The distinctive patterns and evolution of earnings differentials in Scotland relative to England discussed in Chapters Nine and Ten of this book reflect the operation of the Scottish labour market, but in ways that were not clear. Furthermore, policies directed at encouraging economic growth and improving social equality are likely to affect the Scottish labour market, and in many cases they may be designed to do so, as Chapter Twelve illustrates. This section of the book explores differences in labour market structure, institutions and dynamic processes between Scotland and England.

In Chapter Eleven, Robert Elliot, Vania Gerova and Euan Phimister document the present distribution and level of pay in Scotland, London and the rest of England, the characteristics of the workforce in each area and the pay dynamics. They find that average pay and pay inequality are virtually the same in Scotland and the rest of England. However, they find some important differences in the composition of the labour force. Compared to England outside London, Scottish workers stay longer in jobs, are more likely to be covered by collective bargaining, are more likely to be employed in the public sector, are more likely to have a university degree, but also more likely to have no qualifications, and the Scottish gender pay gap is lower. In line with the results for income dynamics in Chapter Nine, this chapter finds that the Scottish labour market is characterised by a greater degree of earnings instability. Also, pay growth over the 1990s was slower in Scotland, which may be partly a reflection of the higher incidence of public sector and unionised employment in Scotland, sectors which exhibited slower pay growth than private sector and non-union employment.

The further education (FE) sector is regarded by the Scottish Executive as one of the principal policy instruments through which the efficiency and equity aims of both the Social Inclusion and Lifelong Learning agenda are to be delivered. If the expected economic and social benefits from participation in lifelong learning and the acquisition of appropriate skills are to be realised, there must be sufficient individual incentives to participate in FE and acquire new skills.