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For many years Professor Andrew Oswald has researched the links between home ownership levels and labour market performance. This new paper with Professor David Blanchflower takes the debate forward - they argue that rising home ownership can bring about negative externalities for the rest of the economy, damaging labour mobility and curtailing new business start-ups. It is an argument worth looking at when we discover some of the structural causes of joblessness. Read the article here
See also: It's not the deficit that will haunt our children: it's unemployment (Heather Stewart, The Observer, May 2013)
See also: Forget inflation – what hurts the most is unemployment (David Blanchflower, Independent, April 2013)
This two-minute video from The Economist analyses the growing problem of youth unemployment in selected developed economies since the start of the financial crisis in 2007, including Greece, Spain, the UK, France, US and Germany. The chilling statistic from The Economist is that almost a quarter of the world's young people eligible for employment are without a job.
Youth unemployment in the UK
In the period from June to August 2013, 958,000 young people in the UK aged 16-24 were unemployed. The unemployment rate for those aged 16-24 was 21.0%read more...»
Here is a streamed (and downloadable) presentation on policies to cut unemployment in the UK economy.read more...»
He's back but he's still angry! In this latest version of The Angry Economist, our favourite curmudgeonly analyst wants to know students' opinion on George Osborne's economic policies - no wonder his blood pressure has risen!
This simple Powerpoint resource is aimed at getting your students to analyse and evaluate economic policies - 8 of the Chancellor's policies are presented and the Angry Economist randomly picks a macro-economic objective to consider. All you have to do is get 8 volunteers from your class to do the analysing - a great 10 minute activity whilst revising for the up-coming macro exams at either GCSE, AS or A2 level.
Here is a list of the policies the Angry Economist wants students to look at (you may wish to recap on them before you start the activity):
- Reduce Government debt
- Increased number of private sector jobs
- Increased allowance before Income Tax needs to be paid
- Cut Corporation Tax
- Set up Regional Growth Fund
- Funding Lending Scheme
- Deregulating some planning rules
- Frozen Council Tax
Of course, the beauty of this resource is that you can change any of these policies to whatever you want them to be.
Click on this link to download the Angry Economist 2.
PS. Click on this link to have a look at the original Angry Economist.
Where have all the miners gone? To judge by the rhetoric of the BBC and other Leftist media outlets, whole swathes of Britain lie devastated, plagued by rickets, unemployment and endemic poverty – nearly thirty years after the pit closures under Lady Thatcher!
The reality is different. There is indeed a small number of local authority areas where employment has never really recovered from the closures in the 1980s. But, equally, there are former mining areas which have prospered.
Fantastic interactive website here lets you check out migration flows both inward and outward from any country you care to look at.
Introducing The Government Game - tutor2u's new Economic Simulation game that is just perfect for revising for AS & A2 Macroeconomic Policy topics!
Increasing foreign language proficiency could be a key policy tool for encouraging greater mobility of labour between countries of the European Union and reducing the huge differences in rates of youth unemployment. According to research by Professors Ainhoa Aparicio-Fenoll and Zoe
Kuehn, including foreign language studies in the compulsory school curriculum fosters migration across European countries.
A recent World Bank report asked ‘Where is the Wealth of Nations?’ Calculations presented at the Economic History Society’s 2013 annual conference show that for Britain, the answer is undoubtedly in its people.
Dr Jan Kunnas and his colleagues calculate that Britain’s ‘human capital’ has grown by a multiple of 123 over the past 250 years. The main drivers of this phenomenal growth have been the growth in the workforce and the growth in wages.
The researchers define human capital as the knowledge and skills embodied in individuals – and they measure it by the discounted earnings the population is expected to earn during their time in the labour force.We have an extended revision note on human capital and economic growth - read it here
The Changing Wealth of Nations - World Bank reports can be accessed here
How Britain escaped from the travails of the Great Depression and achieved 4% a year growth in the years from 1933 to 1937 has important lessons for today’s policy-makers, according to research by Professor Nicholas Crafts, presented at the Economic History Society’s 2013 annual conference.read more...»
GDP per hour – labour productivity – in the UK remains lower than at the beginning of the recession in 2008. A special session at the Royal Economic Society on Friday 5 April held jointly by the Centre for Economic Performance (CEP) and Institute for Fiscal Studies (IFS) investigated the causes of this mystery. It was also the subject of BBC Rradio 4 In Business - click here
See also: the Job Rich Depression (The Economist)read more...»
The UK national minimum wage (NMW) has been in the news in recent days with several reports suggesting that Coalition government ministers are considering introducing a freeze on the pay floor or going further and reducing the minimum hourly pay rate. The NMW was introduced into the UK in the spring of 1999 and has been up-rated regularly but never cut. It is presently at £6.19 an hour and recommendations on changes to the pay floor come from the annual review conducted by the Low Pay Commissionread more...»
Germany’s low unemployment is in large part due to the ‘Hartz Reforms’, which started as early as 2003 and have reduced the long-run rate of unemployment by 1.1%. That is the central finding of research by Matthias Hertweck and Oliver Sigrist, to be presented at the Royal Economic Society’s 2013 annual conference.
Unemployment rates across much of Europe have surged to unprecedented levels in recent years, particularly among the southern countries. In contrast, German unemployment has continued to fall even during the Great Recession. The authors conclude:
‘Our results build a solid basis for the macroeconomic effectiveness of such labour market reforms. This is particularly important for policy-makers across Europe who are currently planning to undertake similar structural reforms.’
The scale and depth of the unemployment crisis in Europe is confirmed by fresh figures released by Euro Stat. Unemployment in the Euro Zone was 12.0% in February 2013 and the jobless rate for the European Union as a whole was 10.9%. Last month there were 26.3 million people counted as out of work in the twenty-seven countries within the single market, 19 million of whom live in Euro Zone countries. In the last year alone, unemployment in the Euro Zone has jumped by over 1.7 million but this aggregate figure hides large country differences and persistent regional and local variations. Here is the contextual data to take into the exam:
Economic commentators love their acronyms and abbreviations - they come in handy when reaching character capacity limits on a tweet and also for students fighting the exam clock to complete a timed essay. Two new ones have come to my attention in recent days. What does ZIRP and PLOG mean to you?read more...»
This 10-question revision quiz focuses on unemployment.
It’s not often you read such a clearly set out, even-handed article on macroeconomic policy, so this relatively lengthy piece was interesting in itself as its writer appears to deal relatively equally with both sides of the big austerity debate. But you really have to take notice when the writer is the Secretary of State for Business, Innovation and Skills, Vince Cable.
On Thursday 31st of January 2013, the long-awaited LSE Growth Commission Report was published and launched in London. The document itself is available for download from this link and I urge all teachers and students interested in growth, competitiveness and the fairness agenda to have a look at it. It is full of rewarding and important insights into the drivers of balanced growth in a modern advanced economy.
I will be adding new resources and links to this blog following the launch event
Key Points from LSE Growth Report
- Strong rule of law
- Generally competitive product markets
- Flexible labour market
- A world-class university system
- Openness to foreign investors and migrants
- Independent regulators including competition authorities
- Strengths in many key sectors including high end manufacturing
LSE Commission Growth Agenda
- Greater autonomy for schools, tackle the long tail of under-performance. Conditional cash transfers for families to pupil attendance and performance. Focus league tables less on % attaining 5 A-C grades. Reveal performance at the bottom end.
- Concentrating on skills (improving human capital) gives people the resilience to recover from global shifts in the division of labour
- Critical infrastructure essential for competitiveness in modern economy. For the UK, transport and energy are infrastructure areas with biggest issues; there has been a lack of clear strategy and lots of dithering / political delays.
- Huge opportunities for UK - industrial revolution driven by search for low-carbon technologies driving innovation - can the UK keep up?
LSE Commission proposes:
- 1) Strategy Board (for planning)
- 2) Planning Commission (for delivery)
- 3) Infrastructure Bank (for funding)
- Innovation is the third channel for increased growth
- Problems in UK capital markets mean innovation is not properly funded - short-termism remains a structural weakness of the markets
- More competition in retail banking
- Business bank that prioritises lending to SMEs and innovative firms
Changing the compass of economic performance
- Commission suggests that focus on GDP is not helpful
- GDP misses out on who gets the growth and measures production not income
- Need more focus on Median Household Income
- Median household income and GDP per capita have been decoupled since about 2002. GDP no longer tracks it
UK trend growth rate can be lifted by 0.5% with effective structural reforms - large compound effect on incomes over the long run
Institutions and incentives matter for growth. Macro stability important too. UK politics too short term and adversarial. Fundamental weakness is the failure to create a stable policy framework.
More focus needed on evidence based policy making to make government smarter.
Here Professor John Van Reenen, Director of CEP and co-chair of the LSE Growth Commission, presents a 'manifesto for growth' for the UK economy over the next 50 years, backed up by the Growth Commission's report.read more...»
Here is a selection of links and news videos on the vexed economic, social and political issue of fiscal austerity - there is a particular focus on the effects of austerity in the debt-ridden crisis countries of the Euro Zoneread more...»
An updated glossary of key terms for AS macroread more...»
As the sun rises on another year will the headwinds be favourable for Britain or are we facing up to another year of stresses and strains? Here is a brief commentary and overview of some of the key macroeconomic data for the UK economy together with some links to external articles and videos on economic prospects for Britain as we head in 2013.read more...»
Any visa policies that restrict entry by highly productive foreign students are a significant barrier to science and ultimately to innovation and growth. That is one of the conclusions of research by Professors Eric Stuen, Mushfiq Mobarak and Keith Maskus, published in the latest issue of the Economic Journal.
Their study of 700,000 postgraduates in the science and engineering laboratories of the top US universities finds that American students and foreign students are both highly significant contributors to the development of scientific knowledge. But greater diversity in the origins of foreign students raises their joint contribution to knowledge.
These findings imply that visa restrictions limiting the entry of high- ability foreign students – as well as visa policies that prioritise students’ ability to pay tuition fees over their technical merits – would significantly undermine scientific output.
Here is a film of the Royal Economic Society's annual
public lecture 2012 by Nobel laureate Professor Chris Pissarides
|Employment Rate||Employment Rate||Unemployment Rate||Unemployment Rate||Inactivity Rate||Inactivity Rate|
|Mixed or Multiple||64.3%||55.3%||15.7%||15.8%||23.7%||34.3%|
|Chinese & Other||67.0%||51.8%||10.3%||10.6%||25.3%||42.1%|
If you have seen the news stories today showing how workplace discrimination towards ethnic minority women continues to cause the government concern, you may be interested to read the full report. It is available from the Runnymede Trust (it requires registration but it is free) and has been written for the All Party Parliamentary Group on Race and Community. There's a brief summary from the BBC, but the full report gives recommendations that you might like to present to students as possible government intervention strategies and get them to evaluate accordingly. The table above gives you a flavour of the statistics that can be used to discuss inequality of income and wealth.
The Office of National Statistics published some important data this week on the state of the UK labour market as the economy struggles to sustain a decent recovery. They released information showing that the number of underemployed workers i.e. those who want to work more hours, has risen by an estimated 1 million (or 47.3%) since the start of the economic downturn in 2008 to stand at 3.05 million in 2012. Nearly two thirds of the 1 million increase took place in the 12 months between 2008 and 2009, when the economy was in recession.
From 2000 to just before the 2008/09 recession the number of people underemployed was relatively steady and since 2009 the number has been rising, although at a much slower rate than during the recession.
We thank Hannah Thomas from the ONS who has provided us with this superb info-graphic on under-employment
This will make for a terrific teaching resource in the classroom and help to deepen student understanding of differences between unemployment and under-employment.
Youth unemployment is higher than adult unemployment even in normal economic times. But in recessions, especially in countries with rigid labour markets, young people typically stay unemployed for too long. In these circumstances, urgent policy action is needed to avoid long-term unemployment, which destroys talent and creates social problems.
Premier Foods is the UK's largest food manufacturer but in November 2012 they have announced the closure of two large bakeries that have - for many years - produced Hovis bread for supermarkets. The closure of the factories follows the loss of its £75m-a-year contract with Co-operative supermarkets. Hundreds of jobs are set to be lost in the spring of 2013 with damaging consequences for the local economy. What types of unemployment can you associate with these factory closures? What measures might be appropriate in addressing the extra unemployment problem that will result?
BBC news: Hovis shuts bakeries - click here
Hovis bakery worker devastated - click here
Here are collections of regularly updated resources on two key AS macro topics, inflation and unemployment
This article in the BBC about the 21st anniversary of the launch of the Big Issue newspaper acts as a timely reminder that we can find our very own examples of absolute as well as relative poverty in the UK.read more...»
As unemployment hits the headlines for the wrong reasons again : ‘The Eurozone is heading for disaster’.... ‘the lost generation’.... it is a great opportunity to study the theoretical concepts in this area. Unemployment in the eurozone hit a fresh high of 18.2 million in August; the highest unemployment rate was recorded in Spain, where 25.1% of the workforce is out of a job! Youth unemployment remains a particular concern, with the rate among under-25s hitting 22.8% across the eurozone and data from Eurostat shows that 55.4% of adults under 25 are out of work in Greece, compared to 52.9% in Spain!read more...»
In this 60 second summary, David Mitchell explains that Bill Phillips' curve historically described an inverse relationship between the rate of unemployment and the rate of wage (and therefore price) inflation - but since his analysis became popular the relationship has changed.read more...»
This Financial Times news video is excellent on issues surrounding high rates of youth unemployment. The number of 18- to 24-year-olds out of work for at least six months has risen by more than a third in the past year to 403,000.
Many thousands are struggling to find work and the lack of apprenticeship schemes and the high level of short term or vulnerable contract work makes it extremely tough to get into formal work. More and more students are looking to establish their own businesses as an alternative. The rapid expansion of student-led entrepreneurship societies based around colleges and universities is a welcome development. So too is the rise of “start-up” milk-rounds at many of the UK’s universities. Challenging times yes, but opportunities will always exist for enquiring minds with ideas to incubate and grow.read more...»
Lots of students will be revising the economics of supply-side policies this week with their AS macro paper coming into view. There are different interpretations of what constitutes a supply-side policy measure. I like to label SSP (supply-side policy) to any policy or group of measures where emphasis is given to improving the working of markets, raising factor efficiency, improving the quantity and quality of labour and in lifting the capacity and competitiveness of an economy in a constantly-changing international environment.
Many supply side policies focus on improving incentives and outcomes in the labour market, others are geared towards bettering the performance of markets for goods and services, All of them centre on helping to sustain non-inflationary growth, improve trade performance, lift living standards and create new and fulfilling jobs opportunities.
This revision blog looks in particular at some evaluation points on supply-side approaches:read more...»
A revision blog on the economic impact of migration on the UK economyread more...»
An initial change in aggregate demand can have a much greater final impact on equilibrium national income. This is known as the multiplier effect. It comes about because injections of new demand for goods and services into the circular flow of income can stimulate further rounds of spending – in other words “one person’s spending is another’s income”. Put another way, spending becomes someone else’s income. This can lead to a bigger eventual effect on output and employment.read more...»
The unemployed are people able, available and willing to work at the going wage rate but cannot find a job despite an active search for work.
Unemployment means that scarce human resources are not being used to produce goods and services to meet people’s needs and wants. Persistently high levels of joblessness have damaging consequences for an economy causing both economic and social costs.read more...»
How much spare capacity does an economy have to meet a rise in demand? How close is an economy to operating at its productive potential? Has the recession damaged the economy’s productive potential? These sorts of questions all link to an important concept – the output gap. The output gap is the difference between the actual level of national output and the estimated potential level and is usually expressed as a percentage of the level of potential output.read more...»
A revision blog on possible unemployment questions on AS and A2 papersread more...»
How long can China keep its comparative advantage of cheap production for manufacturing goods? We are aware of rising inflation in China which is eroding their advantage, and here is an article about a UK firm which manufactures cushions, some from a factory in Kirkby on Merseyside and some from his factory in the Zhejiang province in China. The story comes from a programme ‘The Town taking on China’ to be shown on BBC2 at 8pm tonight - and subsequently on i-player.read more...»
A selection of key terms linked to the topic of unemploymentread more...»
The NIESR has published its latest ‘Prospects for the UK economy’ this morning - this link given is to the one-page press release. This clear document gives some stark headlines from their predictions: they consider the persistent weakness in the economy to be unprecedented, they continue to expect that CPI will fall below target by the end of the year, and they believe that unemployment will rise to 9% and stay there for some years, doing permanent damage to the supply side of the UK economy. They estimate that a 1 per cent of GDP increase in government investment this year would boost GDP by around 0.7 per cent, and would provide a boost to the short-run lack of aggregate demand. They do predict a return to growth in 2013, with some above-average growth figures for 2014, which may return the economy to its size of 2008. For the sake of the students sitting their AS and A levels in the next few weeks, let us hope that they are right.
Catastrophically high unemployment in countries such as Spain are causing people to leave the Med in search of work elsewhere and thousands are trying their luck in South America. This short video from Al Jazeerah news looks at the growing number of people heading to Argentina looking for a job or perhaps the chance to start a new business. Watching it is a chance to revise some of the factors that affect the geographical mobility of labour? This Economist report looks at some of the causes of geographical immobility of labour.read more...»
Boasting a steering wheel that doesn’t steer, an in car radio that is an optional extra and acceleration powers that - on a good day - can take you from 0 to 60 in less than three minutes, the Lada has for a long time been a figure of fun in global motoring circles. But production is coming to an end following a collapse in sales. As is often the case, news of the demise of the Lada has prompted increased interest among younger urban consumers whose DNA is to go against the grain and drive something that is sturdy, mercifully free of corporate design features and most of all, tremendously cheap.read more...»
This excellent news video from Channel 4 news looks at the changing pattern of employment in the UK economy. The number of full time workers is dropping and there has been a big switch towards part-time employment. Who are the winners and losers in our labour market as the fragile recovery struggles to maintain momentum?read more...»
Here is a superb news report from Channel 4 news about the shortage of skilled workers in the North East of England (an area of high unemployment). Nissan this week announced a big new investment in car making at their ultra-high productivity plant in Washington, Tyne and Wear. But many of the manufacturers along Nissan’s supply chain are finding it tough to get enough skilled people coming througth to make realistic bid for the orders that will come from Nissa. Some businesses are having to turn down contracts because they dont have the extra workforce to cope with the higher volumes of businesses.
Skills shortages are restricting the growth of many small and medium sized businesses especially in manufacturing. Little wonder that Nissan is working very closely with Gateshead College to run an apprenticeship scheme - an example of external economies of scale in action.read more...»
Here is a superbly clear and relevant article on the Channel 4 news blog from Jonathan Portes, head of thr NIESR - it focuses on the unemployment problem facing the UK economy and outlines some policy options for cutting the jobless total. Superb for both AS and A2 macro students.
In the past we have discussed some of the long term economic and social costs of a persistently high rate of unemployment and we have used the term hysteresis effects. It seems that a new term is being used to cover some of the consequences of millions of people being out of work - unemployment scarring - and this revision blog looks at some of the causes of this.read more...»
The recession and weak recovery is bringing about important employment and income distribution effects among different generations in Britain. The externalities of a slump are never uniform and I hope that good examiners at AS and A2 level will always reward students who bring comments and arguments about equity / fairness into their evaluative discussions. Recently there has been increased media coverage of the inter-generational effects of the financial crisis and the recession.read more...»
Professor David Blanchflower didn’t pull his punches when he was a member of the Bank of England’s Monetary Policy Committee and he is making his mark once more with an attack on what he views as the Coalition government’s lacklustre approach to tackling youth unemployment. Blanchflower is reported in the Guardian as wanting zero national insurance contributions for employers who take on younger workers in depressed regions and localities. And he wants greater investment in vocational education in schools and colleges with the school-leaving age raised to 18.read more...»
As ever, there are loads of sources that students can use to analyse the Budget and to extract pieces of Evidence for the Examples they will need to add depth to their analysis in essays. Those who are attending the current round of revision workshops will recognise this as a key part of ensuring that they write essays which PEEL the answer (each paragraph makes one Point, using Examples with Evidence, offering Evaluation and Linking to the question). As start points, I would suggest these sources which are reasonably free of opinions:
BBC website: Budget 2012 at a glance, Farewell 50p tax rate, and Over 65-s tax-free income freeze
The Guardian Budget 2012: welfare cuts, tax cuts too, but retreat on child benefit and for the visual learners a nice graphic version: Tax and spending plans visualised