The evolution of individual male earnings in Great Britain: 1975-95

I study the dynamic structure of male wages in Great Britain using the New Earnings Survey Panel from 1975-95. Computing auto-covariances of individua l wages by cohort I find evidence of a permanent component of earnings that increases over the life cycle and a highly persistent, serially correlated transitory component. In addition, the estimated variances of both these c omponents have risen over this period, each explaining about half the rise in inequality. Using individual's occupation at age 22, I split the sample into four skill groups. I find some differences across these groups, with t he rise in the permanent variance most important for the manual groups.