Finance Sector Wage Growth and the role of Human Capital

Joanne Lindley () and Steven McIntosh

No 2014002, Working Papers from The University of Sheffield, Department of Economics

Abstract: Given the UK finance sector is one of the largest in the world, it provides the perfect setting for a study into the nature of the finance sector wage premium. We reveal the pervasiveness of this premium, across all sub-sectors of finance, and across all occupations within finance, and with the very highest rewards going to 40-49 year old men working in London. Moreover, the UK premium has continued to rise despite the recent financial crisis. Consequently, this study uses rich data from the UK to investigate potential explanations. We find that the financial sector is more skill intensive but also that financial sector workers have higher childhood test scores vis-à-vis non-finance workers. So we investigate to what extent these higher qualifications and higher cognitive skills can explain the financial pay differential. We then go on to consider whether the financial premium is a consequence of differences in job characteristics and thus whether technological change can explain the growth in the premium. While each of these factors has some role to play, we find that none can fully explain the wage premium found in the financial sector, which we find to be pervasive across 17 OECD countries, including the US. We therefore attribute to this to rent-sharing.

Keywords: wage inequality; financial services; cognitive skills; bonuses (search for similar items in EconPapers)
JEL-codes: I24 J20 J31 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2014
New Economics Papers: this item is included in nep-lab and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.shef.ac.uk/economics/research/serps/articles/2014_002.html First version, 2014 (application/pdf)

Related works:
Journal Article: Finance Sector Wage Growth and the Role of Human Capital (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:shf:wpaper:2014002

Access Statistics for this paper

More papers in Working Papers from The University of Sheffield, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Mike Crabtree ().