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Employees in the UK are not being denied their fair share of economic growth, according to research by João Paulo Pessoa and Professor John Van Reenen, director of the Centre for Economic Performance at LSE. Their investigation of claims that wage growth has become ‘decoupled’ from productivity growth finds that decoupling has been overstated and cannot be used to justify redressing the balance between wages and profits.read more...»
This is an updated revision presentation covering aspects of inequality and economic growth/development - it is designed for Year 13 A2 macro studentsread more...»
This topic is of profound importance. It gets the heart of a fundamental economic issue: the distribution of income. When national income rises, does that extra income go into the pockets of workers or capitalists?
The answer is clear cut: labour is getting a smaller slice of the pie. How and why might that be happening, and what might be done? Here are links and summary of a couple of articles, plus a great Economist video clip.read more...»
Don't you just love the BBC website? Just as I am preparing my lessons on global Poverty and Inequality for my A2 Macro students, here is an article written by Hans Rosling about the enormous progress most countries have made in recent decades. He uses statistics to suggest that tremendous global progress has been made towards improving quality of lives in five key ways.
There is a quiz - How Much Do You Know About The World, or 'The Ignorance Test', which will make a great lesson starter.
And as a follow-up, BBC2 has an hour-long programme tonight at 21.00 (22.30 in Scotland) called Don't Panic - the truth about Population (which will be available on i-player) - the programme synopsis says
"Using state of the art 3D graphics and the timing of a stand-up comedian, world famous statistician Professor Hans Rosling presents a spectacular portrait of our rapidly changing world. With 7 billion people already on our planet we often look to the future with dread, but Rosling's message is surprisingly upbeat. Almost unnoticed we have actually begun to conquer the problems of rapid population growth and extreme poverty."
UK immigrants who arrived since 2000 are less likely to receive benefits and less likely to live in social housing than UK natives. What’s more, over the decade from 2001 to 2011, they made a considerable positive net contribution to the UK’s fiscal system, and thus helped to relieve the fiscal burden on UK-born workers.
The positive contribution is particularly evident for UK immigrants from the European Economic Area (EEA – the European Union plus three small neighbours): they contributed about 34% more in taxes than they received in benefits over the period 2001-11.
These are the central findings of a comprehensive analysis of the fiscal consequences of immigration to the UK, published today by the Centre for Research and Analysis of Migration (CReAM) at University College London.read more...»
Suyash Raj Bhandari considers some of the ways in which the rapid expansion and adoption of mobile technology in Africa can act as a spur to growth and development on the continent. We link also to some useful background video resources on this issue.read more...»
Economists like to talk about fallacies – arguments that fall apart when you look at them closely. One such fallacy is the ‘lump of labour’ delusion. If you assume there’s a fixed amount of work to be done, then if people retire later (or whatever) there must inevitably be less work for the younger workforce to do. It doesn’t add up, because the amount of work to be done isn’t fixed. More jobs in the economy and higher levels of productivity could easily create more employment and income.
In one light hearted example to illustrate this point, a French engineer and has American colleague are watching an interstate highway being built in the US. The Frenchman is alarmed by all the capital equipment and machinery used in the process. “Doesn’t that make workers unemployed?” asks the Frenchman. “In France we only use hand tools to preserve jobs”. The American is baffled. “If that were true, surely it would be better to equip the workforce with teaspoons”.read more...»
Here is an updated streamed presentation on overseas aid and economic development (updated October 2013)read more...»
It was a pleasure to visit the LSE earlier on this week to hear a lecture from the distinguished economist Professor Angus Deaton from Princeton University in the United States. His new book "The great escape from inequality" is on my must-read list for the half term holiday and brings into focus over 250 years of changes in health and income inequalities across the world economy.
I will blog about his book a little later on but for now this Financial Times interview provides an introduction to some of the main themes of his book. Incidentally, Professor Deaton has strong views on the efficacy of foreign aid and this chapter of his book has provoked some strong responses from the pro-aid lobby active on twitter. Click below for the full video of his lecture at the LSE.read more...»
On the World Bank twitter account, President Jim Kim is quoted as saying that "Properly managed, new minerals wealth could transform Africa’s development." Back in June 2013, a new report from the African Progress Panel looked at this important issue and set out an agenda for maximising Africa’s natural resource wealth and using it to improve well-being.
My own students have been researching the economics of natural resources and whether they can be a blessing and/or a curse to countries seeking sustained growth and development. I just wanted to share one or two of these essays with you because I was delighted with the depth of the independent research on show and the quality of evaluation in their arguments.read more...»
Inequality has been rising for 30 years. The gap between rich and poor is the widest since the second world war. If current trends continue, we will have reached Victorian levels of inequality in 20 yearsread more...»
The cost of living will be a key battleground in the next election and the main political parties seem to be coming up with offers covering utility bills, rail fares, banking charges and the cost of housing as a way of limiting increases in the living costs of "hard-working" families! One should always take promises from politicians with a huge pinch of salt - intervention to freeze bills is fraught with risks and unintended consequences. This Channel 4 news clip looks at the issue.read more...»
Mobile phones have changed how we negotiate our relationships with family, spouses and close friends. Increased levels of mobile phone subscriptions are linked with improvements in education, gender equality and political participation, particularly in developing countries. They are also associated with higher economic growth.read more...»
As soon as students encounter the idea of GDP they are guided towards thinking about the possible drawbacks to growth, especially for the environment.read more...»
This revision presentation provides an introduction to the concept of GDP as a measure of economic growth and an indicator of the standard of living.read more...»
Anyone starting out in Economics will almost certainly tackle this issue right from the start: it's completely fundamental to the way economists think. Ben Cahill may have helped you with a starter activity on this topic, and I've included a few more links that may help you link to the topic of specialisation and the division of labour: our main way of tackling the problem.read more...»
Channel 4 news investigates the impact of persistent and deep poverty on the lives and hopes of children in thousands of households. A potent and stark report that reminds us of the gulf in living standards and the challenges of meeting basic needs such as a decent diet that meets minimum nutritional standards.read more...»
In the United States many thousands of workers employed by fast-food businesses on low pay have launched a strike complaining against endemic low pay in their jobs. Workers want to be paid $15 (£10) an hour, the median wage [for service workers] is $9.08 an hour and the minimum wage is just $7.25 an hour - unchanged since 2009.
What are the main reasons why workers in these jobs are low paid? One contributory factor is the frequent absence of trade union representation when negotiating pay and conditions. Virtually all private sector fast food jobs in the United States are non-union.
To what extent might a higher minimum pay floor cost jobs? Or could it have the reverse effect and bring about higher productivity and employment? Would the profits of businesses such as McDonald's suffer if they were required to pay more? McDonald's profits totaled $5.47 billion in 2012 and the US fast-food industry each year generates revenues in excess of $200 billion.read more...»
An intriguing take here on relative real wages in a range of developed and developing economies - using that staple resource to help teach PPP: the price of Big Macs!read more...»
What is it like to live in extreme poverty? Could you budget only one dollar a day to survive? Four friends from the United States spent their summer living in Guatemala on one dollar a day to try and understand the reality of poverty first hand. This is the official trailer of a new documentary being screened for the first time in August 2013 and comes from the Center for Global Developmentread more...»
The United States is making changes to the way that it calculate the value of their national output and the result is that the total value of the goods and services produced in the world's biggest economy will be substantially higher as a result. According to this article from BBC news "The way the US economy is measured has changed, to include the amount spent on intellectual property outlays such as pop song production and drug patents for the first time." Check out this short dynamic chart from the Economist for more background details. The gain in GDP is 3.5% or - in effect - a country the size of Sweden has been created by changing the scope of the GDP measurement!
Several news sources are quoting a new report from the Chartered Institute of Personnel and Development (CIPD) which estimates that as many 1 million people are on zero-hours contracts in the UK. For a summary of the report go to this link to see the CIPD version.
Zero-hours contracts are those where an employer gives no guarantees about the amount of hours an employee may work in any given period. In effect, the employee waits to find out how many hours they may be required and generally does not earn anything if they do not work. Whilst the zero-hours contract are controversial (trade unions are generally opposed and even Vince Cable is investigating their use), the CIPD report suggests that only about 14% of employees on these types of contracts do not earn a living wage.
The UK's approach to part-time, flexible and non-contract employment is often quoted as one of the reasons why unemployment figures have not matched those of previous recessions in the UK - someone on zero-hours contracts may not be classified as unemployed even if they do not work. A relatively large proportion of workers in the UK are working part-time would rather work full-time but have less choice in the current job market.
Fascinatingly, the Education sector is now one of the biggest users of zero hours contracts (approximately 35% of education establishments have at least one person employed using the method).read more...»
Here are some summary notes from a discussion between Danny Quah and Ha Joon Chang at a recent LSE panel discussion on the question "Is there a future for market-led development?"read more...»
The UK Coalition government has introduced a controversial welfare cap - imposing a maximum on the total social security spending per year for each family. The welfare cap limits households to £26,000 a year. Couples and single parents receive no more than £500 a week in benefits, while the limit for single people is £350, although there are some exemptions.
The cap is designed to ensure that benefits payments do not exceed the income of the average working household and is designed both to cut total welfare spending and as part of a strategy of improving incentives for people to actively look for and take paid work.
Critics argue that a welfare gap does little or nothing to address deeper underlying problems such as the soaring cost of renting property and the lack of affordable child care.
Social spending varies greatly across different countries. The Economist live chart below looks at some of these differences.read more...»
CK Prahalad once wrote of the "fortune at the bottom of the pyramid" - reflecting the commercial opportunities for businesses that can successfully connect and bring products to markets inhabited by low income consumers whose living standards are on the rise. China's fast-growing economy provides an enormous opportunity, but how can companies win sales in the Chinese interior, hundreds of miles away from the coastal centres of commerce?
As wealth and consumerism reach China's most remote cities, foreign brands are venturing far from Shanghai and Beijing hoping to win over millions of new consumers. The FT's Patti Waldmeir visits two lower tier cities in central China and looks at how Adidas is expanding in the far outposts of the Middle Kingdom.
Currently, barriers of law and custom stop many women from getting
financing for business. Removing those barriers can help overcame the
gender gap, and unleash economic growth. This World Bank video looks at some of the evidence. Our Development Economics blog covers many articles relevant to students tackling this for Unit 4 - click here for the Development Economics Blog
Hundreds of millions of people around the world are escaping poverty and becoming middle class. The explosion of new consumers in China, India and other economic powerhouses is changing the global balance of power. The BBC website has a new series on exploring the effects of this shift in global economic power and influence - click here for further research and watch the video below
Here's a teaching resource suggested by one of our colleagues who attended the Wow Economics CPD event in Birmingham last week. We were discussing a resource called the Average Wage game (available as an individual download from this website) which asks students to categorise occupations into those jobs with pay above the national average and those below the national average (as per the latest available statistics from the Office of National Statistics, November 2012).
One delegate suggested that they had used a similar resource which starts by asking students to rank occupations in an order which reflects their relative value to society (ignoring, initially, any notion of wages or pay). Having ranked the occupations from the 'most' to the 'least' valuable, the teacher then shows the students the average wage paid to people working in those occupations and leads a discussion on how many of the most 'valued' occupations pay among the least wages.
This is a fantastic starter activity to initiate conversations about wage determination and equality of pay. You may also find this as a good discussion point over the coming weeks when introducing some A2 concepts to AS students.
Click on this link to download the Tutor2u version of this resource developed directly from our delegate's suggestion.
The Wow Economics event has its last airing this Wednesday in London. An all-new version of the resource-packed day will be advertised soon in time for the new academic year.
FOOD banks are a rapidly growing phenomenon in the UK. A few years ago, they barely existed, but an estimated half a million people now make use of them every week. On the face of it, it seems that poverty has sadly become endemic since the financial crisis, with many families unable even to feed themselves. Real incomes have declined since 2007, putting pressure on household budgets. But the pace of increasing demand is surprising.
In fact, the food bank is a market. It is, however, complex – with particular features which mean that it is likely to grow rapidly, exactly as we have seen. The key point is that food is not the only commodity traded.
Students looking for a good example of a supply-side policy for improving the economic performance of the UK may be interested in this news article about how increasing the labour participation rates of women in the UK could lead to an increase in GDP by up to a staggering 10%. This growth could be achieved by encouraging the number of women wishing to provide their labour (or increase the provision of their labour) to the same level as men.
The common view now is that legislation is no longer good enough in itself to provide this encouragement. The Equality Act of 2010 combined the various equal opportunity laws together to penalise businesses that operate unequally. What appears to be needed is an improvement in the accessibility, availability, cost and quality of childcare facilities to allow more mothers to work (or work longer).
A further article (follow this link) explores how this principle is equally true of the Japanese economy. This article has a fantastic graph comparing the female participation rates for many of the major economies which might be a fantastic data example for teachers to use as a compare and contrast exercise.
As for the costs on society of such a policy....... That's a different question!
Here's the return of not one, but two Tutor2u favourites in one blog! Many of you will have heard of the 'Better Life Index' (follow this link to go to the website) - which is an OECD compiled statistical index of the quality of living in 36 of the most economically advanced countries in the world using a varied number of categories above and beyond just economic information. Indicators include life expectancy and work-life balance alongside unemployment and average earnings.
The latest version of the index is now available and Australia has been measured as being the 'happiest' for the third year on the trot (the UK ranks as 10th in the world - you didn't realise how happy you were!). The website homepage actually allows you to create your own index - a nice exercise to give to your students if you wanted to stimulate debate on the relative importance of the different indicators (for example, is the 'environment' more important to some students than others when measuring the quality of life?).
I've taken the raw data from the index and created some 'Top Trumps'-style cards to act as a fun and engaging activity for students. The resource allows students to play a game where they attempt to 'win' their opponents cards from them by challenging them on the statistical outcomes for each country. So, for example, if I hold the card for the UK and challenge my opponent to consider the citizen's average earnings and this is higher than their card (for example, if they were holding the card for Greece) then I would win both cards. The rules are all in the file!
An interesting activity to challenge the minds of those AS students returning from exams soon.
I've created three versions on the links below - please forward the link for this blog to your sociology and politics collegues - they might find the data and activity equally useful.
I'm always sightly dubious about statistics and information represented by campaign organisations - I'm left with the reservation that information can presented in any way that you want to prove whatever point that you are trying to make (wasn't it an economist who came up with the phrase 'lies, damned lies and statistics'?). So this fascinating report from an organisation called 'Vision of Humanity' needs to be looked at with an open mind.
However, if you take it at face value, it offers some really interesting information.read more...»
A newly constructed Social Progress Index has been unveiled for the first time with the hope that over time, it might become as widely quoted and recognised as the Global Competitiveness Index as a benchmark of progress made by individual countries in achieving sustainable, balanced and inclusive growth and development. In the 2013 rankings, Sweden comes first and the United Kingdom is second.read more...»
New figures from the OECD find that overseas development aid fell by 4% in real terms in 2012, following a 2% fall in 2011. Aid payments have dropped in large party because many governments of developed countries are embroiled in fiscal austerity and choosing to cut aid as a result. The OECD data shows too that there is also a shift in aid allocations away from the poorest countries and towards middle-income countries.
Oxfam senior researcher and former co-author of the UN's annual Human Development Report Kate Raworth visits the RSA in London to explain 'doughnut economics' -- the bold new theory that is sweeping the development world. A really clear seventeen minute video covering some of the key environment challenges that threaten sustainable growth and a call to make central to the debate the protection of natural capital and social capital.
Schools and College up and down the country are preparing for all sorts of different activities for the Comic Relief Red Nose Day this Friday (15th March). Are you doing anything with your class?
Here is a ready-made Powerpoint game to run for approximately 20 to 25 minutes in your class this Friday. Whilst being a fun, team-based challenge, the multi-choice questions are all about facts and figures related to the causes that Comic Relief are attempting to support. As such, the information contained within the game should prove a useful stimulus for discussion within your class about the causes of poverty in Africa, as well as alcohol-abuse and other social issues within the UK. It could also prove a useful tool with discussing why these problems exist and what government solutions could be implemented (as well as asking why they haven't already been put in place!).
Click on this link to go to the Powerpoint file that contains the game.read more...»
The economist argues that the era of fast-rising world population is over - this video looks at the momentum shift brought about by a trend fall in the fertility rateread more...»
The Middle-Income Trap has become a popular and much quoted concept in development economics. Much discussion on the policies and strategies to lower the risks of growth slowdowns before a country has achieved high income status. But how relevant is the middle income trap? The absence of a clear definition of the idea makes it difficult to measure, this article from the Economist has a go and is highly relevant for students taking courses in development economics, especially EdExcel Unit 4.
Peter Mandelson famously said that he was ‘intensely relaxed about people getting filthy rich’. As was the case with many aspects of New Labour, he was working firmly in the Leninist intellectual tradition. Some 20 years earlier, the then leader of the Chinese Communist Party, Deng Xiaoping, stated that ‘to get rich is glorious’.
The Chinese have certainly put the philosophy into practice. An intriguing article in the Wall Street Journal at the end of last year by James Areddy and James Grimaldi, described the deep intermingling of China’s richest men with the Communist Party. For example, Liang Wengen, who owns a major construction equipment making firm and whose personal wealth is estimated at $7.3 billion – billion! – is a member of the key political body, the Communist Party Congress. Overall, the elite political institutions in China have no fewer than 160 individual billionaires as members.read more...»
It has suddenly become fashionable to be concerned about China’s growth rate slowing down. This is not a matter of a short-run cyclical downturn, with normal service being resumed shortly as the economy roars ahead once more. It is a worry that there will be a permanent slowdown by the end of this decade. Instead of annual growth rates around 10 per cent and even more, the Chinese economy will settle down to the much more sedate rates seen in the West in the 1950s and 1960s in the range 3 to 5 per cent.
Like many teachers, I'm firmly of the belief that money is not the root of happiness. I have to think like that - otherwise how do I argue with my old university friends who went to join the big banks that there’s more to life than big cars and foreign holiday homes ("Come and join us, Jon," they used to say to me, "you can set your own Libor rate and everything" ). It's important that we remind the 'those-who-can't-do' brigade that teaching is a life-style. It's a vocation. A calling.
Well, according to research by US academics Daniel Sacks, Betsey Stevenson and Justin Wolfers, the evidence suggests that wealth is a determining factor in happiness after all. Apparently, the data shows that there are no upper limits to happiness with regards to money – yes, the increase in happiness slows down but still rises.
Quick, somebody tell Victoria Beckham before David gives away all of his cash to the Paris children.read more...»
Mark Austen writes on this essay title: Evaluate the impact that the micro-finance and Fair
Trade movements can have in supporting development in some of the world’s
Robert Nutter explains that, over recent years, the fear that the minimum wage would cause increased unemployment has not materialised, although since the start of the current economic crisis employers have expressed some concerns that employment may be affected in low paid jobs. Another concern has been the belief that a national minimum wage is inappropriate for an economy where costs and labour market conditions vary significantly between regions. The national minimum wage may perhaps provide a living wage in North-East England but certainly not in London.read more...»
Does aid help or hinder economic growth and development? This is the subject of a fierce debate in the development economics literature
Gross domestic product (GDP) is the total value of output in an economy and is used to measure change in economic activity
GDP for different countries is usually measured in a common currency – normally we use the US dollar. But there are two problems in using exchange rates to measure GDP
An updated glossary of key terms for AS macroread more...»
Liz Veal (Editor of econoMAX) writes: Here in the UK we take for granted our education – my daughters have the same educational opportunities as my son; my sisters and I had the same chances as my brother. Education for all, irrespective of gender, is highly valued in our society and we are well-aware of the private and external benefits of education. In economics, we teach that the market would fail to provide enough education as it would be under-consumed because of the extra benefits to society that private individuals do not appreciate. This information failure is overcome with public sector provision of education, compulsory by law until aged 16.read more...»
My AS macroeconomics students this week are researching the topical issue of a living wage and the possible macroeconomic effects. The title of the assignment is:
"The introduction of a living wage in Britain to supplement a minimum wage will improve the long term performance of the UK economy" Discuss. (20 marks)
I have put together some news articles and videos on this topic using a Pinterest Board. You can find it by clicking here
BBC Newsnight Report on Living Wages - July 2012 - click here
Here are some links connected to the news that the United Kingdom is drawing to a close financial aid to India by the year 2015. The focus will shift from aid to trade. Bilateral trade between the countries in 2010 was worth £10 bn. The countries have set a target of £20 bn by 2015. We also link to a new Inside Story programme from Al Jaxzeerah on the continuing debate over the effectiveness of and future of overseas aid in the world economy.read more...»
You may have been too busy to notice but today has been National Stress Awareness Day. This comes just a few days after Ed Milliband's speech about the taboo of Mental Health and how it impacts upon people's lives. If you haven't done so recently, do check out the World Health Organisation 's website which has lots of data on the prevalence of mental health issues around the world with the most startling facts being that 1 in 4 people around the world suffer from mental health issues at some point in their lifetime affecting as many as 450 million people.
And yet, when was the last time you used this as an example of labour market failure or poor economic performance?read more...»