Economics CPD Courses Coming up this Term!- Book Your Places Now!
Reports out over the last couple of days suggest that government spending on free nursery places for 3 year olds since 1998 has not produced any valuable educational or economic outcome. The policy was introduced as part of a series of reforms introduced by Tony Blair when he came to power in 1997. The Blair Government saw it as a method of reducing the differentials between educational attainment of poorer and wealthier sections of society and promoting a speedier return to work for some mothers.
Researchers studying the impact of the policy during the 2002 to 2007 time period, where spending on the policy amounted to more than £7bn found that the education received at age 3 had some impact on attainment at age 5 but any improvements were lost by age 11. The research suggested that the policy had only a minor impact on enabling more women to return to work earlier. Also, there is evidence that 5 out of 6 users of the free place would have gone to a paid-for equivalent at age 3 anyway.
So, does this offer us a good example of government failure in economic and social policy?read more...»
Here are a couple of current UK problems. Firstly, although the economy is recovering strongly, tax receipts aren’t. Secondly, flaws in the way the welfare system operates may be creating disincentives in the labour market. Could a radical proposal: streamlining the whole welfare system by paying everyone a ‘citizen’s income’ help?read more...»
A hat tip to Hannah Thomas who has spotted a new info graphic on human capital produced by the Office for National Statistics. You can find it here http://www.ons.gov.uk/ons/rel/wellbeing/human-capi... with more supporting detail and explanation here http://www.ons.gov.uk/ons/dcp171766_374868.pdfread more...»
How much money do you need for an 'adequate' standard of living? This short video from the Joseph Rowntree Foundation considers the levels of income needed to sustain a modest but adequate life-style in the UK in 2014.read more...»
In this blog, Professor Simon Wren-Lewis from Oxford University bemoans the absence of debate over the notion of a maximum wage - with specific reference to the pay of senior executives.read more...»
This Mini Lecture discusses issues of labour productivity, low-wage work and economic growth of emerging markets.read more...»
So, farewell then England! Yet another failure by our boys at the highest levels of the game. Despite their stupendous salaries, they seem once again to be unable to exhibit the necessary skills, a point which seems to exercise many fans of the game. Tens of thousands, if not millions, of words have been written about the purely footballing aspect already. But one topic which is hiding away under this torrent is the question of incentives.read more...»
Question six for the RES competition in 2014 is bound to produce a large number of answers. Labour migration is an important economic, social and political issue and many students will have clear views on the issue. So what will make an essay stand out from the crowd?read more...»
This is the second essay of six available for students researching an entry for the 2014 RES competition. There has been some discussion about the choice of phrase "working mothers" in the question. We will expect to see some students challenge this in their answer to broaden the discussion to "working parents" but any approach is fine as long as the economics is interesting, relevant, evidence-based and has a strong narrative running through it!read more...»
Unemployment benefits can address the failures of credit markets by enabling unemployed people to spend more time searching for a new job – even in countries like Norway, which have an equitable wealth distribution and a generous welfare state. That is the central conclusion of research by Christoph Basten, Andreas Fagereng and Kjetil Telle, published in the May 2014 issue of the Economic Journal.read more...»
This Channel 4 news report looks at va growing protest movement among food industry workers campaigning against zero hours contracts and persistent low pay. Zero-hours contracts do not guarantee a minimum number of hours of employment. It has been estimated that 583,000 people, around 2% of the UK workforce, were employed on zero-hours contracts between October and December 2013. The actual figure is likely to be substantially higher than that.read more...»
The prospects of significant wage increases for typical UK workers are bleak, according to Professors David Blanchflower and Stephen Machin writing in the Spring 2014 issue of CentrePiece magazine from the London School of Economics.
It is quite clear that the economy is still well below full employment and there is a large amount of slack in the labour market, they say. There is little evidence of widespread skill shortages, which would push up wages; and public sector pay freezes with continuing redundancies continue to push down on workers’ bargaining power.read more...»
Here are some revision resources on the topic of labour market failure.read more...»
Revision blog on factor rewards / factor incomes together with a revision quiz to check your understandingread more...»
The introduction of a national minimum wage does not lead to job losses. That is the central finding of research by Peter Dolton and
Michael Stops, to be presented at the Royal Economic Society’s 2014 conference.
Removing the barriers to labour market participation that women face in many parts of the world will lead to substantial productivity gains, according to research by Marc Teignier, to be presented at the Royal Economic Society’s 2014 conference.read more...»
Here is an example of reverse capital-labour substitution! A hat tip to Dave Sowden for spotting this one! Read through the article and consider the motivations, opportunities and challenges facing Toyota with this change of approach.
I thought it worthwhile sharing my resources which I have been collecting for students (and teachers alike). I have been promoting them on Twitter (@Economics_KSF) through scoop.it but for those of you not on there, the link for the scoop.it boards are here:read more...»
One type of market failure that contributes to inequality and unemployment is the geographical immobility of labour.
If the labour market really ‘cleared’ effectively, wages would equalise across the economy. Workers would drift away from regions with low wages and/or high unemployment towards areas where wages were higher and labour was scarce.
Why are people finding it hard to move across the UK in search of work?read more...»
Showing critical awareness of economic statistics is an important skill for all economists.
A hat-tip to Fiona Quiddington for this article on youth unemployment from the Telegraph which analyses youth unemployment figures with a more critical eye.read more...»
Are skills shortages holding back the economic recovery? The Financial Times is running a video series looking at the problems businesses are having in recruiting people with technical skills. The apprenticeship programme is expanding but will it be enough to meet the growing gap between demand for and supply of engineers and other specialist jobs in industries surrounding precision engineering, nuclear power and many others?
According to an article in the Financial Times:
"Migrants are filling a fifth of jobs in industries such as oil and gas extraction, aerospace manufacturing and computer, electronic and optical engineering because of a lack of skilled British graduates."read more...»
In Germany the government has reluctantly agreed to introduce a minimum wage of €8.50 (£6.98) per hour. Angela Merkel's conservative Christian Democratic Union party is opposed to the idea, but need to make concessions in coalition negotiations with centre-left parties such as the Social Democrats, who have campaigned for a national minimum wage.read more...»
The UK’s biggest companies remain biased when appointing women to their boards, according to new research by Dr Ian Gregory-Smith and colleagues, published in the February 2014 issue of the Economic Journalread more...»
Despite public calls for shareholders to get tough on executive pay, a new study of the UK’s highest paid company directors reveals that shareholders are overwhelmingly inclined to approve the pay packets of top directors, just as they were before the crisisread more...»
These slides are from our January 2014 revision workshops for unit 3 microeconomics. They focus on some of the arguments surrounding the possible introduction of a £7 per hour national minimum wage in the UKread more...»
David Smith's weekly column in the Sunday Times yesterday is worth getting hold of, to study the conundrum around stagnant productivity and rising employment. He uses data from the ONS to look at average weekly real wages, which started falling in 2008 and are still falling now, to consider whether this year will show a turnaround in real incomes.read more...»
Here is a resource (in editable word format) that I use when introducing the topic of unemployment - I find it works for students to get a sense of the numbers for employment and unemployment when we get onto the policy issues. The resource has the answers at the back!
Hope this might prove a useful classroom resource!
Capping seems to be all the rage at the moment. We read of capping electricity and gas prices, capping welfare payments for families ... and now a proposed cap on bonuses for bankers is being put forward by the EU and by the Labour Party.
In this article, Tim Harford cuts to the chase and highlights the contradictions in the EU blanket policy on capping bankers' bonuses. It is a good example of a policy where the unintended consequences include the probably that banking salaries would rise still further.
Under the EU proposal, a cap on rewards would limit payouts to banking executives to annual pay - or twice that only if shareholders approve.
BBC Hard Talk: Adair Turner on the effect of a bonus cap on bank salariesread more...»
Here are some news clips on the sharp fall in measured unemployment and a record rise in employment in the UK economy at the end of 2013. Students can find revision notes on unemployment using this linkread more...»
This is an age-old debate - the extent to which emerging technologies built on robots will replace labour and scale down the number of jobs in previously labour-intensive industries. Are we still several years away from robotics eliminating millions of jobs or will the process arrive far faster than many expect? The Washington Post reports on eight ways that robots are changing labour markets: Click here
Click below for a short interview with the excellent Tom Standage from The Economist who discusses what types of robots we should be looking out for in 2014read more...»
The GINI coefficient for Switzerland is already low, at 29.6 (compared to the UK's 34, US's 45 and an EU average 30.4). Current data indicates the relative strength of the economy - real GDP growth at 1.9% in quarter 3 of 2013 (compared with a year earlier), 3.2% unemployment, real incomes rising, a current account surplus, high levels of both inward and outward FDI and a small government budget surplus. But things can always be improved, and the Swiss approach to 'direct democracy', which allows citizens to call for a referendum on anything they want, if they can gather 100,000 signatures calling for a vote, is currently resulting in a series of proposals to promote equality and social welfare.read more...»
The contrasting reactions to Vince Cable's announcement that the Government is launching a consultation on zero hours contracts but will not ban them because they offer "welcome flexibility" for some workers, offer some good opportunity for stakeholder analysis. The report linked here summarises the government's analysis of the advantages and disadvantages, emphasising the benefits of flexibility for both employers and workers, but also the need to ensure fairness and transparency in the labour market. Here you have the differing viewpoints of employers, from the Institute of Directors andread more...»
Calling all previous delegates of our Wow Economics CPD events! If you attended Wow Economics last academic year (2012-2013) you may recall an activity called 'The Average Wage Game'. If you have attended this academic year I'm sure you will remember the activity 'The Value of Occupations'. Both resources were aimed at introducing or stimulating initial discussion about wage determination before moving on to developing the theory behind Marginal Revenue Product and its value.
Both activities relied upon data relating to UK wage rates by occupation. This data was based upon information taken from what was the latest ONS report on wages in the UK (November 2012). I said, at the time, that when the data was updated I would forward information for both games so that teachers can update them accordingly. This information is now here and ready for you to download!read more...»
We can get such a lot from maps and infographics - far more than one blog can cover. Before I set to work putting a few favourites together, here's a great one for UK earnings.read more...»
Boris Johnson has got into trouble for his statement that it is "surely relevant to a conversation about equality" that just 2 per cent of “our species” has an IQ over 130. Over the past couple of years, the Occupy movement has made headlines by attacking the top 1 per cent.
The summer 2013 edition of the top American Journal of Economic Perspectives focuses specifically on the “Top 1 Per Cent”. This is written almost exclusively in English rather than maths, and top economists debate a range of intriguing questions.read more...»
Hopefully the UK economy will turn a corner in 2014 and return to robust growth and good health, raising living standards for some of the poorest people in the UK. It would be very odd if you hadn't reflected on the plight of the poor in the UK over the last few years, and in the build up to Christmas.
Much discussion of poverty in Economics is of a normative nature. What do we mean by poverty anyway? Isn't it all just a matter of opinion? Is poverty a lifestyle choice, picked up by people who have been given the wrong incentives by the welfare system? Perhaps it's the fault of immigrants, or greedy business, or dishonest politicians.....
Some relatively impartial data would be very welcome in this very heated debate.read more...»
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...»
I've recently looked at the issue of a smaller slice of GDP going to wages, and here are a couple of links and updates on the minimum wage discussion. For those of you who follow this topic, you’ll also perhaps be familiar with the idea of a living wage, which is based around the argument that minimum wages are too low anyway.read more...»
A currently fashionable pessimistic topic is the lifetime prospects of children born into the middle class. Graduate debt, lack of finance to buy homes and job insecurity after they graduate, the list goes on. Alan Milburn, the government’s ‘social mobility tsar’, put the seal of approval on this prevailing angst last month. His Social Mobility and Child Poverty Commission pronounced that children from families with above-average incomes are now set to enjoy a worse standard of living as adults than their mothers and fathers.read more...»
Key changes in the labour market are important in understanding developments in the British economy. Here is a selection of ten updated charts on unemployment designed as a teaching resource for colleagues covering the Unit 2 macro course. Also available for download as a pdf file.read more...»
Surplus value is the difference in value between the product and the wages paid to the labourer who produced the product, as Marx defined it. Marx highlighted the huge difference and thus sizeable surplus value as an important problem with Capitalism in that the proletarian is taken advantage of, as Marx would argue. Surplus value is becoming more and more relevant today, but in this case we are the Proletariat and innovating corporations are the Bourgeoisie.
A deeply troubling report is featured here in the Guardian. Qatar, one of the richest countries on the planet, will be hosting the World Cup in 2022. But much of the Gulf state's expansion is being built by some of the poorest migrant workers in the world. In the worst cases, employees are not being paid and work in conditions of forced labour. Thousands of workers from Nepal are trapped in jobs and wages very different to what they were promised.read more...»
This is a short video covering the key points from the report on women in the labour market in 2013read more...»
Since the appalling fire a few months back at the Rana Plaza complex that cost the lives of more than 1100 people, there has been intense interest and scrutiny of working and living conditions of thousands employed in Bangladeshi clothing factories.
On Monday night the BBC programme Panorama broadcast an investigation into this and the findings were compelling and deeply disturbing.
In "Dying for a Bargain" Panorama discovered there have been at least 50 fires in Bangladeshi clothing factories in the last 10 months. Clothing factory workers filmed by
#BBCPanorama were released at 2:30 am, 19 hours after they started. They were due back at 7am. You can see a clip of this here. Events uncovered at the Ha Meem Sportswear factory will no doubt have left executives at Lidl scrambling to find out the truth about what is happening at one of their major clothing suppliers.
Why do CEO’s earn so much more than the regular workers? Why do managers of the largest teams earn disproportionately more than their corresponding managerial advantage affords them? The answer lies in the fact that these are both examples of winner-take-all markets.
A new report from the Resolution Foundation provides evidence for students and teachers on the deep structural divides between well paid and low paid jobs in the British labour market. According to a report in the Guardian "Today more than one in three people aged 16-30 (2.4 million) are low-paid, compared with one in five in the 1970s (1.7 million at that time)."
There are many causes of low pay and students who look at labour market economics will be expected to explore some of them as part of their course. Most of the jobs at risk of poverty pay are relatively low skilled, temporary, mainly non-unionised, often part-time and concentrated in service sector industries such as catering, caring, catering, cleaning and retail. What are the long term economic and social dangers from a deeply embedded two-tier labour market?
The campaign for an (optional) living wage continues to gather momentum. Businesses are being urged to pay employees at least £1 per hour more than the minimum wage in a bid to lift those on the lowest pay out of poverty.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...»
How sticky is unemployment? Will it take three years to fall?
The views expressed by the new Bank of England Governor, Mark Carney, on interest rates and unemployment remain a hot topic. Interest rates will not be raised until unemployment falls below 7 per cent, a process he thinks will take three years.read more...»
The Governor of the Bank of England has announced a change in the handling of monetary policy for the UK economy. Although the inflation target remains the same (CPI inflation of 2%) and the Bank remains committed to maintaining price stability as their main macroeconomic objective, they have decided to introduce forward guidance in the setting of policy interest rates. This takes the Bank of England closer to the approach to setting interest rates taken by the United States Federal Reserve.
Download this chart
What is forward guidance?
Forward guidance means that interest rates will stay at their historic low level of 0.5 per cent and monetary policy in general will remain expansionary until the unemployment falls below seven per cent. More here from the BBC news website.
However, that link could be put aside if the inflation rate threatens to rise above 2.5% in the medium term. Another wind-check to this system is that if the Financial Policy Committee judges that the UK economy is in danger of experiencing another credit boom then the Monetary Policy Committee will also re-visit their decisions on interest rates.
According to Ed Conway from Sky News "The UK inflation target remains in place - in theory - but in practice it has become significantly less important." Developments in the labour market and real output growth are likely to become more significant in helping to shape the future path of policy interest rates and whether monetary policy is expansionary, contractionary or neutral in its effects on the wider economy.
Sky news - Forward Guidance, a Monetary Policy Gamble
Anatole Kaletsky (Reuters): Carney at the Bank of England confirms the end of monetarism and return of neo-Keynesian demand management
With the unemployment rate currently at 7.8% of the labour force and predictions from the Bank that the jobless rate may take between two to three years to drop to the 7% way-marker, we can expect the period of exceptionally low monetary policy interest rates to remain with us well into 2015 and possibly 2016. This is not good news for savers struggling to find any kind of interest rate that at least matches the current rate of CPI inflation.
Governor Carney's response to this is to argue that what the economy needs most is a return to growth - in his words an economy growing sufficiently quickly to achieve "escape velocity". The current recovery has been the weakest for decades and real GDP remains below the peak achieved before the Global Financial Crisis took hold.read more...»
Access to affordable comprehensive child care and schooling is widely regarded as being crucial to improving the incentives for mothers to actively search for and take paid work. Effective early years education also has a long run positive effect on employment prospects and is important as part of the overall supply-side capacity of the economy.read more...»