The NIESR blog is a forum for Institute research staff to provide an informed, independent view on current economic issues and recent NIESR research. The views expressed here are those of the authors, and are not necessarily those of the Institute.
A debate is raging among both academics and policymakers whether wage growth and unemployment still form a negative relationship, in other words, whether the wage Phillips curve is alive.
Real wages are currently growing considerably below the pre-crisis average in many advanced economies. This is particularly striking especially against a backdrop of tight labour markets across a number of G7 economies, leading many economists to question the well-known relationship between unemployment and wage growth that is embodied in the wage-Phillips curve. Take the UK as an example, why is wage growth so low with the unemployment rate at a 40 year low of 4.2 per cent? Back in 1975, when the unemployment rate was at similar levels, wage growth was above 30 percent in nominal terms.
The Trump administration has embarked on an ambitious trade policy agenda supposedly to strengthen the US economy and reduce its trade deficit. Amongst other things, the government initiated renegotiations of existing trade deals (such as NAFTA) and started to enforce US trade laws aggressively, not shying away from unilateral actions.
Football is a truly global sport. Behavioural economics can now be used to chart this phenomenon and its knock-on consequences. The vagaries of our team’s fortunes affect us much more than we think and can have many unfortunate consequences. It is well known that football outcomes can affect absenteeism at work, drunkenness, and civil disorder. Indeed research in the US has also linked NFL results to domestic violence.
There is a puzzle around the world as to why wage growth has been so weak given that the unemployment rate has returned to pre-recession levels. This lack of wage pressure has continued to generate consternation among policy makers, who continue to expect nominal annual wage growth to revert to pre-recession averages of 4% or higher and real wage growth nearer to 2%.
The past few months have been difficult for some of the UK’s largest low-paying sectors, with frequent news stories telling of squeezed profits and store closures among high street retailers and restaurant chains. In retail, the ‘bricks and mortar’ outlets are locked in a ‘survival-of-the-fittest’ battle with online competitors, whilst restaurants are suffering from a decline in spending on leisure activities due to inflation and stagnant wages. Last week’s rise in the National Minimum Wage and National Living Wage rates will only add to the challenges.
NIESR marked its 80th year with a special session at the recent annual Royal Economic Society Conference devoted to the “Productivity puzzles past and present.”
Four outstanding speakers - Nicholas Crafts from the University of Warwick, Eric Bartelsman from the Vrije Univesiteit Amsterdam, Phillip Wales, Head of Productivity at the ONS and Rebecca Riley, Director of ESCoE – took turns to examine the issue which has been bedevilling successive generations of economists .
Since the introduction of the Apprenticeship Levy a year ago, there has been a shift from Intermediate Apprenticeships to the Advanced and Higher Apprenticeships, which are vital for increasing productivity. Data from the Institute for Apprenticeships on approved and planned Apprenticeship Standards suggest that Higher Level Apprenticeships, in particular degree apprenticeships, will grow further.
If successful, the new Standards could help build a second, professional route of high-level education to deliver qualifications for associate professional roles, benefiting workplace productivity and social mobility. However, there are also risks, for example if the Levy-funded apprenticeships simply replaced existing under and post-graduate studies, which would have also been undertaken in the absence of the Levy, and did not result in a genuine increase in skills investment.
With many of the emerging Apprenticeships taking up to four years to achieve, we will begin to be able to estimate the full impact of the Levy in a couple of years.
For decades, private sector firms have been aware of the benefits they can derive by investing in the management of their employees. Incentivising employees through individual and group performance pay allows firms to attract the best talent and increases worker effort. Fostering employee ‘ownership’ of the production process through team-working, initially pushed by Japanese manufacturing firms like Toyota, are now widely diffused across industries across the globe. But it is only relatively recently that providers of public services have thought to apply the same techniques in sectors such as education.
Like other public bodies, the UK government is required under the Public Sector Equality Duty to assess the impact of specific policies on ‘protected groups’ including by gender, age, race and disability. For the wide-ranging series of welfare reforms since 2010, this has been done largely through equality impact assessments, introduced in the 2010 Equality Act. As one of the authors of this week’s NIESR report on the equality impacts of recent welfare reforms, in this post I will reflect on the role and quality of the government’s own impact assessments.
The period from 2010 to the present has been one of far-reaching change in the design and delivery of welfare and of welfare to work. This has included the replacement of six key benefits with Universal Credit (UC); the introduction of an intensified conditionality and the sanctioning regime, requiring claimants to meet certain conditions or face losing benefits; and changes to assessment and entitlement to incapacity and disability-related benefits.
NIESR research for the Equality and Human Rights Commission, published today, reviews evidence for the impact of the reforms on protected, equality groups. Covering more than 400 sources of research evidence, we found that some reforms, for example UC, have winners and losers. Others have no winners, for example the benefit cap, bedroom tax and sanctioning. The data also clearly showed that the most disadvantaged in British society have been hit hardest.
The heavy debt burden imposed on recent and current university students in England is frequently justified on the grounds that graduates derive many private benefits from their privileged higher education.
In light of new announcements expected from the Prime Minister today, heavily trailed as an attempt to place housing at the heart of the policy agenda once again, it is well worth looking at the role that the UK’s housing market plays in the macroeconomy.
On Sunday Italy will go to the polls, at the end of a bitter and at times violent election campaign dominated by the issue of immigration. Migrants, refugees and asylum seekers have frequently been the scapegoats of a society facing a prolonged period of economic discontent post financial crisis, with poor job opportunities especially for young people.
As we have seen in other European countries, an increased hostility to migrants was fed by public discourse, politicians’ statements and media representation.
Unlike the 2013 elections and the recent French elections, the outcome of the Italian elections due 4th March is hardly predictable, and that’s due to the fracture of the country into three main blocks, the centre-right coalition, the 5Star Movement, and the Centre-left coalition.
The most recent polls point to the centre-right coalition composed of Berlusconi’s backed Forza Italia, the League (previously known as the Northern League) and Brothers of Italy having roughly 37% of the support. With around 28%, the 5Star Movement currently stands as the biggest single party list. Finally, the centre-left coalition with an estimated 27% of the votes has seen a strong decline in support over the past years. The fragmentation of the country into three main blocks makes the formulation of the outcome highly challenging.
The latest immigration statistics, out this morning, show net migration of 244,000 in the year ending September 2017. While this is slightly higher than figures for the year ending June 2017, they show a large decrease in EU net migration, compared to migration from outside the EU. This is a result of a fall in the number coming to look for work and an increase in the number leaving, continuing a downward trend since June 2016. The number of citizens from the EU8 countries, including Poland, coming to the UK to work is now at its lowest level since accession in 2004.
We recently met a Newly Qualified Teacher (NQT), let’s call her Ellen, who had been delighted to get her first teaching job in an Ofsted outstanding primary school in North London. She arrived on the first day of term looking forward to the challenge of teaching, but by lunchtime it dawned on her that the school had lost 100% of its classroom teaching staff since the previous academic year. At the time, she wondered what could have happened to make all these teachers leave.
Recent leaks of a Brexit impact study produced for the Department for Exiting the EU have reignited the debate about the costs of leaving the EU without a comprehensive trade agreement. The reported magnitude of estimated aggregate effects for such a ‘no-deal’ scenario is very similar to estimates published independently from each other prior to the Brexit referendum and also in line with updated work presented in our latest National Institute Economic Review: a loss in annual GDP relative to what it would otherwise have been of 7 to 8 per cent within the next 10 years. Put differently, annual income per head would be up to £2,000 less, compared to a scenario in which the UK remains in the EU’s single market.
What remains less clear in the debate is how these numbers came about, leaving room for political attack. This blog explains the assumptions behind our analysis.