Globalisation and the skills bias of world trade
The latest edition of the Economic Journal contains new research by Paolo Epifani and Gino Gancia that focuses on the skills preium for highly skilled workers in an age of globalisation. Whilst increasing economic integration between countries has undoubtedly contributed to a process of income convergence across nations, one of the paradoxes it that it can also lead to greater pay and earnings inequalities within countries - this research helps to explain why.
“Since the mid-1970s, the wage gap between high-skilled and low-skilled workers has widened. At the same time, world trade has increased dramatically: between 1980 and the late 1990s, the share of countries ‘open to trade’ rose from 35% to 95%, and the volume of trade of the average country rose from 59% of national income to 74%....Globalisation increases the size of the market firms can access. Some industries can take advantage of a larger market more easily than others as they benefit from ‘economies of scale’.The study argues that those industries that take advantage of a larger market are more likely to employ skilled workers, and so the wages of skilled workers will rise faster than unskilled workers in a period of globalisation.”
The rest of the media briefing on this new research is available here
TUC calls for minimum wage for apprentices
The Trades Union Congress (TUC) is lobbying for the UK government to extend the statutory minimum wage to cover apprentices as an intervention designed to improve incentives and combat employer exploitation of younger workers. Their submission to the Low Pay Commission can be found here. What was striking to me about their report was the low completion rates for apprenticeship schemes for those workers not covered by pay floor legislation. And also the persistent gap in apprenticeship pay between males and females. It is an area of the labour market where monopsonistic employment practices are prevalent and damaging to the long term skills base of the economy.
“The TUC believes that bringing all apprentices under the NMW enforcement regime is the most effective way of addressing low pay and tackling the minority of employers that treat apprentices as cheap labour. Recent Government data revealed that five per cent of apprentices received less than £80 a week and 12 per cent received no pay at all.”
The current minimum wage rates are £3.40 for 16-17 year olds, £4.60 for 18-21year olds and £5.52 for people aged 22+.
£7-45 an hour - a living wage in London?
The London Mayor Boris Johnson has issued a report that raises the ‘living wage’ in London to £7-45 an hour. It is an interesting example of a policy designed to create an informal pay floor for thousands of low-paid workers throughout London which is higher than the UK national minimum wage and which reflects the increased cost of living in the capital.
read more...»Barriers to labour mobility in Europe
The BBC website has updated developments in restrictions introduced by national governments for the movements of workers within the European Union. The free movement of labour is one of the key foundations of the single market but in the wake of EU enlargement, many governments have introduced limits often in the form of quotas - funny how these ‘temporary’ controls often become semi-permanent! And any form of restriction creates an incentive to by-pass the control. There is more detailed background information available from the EurActive website.
US minimum wage rises to $6.55
The US federal minimum wage increases today by 70 cents on Thursday, to $6.55 per hour from $5.85. The increase will raise the minimum wage in 25 states; the other 25 have minimum wages higher than $6.55 and the move will affect around two million workers. But will rising food prices simply swallow up the real income boost that the rise in the pay floor provides? And is it wise to rack up the minimum wage at a time of recession? What will happen to employment in the low skilled segments of the US labour market? Coverage here via the Associated Press and also the Charlotte Observer in North Carolina.
Another UK restaurant chain has been exposed for paying the staff less than half of the UK minimum wage of £5.73 an hour and using tips and other gratuities to make up the difference - there is a groundswell of public opinion that this is inequitable and may require further government intervention
Deep Very Deep
Here is a great example of occupational mobility and transferable skills in the labour market. With the UK construction industry shedding thousands of jobs among highly skilled workers, another industry is booming and trying to encourage newly redundant workers to retrain for a trade as a deep-sea diver. The Underwater Centre in Fort William has a world-class reputation for providing professional diving courses and demand for divers has been booming as the oil and gas industry looks to step up production in response to rising prices.
“According to the International Marine Contractors Association (IMCA) who represent over 350 offshore marine and underwater engineering companies worldwide, over 40 more floating drilling rigs will be commissioned over the next two years, creating a demand for 5000 more support roles, of which commercial divers and ROV operators make up a proportion.”
The work is arduous and risky but the rewards are good providing that people are able to work their way through the training programme.
This story helps to apply lots of economic concepts linked to the labour market
Opportunity cost of paying for a diving qualification
Occupational mobility of workers when they are made redundant
The elasticity of supply of labour to highly skilled jobs such as deep-sea divers
Outward shift in market demand for labour and the effect on wages
The derived demand for labour
Here is a BBC report on this story
Making both ends meat
Two minimum wage stories
A Sheffield butcher has become the first employer to be prosecuted for not paying the minimum wage to its employees - this BBC report covers the story - Jackson, from Pontefract, and Smout, from Sheffield, were charged with non payment of minimum wage and failing to keep adequate pay records. Reading between the lines, I was surprised to read that so few prosecutions have been brought forward since the NMW came into force in April 1999.
And today BBC London exposes the Hard Rock cafe for paying a basic wage of just £2.06 an hour in a story linked to the debate about whether restaurants are routinely using customer tips to supplement the wages of their workers.
The current minimum wage stands at £5.52 for workers over 22 years of age. If you worked 48 hours a week, that translates into £13,772 a year - a few weeks ago, the Joseph Rowntree Foundation published survey research which indicated that a single person in Britain today needs to earn at least £13,400 a year before tax to afford a basic but acceptable standard of living.
Poverty Trap worsens
The soaring cost of child care is worsening the poverty trap according to a new report commissioned for the save the Children Fund in Scotland. More than one quarter of Scots parents on low incomes cannot work full time because of the cost of registered childcare which has risen by more than 10 per cent this year across most of the country. The average cost of child care in Britain during the holiday season is nearly £90 per week.
The Times has this article
“Joanne Brady, a single mother of two children from Glasgow, is unable to work because she loses more in means-tested child tax credits than she gains in income. “They take 20 per cent off for each child when you go to work. You still have to pay your housing, travel and lunches and it’s just not adequate.” Ms Brady, 27, is among the 28 per cent of parents with children under 18 and an income of less than £15,000.”
And the BBC also covers the report.
Turning points for the labour market
It usually takes some time for turning points in the broader economic cycle to show through in the labour market numbers - in econ-speak, we talk of unemployment being a lagging indicator of the rest of the economy. Job losses make the headlines but new jobs created rarely filter into the news. But such is the nature of our flexible labour market that the jobs data looks likely to start moving in the wrong direction with greater haste than in previous downturns. Just listening to the banter in my local gym, I have picked up that many of the small to medium sized businesses in my area are battening down the hatches and looking to cut their overheads - if businesses want to survive they have little choice.
read more...»Tipping Point for Restaurants
Do you regard yourself as a good tipper? Or is it something that fills you with dread everytime the bill for a meal comes round?
Who do you tip? Your hairdresser? Your taxi driver, cleaner or perhaps the person who delivers your groceries? Why is it considered routine to tip waiters and waitresses and hotel staff whereas good service at the check-out counter in a supermarket is rarely if ever considered worthy of an extra financial reward?
The Independent today launches a campaign for greater transparency and fairness in the restaurant industry when it comes to tipping staff and the distribution of money from service charges. I didn;t realise until today that money left as a tip on a credit card or paid as service change on a menu is legally the property of the employer to dispose of as they wish.
read more...»Soft landing for the labour market
Paul Mason’s superb blog “Idle Scrawl” on the Newsnight website asks whether the UK labour market will prove to be more resilient that expected in the face of a downturn.
read more...»Youth unemployment in the UK
A timely report from the OECD on the long term difficulties of getting low skilled youths into regular full-time and part-time employment in the UK. Despite the favourable labour market trends of recent years, the employment prospects of youth workers leaving school and college with limited academic and vocational qualifications have actually deteriorated. In 2007, the unemployment rate of 16 to 24 year olds was 14.4% in Britain, up from 11% in 2002 and employment rates among 16 to 24 year olds fell to 55.9% in 2007 from 60.9% in 2002. Little wonder that some parts of the media have described a ‘lost generation’ many of whom remain persistently in workless households, drifting into the informal economy.
The OECD report - which urges the UK government to intervene with ‘vigorous action to help them with education and training and with job-search support’ is available here and here is a BBC report on the publication.
Michigan’s Minimum Wage
A good story here courtesy of Mark Perry’s blog from across the pond concerning fears that a fresh hike in the Michigan minimum wage from $7.15 to $7.40 per hour will create higher unemployment in a state where the jobless rate is already relatively high
read more...»Gangmasters and monopsony power
How many gangmasters are there operating in the UK? Does the Licensing Authority really have a proper handle on the scale of workers being organised and often exploited by gangmaster businesses? I was discussing this issue of monospony in my A2 revision presentations at London and Manchester in the last week. It is I feel one of the really important aspects of market failure in a largely deregulated labour market.
The BBC reports that “a gangmaster has been stripped of his licence after investigators uncovered a “disgraceful story of forced labour” amongst migrant workers in Scotland.” The government has introduced a licensing scheme for gangmasters - partly as a consequence of the awful events that unfolded for the Chinese cocklepickers on Morecambe Bay (captured superbly in Nick Broomfield’s recent film “Ghosts”).
Aspects of labour market failure
I have been researching some video clips for a presentation on labour market failure at the Tutor2u revision workshops - here are a couple of good ones. This BBC report looks into exploitation of migrant workers by a gangmaster business which has had its licence revolked. And Hugh Pym reports on the rising level of relative poverty in the UK despite sixteen years of economic growth. Finally this clip comes a series of progammes from BBC South East on ‘Breadline Britain’.
Revision: Labour Market Failure
Markets fail when they do not reach an efficient and/or equitable outcome from society’s point of view. At AS level, you will have studied many examples of possible market failure ranging from the provision of public and merit goods through to externalities and the welfare consequences of monopoly power in markets. At A2 level, you are asked to explore some issues relating to labour market failure. This revision note flags up a few of them:
Revision note:
Revision_Labour_Market_Failure.pdf
Revision: Trade Unions
Recognise these guys? I will hazard a guess that a normal sixth form economist will struggle to name more than one of the people pictured! All of them are senior figures in the trade union movement but such is the scale of the long term decline of unions that few union leaders command much in the way of public awareness beyond the confines of their own union community. This revision note looks at trade unions in the labour market and is designed for A2 students.
Revision note:
Chart of the Day: Unfilled Vacancies
The seasonally adjusted number of unfilled vacancies in the UK economy has grown steadily over the last two years from just under 590,000 to a new high of 680,000. What might this figure be telling us?
read more...»Old duffers brigade have their say on migrants
The publication of a new report on the economic effects of immigration by the House of Lords Economics Affairs Select Committee has prompted the usual and predictable mixture of commentators, rent-a-quotes and so-called experts to come out of the woodwork and use up copious amount of media time. There is no doubt that the committee contains some heavyweights including Lords Layard, Turner, Paul and Skidelsky. And there is a terrific amount of economic data and comment in the report for us to soak up.
But no single report is ever definitive and, as the report itself makes clear, the real problem at the moment is that we simply do not have sufficient accurate data on the scale of the migration flows and the characteristics of those who come to live and work in the UK. The report seems to be heavy on the static effects of large-scale net inward migration - but perhaps gives insufficient weight to the dynamic impact of migration in areas such as innovation within businesses and the longer term bsocial benefits from greater cultural diversity.
Anyway, here is the link to the report for those of you who want to read it for yourself.
And the always lively and interesting commentator Philippe Legrain offers this robust defence of the economic benefits of inward migration
UK migrant flows starting to reverse?
Migrant flows starting to reverse
There are signs that the huge inflow of migrant workers predominantly from eastern european countries which has boosted the effective UK labour supply in recent years is starting to go into reverse.
read more...»Union membership among teachers
I read in the Guardian a couple of days ago that “Only 55% of teachers in private schools are members of a union compared with 95% in state schools.” This came from a report on employment practices in the independent sector which hinted that many staff in the private sector operate without formal contracts or with employment contracts that are rarely if ever altered as circumstances change. I was surprised to hear that so few teachers in independent schools are unionised, after all, although every school is bound by employment law, teaching is a profession where trade union support can be crucial in matters relating to health and safety and employment protection. I was teaching about trade unions last week and gave my students a list of the acronyms of ten of Britain’s largest union organisations. The top number of correct identifications was three! Trade union membership has been in decline for many years, The most recent figures show that only one worker in four is now a member of a trade union.
Job Vacancy: Butternut Squash Picker
It may be worth setting your video recorders this evening at 9pm, BB2. As you may well be aware the BBC is running a series of programs under the heading of The White Season, Is white working class Britain becoming invisible? The title of the program tonight being The Poles are Coming:
According to some of the locals, Peterborough is being stretched to breaking point by the influx of Eastern Europeans, attracted to the area by the promise of high wages and decent living conditions in exchange for manual labour. Employers are delighted with their Polish recruits, but some residents want the Poles to go home.
read more...»Costs and Benefits of ICT
We live in an information age and a knowledge economy - but what price do we pay for instantaneous communication?
read more...»Teaching wage differentials
I am teaching the economics of wage and earnings differentials to my students this morning and I wanted to have an up to date set of information on the gap between high and relatively low paid jobs. The ONS Annual Survey of Earnings and Hours is a good reference point. All of the data is available for download in excel spreadsheets if you want your students to do some independent research and then select occupations with different earnings levels. Here is the link
I selected a number of occupations and tried to get a spread of earnings - the data below is for mean weekly gross earnings (we will discuss the difference between mean and median in class). But the selection proved useful in generating discussion about the economic and social factors behind persistent wage and earnings differentials. Here is my selection
read more...»Minimum wage is increased
The government has today announced plans to increase the national minimum wage (NMW) by 3.8%, from £5.52 to £5.73 per hour. This rise will come into force in October.
18 to 21 year olds will also see an increase in their minimum wage from £4.60 to £4.77, and 16 to 17 year olds from £3.40 to £3.52.
read more...»Asda plans to expand
According to The Times today, the new roles will be created ‘through a mixture of new stores, shop extensions and business expansion’.
7000 jobs will be created as between 10 and 12 new stores are opened
1500 jobs will be created by growing its Home Business and online retailing function
500 jobs will be created through the opening of 50 in-store pharmacies
Asda is the UK’s second largest supermarket, with a 16.9% share of the market, just ahead Sainsbury’s with 16.4% and Morrison’s with 11.5%. Of course, Tesco lead the way with a staggering 31.4% market share.
Is the growth of a value supermarket a sign of a strong economy - or weakening market conditions? A knowledge of income elasticity of demand gives some insight into the impact of changes in (average) income on patterns of demand: will there be an expected shift to cheaper brands as the economy falters? Or do households find other ways of cutting spending?
Andy Bond, Chief Executive of ASDA, speaks to BBC Business here.
For anyone interested, you can check out the radio station ASDA FM here!
When a million is a small number
Prison officers, driving instructors, passport staff and postal workers have all been involved in different forms of industrial action in the last twelve months. And last year the number of working days lost through industrial stoppages exceeded one million for only the second time in a decade.
One million days lost – that sounds like a big number - but it is not!
read more...»The Fairer Sex
It’s been a great week for economics with plenty of macro issues in the news. Half term has also given me lots of time to think about the microeconomics of everyday life, inspired in part by reading Tim Harford’s The Logic of Life.
On Friday I rushed, fashionably late, into Rhyme Time at my local library. My daughter and I quickly joined in a rousing chorus of ‘The wheels on the bus’ and after a few lines I realised that my voice stood out, and not just because I am appalingly tone deaf; its defining characteristic was that it was probably at least two octaves lower than anyone else’s in the room. Of the thirty plus parents there, I was the only dad!
read more...»Unemployment - In Charts
The labour market provides a rich stream of information about what is happening in the real economy. It is often said that the number of people of work is a lagging indicator of the economic cycle - is that true this time around? Unemployment is still falling on both of the main published measures. And the number of people in work has never been higher. Thus far the signs from the labour market do not suggest an economy teetering on the brink of a slowdown or, worse still, a full-blown recession. My new ‘labour market in charts’ provides a set of fourteen up to the minute charts and is streamed here. The presentation can also be downloaded from the Tutor2u web site, it might be a useful resource if you are teaching aspects of unemployment at AS and A2 level.
Good Job?
At last, some good news for the British economy? Unemployment fell in the UK in the final quarter of 2007, with both the Claimant Count and Labour Force Survey measures recording decreasing joblessness. Overall, the employment rate has risen to 74.7%.
The Claimant Count recorded a drop of 10,800 to 794,600 and the LFS a fall of 61,000 to 1.61 million. As expected, the distribution of employment and unemployment differs from region to region, and also within regions.
read more...»
