Google and Average Revenue Product of Labour
Google’s headcount quadrupled between 2005 and 2009 but for some years the revenue per employee was in decline. This is now in reverse and income from each worked employed is now at a 3-year high at just over $300,000 a year! I might use this chart as a teaching aid when teaching labour market economics - Google is perhaps the world’s biggest advertising agency and it finds even more ways to monetise its services from month to month - whilst keeping the bulk of core functions free to users.
Explaining the Malthusian Trap
Dugie Young explores the idea of the Malthusian population trap. Is the prediction of Malthusian misery coming back into focus?
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(2/5), based on 1 review
World Economic Forum drops UK a place in competitiveness rankings
I always take the annual rankings of international competitiveness with a pinch of salt. There are plenty around - the latest has just been published by the World Economic Forum - all of which have a different methodology and emphasis. That said they do offer some interesting and useful insights on the current state of health of any particular country and also some of the underlying strengths and weaknesses especially on the supply-side.
The World Economic Forum places the UK as the 13th most competitive economy in the world in the new rankings - down four places from the 2007-08 table.
According to the WEF our main strengths are:
*An efficient of labour market (ranked 8th globally)
*We are ranked 8th on the technological readiness pillar.
*The country continues to have “sophisticated and innovative businesses, characteristics that are important for spurring productivity enhancements.”
But the fragile nature of our financial system is the Achilles heel this year
“The drop in rank is largely attributable to a weakening of the assessment of the country’s financial market, which has slipped from 5th to 24th place since last year, based on rising concerns in the business sector about the soundness of banks (126th) on the back of several banking-sector bankruptcies and bailouts. In this context it is not surprising that a significant and growing weakness remains the United Kingdom’s macroeconomic instability (71st, down 13 places since last year), with low national savings, an exploding public-sector deficit (related in large part to recent efforts to bail out the financial sector), and consequential public indebtedness”
Falling productivity - a cause or symptom of the recession
The annual rate of growth of output per hour worked (seasonally adjusted) for the UK economy is falling for the first time since the mid 1990s. There are good reasons for thinking that labour productivity tends to directly related to the business cycle; when demand and output is strong, firms will be making full use of their existing factor resources and capacity utilisation will be high. In a downturn, there are spare factor resources and productivity growth may suffer if businesses do not wish to adjust their labour force in response to declining demand.
The danger is that, in the absence of flexible pay that reflects lower output per hour, weaker productivity will cause a rise in unit labour costs and this will put further pressure on business profit margins and the internal funds available to finance investment. UK productivity continues to lag behind levels achieved by many of our major international competitor nations.
Q&A: What is the productivity gap?
The productivity gap is a phrase to describe a sustained difference in measured output per worker (or GDP per person employed) between one country and another.
read more...»Revision - Labour Market Failure (presentation)
Here is a revised streamed presentation on market failure in the labour market
read more...»Revision: Wage Cuts in a Recession
What connects professional rugby players at Gloucester RFC, staff at Swindon’s Honda car plant, employees of the successful Game retail store and thousands of people working for the Royal Mail? The answer is that all of them have been asked either to take a pay cut for the year ahead, or at the least endure a wage freeze until economic conditions improve. They are part of a growing trend.
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Revision: Trend Growth
This revision note looks at trend or long term growth in an economy. The trend rate of growth is the long run average rate for a country over a period of time. Measuring the trend requires a long-run series of data to identify the different stages of the economic cycle and then calculate average growth rates from peak to peak or trough to trough.
Supply-Side Indicators for the UK
I am about to start teaching supply-side economics with my AS students so the time has come to update some of the charts I use to illustrate aspects of supply-side performance. This is available to download as a PowerPoint file below.
read more...»Dell Relocates - Nissan Downsizes
On the day that Nissan opted to cull a quarter of its workforce at the ultra-efficient car plant on Tyne and Wear, the story that caught my eye was across the Irish sea.
Dell’s decision to close its manufacturing capacity in Limerick and transfer production to a low-cost location in Lodz in Poland will come as a severe blow to the Irish economy....
A quite astonishing statistic from this news article today. It claims that Dell’s operation in Ireland accounted for 5% of the country’s GDP. Dell is Ireland’s largest exporter too. So the loss of around 1,900 jobs (add another 3-4,000 on top from suppliers to the factory) will deal a crippling blow to the local economy.
This is a good example of the multiplier effect - where a change in output and jobs in one business or market can have important second-round effects in related supply-chain industries or the local or regional economy. It has been estimated that the knock-on effect could be between one and three jobs lost elsewhere in the region for every one lost at the Dell plant directly.
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