UKC

The UK has the worse real wage growth since 2008 of any European economy except Greece. Conservatives - strong on the economy.

Chart and explanation/caveats here. https://mainlymacro.blogspot.co.uk/

In reply to sebastian dangerfield:

After my immigration thread i was going to start an economics thread, so Good Work!

Simon Wren-Lewis is incredibly insightful and this graph (click continue if you get a warning from the link) is pretty damning.

http://bit.ly/2poQN9s

People have forgotten about Osbourne's austerity and how pointless & damaging it was.

In reply to Shani:

Yes, he's a really good record of being right as well.

In reply to sebastian dangerfield:

Well, if we do keep importing cheap labour from the EU, then average wage growth is bound to fall. Who wants to pay someone £80.00 an hour to fix your plumbing, when you can get someone from Poland to do it for £7.50 an hour?

In reply to Big Ger:

If you could let me know one of these £7.50 an hour Polish plumbers that would be great, as most of the ones I know all seem to work in the warehouse on zero hours contracts.

In reply to JMarkW:

If it helps last year we got 3 quotes for a full kitchen install.
The Polish guy quoted £600 for the labour.
The 2 UK companies were both around the 2k mark.
I went with one of the UK companies, paid more but the other difference was supply.
Polish guy would fit what I bought, other guys supplied and fitted so there is no argument if anything isn't right.

In reply to sebastian dangerfield:

Perhaps it's proportional to UK productivity?

In reply to sebastian dangerfield:
So let me get this right. All the eumigration into this country is for what reason. ? Jobs which are not available in other European countries as their economies are shot to pieces. So we have Young people coming from all over Europe to work here.

I would suggest the economy has done pretty well in comparison with others .

If it had not there would simply be no jobs for these migrants.

It is something we should be celebrating

In reply to sebastian dangerfield:

Carefully chosen statistics from an academic who should know that in the big picture unemployment rates are as or more important then wages growth. Have a look at employment trends across the major economies and see if you can make the same case. The coalition government's austerity promises, flawed though they might be, gave businesses the confidence to avoid mass redundancy programmes. Look at Spain, France Italy and ask if you'd accept millions of unemployed youngsters as the price for an extra 1 or 2% of wages growth. I think it's time to reel the austerity in, but it's a delicate balance before debt spirals back out of control, and I think you'll find few Labour supporters, let alone floating voters, to be confident that a pair of 70s throwbacks will chart a better course. There are other issues in this election than the economy of course.

In reply to BnB: its very tricky to balance this out. As you note the UK suffered far less post crash unemployment than other countries, but it does mean the uk still has a bunch of zombie businesses and also has had now a good few years of low (very low or even effectively) negative wages growth. This reflected in debt, 'the squeezed middle class' and a lot of dissatisfaction.

I wonder if the UK's low productivity is a symptom, or a result, or both.

Of course it's a good argument that any job is better than no job. It's very difficult when an industry disappears to replace ( see coal, shipbuilding, steelworks et al.) especially when people are living far from the new centre of economic activity. Has the UK ever had an effective regeneration plan, or even a clearly defined economic policy?

In reply to summo:

Expect the two are related.

In reply to neilh and BnB:

There's perhaps a trade off between real wage growth and unemployment going on here. I don't think I'm persuaded by BnB's explanation for this (we've been round it before), but it's an interesting question. I expect it might get discussed in the comments on the blog I linked.

My initial thoughts of what might be going on here are -

1. even if such a trade off has been going on, that's not necessarily a vindication of GB performance. GB overall relative performance has been bad. This is bad for a wages and/or unemployment. In this case for GB it's been weighted towards wages
2. employment conditions may well have fallen rather than unemployment rise (zero hours contracts, part time jobs, going self employed etc.). I'm not saying this is a bad thing relative to increased unemployment.

In reply to sebastian dangerfield:


But also the type of industry etc..

Living costs for workers are the same, if you are in an industry that is having to tighten it's belt to be competitive with Asia, versus some cutting edge IT or space tech. I think the reality is the UK or Europe isn't likely to see growth over 3% ever again. The rest of the world is catching us up, we will do well to maintain our standard of living.

In reply to neilh:

Exactlty: near 50% youth unemployment in much of southern Europe. Perhaps a wage that is a few percent behind the ideal, is better than being jobless.

In reply to summo:

Forever is a long time! Your general point seems plausible, though, but it's not really relevant to this which is about performance recently relative to other countries.

On the unemployment, see post above.

In reply to sebastian dangerfield:


Except that is completely untrue. UK performance in employment terms is remarkably good relative to very similar countries, e.g. France which is our closest comparison. And a very valid comparison when their government over the same period pursued a high tax, anti-austerity agenda. A government that so recognises the stark failure of its economic policy that it barely offers a candidate in today's election. Meanwhile in the UK, ours is sufficiently emboldened by its economic performance to call a snap election (amongst other reasons).

Be careful what you wish for.

In reply to BnB:

I *think* you might have misunderstood my post. No doubt my writing, rather than your understanding. Could you be specific about which bit(s) are completely untrue?

In reply to sebastian dangerfield:
That Wren-Lewis accuses the media of being propagandists rather reporters on the economy is more than a little ironic given his own disingenuous use of statistics.

Every economist knows that real disposable income is a better indicator of living standards than real wages (and it is living standards that Corby claims to be referring to), including as it does the impact of tax and benefits etc. RDI shows a much more nuanced picture.

Median RDI in the UK is up 7% from 2008 and 8.4% from 2010 (the low point). Interestingly, it has been the lower income deciles that have seen the biggest gains whilst the higher have been flat or (at the very top) have fallen. So Corbyn's claims of growing inequality are also false.

It is particularly obtuse to blame the government for the non existing fall in living standards when it is actually government interventions on tax and benefits that have made the RDI numbers better than the wage numbers. (albeit some of them the result of the continued impact of Labour policies in 2009)

It's true that UK growth has been slightly below the EU average (8.7% from 2008, 10% from 2010) but part of this will be accounted for by the strong growth of Germany alone.

In addition, of course BNB is right that wage numbers have to be taken in the context of employment numbers and the UK has both a higher labour participation rate and lower unemployment than the EU average.

So, whilst the UK performance is far from stellar, and weaker than a number of its peers, both Corbyn and WL's description of it is highly misleading.

PS. My calculations for percentage changes. Source eurostats.

In reply to wbo:
I am not sure I know what an effective regeneration or economic policy really looks like. Most of the time such policies just seem to be protectionist and focused on preserving a few so called high value sectors.

We happen to be very good in the uk at not doing this and fumbling through.

This does not mean that everything is ideal, nor that certain issues should not be addressed( I will never go near a sports direct shop).But perhaps we should not be so hard on ourselves about our economy.

In reply to Dax H:

Fair enough. Two weeks work, that's about minimum wage I guess. Though I'm guessing the UK companies were vat registered and the Polish plumber was cash in hand?
Cheers
Mark

In reply to sebastian dangerfield:
Talking to the two (unemployed) children of a French friend a few weeks ago, and the last thing they were concerned about was wage growth. Any wage would suit them.

In reply to Tim Davies:

I think it's a given amongst social scientists and economists that being in employment is better in all sorts of ways than not being employed for the individuals involved and their families but also for the economy.

In reply to Tim Davies:

Desperate.

In reply to Postmanpat:

Although generally this is usually espoused by people who wouldn't actually do the minimum wage arse wiping care jobs, zero hours warehouse picking amazon jobs that they tend to refer to.

I take your point though.

In reply to sebastian dangerfield:


I thought you were saying that the UK's performance in terms of employment levels had been bad, which is patently untrue. Re-reading the post I quoted from you it could be you that you meant poor economic performance was bad for employment, which would make more sense even if it doesn't necessarily follow in all cases. If I got the wrong end of the stick I apologise for jumping to assumptions.

In reply to Big Ger:

Doesn't the principle of this argument of services also apply to goods?

This is why so many in Britain drive BMWs, Audis and Mercedes, and Austin and British Leyland have gone bust; if others can do a better job (in terms of price or quality), then that's where the market goes.

In fact if you neuter competition then you also open the door to inflation and hinder quality (as we saw in the 1970s). Competition has driven our growth and living standards.

You're basically arguing for protectionism and anti-competition. Why are you so anti business and the economy? Why are you again taking a recessionary position, hampering growth of GDP?

In reply to Shani:

I didn't read Big Ger's response that way. I felt he was offering an explanation for wages stagnation, ie the ready supply of cheap labour, not arguing for its abolition.

In reply to Postmanpat:

As any good economist will tell you

You can't use RDI to compare economic performance across countries over time - which is what SWL is doing - or statically, because they're sensitive to tax and don't include public services. You can't use it to compare within country across time if public services are being significantly cut (or increased). You can't use them for overall country performance if public services are changing or if borrowing is changing. You can't use median because it's sensitive to income distribution and, for RDI, distribution of taxes. Also, SWL isn't just talking about lower/median income here, so again median wouldn't make sense.

For all these reasons and possibly others SWL's measure's a sensible one that no good economist would consider disingenuous or obtuse. I don't think you're being disingenuous here though - I expect you just don't know what you're talking about.

You might have a point that Tory policies have protected the lower earners from their bad overall economic performance to some extent and Corbyn doesn't give them credit for this. I'm not sure your numbers are right though - where are they from? - and even if they are you need to take pubic services into account as well and they just focus on the median so miss out a lot of the story either side. And he could still quite reasonably argue that inequality was too high - it's not like he was all for new labour and is now changing his tune.

In reply to BnB:
Interesting stats in the economist on the % of 15-29 year old in employment on temporary contacts in the EU.

for example.Spain 55%,France 40%,Germany 38%, Denmark 20%.

And the Uk 11%

No wonder the article highlights an Italian dreaming g of a job in England.

In reply to BnB:
I mean that overall economic performance has been bad - ie growth in GDP per head. GDP per head depends on what proportion of people are working and productivity, the value of what they produce. If GDP per head is bad, but employment is reasonable, then productivity must be bad enough to account for the over all poor performance in GDP per head.

So, given poor overall performance, you can say that it's better to have good employment and poor productivity (I basically agree, although see my point 2), but you can't cite good employment (on it's own) as a sign of good economic performance.

ps - no apology necessary!

In reply to neilh:

That's interesting. I know Spanish folk working rubbish jobs are much better off here.

For the other countries I guess you'd need to know what the contracts are like and their chances of a good/stable job afterwards.

The stereotype of France is it's difficult to get a good job when your younger but then goos stable jobs when your a bit older.

Do you have a link to the article?

In reply to sebastian dangerfield:

>
There is , as you know, much criticism of Corbyn's claims about living standards and inequality, on just the basis I have used eg.from the IFS. So whether you want to use your favourite terms or not, his and WL's claims made are regarded by many as misleading.

As you say, RDI can be misleading because it doesn't allow for the quantity or quality of public services, but nor do earnings stats. Indeed they are self evidently an even narrower measure of living standards. WL knows that.

Regarding median, as you'll have noticed, I specifically indicated impact on different elements (I can break it down more precisely if you want) , which substantiate the basic claim on living standards.

So, whilst I accept that RDI (PPP) has many failings when compared across countries, it is nevertheless often used.eg.http://www.oecdbetterlifeindex.org/topics/income/. Given that
some commentators use such useless stats (for this purpose) as GDP per capita it doesn't seem unreasonable to use it over the narrow earnings number.

There is an ONS number "actual real disposable income" which allows for the element and cost of public services. The UK's ranking fell sharply from 2005 to 2011 (Labour government!!) but I cannot find the numbers up to 2016. Can you?

Or have you an alternative measure?

In reply to sebastian dangerfield:
I read the printed one . It's in this weeks and is titled "McJobs"

In reply to sebastian dangerfield:


The problem with the two-tiered job systems in Southern Europe is, apart from the fact that it is harder for young people to get jobs in the first place, is that employers don't invest in young people who are supposedly on "trainee" contracts and are reluctant to put people on full time contracts because of the cost of making redundancies as well as the high taxes and social security payments that companies have to make. The consequence is that it is very hard for young people to advance.

Here is the article that neilh mentioned

http://www.economist.com/news/europe/21721219-segmented-labour-markets-have...

In reply to sebastian dangerfield:


It's well documented that there's a problem with productivity here. But no one seems to be able to put their finger on why. My company is among the most productive in a sector (IT services) that bucks the trend already so I'm not well placed to offer an answer, but I doubt it's Brown or Cameron's fault. Could it be an untrustworthy statistical tool? France higely outperforms us despite shorter working hours. But their economy in the round, and certainly in the opinion of their voters, is performing rather worse. A paradox.

In reply to BnB:

Yes, productivity puzzle is an interesting one. I've heard good arguments that we have a 'long tail' of bad management in the UK. Our best firms are very productive but we've lots of badly managed inefficient ones that keep going rather than folding. That would be consistent with your firm being good. Also just working long hours reduces productivity per hour all things equal. So when people say Franc is just as productive as the US per hour (or close), the question to ask is how productive the US would be per hour is they worked less? I expect more. Stats could well have something to do with it too.

France's economy gets a (relatively) bad press as I understand it, but I don't know enough about it to have a strong opinion. One thing worth remembering is that our relatively better performance in recent years has been catching back up - we had a steeper dip, and are now having a steeper recovery. Krugman has some interesting stuff on France v the US expect you might see it as left wing bias but worth read. Near the top of his blog just now.

In reply to Bob Hughes:

cheers

In reply to Postmanpat:

So you're conflating Corbyn and SWL here. My main points were about SWL and how his use of real wages is entirely appropriate. If he had used RDI it would have been inappropriate and misleading - he would have been shouted down by other good economists.

I said you might have a point on Corbyn and that your numbers might be useful (but not sufficient) for making that point. I wouldn't expect Corbyn to be particularly honest with his numbers, being a politician and all that. If the IFS have criticised him their very probably right. On the other hand, the IFS will have a lot of respect for SWL. Certainly he does for them.

The betterlife stuff uses RDI is as one of many measures which include public services, and goes beyond economic performance. It makes sense to use RDI as they do.

I don't have an alternative measure. I was just explaining why SWL's measure was appropriate for what he was doing, and RDI wasn't. (As you accused his of being disingenous and a bad economist for using real wages instead of RDI).

The "actual rdi" sounds more useful, but measuring from 2005 to 2011 isn't going to tell you much other than we had a massive recession which bottomed out towards the end of that period.

Anyway, I'm off - just saw I'm in the top forty posters which is a bad sign! Interested in what figures you are using though (?) as I understood RDI didn't start going back up until 2014 and then went up faster that GDP per head. Which suggests it was something to do with taxes and benefits.

In reply to Big Ger:

With the added bonus that your firms have not had to spend anything on training/apprenticeships . Win win ?

In reply to Shani:


I'd lie to see your evidence that I have done ANY of that. I won't, because you're just frothing at the mouth now.

Pointing out fact, isn't the same as arguing that the facts are a good thing. I suppose you know that, but have no other argument to offer.

In reply to BnB:


Yes, but don't let that spoil Shani's hyperventilation.

In reply to Jim C:


Oh yes.

Under an EU scheme partly funded by British taxpayers, all positions advertised in UK jobcentres also have to be offered to workers in European member states. UK firms are given as much as £1,000 as a bonus for taking on the foreign workers. The disclosure undermined comments made by Matthew Hancock, the business and skills minister, who called on UK bosses to stop taking the “easy option” of filling jobs with foreigners when they could train local workers instead.