Here there be NEETs.
Regional unemployment is seen as a significant economic problem, but employers may be reluctant to relocate if the educational quality of the workforce is below par. The term NEET refers to young people Not in Education, Training and Employment, and it appears that there are significant pockets of NEETs across the mainland of Great Britain.
read more...»Unit 2 Macro: Economic Importance of Investment
Capital investment spending can have a significant effect on both the demand and the supply-side of the economy. We were looking at this issue in class this afternoon and I used a small selection of video clips linking to investment projects across different countries. I have linked to them below:
read more...»The Bicycle - A merit good and an integral part of sustainable transport solutions?
A recent economic study1 found that bicycle ownership can boost household income in sub-Saharan Africa by 35%. I may be biased given my passion for cycling but I think there are indeed some very strong economic arguments for encouraging more bicycles both in the developing and the developed world.
The bicycle: more than just a mode of transport
Unit 3 Micro: Science Cities and External Economies of Scale
This feature article from the BBC web site is essentially about the vital importance of high-knowledge industries in sustaining competitiveness and growth in a globalising world. Europe lags behind many emerging countries in terms of the resources devoted to science and technology, research and development and creative industries in particular.
But the article makes reference to the expansion of science cities - knowledge clusters that bring together higher education expertise and entrepreneurial zeal - their number continues to grow from California and Boston in the USA, Cambridge in the UK, Education City in Qatar, Science City in Zurich and Digital Media City in Seoul. All good examples to use of the commercial leverage from external economies of scale in high-tech industries.
Childcare cost means that working doesn’t pay
I don’t think this dilemma is anything new, but Aviva’s Family Finance Report presents some up-to-date figures which show how difficult it can be for working parents to fund the cost of the childcare that makes it possible for them to take a job. Based on average pay rates, they estimate that a parent of two children working full time would only keep £120 a month of their pay after paying all the costs associated with work, including travel as well as childcare, while those who take a part-time job may actually be £98 a month worse off. The trade-off faced by working parents if they decide to swap the unpaid role of full-time childcare at home for paid work outside the home, which necessitates paying for some other form of childcare, has always been an issue, but the gap between the gain in pay and the loss in costs seems to be getting more difficult to manage.
The report also looks at costs for child-related expenses such as school trips, clothes and sporting activities which have risen by 6.9% over the past year. Compare this with the fall in family incomes estimated at 2% between May and August this year - and the strain on family budgets is very clear. This report goes on to give some more data about the burden of unsecured debt and the measures government is taking to try to make working a more affordable option for families, which will be useful when looking at government intervention to deal with the poverty trap and the distribution of income.
Unit 4 Macro: Savings and Banking to enhance Development
A hat tip to Patrick North from Crown Woods College for spotting this excellent article on growth and development strategies in Mozambique. The piece focuses on the efforts of Mozambique to increase participation in the banking system to boost savings, investment and ultimately growth and is a good illustration of the Harrod-Domar growth model.
Transport Economics: Rail Investment
Here is a super short transport cost benefit analysis example regarding plans to re-open a rail link between Oxford and Milton Keynes could generate millions of pounds for the economy. In total it would cost £178m and then £11.6m a year to run, but Oxford Economics says it would bring an economic benefit to the area which it estimates at £32m a year. This BBC news video would make for a good short introduction to the example, and here are some other links to coverage of the Oxford Economics research in the local papers.
Oxford Mail: Rail link could be worth £38m a year
Official web site East West Rail
Where there’s muck there’s brass
I am cross-posting this from the Business Studies blog, so apologies to those who read both - but I think it is a good story for both subjects. I have changed a few of the terms and themes to cover the different emphasis for an economics student.
On the face of it, this is a good end-of-term case study which is bound to raise a smirk or a grimace from most students, but actually there is a wealth of good solid theory in it. In answer to the question “What to do with 12,000 tonnes of pig poo?” a farm in Gloucestershire has taken advantage of government grants to set up their own biogas generator, which enables them not only to provide their own power for the farm and farmhouse, but also to sell about 2.2 million kilowatts of electricity each year to the National Grid, and even better, to save money on fertiliser as the by-product has been broken down into a form that can be used on the fields. Even better, the process prevents huge amounts of methane from being released into the atmosphere - apparently each year it saves the equivalent of almost 9,000 return flights from London to New York. So lots of good positive externalities there.
read more...»Protection of British jobs?
Is this protectionist, or is it common sense? Today’s headlines are all about Ian Duncan Smith’s speech in which he urges British employers to give young unemployed workers in the UK a ‘level playing-field’ and a better chance of getting the jobs which are being created.
read more...»Do you agree that the government should provide support to the UK car industry?
This is a fairly classic A2 macroeconomics question, and one that the European Automobile Manufacturers Association has been considering at their meeting in London last week. Their conclusion? That non-European governments should scale back assistance for their own automotive industries, but at the same time governments in Europe should support the industry’s efforts to cut car emissions.
read more...»AS Macro Key Term: Supply-Side Policies
Here is a streamed presentation of a revision talk on the economics of supply-side policies. The Unit 2 macro syllabus places a heavy emphasis on the supply-side as a driver of economic growth, improved trade balances as a better trade-off between unemployment and inflation. Make sure that you are secure on the main supply-side policy approaches and also the impact of such policies on LRAS. You ought to be aware too of some of the limitations of supply-side policies - and the importance of having a sufficiently high level of aggregate demand. I have linked below to some revision blogs on supply-side topics.
Revision presentation on supply-side policies
read more...»AS Macro Key Term: Brain Drain
A brain drain is a term that describes the movement of highly skilled or professional people from their own country to another country where they can earn more money. It has been used to describe net outward migration of people from several European Union countries in recent times (notably Ireland, Greece and Spain) - another phrase for this is human capital flight.
A sizeable brain drain can bring economic costs and benefits for the sending nation. One disadvantage is that countries lose out on the benefits that might have accrued from the resources used in educating people who leave. Add to this the loss of tax revenue from those who choose to live and work overseas. A sizeable loss of skilled workers (many of whom may be younger and therefore more geographically mobile) could lead to labour shortages in the sender country, putting upward pressure on wages and labour costs.
Some of this income earned overseas returns to the sender country in the form of remittances (adding to GNP) and many skilled migrants often leave only for a year or two - the percentage of permanent migration inside the EU is relatively small.
A2 Macro: Chinese investment in the EU
There is much focus on Chinese foreign direct investment in Africa and Latin America - China is also making huge investments in Australia as my friend Mark Johnston writes about in this blog. Here Euro News looks at investment in the European Union by Chinese owned businesses. New motorways in Poland ahead of the 2012 European Football Championships, co-financed by the EU, are being built by Chinese companies. The Chinese are also buying up public debt, in Greece, Spain and Portugal.
Consequences of One Child Policy Play Out
There has been much coverage in the last few days of the latest data on China’s population trends and in particular strong evidence about the ageing of her population. The demographic dividend of the fast population growth during the Mao era is well and truly over.
The annual growth of the Chinese population is falling away - the average annual growth was 0.57% over the last decade, down from 1.07% in 1990-2000. And when the age structure of the population is analysed, we find that the number of people over the age of 60 rose by about 48m, reaching 13.3 per cent of the population. China’s total population is now 1.339bn – up 5.84 per cent from the last decade. The number of old people in China has grown by more than the population of Spain over the last ten years and there is growing pressure for a reversal of the controversial one-child policy.
read more...»Discrimination and distribution of income news resources
If you are nearing the end of an A2 microeconomics syllabus and looking for current resources to help with issues of distribution of income and discrimination, the BBC came up with a couple of helpful items yesterday.
read more...»Timetric: Total Employment in the UK Economy
The level of employment fluctuates over time as an economy progresses through the business cycle and because of structural changes in economic performance, labour market activity and the total population. Our Timetric chart tracks total employment and shows the extent to which jobs were lost during the recession and whether they are recovering sufficiently well as we head into the upturn.
read more...»Patent Box or Innovation Box as Innovation Stimulant?
The UK coalition government does not yet have a growth strategy worth the name but they have invested plenty of capital in the idea of a Patent Box. This involves a lower corporation tax on profits drawn from patented products) and is a supply-side policy to make UK an attractive location for innovative industries. One proposal is that royalties and other profits from patented products and technologies would be taxed at just 10 per cent.
But many economists argue that this is at best an ineffective way of lifting the amount of research and development in the British economy. They look instead to the Netherlands where an Innovation Box has had a significant impact - it reflects the view that patents are only a small part of the innovation process - you dont necessarily have to patent an idea to make small scale innovations commercially viable.
Channel 4 news tonight visited Sandwich in Kent where the Pfizer research and development facility is set to close.
Chinese and Indian Railways - Importance of Infrastructure
Two videos show the stark contrast between rail networks between China and India! Good for understanding a little more about the importance of rail network investment (high speed and conventional) as a platform for economic growth and development.
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Economic Growth Presentation
Here is a streamed version of my notes from the LSE presentation last night on “Where is economic growth going to come from”? PDF Handout available here
A copy of Professor John van Reenen’s powerpoint presentation is available to download. Download ‘Where is Future Growth Going to Come From?’
Never Mind Plan B - Plan V needed for the UK Economy!
George Osborne is convinced that the Coalition does not need a plan B. But for growth to be nurtured and sustained in the years ahead we need a Viagra-style boost to our competitiveness and capacity - Plan V. This was one of the main themes from a talk given by Professor John Van Reenen at a packed Hong Kong lecture theatre at the LSE (London) last night.
read more...»Government has a role in building growth
The government retains a crucial role in helping to shape and sustain the eco-system needed to foster innovation and growth. This is one of the key arguments of Will Hutton in his piece in the Observer today, essentially a review of a new book by Tyler Cowen. “Invention and innovation, we are discovering, are much too important to be left to the tender mercies of markets.” More here
5 Fresh Links: Videos to attract FDI
I am teaching European and Global context for A2 macro this term and one of the key topics is the economics of EU enlargement. The opportunities to attract inflows of direct investment is one of the major attractions for new EU countries as they enter the single market. Here is a selection of videos promoting FDI into a selection of European nations.
read more...»James Dyson on Innovation
This is a must read article for every student who wants to appreciate the impact of innovation on competitiveness and growth. Writing in the Business Guardian, James Dyson argues that “For me, the UK economy shouldn’t be built entirely on the City of London or the next digital fad. We need substance – patentable exports. They bring new money into our coffers. And what will generate economic growth is not just talk of spending cuts, but creating the right environment for research and invention.” Dyson is a strong supporter of tax credits and lower corporation tax for research and development projects and also for science and maths graduate teachers to be paid more.
More here: Innovation: Britain’s other deficit
Tories look to Dyson on hi-tech economy (BBC news video)
Migration caps and the supply-side of the economy
The Coalition’s plans to bring down annual net inward migration into the “tens of thousands” is running into some well organised, influential lobbying from business and academic organisations who complain of the impact this will have on the UK’s competitiveness. It is neither equitable or efficient for highly paid (often under-performing) footballers to be given an exemption under the migrant cap but not for skilled scientists from non-EU countries who may well become the distinguished future leaders of our scientific community. This report last night on Newsnight by BBC Science Editor Susan Watts makes the argument clearly and persuasively. Migrant controls damage the supply-side potential of the economy.
Video resources on UK economic growth
I have been discussing growth policies for the British economy with my A2 macro groups. Here are some of the short news videos and audios that have been used as a stimulus to discussion
read more...»What would Adam Smith think of a graduate tax?
The Institute of Directors reports that a graduate tax would be bad for the UK’s competitiveness. How well would a Graduate Tax fare when scrutinised by Adam Smith? He developed his four Canons of Taxation to determine how ‘good’ a tax will be. The four are:
1. The cost of collection must be low relative to the yield
2. The timing and amount to be paid must be certain to the payer (It should all be open and above board and clearly set out so that people know what their obligations will be.)
3. The means and timing of payment must be convenient to the payer
4. Taxes should be levied according to ability to pay
However much the undergraduates of the future may dislike the idea, a direct tax which is collected with standard income tax and based on the level of income generated by those with degrees would seem to meet those pretty well.
Macroeconomic Developments in the UK Economy - September 2010
Here is an updated version of the keynote tutor2u teacher presentation on key developments in the UK Economy…
read more...»CEO Summit focuses on supply side support
The Times is sponsoring a ‘CEO Summit’ this week, with about a hundred Chief Executives including Sire Terry Leahy of Tesco, Sire John Rose of Rolls Royce and Steven Hester of RBS. It provided their main headlines yesterday and several pages of coverage, which contain a great deal of comment about the opinions of the delegates about the Coalition Government’s plans to cut the deficit. The summit has been attended by George Osborne, David Cameron and Vince Cable as well, providing plenty of opportunity for analysis of fiscal policy and the discussions at the G20 over the weekend.
read more...»Innovation to get the British economy growing again
Larry Elliott in this latest piece for the Guardian turns his attention to the importance of innovation as a catalyst for competitiveness, growth and new jobs. The basis for the article is the speech given last week by the new Business Secretary Vince Cable who is charged with finding the right incentives to encourage domestic and externally-owned businesses to invest and commit to sufficient research and development to speed up the process of innovation in the UK. As a nation our spending on R&D is painfully low and has been for years despite the best efforts of successive governments. Many emerging market countries are streets ahead in terms of R&D spending as a share of their national income. Successful innovation brings benefits on the demand and supply-side of the economy. And most of it will flow from the private sector - so how best to achieve this?
The Elliott article links to a new report from NESTA - available here which focuses on the need to re-balance the British economy to provide a stronger platform for sustainable growth and new jobs. Re-balancing the economy has become a buzz phrase in recent months.
“Economic ‘balance’ has come to refer to many things, including the balance between imports and exports, the balance between the public and private sectors, the balance between public spending and tax receipts, and the balance between the South East and the rest of the country. This report focuses on one particular aspect: the balance between different sectors in the economy.
There are some super charts showing the changing contribution of manufacturing and other sectors to output and trade. This will be a good resource for teachers wanting to update their notes on manufacturing and competitiveness.
How can supply-side policies help in an economic recession?
Recessions are often the result of negative demand-side shocks that hit real incomes of consumers and demand and profits for businesses. The consequences show through in higher unemployment, a fall in capital investment and an increasing rate of business failures. Most macroeconomic policies in a recession centre on boosting demand and confidence in a bid to generate a rebound in output, jobs and incomes within the circular flow.
What role can supply-side policies play during an economic downturn?
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