Counting hours, insuring incomes and mourning economists Top of the Charts 16 April 2021 Torsten Bell Sign up for our weekly Top of the Charts reading email Morning all, It’s been a difficult week for some of us, realising that we’ve somehow not managed to bag a second job with Greensill when it turned out they were handing out cash to any Tom, Dick or Harry (it does appear to all be men). To get through the tough news that you’ve missed out on being paid to send the odd inappropriate text, try being glad that your reputation is intact. When that doesn’t work, just remember that no pay check is worth that ultimate indignity: trying to sit cross legged in a suit. If that fails, well – just be grateful the pubs have reopened just in time to drown your sorrows. But obviously you shouldn’t be getting inebriated until you’ve got through this week’s reads… Have a great weekend, Torsten Bell Chief Executive Resolution Foundation Hours count. We’re always encouraging everyone to pay more attention to the hours workers do. What determines our living standards is how much we take home each week/month, not just our hourly pay rates. For lower earners, being unable to get the hours you need has been a growing problem pushing up income inequality. And certainty/control over those hours also matters – we showed last year that two-in-five workers in sales/customer service jobs feel anxious about “unexpected changes to their hours”, in part because zero and short hours contracts often mean an employer can cancel a shift with little notice. A new survey published by the Living Wage Foundation reinforces the madness of the status quo, finding two-fifths of working adults are given less than a week’s notice of their hours/shifts. We should require all firms to give workers two weeks’ notice – and while we wait for government to act, employers should just get on with doing it. Yes Minister… fans will love this one. Those believing our elected officials are cunningly duped by civil servants who disagree with them have relied on the TV series as proof for decades. Luckily for them new research offers some rather more recent evidence. The paper first proves the blindingly obvious: career civil servants often disagree with political masters. Which civil servants disagree changes as governments change, but the paper shows the US career civil service leans heavily Democrat (fitting the advanced economy pattern of higher qualified public service workers being lefties these days). The more interesting part of the paper shows that civil servants disagreeing with their masters matters – or more specifically costs. Focusing on the behaviour of procurement officers around presidential transitions, the authors find that officers having a different political persuasion to the government tend to oversee cost overruns that are 8 per cent bigger. But before the conspiracy theorists claim conclusive proof of obstructive civil servants, note the authors think this is about lower motivation when civil servants don’t love the boss rather than actually engaging in proactive Sir Humphrey-style plots. Pandemic comparisons. Have a read of this new blog post from the New York Fed. There’s lots of food for thought about the pandemic’s different effect on households across Canada, EU, Japan, UK, and US. The main takeaway = while the UK’s (and to a lesser extent EU’s) big savings increase is driven by a huge fall in consumption, in Canada/US/Japan it is also driven by incomes having actually increased (due to smaller earnings hits and greater government support). The much deeper consumption fall here is something that hasn’t received enough attention (partly it’s the result of deeper/longer restrictions) and nor has the relative robustness of incomes outside Europe (somehow the US is showing no nominal fall in market income despite unemployment peaking at 14 per cent). The authors conclusion is that while by any historical standard Europe has done loads to insure incomes, in comparative perspective it hasn’t done that much. Resigning productively. Economists often say that workers being able to move jobs is good for an economy as they leave less productive businesses to move to better (and higher-paying) firms. But using data from Chile, new work looks more closely at whether job moves really tend to lead to workers moving to better firms… in reality almost half of all jobs moves (48 per cent) actually see a worker go from a higher to a lower-productivity firm. Looking under the headline however does provide more support for economic theory. Moves between jobs that don’t have a period of unemployment in the middle are generally into higher-productivity firms. Young workers moving is particularly productivity enhancing (the bad news for us is that our youth has been moving jobs less this century). How do we get more of the good kind of job moves? Get back to full employment as swiftly as possibly. Mourning economists. While the UK has been focused on remembering the life of Prince Philip/ pointlessly arguing about TV schedules, the economics world has been doing some mourning of its own with the passing of both John Williamson (the British economist and coiner of the term “Washington Consensus”) and Robert Mundell – the founder of much of international macroeconomics. On the former you should read this short paper from last December pointing towards a reassessment of that consensus (which by the turn of the millennium was becoming unfashionable but which the paper argues was a better bet than populism, which in a Latin American context was the alternative on offer…). And for a whirlwind tour of the huge contribution to economic theory and policy debates of Mundell everyone should read Paul Krugman’s great column. Chart of the Week Furlough means we’ve managed much higher employment through this crisis than expected – it’s only fallen by a bit over 1 per cent. But before we relax, note that the job losses have been very concentrated. As this week’s COTW shows (see report), young people have seen three times the average employment fall. Indeed, those aged 16-24 have accounted for a staggering 52 per cent of the total fall. And there are big differences even amongst the youth – young Black people have seen four times the average fall in employment (note low employment also reflects that they are nearly twice as likely as young White people to be in full-time study). The result is that their unemployment rate has increased from 25 to 35 per cent, compared to a rise from 10 to 13 per cent for young White people. These employment falls aren’t all about job losses – they include many young people not finding that first job. So amid vaccine euphoria let’s not forget the sacrifices made by the young to help us protect lives – or the big role of luck in when you left education and/or existing inequalities in determining which young people have paid the highest price.