and does not progress out of low pay employment? 

• What is the relationship between migration and the labour market? 

• What role do employers play in wage inequality? 

Evidence generated by the WED project could help policymakers in government and other agencies support and improve people’s wage and career progression, from their first job until retirement. 

This could help tackle inequalities in the labour market, such as the gender pay gap (with most recent figures now standing at 8.9%); and address social challenges such as in-work poverty: according to a report published by the Institute for Fiscal Studies (IFS) last year, almost three in five people (58%) in relative poverty in the UK live in a working household. With the coronavirus lockdown likely to worsen these figures further, research is needed to address these issues now more than ever. 

The data being linked includes data on earnings from the Annual Survey of Hours and Earnings (ASHE), data on UK businesses from the Inter-Departmental Business Register (IDBR), and the 2011 Census. The data will be linked with support from ONS, and made available for research in de-identified form via their Secure Research Service (SRS), ensuring it cannot be used to identify individuals. 

WED is one of the first Britain-wide research projects to receive a major grant (almost £450,000) from ADR UK, which is itself a £44 million Economic and Social Research Council (ESRC) investment to transform the way researchers access the wealth of administrative data already created by public bodies across the UK. 

As well as UWE, the project team includes researchers from UCL, City University, and the National Institute of Economic and Social Research (NIESR). 

Announcing the project, Dr Emma Gordon, Director of ADR UK, said: “We are delighted to be supporting the WED project, which is groundbreaking for research into pay and employment in Britain. By linking this data together for the first time, researchers will soon be able to map out trends across a lifetime of employment, taking into account factors such as race, gender, or different business sectors. 

“Understanding these trends could help address pressing challenges facing the UK, such as in-work poverty – an experience unfortunately widely shared, yet also experienced differently across social groups. By intelligently linking data that represents people from every walk of life, we can help inform policy and practice that is fair and representative, ensuring everyone benefits from positive data-driven change.” 

UWE Professor Felix Ritchie, lead researcher on the WED project, said: “We live in the most uncertain of times, with policymakers facing important challenges in understanding movements in productivity and wages. With the outbreak of Covid-19, these challenges are now more pressing than ever: we face mass unemployment and unprecedented downward pressure on wages and family incomes.” 

“However, there is also a buzz of excitement around initiatives such as ADR UK, that increase safe research access to linked administrative data from a range of sources, and how they can help us address these challenges. The WED project is part of this, providing new opportunities for academics and policy researchers to explore wage and employment data in innovative ways and generate research findings of direct interest to policymakers. We expect the WED project to have a transformative effect on research to understand the UK labour market.” 

The WED project is supported by the Low Pay Commission, which advises the UK Government on the National Minimum Wage. Their Chief Economist, Tim Butcher, said: “At the Low Pay Commission we place great weight on evidence. The research the Wage and Employment Dynamics team is currently doing in relation to transitions from low pay is of great interest to us. This project also addresses weaknesses in our evidence base – improving the quality of longitudinal earnings data and extending coverage to a broader range of characteristics – that should enable researchers to give new and innovative insights into the wage and employment dynamics of the lowest paid.” 

Visit the Wage & Employment Dynamics website to stay up to date with this project.