Caught in a Trap? Wage Mobility in Great Britain: 1975–1994

In this paper I study wage mobility in Great Britain using the New Earnings Surveys of 1975–94 and the British Household Panel Surveys of 1991–94. Measuring mobility in terms of decile transition matrices, I find a considerable degree of immobility within the wage distribution from one year to the next. Mobility is higher when measured over longer time periods. Those in lower deciles in the wage distribution are much more likely to exit into unemployment and non‐employment. Measuring mobility by studying changes in individuals’ actual percentile rankings in the wage distribution, I find evidence that short‐run mobility rates have fallen since the late 1970s. This has potentially important welfare implications, given the rise in cross‐section earnings inequality observed over the last two decades.