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As the comedian Mark Steel once said, “anybody who says we’re all middle class now obviously hasn’t been to Wigan” (I can make that joke because my dad’s from there). One huge global cause for celebration is that the scourge of absolute poverty is in retreat. Instead we hear much more about rising inequality within nations, which is progress, of a sort. In amongst these discussions is talk of a rising new middle class (see above – link here). What might this mean?read more...»
Notes from a talk given by Ricardo Fuentes-Nieva (Head of Research at Oxfam) at the Marshall Society Economics Conference in Cambridge in January 2014read more...»
Notes taken from the Marshall Society Economics Conference - this panel session focused on growth and development issues in South Korea and sub Saharan Africaread more...»
Here are some notes taken from a talk given by Peter Coy, Economics Editor for Bloomberg Businessweek, at the Marshall Society Economics Conference in Cambridge in January 2015read more...»
It's the time of year when many commentators are going back to basics and asking if our dominant economic model - free market capitalism - is a force for good in the world.read more...»
According to Oxfam, half of all the world's wealth is owned by 85 people, who could all fit onto a single double-decker bus.read more...»
This resource from The Guardian could offer students an excellent way of considering the negative social consequences of civil war and internal conflict.read more...»
This short you tube clip published by the World Bank looks at some salient facts and figures on the extent of extreme poverty in the world
The extreme poor live on less the US$1.25 a day. Many lack basic sanitation and clean drinking water; they're malnourished and suffer from lack of education. The facts speak volumesread 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...»
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...»
Twenty years ago, South Africa had a GDP of $136bn. Today, that has almost tripled to $385bn. Tax receipts have risen from 114bn South African Rand to 814bn Rand, and in the last ten years labour productivity per worker has risen from $8,800 to $25,600. Electricity was available to only 58% of households in 1996, now it is available to 85%. And social grants for welfare which were paid to 2.4mn people in 1994 are now paid to 16.1mn.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...»
Working with one of my A2 Economics classes, we spent a few lessons rsearching useful case studies for the development economics section of Edexcel's course. Here is the results of our work.read more...»
The cost of renting property in many parts of the UK continues to rise - would rent controls make any difference? Here is an updated Unit 1 economics revision presentation.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...»
The biggest issue facing capitalism in modern times is the moral critique. This is partly due to a misunderstanding of capitalism, which has allowed it to become synonymous with “fat cat” bankers, “wide boys” and the fast and loose nature of our booming financial centres and cities. These are good in their own right, providing many jobs directly and indirectly and through their role as the life-giving force in the economy with small business support, which was albeit more prominent before the crash.
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...»
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."
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...»
In a recent assignment, A2 students were asked to write a 500 word profile on each of two development economists of their choice and to capture their key ideas and connect to one or more current issues in development. I will be adding some of their responses to the economics blog. Here Ben Evans focuses on the work of Amartya Senread more...»
Suyash Raj Bhandari profiles the Founder of the Grameen Bank, Mohammad Yunusread 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...»
Growth elasticity of poverty is a measure of elasticity (responsiveness) that calculates how much poverty falls for each percentage point in economic growth. According to a recent estimate from World Bank development economists Luc Christiaensen, Punam Chuhan-Pole and Aly Sanoh, that elasticity was about 2.0 in the developing world as a whole (excluding China) during the 2000s, but only 0.7 in Africa. In other words, the rapid growth achieved in many African countries over the last decade or more has not had as much impact on inequality as in other regions.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...»
Does migration harm developing countries? Professor Paul Collier is interviewed by the Guardianread more...»
Almost one in five people worldwide paid bribes to education services last year, according to Transparency International’s 2013 Global Corruption Barometer. In the world’s poorest countries the number rises to one in three.
These shocking figures feature in their report into global education, and an excellent item on the BBC website highlights some of the key findings, with analysis of how they impact on potential for development. For example, in parts of sub-Saharan Africa and Asia the corruption might take the form of requiring parents to pay a fee for a school place that should be free. In Eastern Europe, it might be paying to gain an advantage in university admissions.
"Leakages" in the funding of schools in Kenya had the equivalent value of losing more than 11 million text books, says the report. A study of 180 schools in Tanzania showed that more than a third of intended funds had failed to reach the school. The list of examples goes on, and the BBC item gives some analysis of the effect, raising the cost of education and lowering the quality of human capital.
Students learning about growth and development issues can often state that 'corruption' constrains development, but struggle to give clear evidence of exactly how it does so. Studying this report would really help them to give that evidence, and also to understand some of the difficulties faced by students in other countries.
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...»
Here is an updated revision presentation on aspects of the natural resource trap or natural resource curse issue facing low (and also high) income countriesread more...»
Are the government’s economic policies fair?
Is that a testable, positive economic statement? You might be considering this question at the very start of an economics course, or you might be further on, and carefully considering issues surrounding inequality in the distribution of income and wealth.read more...»
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...»
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.
As part of our introduction to micro economics we have been looking at the shortage of housing in the UK. The chronic shortage of affordable and suitable housing raises many micro (and macro) issues and I find it a good example of an issue where different policy measures can be looked at in a non-technical way as a path into supply and demand analysis. It also covers the ground with topics such as scarcity, changing needs and wants, affordability, cost-benefit principles, opportunity cost and production possibilities.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...»
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...»
For years, a mystery has baffled visitors to developing countries: Coca-Cola is everywhere, but basic medicines are not. This year, Zambia has become the first African country to embrace a trial of the ColaLife concept. ColaLife aims to use Coca-Cola’s distribution model to deliver life-saving medicines to far-flung, rural communitiesread 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...»
“Give a man a fish and he will eat for a day. Teach him how to fish and he will eat for a lifetime”. This Chinese proverb has great sense and should be applied to foreign aid. Simply giving developing countries money does not benefit them in the long term, as this aid is finite. Inward investment gives them the skills to develop their own economies, whilst benefiting the aid-givers in the process. Bono is well known for his philanthropic work and he recently said: "In dealing with poverty here and around the world, welfare and foreign aid are a Band-Aid. Free enterprise is a cure." So this really is a "rockstar" concept.read more...»
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...»
As of today, any employee wishing to take their employer to an unfair dismissal, unequal pay or sexual discrimination tribunal will have to pay a fee. This fee will not be automatically refunded on a successful tribunal outcome meaning that employees who are making choices about such an action have to be aware of the potential financial cost of such an action.
The government argue that this removes some of the burden of tribunal costs away from tax payers and should also reduce the number of frivolous claims made (and thus reduce a further burden on businesses). As such, you could claim that the tribunal fee represents a supply-side policy by the government - an attempt to improve the efficiency of the operation of businesses by reducing some of the red-tape that can stop a business working effectively (particularly small businesses).
Trade Unions are unhappy about the fee introduction. They argue that it reduces the opportunity for poorer workers (or unemployed people who have lost a job) to seek justice for what may have been unfair treatment. An evaluative argument here, therefore, might suggest that the tribunal fee acts as a barrier to fair pay, particularly in cases of discrimination.
Follow this link for some details as illustrated by the New Statesman.
A major news story this week has been the attack made on the pay-day lending industry by the Archbishop of Canterbury Justin Welby. He claimed that he wanted to compete the likes of Wonga out of existence by encouraging the Church of England to offer more support for credit unions. Whether this is likely is open to question.
The commercial pay day loans businesses have grown rapidly in recent years but concerns over some of their practices has led to an investigation into the industry by the Office of Fair Trading. Payday lenders have been accused of a variety of poor practices, including aggressive debt collection and failing to work out whether repayments are affordable.
Pay day loans industry by numbers (Telegraph)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...»
For students' exam answers to be lifted from the ordinary to the higher levels, they really need to add some convincing evidence for their statements of theory. Here is a nice, simple report from the BBC of the latest figures from the ONS which shows what happened to household incomes in 2011-12, which would really fit the bill nicely.
Average household income has fallen by £1,200 since 2007-8 in real terms;
Before tax and benefits, the average income of the top fifth of households was £78,000 and of the bottom fifth was £5,400 - a ratio between them of about 14:1
After tax and benefits these had changed to £57,300 and £15,800 - a ratio of four to one
Between 2007-8 and 2011-12, the average income of the top fifth has fallen by 6.8% and the bottom fifth has risen by 6.9%, so the gap between the two has narrowed (- note that the latest changes in benefits are not included as they took place after the end of the 2011-12 year).
All groups paid more in indirect tax in 2011-12 than in the previous two years, due to rises in VAT in 2010 and 2011.
The Competition Commission is to launch a full-scale inquiry into the operation of payday loan companies. In the past three years, the payday loan industry has expanded rapidly from £90m to around £2.2bn - a reflection of the increasing financialisation of the British economy. The review will take over a year to complete and a range of actions are possible including caps on the sky-high interest rates that are charged on loans.
Average loan interest rates charged by Wonga, the UK’s largest payday lender, are now 5,853 per cent (annual percentage rate). For more on this potentially important competition inquiry - Payday loans industry to face competition inquiry (BBC news)
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.