Boom scrolling, bitcoin bashing and dodging difficult policy choices

Top of the Charts

Afternoon all,

We did it! Well done Britain avoiding a recession in 2022 with growth in the fourth quarter of… 0.014 per cent. This is what success getting over the line by the skin of your teeth looks like.

Just to ensure we don’t get at all perked up by the no recession news, the ONS put out an update on our life satisfaction alongside the GDP data this morning. It shows that the proportion of us with high life satisfaction fell to 24.2 per cent in Q3 2022, down from 26.8 per cent a year prior. Very nice of them to remind us on the same day that neither our GDP, nor our life satisfaction, have recovered to their pre-pandemic levels.

We of course are here to raise your life satisfaction, with some good news reads… and a very bad news chart. Unless you’re American.

Have a great weekend.

Chief Executive
Resolution Foundation

Wonderful web.You get loads of focus on the bad (mental ill-health) or productivity-sapping (put the cat videos away people) things that come with the internet, so for balance read a new paper that quantifies a real benefit: quicker hiring. In the dawn of time 1990s job search involved scouring newspapers or calling up mates. Then along came online job ads/forums which are much cheaper for firms, and easier to find for workers. This is good new all-round, concludes a new paper looking at Norwegian data. The web helped firms to fill vacancies 9 per cent faster, and increased job-finding rates by over 2 per cent while boosting starting wages by 6 per cent (although note there’s not much evidence of it impacting job-to-job moves or pay progression). The authors’ biggest pro-internet finding? That it may have reduced the “steady-state” unemployment rate by as much as 14 per cent. Maybe the cat videos are a price worth paying after all.

Top targets. On the ‘good news’ theme, we’ve at last got some NHS performance recovery. The Nuffield Trust/Health Foundations’ helpful data summary for January saw 28 per cent of people wait four hours+ in A&E, down 7.4 percentage points from December. Better, but still a disaster vs the 2000s target for 95 per cent to be seen within four hours. Since then the idea of clear, high profile targets has gone out of fashion (with government because they were rarely met and some clinicians who note it distorts decisions). Unfashionably then, new research reminds us that the four hour target was maybe a good idea because it saved lives (14 per cent lower mortality within thirty days, 3 per cent after a year). Not because the target leads to more hospital admissions from A&E (which it does – reflecting the argument against such targets) but because it reduces wait times – which saves lives for those with conditions that really need swift treatment. Healthcare is complex, but that doesn’t mean writing off simple targets.

Devolution dilemma. There’s a cross party consensus that more devolution is part of the answer to the UK’s economic malaise: more local powers over X or Y are needed because local decisions will be better ones. I’m part of that consensus. But a new OECD blog contains an important warning: devolving powers but not financing doesn’t get you very far, creating what the author calls “unfunded mandates” and no growth benefits. The paper highlights a key difficult question that the UK is currently ignoring if we’re to make meaningful economic devolution a reality: which tax raising powers are actually devolved, and how is that done in a way that doesn’t make the poorest parts of England even poorer? There’s a reason the current consensus is cosy – no party’s trying to answer that question.

British bitcoin. The Treasury and Bank of England are excited. They think we should probably have a ‘digital pound’ – and have launched a consultation this week to see if you agree. A digital pound is a central bank digital currency (CBDC) for retail use (i.e. by you/normal businesses – the existing form of a digital currency is central bank reserves but those are only for use by big banks). CBDCs have become all the rage to create (China) or talk about (basically every other central bank). Why are we trying to get in on the act? It’s not massively clear, as you’ll see from the consultation talking round lots of potential reasons – much of which collapses into “we don’t want private sector/other countries’ digital currencies having all the fun”. Tony Yates has a very sceptical take for anyone of a cynical disposition. Which obviously I would never have

Absence angst. There is a lot of angsting about school absences, which are (unsurprisingly) up post-pandemic: 7.8 per cent absence rates in Autumn 2022 vs under 5 per cent pre-pandemic. Headteachers are being told to get a grip. Which is good because new evidence from Sweden shows the effects of absences really do last. The authors examine primary school absence records for kids born in the early 1930s. The dull bit: absences hit academic achievement (previous studies showed this). The interesting part: by comparing children from the same families and examining earnings much later in life the paper shows that the impact of school absences continues into the labour market. The key result is that ten days of absence a year decreases incomes by 1 to 2 per cent. So never mind the back to the office drive, let’s get the youth back to school.

Chart of the Week

The problem is we speak the same language and watch the same TV. So people often just assume we’re similar to Americans. But we’re not these days. Why? Because they are absolutely minted. I really don’t think people have clocked how much richer Americans are than us: a whopping 60 per cent. When I tell politicians or punters that fact I generally get disbelief back. So here’s a chart to spell out why the gap is so big. Let’s start with the basic US advantage – they’re 17 per cent more productive than we are. The Yanks then build on this output advantage. Unlike the French who have the same 17 per cent productivity lead over us but use it to work less (hello early retirement) the Americans double down on it by working longer hours (raising the income gap another 13 per cent). Plus consuming is cheaper (relative to the prices of what the country produces) and taxes are lower (see our recent Economy 2030 note for more detail). Yes, the 60 per cent income gap hides the fact that Americans have to pay for health insurance out of that income, but that just isn’t enough to remotely close the gap. We talk the same language as American but we’re living very different lives.