employer's point of view, a zero hours contract is a great example of the
benefits of the flexible labour market. They allow the employer to change the
number of hours an employee works each week, with more shifts offered when they
are busy, and fewer when they are not; costs can therefore be controlled and
matched more exactly to revenue. Neil Carberry at the CBI says that they have
helped to save jobs during the recession and stagnant growth: "It's zero
hours contracts and other forms of flexible working that mean there are half a
million fewer unemployed people than there might otherwise have been." Now
figures from the Office of National Statistics (ONS)
show the number of 16 to 24-year-olds on zero hours contracts has more than
doubled since the start of the economic downturn, rising from 35,000 in 2008 to
76,000 in 2012. This means that one in every three people on a zero-hours
contract is under 25 (- although that proportion doesn't look as if it has
changed very dramatically throughout the period shown). If this is good for the employer, how is it for the
Apparently this is how George Osborne ended his tweet last night, announcing that the next Star Wars film is to be made in the UK - how nice to have some good news for a change! It looks like a great example of supply-side fiscal policy being effective. As long as at least 25% of the total production expenditure takes place in the UK, the film will benefit from tax relief, up to a maximum of 80% of the total budget for production costs in the UK. This seems to be acting as a powerful incentive: hundreds of films have been made here in the last few years and benefited not only from the tax relief but also from the comparative advantage which the UK is establishing in the creative industries with major film studios such as Pinewood, Leavesden and Ealing. How much is this worth to the UK economy?
Here is a streamed (and downloadable) presentation on policies to cut unemployment in the UK economy.read more...»
I'm always sightly dubious about statistics and information represented by campaign organisations - I'm left with the reservation that information can presented in any way that you want to prove whatever point that you are trying to make (wasn't it an economist who came up with the phrase 'lies, damned lies and statistics'?). So this fascinating report from an organisation called 'Vision of Humanity' needs to be looked at with an open mind.
However, if you take it at face value, it offers some really interesting information.read more...»
Introducing The Government Game - tutor2u's new Economic Simulation game that is just perfect for revising for AS & A2 Macroeconomic Policy topics!
The annual NORFACE migration conference at University College London this week has generated plenty of new research papers on the economics of international migration, a topic that of growing significance for students of globalisation, competitiveness, innovation and growth. Some of the key findings are summarised below together with external links to relevant articles and news reportsread more...»
Unicef have just released their latest 'report card' on the relative state of well being among children in 29 of the most wealthy countries. The report (a full version and a summary) are available from this link.
The report shows pleasing progress for the UK (our place on the overall ranking has gone up from last place to 16th) with an improvement in obesity levels and a reduction in consumption of alcohol, cigarettes and drugs compared to the 2007 report.
However, worryingly, the UK is ranked 24th in the table with regards to its provision of Education. The biggest weakness highlighted, is the fact that the UK has one of the lowest percentages of young people continuing with education post 16 (only 74%) and very high levels of young people not in education, employment or training at all (nearly 10%). Students of economics could use this as evidence of government failure with regards to supply-side policies - with such a low level of participation in comparison to our major competitors can we guarantee that we are developing skills that will allow the economy to grow in the future? Could your students suggest (and then evaluate) suggestions for how this situation could be remedied?
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 radio 4 In Business - click here
See also: the Job Rich Depression (The Economist)
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 success of small firms is crucial to hopes of a sustained recovery in the UK economy and the government is keen to promote innovation within small and medium sized enterprises with a range of tax incentives including the Patent Box. The Patent Box system allows companies to apply an effective 10 percent preferential rate of corporation tax to profits attributable to patents and is introduced from April 2013.
Will this fresh supply-side fiscal policy prompt a significant boost to patent applications from UK firms? The evidence so far is mixed. The number of patent applications to the UK Intellectual Property Office from within the UK was just 15,370 in 2012, almost equal to the 2011 figure of 15,343. (Source: Independent, March 2013). But there has been a large rise in the number of patent applications made in the UK by foreign businesses especially in the pharmaceutical sector.
The reality is that most small businesses are too busy reinvesting their revenues back into growing their businesses rather than going through the lengthy, uncertain and often costly process of making multiple patent bids on their new product and process ideas. In a recent blog from the Wall Street Journal it was claimed that "it is almost impossible to defend software or business process innovation patents in the UK." Others are more optimistic - read this short piece from the Scotsman which claims that the Patent Box fits well with the ambition of the Scottish government to attract inward investment from high-knowledge businesses.read more...»
Here's a 5 to 10 minute activity for your post-Easter classes on macro-economic objectives - The Angry Economist! The design is very loosely based upon the 'Angry Bird' game.
You will need up to 8 volunteers to answer the 'Angry Economist's' questions.
Each student can choose a Government policy named on-screen and then the Angry Economist randomly chooses a macro-economic objective. The student has to to apply their knowledge and understanding of their chosen policy to the macro-economic objective shown.
The screen encourages the student to analyse and evaluate their own answer.
Use this link to access the resource. Give it a go!read more...»
This 10-question revision quiz focuses on supply-side policies.
I know that it is April Fools Day, but the new and quite radical social welfare reforms are starting to come in to play from this week and they are genuine!
Use this link to access a document that summarises the main changes to the welfare reforms. You can use this document as a lesson activity to discuss government policies to achieve macro-economic objectives.
Are these reforms just aimed at reducing the government's debt or are they aimed at improving the unemployment situation? Are they part of a wider supply-side set of policies aimed at making the UK workforce more effective and flexible?
Could students discuss each policy's strength and weakness? Could they suggest alternative and (possibly) more effective policies.
Useful graphic from The Guardian showing Government Revenues and Spending - helps to put some perspective on some of the announcements.
Politicshome's live Blog showing that hell hath no fury like pressure groups scorned, with plenty of useful links to early comments on The Budget.
Evening Standard's coverage here, it managed to pre-empt the Chancellor's statement.
With Evening Standard-like speed, please follow this link for a short set of questions about today's Budget.
Attention is often focused on the tariff and non-tariff barriers to trade and in particular, the extent to which trade from developing countries to advanced high-income nations is influenced by import taxes. Average tariff rates have come down to historic lows in recent years although non-tariff barriers proliferate.
New research from a group of European economists finds that trade costs - a concept that captures the broader expenses of getting goods and services across borders into international markets - are much higher than tariffs. And for developing countries these costs have not fallen to the same extent as richer countries.read more...»
The economics news, and this blog, has recently featured the debate between those who favour more government spending on public infrastructure and those who favour sticking to the role of austerity, in the search for growth - see the debate (or spat) between Krugman and Sachs, Vince Cable's article in the New Statesman and Liam Fox's speech to the IEA last week for a range of different views. The idea that more UK spending on 'shovel-ready projects' (if such a thing exists) would help to kick start the economy through multiplied growth of GDP suggests that we don't spend enough. And this view would be borne out by those who suffer damaged car tyres from potholes, hold-ups on the roads and railways from lack of maintenance, and delayed or re-routed air travel when the airports can't cope with adverse weather. However, an article in the Wall Street Journal this weekend suggests that the UK's spending is well ahead of other countries,and that Germany in particular has a real problem with aging, collapsing infrastructure.
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.
Tomorrow's Financial Times leads with a headline, "Osborne to hand Carney powers to kick start the economy." Budget to alter Bank of England's remit...Loser Monetary Policy."
Stephannie Flanders, the BBC's Economics Editor, considered if the UK's present monetary policy with its use of Quantitative Easing had played a part in pushing up share prices and wondered if other unorthodox measures would be effective to deal with a stagnating economy.
Vince Cable the Business Secretary provides an outline in The New Statesman of the economic problems the current coalition government has faced, how monetary, fiscal and supply side measures might be used to stimulate the UK economy in response to what he calls the long economic stagnation of post-crisis Britain.
The FT implies that The Chancellor is not wholly convinced by arguments from Vince Cable to boost growth with a new programme of infrastructure spending on schools, roads and housing, funded by extra borrowing. The arrival of Mark Carney at The Bank of England may signal a sea change in how monetary policy is used to stimulate the economy, breaking with the 2% inflation targeting approach. The MPC may be encouraged to focus on targets for inflation and employment. Some of The Committee's members support more quantitative easing whilst The Deputy Governor Paul Tucker said the idea of negative interest rates should be considered.
Link to coverage of Cameron's Speech http://www.guardian.co.uk/politics/2013/mar/07/david-cameron-rules-out-extra-borrowing
The Economist wades in with an analysis of why the slump in consumer spending has contributed to a flatlining economy with low or barely perceptible growth. Household saving has increased to c.7%. Falls in real wages, coupled with rising 'administered prices' of gas and electricity have also helped lower consumption. But the cycle of higher costs and prices isn't helped when Sterling depreciated by 6% in the course of the New Year.
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...»
There are several research organisations out there producing regularly updated forecasts on what is likely to happen to the relative shares of global GDP and income per capita over the long run. Typically the forecast stretches out to 2050 and necessarily involves plenty of uncertainty. But these over the horizon studies are quite interesting in their own right because they remind us of the changing drivers of growth in the world economy.
Here is one of these reports - World in 2050 The BRICs and beyond: prospects, challenges and opportunities - produced by economists at PriceWaterhouseCoopersread more...»
Robert Nutter explains that, over recent years, the fear that the minimum wage would cause increased unemployment has not materialised, although since the start of the current economic crisis employers have expressed some concerns that employment may be affected in low paid jobs. Another concern has been the belief that a national minimum wage is inappropriate for an economy where costs and labour market conditions vary significantly between regions. The national minimum wage may perhaps provide a living wage in North-East England but certainly not in London.read 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...»
Immigration lowers the wages of relatively low-skilled native employees in sectors of the service economy that hire bigger shares of foreign workers. But the cost reductions that employers enjoy from lower wages are typically passed on to consumers: price inflation is much higher for services with no change in immigrant employment than for services where immigrant employment is growing.
These are among the findings of research by Professors Bernt Bratsberg and Oddbjørn Raaum, published in the latest issue of the Economic Journal. Their study confirms that there are clear winners and losers from labour migration: low- and semi-skilled workers face increased competitive pressures on their wages and employment while consumers enjoy more services at lower prices.
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 link to a video of a talk given by the eminent economic historian, Professor Nick Crafts on whether there are important lessons from the 1930s for policy-makers as they search for growth enhancing policy measures. The opening statement is gloomy, but the historical sweep and arguments are impressive! A stretch and challenge talk for ambitious sixth form economists.read more...»
At our Teaching the Global Economy at the RSA (London) in November 2012, the distinguished development economist Professor Paul Collier spoke on some of the leading development issues of the moment. A-level student Mark Austen was there to scribe some notes on the talk and the subsequent Q&A discussion. Here are his notes together with some connecting links and other resources. We hope that you find them useful.read more...»