This project had two themes:
(i) What empirical evidence is there relating to the wage elasticities of demand and supply for social care workers or for occupations of a similar nature, with particular emphasis on low paid occupations?
(ii) What methodologies are used to estimate the wage elasticities of demand and supply of particular occupational groups, emphasizing which techniques are most appropriate?
Part (i) Wage Elasticities of Labour Supply and Demand: Social Care and Related Occupations (Bosworth and Sarkar)
While there is a literature on estimating supply functions to social care, few, if any, of the articles are for the UK. So this report draws what lessons it can from the literature for the USA and Japan, countries which appear to have similar recruitment and retention problems as the UK. Second, while nurses and teachers cannot be classed as low skilled, they also exhibit high wastage rates and recruitment problems, so they form part of the literature review. In order to look at the lower skill / lower income part of the spectrum, a number of articles that focus on estimating wage elasticities of supply for different deciles or percentiles of income are reviewed. While there are few estimates of wage elasticities of supply, which are reported, there were no corresponding estimates for demand. However, what this report does is to address the question of whether estimating the wage elasticities for UK adult care services would be useful to policy design.
Part (ii) Modelling Labour Supply and Demand Wage Elasticities: Methodology (Bosworth)
Wage elasticities of labour supply and labour demand are relatively straightforward concepts. The former is the percentage change in the supply of labour caused by a (small) percentage change in the wage and the latter is the percentage change in the demand for labour caused by a (small) percentage change in the wage. However, identifying them empirically is a much more complicated matter, which is related to the technical nature of this report (although not the executive summary). The report considers the lack of a standard by which researches measure both the wage and control variable used in the modelling. The reports discusses what is though to be current best practice when estimating labour supply functions, as well as labour demand functions, although there is a clear need for researcher to develop more disaggregated labour demand functions, which include a range of occupational demands.