Measuring merit fairly and proper pay for carers

Top of the Charts 'Insights' round-up: April 2020

The latest from Resolution Foundation Chief Executive Torsten Bell’s weekly Observer column, Insights. Read more of the latest economics and policy research in our weekly reading email, Top of the Charts (sign up here).

In the coronavirus jobs wipeout, the young and low earners suffer most

This recession stands out for its scale and speed, on both counts far outstripping the impact of the 2008 financial crisis that we thought would be the defining economic event of our lifetimes.

And this is a jobs recession. Jobless numbers never grew as expected during the financial crisis, but are certainly picking up now. Last week, worries about the economic impact of coronavirus became reality – almost one million claims have been made for universal credit in the past fortnight.

Job losses are spreading much faster than the virus. The spread of the first is helping impede the spread of the second, so while this surge might be unprecedented it should not be surprising. Government policy is to close down employment-heavy sectors such as hospitality, so it’s almost automatic that we see “by far the fastest downturn in service sector output” on record.

But while we know work is drying up, there is much we don’t know about who is being affected. The data we usually rely on doesn’t become available at the pace of the crisis, but there is some evidence. timely survey conducted by academics in Britain and Switzerland showed that the young and low earners are hit hardest. Lower earners have been twice as likely to lose their jobs as high earners, while 12% of under-30s report being unemployed because of this crisis, against 6% of those aged 40-55.

Policymakers wishing to see us through this crisis need to recognise that we face a jobs catastrophe, but one that has arrived sooner for some than others.

Job appraisal by numbers encourages pay inequalities

Those grades determine education opportunities and jobs. Equal opportunity and meritocracy are seen by many as crucial features of our society. This approach extends into the world of work, with formal appraisals informing who gets what bonus or job.

So how we assess merit matters – not just for individuals affected, but for inequality too. That is the key takeaway from a creative experiment asking nearly 3,000 participants to allocate bonuses among a group of employees after having sight of annual performance reviews.

All participants were considering the same employees; however, while some saw the narrative discussions of performance, others had a single summary score, either a verbal (“unacceptable” to “exceptional”) or a numerical score. Which kind of appraisal they saw had a big impact on how they doled out the cash.

The bonus gap between top and bottom performers was 20% bigger if based on summary verbal grades rather than the discussions. And it rose another 10% when performance was shown via a numerical score. It turns out that we treat these simple measures as more authoritative than the inevitably more complex narrative discussions and therefore crank up the gaps in the bonuses we allocate.

So what makes for good or bad systems of measuring merit isn’t just that they rank people in the right order, but whether they accidentally increase inequality.

Originally published in The Observer

When it comes to care workers, don’t just applaud, pay them properly

We like to clap our care workers. On my street, as on almost every other, people are out in force each Thursday to applaud the NHS and social care workforce. Drums and the odd firework are involved. But how much effort have we put in as a society to treat those very same social care workers with a shred of respect in recent decades? Precisely zero is the unavoidable conclusion from new Resolution Foundation research.

More than a million people work in care – they are overwhelmingly women and 50% more likely to be from a BAME background than other workers. How have we chosen to pay these workers? Badly.

Around half are paid less than the real living wage (£9.30 or £10.75 in London). While the rising minimum wage has helped, many tens of thousands also miss out even on this legal entitlement. And it’s not like we offer security in exchange for low pay – care workers are four times more likely to be on a zero-hours contract than the rest of us.

Most care workers are in the private sector, but they are very much delivering a public service. And it’s the squeeze on public funding as demand rises from an ageing population that has brought us to this place. Yes, we can blame politicians but ultimately it’s we voters who have given them the strong incentive to put proper funding of social care in the too-difficult-to-solve pile for decades.

So, let’s enjoy clapping our care workers today and start paying them properly tomorrow.

Originally published in The Observer

Wage inequality is the price society pays for grammar schools

Some terrible ideas are brand new, such as injecting disinfectant. But some bad policy plans are like zombies – however many times they are killed by the evidence, they just keep coming back.

And grammar schools are the zombie king. The grammars debate is usually about who gets in and the impact on social mobility. The evidence falls heavily on the “grammar schools are a disaster for social mobility” side of the argument. Only 2.5% of grammar school pupils are on free school meals v 13.2% in all state schools. And still the idea comes back.

But if demonstrating that grammars take the privileged, not the bright, hasn’t killed the idea, maybe a new approach is called for. That’s what recent research did by examining grammar schools’ impact on wage inequality.

The paper finds that it is significantly higher for those growing up in local areas where grammars are present – lower earners from grammar areas earn less than those elsewhere, while higher earners earn more.

This effect is big, with the school system explaining a quarter of the gap between low and high earners. So while the political consensus has been to raise the minimum wage and reduce earnings gaps, grammar schools push in the opposite direction.

The evidence from my household confirms that home schooling is a terrible idea, but that problem will disappear at some point. It’d be nice if the same could be said for grammar schools.

Originally published in The Observer