Bojo goes Red Robbo

Top of the Charts

Afternoon all,

I was wrong. More accurately, Boris Johnson did the wrong thing. But I was wrong in thinking he wouldn’t press ahead with removing the £20 a week Universal Credit uplift. Although it feels like old news, it’s obviously very fresh for the 4.4 million families whose incomes fell by £1,000 overnight on Wednesday (lower Universal Credit payments will start arriving from next week). This income fall for the poorer half of Britain is on a scale only seen during recessions and happening exactly as prices surge. It’s going to take more than jokes about Hereward the Woke to get many families through a difficult winter.

The only good news this week is that party conference season is over. We’ve got some reads (and a chart) reflecting on the big arguments that got made – and some light relief too I promise.

Have a good weekend,

Chief Executive
Resolution Foundation

Harmful hunger. Just in case anyone needed a reminder why low levels of benefits are a problem, read the latest report from the Welfare at a (Social) Distance research team on food insecurity. This has grown faster in the UK post-financial crisis than elsewhere in Europe and is unusually focused among benefit recipients. People not having enough money to feed themselves has become such an issue that the DWP recently began publishing official figures on it – showing half of Universal Credit claimants were food insecure. The new report highlights that being affected by a specific benefit cut (e.g. two-child limit, the bedroom tax, and the benefit cap) is associated with higher insecurity. The Chancellor’s conference speech defended the Universal Credit cut – arguing that he’s doing families a favour cutting their benefits to save them from becoming slaves to the state. Back in the real world this makes it harder for many households to eat.

British Balloting Corporation. The BBC is a massive asset to Britain – economically, culturally and socially (the idea that what Britain needs is fewer things we all share in common is bonkers). But obviously politicians love screaming at it for coverage they don’t like. For those not persuaded by the “it’s trying to be neutral so get over it” argument, new research offers another reason for MPs to be grateful to the BBC: it drives up election turnout. In the 1920s at least. A new paper uses the roll-out of BBC radio to investigate the role of media exposure on political engagement. The conclusion? Radio coverage increased voter turnout by around 2 per cent per year. Vote Beeb.

Hiring HGVs. The official plan is no migration = higher wages for Brits. Except that the plan is also more emergency visas for HGV drivers. The rising wages bit is happening, with advertised pay rates up between 15 and 19 per cent since January according to a new blog from the Indeed Hiring Lab. Who’s showing interest in those jobs? Well interest in HGV driving jobs (as measured by clicks) has jumped 307 per cent after the visa announcement – driven by a big surge in interest from outside the EU, but also increases from within the bloc. A comparison of drivers’ wages in the UK compared to other European countries points towards them generally being attractive but not always the highest.

Hidden harassment. Workplace harassment is chronically underreported, despite #MeToo-related progress. A new paper adds economics to the intuition that employee fear of employer retaliation supresses reports. The hypothesis is that when the costs of being fired are high (i.e. when it’s harder to find another job), only the most egregious harassment will be reported. The authors find evidence of this: when unemployment rises so does the chance of claims that are made being found to have merit. This increase is in even larger among firms with a high proportion of male managers. The paper also finds a similar pattern when the level of benefits were cut in North Carolina following the financial crisis. At work, as elsewhere, the path to justice often comes with real risks for victims.

Pricey wages. Wages are going to surge is the Prime Minister’s new argument. Which is at least something to look forward to. Those pondering the PM’s transformation into a 1970s trade unionist (there’s a reason the Labour Party have been totally absent from this week’s migration/wages row) may enjoy a new paper examining the impact of American minimum wage rises.  Unsurprisingly minimum wages increased pay for grocery story workers. A huge literature focuses on whether that leads to lower employment (answer = largely no), but not enough examine why that’s the case (because firms have multiple ways to respond to wage pressure). This research shows one example: a 10 per cent minimum wage hike raises grocery store prices by over 0.5 per cent – with particularly large rises in poorer areas. Our own research showed that the most popular immediate response of UK firms to the 2016 introduction of the National Living Wage was to raise prices (over a third did so). The paper argues this isn’t just about stores responding to higher costs – it’s also about minimum wage rises making poorer households less price sensitive. The economy, like life, is complicated.

Chart of the Week

The Prime Minister wants wages up, up, up. In fact he thinks they’re already surging. They are rising, but 1) not as much as headlines suggest 2) for some – truckers – more than others 3) possibly not for that long as inflation surging to four per cent will mean many peoples’ wages falling in real terms by Christmas. But focusing on wanting wages up is spot on given the disastrous decade we’ve just had – the worst pay growth since the 1930s and among the worst of advanced economies.

What’s caused this wage stagnation? Low-paid immigration is Boris Johnson’s answer. Unfortunately, the evidence and Chart of the Week offers a rather different explanation – terrible productivity growth (Britain’s terrible record is in contrast to other countries with high migration, like the US and Germany).

At a sector level there can of course be a link between migration and productivity – ending free movement will improve labour productivity by ending hand car washes, raising prices and leaving the keen/frugal washing their own cars. But the effect on the economy as a whole is 1) small 2) complicated. For more chat about the link between the UK’s need to sort out its economic strategy and lower migration listen to the latest edition of Evan Davis’ Bottom Line and come along to our latest Economy 2030 Inquiry event next week.