Middle-Aged Marxists, Pelénomics, and Previewing Pre-Budget Rows Top of the Charts 6 January 2023 Torsten Bell Afternoon all – and happy New Year. Now obviously we wish good luck to those of you vowing to diet/exercise or sort out your finances/personality in 2023. But not everyone has opted for the same old self-improvement vows. Let it all hang out seems to be the resolution of many in the first week of the new year – from suicidal American politicians to fratricidal British royals. This does at least show more imagination (if even less judgement) than buying a new gym membership, and has the benefit of making British politics look dull. The good, old fashioned new year’s speeches from current/would be PMs are worth a read. Not because of what got the 1997 inspired headlines (Five rather basic pledges from Sunak and ‘Labour won’t splurge’ mood music from Starmer) but because they kinda do spell out what’s on offer. Sunak’s vision (see the back end of the speech) is basically a Californian version of Wilson’s white heat – the UK’s future is one driven by tech-focused innovation – while Starmer’s is a less boosterish version of Johnson’s levelling up agenda. Now to much more important business. The Resolution quiz, which was much like 2022 – tough. Sorry about that. Of the 400-odd entries, only two people get all the answers right (I definitely didn’t): congrats to Peter Strachan and Bruce Moore. Prizes are in the post to them and two runners up who were just one-answer off a perfect ten. Thanks all for taking part – it’s fun to write, and hopefully fun to play too. We’ve got nothing as stressful this week, with reads on the age divides in British politics and the economic legacy of… Pelé. Have a great weekend. Torsten Chief Executive Resolution Foundation Marxist millennials. As everyone else got ready for new year celebrations, ever-brilliant FT columnist John Burn-Murdoch was busy arguing that UK/US Millennials are breaking with tradition by failing to become more conservative as they age. We know age divides have grown in our politics, but what’s interesting is evidence Millennials don’t age out of the lefty voting habit as they approach reach middle-age (it’s a cohort not just life stage effect). Note this isn’t true across Europe, but why might this be happening in the UK? Ben Ansell’s great blog offers some insight, arguing the young and old are divided in how they see the world more than specific policies: the old are more socially conservative and believe incomes are due to individual effort, while the liberal youth think things beyond your control often determine your position in society. The good news is the generational divide often disappears when you get down to what policymakers should actually do: everyone thinks more houses should be built, and no one wants them built near them. Oh good. Partying pensioners. The rise in inactivity among older people in the UK labour market post-pandemic has led to much ink being spilled on how much ill health vs early retirement is the issue (incoming Resolution paper on this). For more on the question of what affects older workers’ labour market exits read research examining a 2014 public pension reform in Germany that substantially increased (by 8 per cent on average) the pensions of mothers with children born before 1992. A higher “mothers’ pension” resulted in lower employment (think about those targeting a particular pension level not having to work as long to get it). The average impact might sound small (one percentage point lower employment rate) but don’t be fooled – it’s a big deal for women in their late 50s/early 60s (e.g. 6 percentage points lower employment at age 62). The lesson for policy makers desperate to reverse the inactivity rise? There are good (pension wealth) as well as bad (ill health) reasons why people don’t work. Enlightened eating. As Europe’s freaky January heatwave sparks more worries about our carbon footprints, listen to a fascinating new podcast encouraging us not to focus on the popular answer of “eating locally”. The brilliant Hannah Ritchie debunks a lot of misconceptions, revealing that transport is a small component of food’s carbon footprint. This doesn’t let us off the hook, but encourages a focus on what we eat, not simply where it’s from. Parsing Pelé. This week Pelé was laid to rest, amid huge discussions of his legacy on the game. Shockingly not much space was given to his legacy for economists – but there is one. In 1998 (when Pelé was sports minister) a ban on non-compete clauses in Brazilian football was introduced (like the Bosman ruling in Europe). This meant players could head to a new club for no fee once their contract expired. The so-called Pelé law allowed economists to study the impact of non-compete agreements on wages, as a recent article explains. Overall this was good news for players (boosting their lifetime incomes by increasing competition), although it also changed the age profile of earnings (with younger players’ wages falling). Pelé’s impact on labour economics maybe wasn’t quite as big as on the great game, but it wasn’t nothing. Enhancing economics. We tend to only celebrate people/institutions when they pass away/get shut down. Which is rubbish. The 10th anniversary of the CORE Econ initiative is a good excuse to celebrate it – you should read Director Wendy Carlin’s blog on their journey. When I studied economics the gap between our textbooks and what mattered in public policy discussions was ludicrous. Narrowing this gap is partly why the CORE Econ initiative was started – creating a free, open-access textbook which better reflects a real world of very much imperfect competition, power and non-market relationships. The quantity/quality of content CORE produces is always amazing – keep an eye out for the new textbook in April (Economy 2.0) which will have more on the economics of racial inequality and the history of capitalism. Chart of the Week The best news of 2023 so far is chunky falls in wholesale gas prices – the surges of which last year drove our double-digit inflation. Does this mean the cost of living crisis is about to be over? This week’s chart tries to explain why the painful answer is no (our Living Standards Outlook on Monday has loads more). While wholesale gas prices are coming down, retail prices paid by households will be rising in the months ahead. This partly reflects the lag as wholesale prices affect the retail prices set by OFGEM. But it’s mainly the cutting back of government support, which previously prevented retail prices rising in line with wholesale prices. This winter’s £400 universal payments aren’t being repeated and the Energy Price Guarantee is rising from £2,500 to £3,000 in April. The result is that retail prices will rise to meet falling wholesale gas prices in the months ahead, and that while Britain benefits from lower gas prices, that mainly initially goes to the Treasury/taxpayers, rather than households/bill payers. This will create political heat when people realise lower gas prices ≠ lower energy bills. Expect more energy support rows ahead of the Budget.