Technological toddlers and the Manchester miracle

Afternoon all,

Ruth did warn you – and now it’s my turn to drop something thought‑provoking into your inbox. It’s been a lively week in the worlds of politics and economics, and we’ve pulled together the sharpest takes. If the spectacle in Davos has worried you, Something for the Weekend may offer an antidote – your top reasons to stay optimistic.

There’s plenty more to get stuck into: fresh research on intergenerational inequality, the drivers of economic growth, and the ever‑thorny question of screen time. And in this week’s Chart of the week, we’re unpacking the decline of reading and the problem of science in schools.

Have a great weekend.

David

President
Resolution Foundation

Technological toddlers. The Government bowed to cross-party pressure this week and launched a consultation on banning social media for under 16s. But their own data shows that there’s more to childhood screen use than just tweens on TikTok. New data from a survey of families with two-year-olds is fairly jaw-dropping. It revealed that 98 per cent watch screens daily – at an average clip of more than two hours (127 minutes) per day. This generation is experiencing more screen time than any that came before. A decade ago, nearly half of toddlers (46 per cent) met the WHO recommended limit (max 1 hour), but that’s now dropped to one-in-three (34 per cent). Compounding those square eyes is the fact that only 56 per cent of 2-year-olds spent any time reading with a caregiver every day. And there’s clearly more at play than personal choice. Screen time is higher among lower-income families, those with less-educated parents, and children of Black, Asian or Mixed ethnicity backgrounds. What about us adults? Apparently, only 2 per cent of adults had a new year’s resolution related to getting less screen time this year. The scroll continues.

Dealing out development. Why do some countries embrace new technologies quickly while others fall behind? A new paper from Nobel prize winning economists Daron Acemoglu and Simon Johnson  identifies what’s holding back developing economies from going all-in on innovation: namely, poor quality institutions, constraints on credit, and a mismatch between needs and tech. They show that more access to higher education is particularly important for technology absorption and total factor productivity even in developing countries – an important corrective to the fashionable hostility to higher education. Countries that can surpass these barriers and grab inventions from around the world (think Kenya and mobile money) will see their incomes rise, with their long run rate of growth eventually settling at the same rate as the world technology frontier. This could pair for some nice weekend reading with this new paper examining the ideas of another recent Nobel laureate Joel Mokyr, which confirms that the feedback loop between scientific theory and innovation got the ball rolling on modern economic growth.

Wonderful windfalls. Different sized inheritances might sound unfair, but they can counterintuitively lead to a reduction in inequality. New evidence from a US study finds that when someone dies, the wealth inherited by their child causes an increase in investment income by $300 annually, but a fall in wage earnings by about $600 and therefore a net decrease overall. The authors attribute this to people reducing their labour supply by 2 per cent partially in response to a short-lived grief effect, but mostly due to fewer eldercare costs and a positive wealth effect that persists for up to six years. It isn’t just early retirement either, as the result holds for inheritors under 40.  Interestingly, the earnings effect is smaller for poorer families and larger for richer ones, leading to the counterintuitive result that parental inheritances lead to a slight compression in the wealth and earnings distribution over time. The authors note that their findings are larger than in similar studies, so we’re holding out for some more data before we recommend abolishing inheritance tax to reduce inequality…

Mulling the Manchester miracle. Andy Burnham was in the news this week for (among other things) arguing the country should embrace ‘Manchesterism’ as an economic model, citing as evidence the rapid pace of growth under his mayoralty. Maybe not a bad idea considering the city’s productivity rose by 14 per cent between 2019 and 2023. But is the mini-boom real or simply a data mirage? Economist Paul Swinney warns that this hopeful story may be down to an overestimation of the high value ‘Legal and Accounting’ sector growth in Trafford, matched with an inaccurate estimate of total hours worked due to an undercounting of self-employment in recent years. Discounting these factors, he reckons that productivity growth has been closer to 9 per cent – still well ahead of the rest of the UK on around 3 per cent, so the disciples of Manchesterism still have plenty to cheer about. Useful context for an upcoming by-election that could bring the King of the North back down south…

Something for the weekend | Reasons to be cheerful

Amid the economic challenges and nail-biting geo-political turmoil, there are genuine grounds for optimism about Britain’s future. Don’t believe me? It’s all there in the data…

The UK punches above its weight in research – producing 5.9 per cent of the world’s publications with just 0.8 per cent of the global population, ranking third worldwide for highly cited researchers. Our universities continue to create a pipeline of innovation that few can match.

We also hold unexploited assets. Government datasets – from the ONS to the NHS – could be worth £15-200 billion to the economy if properly leveraged, with open access to public sector data alone estimated to add 0.5 per cent to GDP annually. Meanwhile, our revealed comparative advantage in services – from financial and legal to pharmaceuticals and aerospace – positions us well for future growth. The UK remains third globally for overseas investment in greenfield sites (as audience member Tera Allas pointed out to me at the launch of our excellent growth paper earlier this week) suggesting international confidence in our fundamentals.

As Hannah Ritchie notes, many of us are individually optimistic about our own lives while collectively pessimistic about society. Perhaps it’s time to bridge that gap. The foundations are there: world-class institutions, valuable data, service sector strengths, and continuing international investment appeal. The question isn’t whether we have the ingredients for success, but whether we’ll use them.

Chart of the week

The British Science Association published this week a chart showing a steady increase in the number of young people saying they were put off science by school. Even whilst we are all advocating for the importance of STEM subjects, it looks as if the proportion of 16–24-year-olds turning their backs on them is rising, despite already being much higher than it was for older generations. Perhaps this could be to do with the decline of practical science in schools – but the data shows this is not just a problem for science subjects. Although attainment in reading is continuously improving, the proportion of young people who enjoy reading for pleasure is falling fast. It would be a great shame if a focus on getting people through their exams was detrimental to their actual enjoyment of science and literature,and limiting their cognitive skills too.