On the Job Search and Job Competition: Relevance and Wage Impact in the UK

Abstract

In the literature job competition is often measured by the unemployment rate. By neglecting on-the-job search, however, the unemployment rate is likely to be a biased measure of job competition: various studies have suggested that on-the-job search varies over time and across groups of people, and might have a relevant impact on the outflow from unemployment. In the UK, for example, less than half of people who are actively looking for a job are unemployed; the other half already has a job.

This paper estimates the direct impact of job competition on individual wages in the UK using data from the quarterly Labour Force Survey for the period 1993-2005. Measures of job competition based only on the unemployment rate are compared to measures that account for on-the-job search as well as regional accessibility. The results suggest that job competition has a negative impact on wages, and that this impact is not equally distributed across workers.