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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 a one page revision sheet covering some of the key data on the state of the UK economy - I hope it might be useful for students taking their mock exams in macroeconomics. There was also an excellent feature on prospects for the UK here - Is Britain's economy really on the path to prosperity? (Observer, 1st December 2013)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...»
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...»
This revision presentation highlights the key opportunities and threats faced by firms outside China looking to do business in and with China. It also provides examples of businesses that have succeeded in China and those that have struggled!
A fully editable and printable version of this presentation is included in our AQA BUSS4 2014 Toolkit on China which is being published on 8 November 2013.read more...»
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...»
The Confederation of British Industry has today launched a report called Our Global Future: The Business Vision for a Reformed EU - The report calls for further EU reform not least the completion of the single market in particular in services and the new internet economy. They argue for more free trade deals with other countries and regions.
The report produces estimates – based on past academic studies – that EU membership adds £62bn-£78bn a year to UK gross domestic product, equal to the combined economies of northeast England and Northern Ireland. That works out at £3,000 per household and £1,225 per individual. The fact sheets from the report can be found hereread more...»
The recovery in the British economy is now firmly established. Output in the services sector, the largest part of the economy, is above the previous peak level prior to the crash in 2008. There is a widespread myth that the recovery is fuelled by debt-financed personal spending. Yet since the trough of the recession in 2009 the economy as a whole has grown faster than spending by consumers.read more...»
BBC Newsnight explores the latest UK growth data and holds a discussion about the durability and nature of the upturn in economic fortunes. Excellent background for evaluating this crucial stage of the cycle.read more...»
The nature of A2 economics specifications is that they lag interesting and important developments in the subject much of which are directly relevant to what students are taught in the classroom. The role of complexity in understanding how and why countries grow is one such example and I have blogged before about the work of Cesar Hidalgo and Richard Hausmann through the Observatory of Economic Complexity - see "Teaching Trade in a Different Way"
It is a joy to find the Financial Times covering some of their ideas in a brace of short videos as part of the John Authers Daily Note. You can always find these clips on the FT's You Tube Channel and I strongly recommend this for ambitious and enthusiastic students.read more...»
Here is a set of ten charts on aspects of the UK economic cycle and growth story for recent years - designed as a possible teaching / handout resource for teachers on an AS macro courseread 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...»
If you are teaching inflation as part of the AS macro course, here are ten charts that focus on recent changes in the consumer price index and related inflation measures. Useful perhaps as handouts for class discussion and annotation. You can download the charts as a pdf file.read more...»
A huge reminder about the shifts in economic power arrived with the news about the development of Hinkley C nuclear power station.read more...»
The market for retail gas supplies is mired in controversy and threats of direct government intervention to freeze prices should a new Labour government be elected in 2015. This week we have seen a classic example of the type of price leadership we expect to see in an oligopoly.
Young adults in England have scored almost the lowest result in the developed world in international literacy and numeracy tests. A study by the Organisation for Economic Co-operation and Development (OECD) shows how England's 16 to 24 year olds are falling behind their Asian and European counterparts. England is 22nd for literacy and 21st for numeracy out of 24 countries.
New Labour and the educational establishment harangued us for years about the stupendous success of the system, as record numbers of both passes and A-grades in GCSE and A-levels were registered year after year. The OECD study, by no means the first of its kind, confirms what many suspected. Grade inflation was rampant, and the statistics had as much meaning as the pronouncements about production levels made in the Soviet Union. Actually, that is unfair. When the Soviet Union said 10 million boots had been produced, they really had been. They might have been poor quality and all left-footed, but the boots did exist. It now turns out that many people with GCSE passes can barely read and are virtually unable to add up.read more...»
Just as I am in the midst of teaching my AS students about macroeconomic indicators, and focusing on inflation and unemployment, up pops this piece by Linda Yueh about the latest data on those two indicators this week, and the Misery Index.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...»
Changes to key interest rates by central banks have a significant impact on economic activity during periods when the economy is expanding. Unfortunately, they seem to have virtually no effect during recessions – the time when the stimulus of monetary policy is most needed.
These are the central findings of research by Professor Silvana Tenreyro and Gregory Thwaites, published by the new Centre for Macroeconomics at the London School of Economics.read more...»
Over 400,000 new cars were registered in the UK last month, the highest number for five and a half years. And while this increase of 12% over sales in September 2012 still cannot compare with Mercedes 21% rise in sales in China, it must surely be a sign of recovery in the UK economy.read more...»
A revision presentation on aspects of the links between investment and economic growth. Plus some slides on the causes of the so-called Middle Income Trapread more...»
Ed Miliband is a real hero for teachers of economics at the moment. Not only does his promise to cap energy prices provide a wonderful lesson for unit 1 (already covered on the blog in a lesson plan by Jonny Clark), but it gives an opportunity to investigate the domestic fuel component of CPI, and it's weighting, for unit 2.read more...»
Here at Tutor2u we are really looking forward to the launch of a new programme on BBC - Talking Business with Linda Yueh. Linda has spoken at several of our Tutor2u events in recent years and her ability to communicate important and often complex ideas to a wider public has been clearly evident in her presentations. This is a programme well worth tuning into and sharing with your students. Click here for details. See also: China's Transformation - The Long View (Linda Yueh at the Tutor2u Conference)
The presentation below provides our latest perspectives on developments in the UK economy.read more...»
There are lots of resources out there for students and teachers wanting to cover the debate about HS2 - here is a brief selection of video clips on the debateread more...»
Many of us will be teaching AS students about the methods of calculating GDP at the moment, and then about the use of inflation figures to calculate Real GDP. The Edexcel unit 2 paper this summer featured a question about GDP estimates, which indicated that it is worth spending a bit of time examining how and why the initial release of GDP figures is adjusted over time, as more accurate data becomes available, and also the use of the GDP deflator.read more...»
How do we really know whether the economy is recovering? Measuring the change in GDP is all very well, but it is subject to significant problems - the figures are subject to alterations over time as data is refined, they have to be adjusted by the GDP deflator, and even after all that, they don't tell us anything about people's sense of well-being, or the distribution of income.
So here is a challenge for your students: what alternative indicators of recovery could they devise? Some suggestions to set them off might include David Smith's skip index (see the final section of his blog entry here), Alan Greenspan's underpants index, which features in this NY Times article, the height of women's hemlines, the ease of booking a restaurant table on a Wednesday night..... how imaginative can your students be?
The Today programme on Radio 4 featured a 4-minute discussion on the matter yesterday, and the clip is available as a download here, although sadly only until Friday 27th Sept.
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...»
Here is a great starter activity created by WOW Economics Team member Ruth Tarrant that gets students thinking about what can happen at each stage of the economic cycle.read more...»
Tomorrow the UK will see its newest High Street bank open 631 branches. However, this new bank will be called the TSB (Trustee Savings Bank) which is a brand that was first created over 200 years ago. The creation of the bank comes from EU directives to split up the Lloyds TSB group and create greater competition in the banking market and counteract any advantage Lloyds TSB might have from being Government-owned.
This link will take you to a short Powerpoint stimulus presentation to be used in class. The presentation gives a brief explanation of the TSB story and has links to a few interesting video clips as well as the branch finder web page so that you can show your students where their nearest TSB is located.
Here is an updated revision presentation on international trade that can be downloaded from our tutor2u slide share streamread 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...»
As an introduction to trade theory I am looking at data on the pattern of exports for different countries drawing on 2010 data from the Observatory of Economic Complexity at MIT. The task for students is to match the country with their pattern of exports (% by value) for the year 2010. There are ten countries - who can get all ten right? Download the resource below - in pdf format and also the charts in a powerpoint formatread more...»
Why is economic growth such a rare and elusive butterfly in the UK garden? What institutions and policies are needed to sustain UK economic growth in the dynamic global economy of the twenty-first century?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...»
The International Business Times is producing a series of short videos on life, work and enterprise inside Tech City - a fast-growing hub of digital start ups and established tech businesses centred around Old Street / Digital Roundabout. The clips reveal the energy of the start-up economy in this part of London and the importance of network effects, collaboration and attracting human capital in accelerating routes to market for lean start-ups. This series of short videos is worth a look if you are interested in this potentially significant catalyst for growth in the UK economy and to learn more about the factors that influence the emergence and success/failure of start ups.read more...»
Here are links to two freshly developed sources of data on the UK economy.read more...»
SOME people are never satisfied. The evidence is mounting that the UK economy is now on the path to recovery. But to those who denied the possibility of any economic revival at all under the policies of “austerity”, this is simply not good enough. It is the wrong kind of recovery, they say. Fuelled by debt-based personal spending, unsustainable house prices, another crash, the doom-mongering litany more or less writes itself.read more...»
Britain's exports of whisky have been growing strongly in recent years helped by a lower pound and fast-rising demand from whisky drinkers in emerging markets. Whisky exports set to rise to £4.5bn by 2017 even though sales to traditionally strong markets in the European Union have stalled because of persistent recession in countries such as Spain, Portugal and Italy. This Channel 4 news report looks at the experiences of two whisky producers - one a small-scale manufacturer and the other the giant Diageo to consider prospects for UK exports as a way of strengthening the recovery,read more...»
In a world dominated by hyper-productive (but often loss-marking) industrial milk farming here is a heart-warming, touching and rewarding documentary that has swept critics off their feet at film festivals during 2013. The Moo Man is a remarkable story of a maverick farmer and his unruly cows, filmed over four years on the marshes of the Pevensey Levels. In an attempt to save his family farm, Stephen Hook decides to turn his back on the cost cutting dairies and supermarkets, and instead stay small and keep his close relationship with the herd. How can a milk farmer operating on such a small scale compete and survive in today's world? The Moo Man provides some revealing answers!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 new Governor of the Bank of England, Mark Carney, said last week that interest rates will not be raised until unemployment falls below 7 per cent, a process he thinks will take three years. The battle of Austerlitz in 1805 was one of Napoleon’s greatest victories, leading to his complete domination of Continental Europe. In the aftermath, the Prime Minister, Pitt, famously pronounced ‘Roll up that map of Europe, it will not be wanted these next ten 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...»
The GDP growth figures announced last week for the second quarter of this year have sent most people away on their holidays in a cheerier mood than last year. The recent weather has certainly helped. But gloomy clouds may hover over the exclusive settings of Tuscan villas and beach houses in Martha’s Vineyard, where bien pensant commentators and so-called Keynesian economists ritually gather for the summer.read more...»
Potential defaults in the Euro zone have been in the news again. In Portugal, the ruling coalition parties and the main opposition Socialists have been unable to agree on a European Union-led bailout plan after days of talks. Yields on the country’s 10 year bonds have approached 7 per cent, compared to the 1.5 per cent in Germany. There has been some improvement this week on the news that an early general election has been avoided, but yields still remain over 6 per cent.read more...»
What effects does the rapid growth and development of the Chinese economy have on the prices we pay in the UK for different goods and services. This short video from the Bank of England looks at some research into the impact of China on our own consumer price index. It is good for deepening your understanding of the inter-connections between the two economies.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...»
In its annual assessment of the U.K. economy, the IMF called on the UK to invest in skills and infrastructure and increase banking sector competition in order to foster growth and achieve a sustainable recovery.
The report can be found here and contains plenty of relevant background information on the current situation facing the UK - here is a selection of quotes from their summary
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...»