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What happens if an employer cuts wages by one cent? Much of labour economics is built on the assumption that all the workers will quit immediately. In this text, Alan Manning mounts a systematic challenge to the standard model of perfect competition.

AbstractThere is little doubt that technology has had the most profound effect on altering the tasks that we humans do in our jobs. Economists have long speculated on how technical change affects both the absolute demand for labour as a whole and the relative demands for different types of labour. In recent years, the idea of skill‐biased technical change has become the consensus view about the current impact of technology on labour demand, namely that technical change leads to an increase in the demand for skilled relative to unskilled labour painting a bleak future for the employment prospects of less‐skilled workers. But, drawing on a recent paper by Autor, Levy and Murnane (2003) about the impact of technology on the demand for different types of skills, this paper argues that the demand in the least‐skilled jobs may be growing. But, it is argued that employment of the less‐skilled is increasingly dependent on physical proximity to the more‐skilled and may also be vulnerable in the long‐run to further technological developments.

A comment on Wright & Dwyer's (2003) article focuses on job creation & quality during the Clinton years. The authors correctly underscore the marked job polarization during the Clinton era & effectively document the evolution in the US employment structure over the past four decades. However, the novelty of the job polarization phenomenon was overstated; it is a long-term trend that will probably persist rather than a singular characteristic of a particular expansion. 1 Table, 2 Figures, 7 References. K. Coddon

Human capital theory provides the generally accepted interpretation of the relationship between earnings and labour market experience, namely that general human capital tends to increase with experience. However, there are other plausible interpretations. Search models, for example, generally predict that more time in the labour market increases the chance of finding a better match and hence tends to be associated with higher earnings. This paper shows how a simple search model can be used to predict the amount of earnings growth that can be assigned to search with the residual being assigned to the human capital model. A substantial if not the larger part of the rise in earnings over the life‐cycle in Britain can be explained by a simple search model, and virtually all the earnings gap between men and women can be explained in this way. Overall, the evidence suggests that we do need to reinterpret the returns to experience in earnings functions.