I’m all for
economists improving their communications skills, and there are some
good initiatives currently around. But all that is as nothing when
politicians and the media keep promoting bad economics.
One of the most
obvious is the focus on jobs rather than output. There are some
circumstances were this makes sense. The most obvious is a recession,
where unemployment is high and the focus of policy should be getting
unemployment down. Another is when thinking about the geographical distribution of employment. But at times when unemployment is low, the focus
on jobs rather than output can be very misleading for one simple
reason. We can easily create jobs by having technological regress.
What has happened in
the UK since a year after austerity was imposed is that productivity,
measured in terms of output per hour worked or output per worker, has
hardly increased. Productivity normally rises in a recovery, and it
began to until the middle of 2011, but we have seen almost no growth
since then. That is terrible news, because it means that there has
been no increase in average living standards: add in the Brexit
depreciation and real wages have fallen substantially.
Yet politicians and
newspapers continue to talk up employment growth as if it was a huge
achievement. Here is the Mail from a few days ago.
So many times I have
heard government ministers counter criticisms over output growth
performance by talking up employment growth, and I do not remember a
single occasion where they have been pulled up with the obvious
retort ‘so you are happy with stagnant productivity and falling
real wages then’. [1] Because strong employment growth coupled with
weak output growth means something is very wrong with productivity,
and we cannot have sustained growth in real wages and living
standards without productivity growth.
You might expect
politicians to try and get away with nonsense economics if they can,
and you would certainly expect right wing papers to turn reality
upside down in an effort to protect their precious Brexit. That is
why it is so important that political journalists working for the
broadcast media know some basic economics, and are prepared to use it
to call out the distortion of some politicians. Until they do, basic
misunderstandings about simple economic relationships will persist.
[1] A BBC journalist
did try once, and got into trouble as a result, as I relate here.
Do we have figures for the age profile of newspaper readers, to see how many of them are pensioners, so not in the 'world of work' these Conservative newspapers claim to obsess about?
ReplyDelete"Productivity normally rises in a recovery, and it began to until the middle of 2011, but we have seen almost no growth since then. That is terrible news, because it means that there has been no increase in average living standards: add in the Brexit depreciation and real wages have fallen substantially."
ReplyDeleteActually, the BBC did recently comment on productivity. "The UK has seen the strongest two quarters of productivity growth since the recession of 2008, according to the latest data." This may not last, but it is rank hypocrisy to ignore this and then criticize the media for "dumbing down".
http://www.bbc.co.uk/news/business-43140646
It is difficult to know what is going on with regards to productivity. The only thing I can observe directly is that when I go to the supermarket I see people handwashing cars when this was previously performed by machines.
You have offered no clear explanation of why productivity is low. The only explanation I have seen recently is that the availability of cheap labour acts as a disincentive for employers to invest. If this were so then the recent short term rise in productivity might be attributable to the lower levels of immigration post referendum.
What do you make of conservatives/libertarians like Ryan Borne who explicitly have said that the productivity stagnation is worth it for the extra jobs?
ReplyDeleteI think that's the problem for me, you can ask for people to be able to challenge these fools but the fools will always have some other absurd response. I don't think there's any amount of economics training possible to teach a journalist how to pin down a right wing commentator.
If you've gone from being unemployed to working at 90% of UK average productivity then you are better off.
ReplyDeleteIf you've moved from a job in Romania at 30% of UK average productivity to one in the UK at 90% of average productivity then you are better off.
If you were already doing a job which averaged 90% of UK average productivity but have to keep doing for 2 more years due to the retirement age changes, then you are betted off than being out of work while you wait to draw your entitlements.
I can think of more, but I think you get the point that these all bring the average productivity of UK labour figure down in some way and it's one which no-one in the media is picking up on.
“Until they do, basic misunderstandings about simple economic relationships will persist.”
ReplyDeleteBut you as an economist don’t understand what is going either!
I suggest you read the ONS Statistical bulletin “Labour productivity, UK: October to December 2017”. Output per worker and output per job grew by 0.1% between the third and fourth quarter, BUT ... UK labour productivity as measured by output per hour grew by 0.7%. The difference between these two measures reflects an average fall in the number of hours worked per worker and per job.
It looks that some British workers have enough “stuff” and are putting a greater premium on free time. So your basic premise that output is a measure of living standards is wrong.
This neatly encapsulates the disagreements between Remainers and Leavers. Remainers think that output is the be all and end all of life, whereas Leavers think it is also about the quality of living. It looks like the latter view is gaining traction.
I put a great premium on free time and standard of living, and as rent continues to spiral while wages remain stagnant I'm increasingly losing out on both.
DeletePersonally been waiting for a decent explanation of low productivity growth.
ReplyDeleteIs it low investment except in land speculation leading to lots of jobs around coffee machines/simple equipment and low wages and lowish or at least easily learnt skills? And a plentiful supply of workers and low benefits/welfare or subsidies for low wages? Is self employment covering up things? (This is not a strawman I actually want someone to explain it or is it as opaque as it feels - I would like a causal explanation of the productivity v employment thing)
It does feel as though something very wrong is happening and has done for a while, hypernormalisation?
Apart from the gratuitous introduction of Brexit what you have shown is not so much a dumbing down as an attempt to hide poor performance.
ReplyDeleteThe crash of 2008 was a disturbing event for those in power because it exposed the incompetence and venality of the current power structures. As I see it what you describe as dumbing down is the attempt to present a Panglossian view of things. If those in authority are incompetent then the question arises:" why should you be allowed your authority?" to which there is no satisfactory answer. As the strains between actual performance and "desired" performance become ever more egregious then you can expect even more fanciful ways of explaining it away.
Dumbing down has little to do with it; this is an issue of power and competence.
Given the big decline in the growth of productivity in all major industrial countries since the 1960s (with the decline being even more marked in Japan and Italy than the UK) the main explanation for this seems to have something to do with industrialized countries in general rather than anything specifically to do with the UK.
ReplyDeleteHi, can I just check something?
ReplyDeleteCan I assume you discussed this with one of the many French people living and working in Oxford? I take I you explained that them working here (in low-productivity UK) rather than being unemployed in (high-productivity) France was economically dumb.
Now I think about it, what the hell are you doing here?
"Now I think about it, what the hell are you doing here?"
DeleteHe's writing thought-provoking blog posts - you should try it sometime.
S
RE: "...One of the most obvious is the focus on jobs rather than output. ... The most obvious is a recession, where unemployment is high ...Yet politicians and newspapers continue to talk up employment growth as if it was a huge achievement...."
ReplyDelete• I love it when born-on-second-or-third base white men think that having millions of unemployed folk is lesser deserving of focus.
• Even in a recover there are millions of folk that are unemployed or underemployed. Moreover, wage rates have been anemic for decades.
• Employment growth IS a great achievement. Full Employment is a great great achievement.
RE: "... But at times when unemployment is low, the focus on jobs rather than output can be very misleading for one simple reason. We can easily create jobs by having technological regress. ... ..."
• The focus is not misleading. Its a question of values and humanity.
• Yes you can easily create jobs with tech regress. You can also lower unemployment by murdering the unemployed. That doesn't make tech regress, extermination, or a lack of focus on jobs desireable.
RE: "... That is terrible news, because it means that there has been no increase in average living standards ... ..."
• This may be fundamentally wrong. If previously unempolyed folk are hired and are now working, the economy's output increases and living standards increase due to higher overall output.
• Who gives a crap about productivity. Yes, over the long run it results in increased living standards, but the increase in production/capita is much more important in the short and intermediate term.
RE: "... You might expect politicians to try and get away with nonsense economics ... ..."
• The problem is many of our economists are getting away with nonsense economics.
The problems of productivity can be worthy of focus, study, and hand-wringing only after the economy has been consistently at Full Employment. Full Employment can be easily attained by implementation of a Job Gty as part of a Full Employment Fiscal Policy as the Pup bullet-points for you here: http://mmt-inbulletpoints.blogspot.com/2017/09/im-just-responding-to-various-economic.html
Hardly the worst abuse or even near it. In reality, jobs are what people relate to. Most people don't care about output and would rather know there are jobs. I get that so I don't see this as that bad.
ReplyDeleteThe worst is when flagrant violations become reported effectively as fact because they fear being called biased.
"GOP says cutting taxes will pay for itself, Democrats disagree."
.
ReplyDeleteProductivity is always described as a leading indicator.
Can productivity also be a trailing indicator.
Extreme example: World War 2 “Liberty” ships started out taking months to build. Eventually they coukd be built in a day. Perhaps, sometimes, the economic system has to be greatly stressed to force productivity growth?
.
Although, admittedly, the story and the date are fictional, modesty forbids me identifying the writer of the prescient headline to this post on Mainly Macro (24 June 2016):
ReplyDeleteBREXIT BRITAIN'S BOOMING !
Yet another industry shakes off the shackles of Europe. Now that Britain's fishermen are no longer bound by quotas handed down by Brussels, the fishing industry is booming again.
Eurocrats are already moaning about over-fishing depleting stocks.
Daily Mail 16 August 2018
The tabloids will soon be getting to work to create a favourable impression of Brexit, so you're going to see a lot of articles like this in the years to come.