The pay cheque benefits of daughters and grandparents

Afternoon all,

Released from the strictures of the civil service, I thought my first ever party conference would be like opening a door to a magical new universe. To be honest, it was a bit more conference, and a bit less strange new land than I had anticipated. Maybe the Conservatives will offer more witches and wizards magic and wonder this weekend – hope to see some TOTC readers there.

Below, we’ve got some OBR whispering, LinkedIn bashing and poll pondering.

Have a great weekend,

Ruth
Chief Executive
Resolution Foundation

LinkedIn loudmouths. I can’t say I’ve ever been massively active on the LinkedIn scene – and this research suggests caution over what you read (unless its’ from RF of course!). The paper looks at equity analysts, comparing their ‘self-presentation tone’ on LinkedIn, with the accuracy of their forecasts. The kicker? Apparently, analysts with “high self-presentation tone experience the highest rates of upward career transitions” – even though they tend to be worse at their jobs (i.e. produce less accurate forecasts). This effect is greatest when analysts are inexperienced and male. In fact, the same self-promotional tone in some cases reduces the market attention received by female analysts. Yikes – maybe I’ll stick to BlueSky after all.

Inequality endures. We know socio-economic inequality persists between parents and children. New research finds that it travels further – through three or more generations. Even after controlling for parental background, grandparents’ status predicts their grandchildren’s outcomes. The authors posit that family background can influence an individual far beyond measurable socio-economic outcomes like income. Plus, grandparents are able to directly impact their grandchildren’s futures, through financial gifts and inheritances, but also through social networks. The persistence of wealth inequality seems to go above and beyond what you would expect just from inheritances. Speaking of which, we’re publishing our latest wealth audit next week…

The AI conundrum. Many hope AI is a silver bullet for global productivity woes (and chart no. 2 here reveals we’re using it to all sorts of ends already) but is there an environmental trade off? Yes, according to this paper, which identifies a causal link between the intensity of AI adoption and air pollution in the US. Using data on 722 commuting zones, the research finds that areas with wider diffusion of AI technologies experienced significantly faster growth in carbon emissions – difference in AI penetration accounted for two-fifths of the difference in carbon emissions between Kansas City and New Orleans. Importantly, it’s not just that AI increases energy demand and uses more energy – it also makes local energy generation more carbon intensive, shifting local production toward fossil fuels and away from renewables.

Dear daughter…again. Keen readers may recall a paper we covered six months ago, which found that mothers experience a greater pay penalty when they have a daughter. Now, a recent paper has found the *inverse* to be true for highly educated mothers. The authors use Finnish data (covering all first-born children between 1987 and 2007) to examine how mothers’ preferences and education shape their “motherhood penalty”. They find that Finnish mothers favour daughters – mothers of sons were 0.9 percentage points more likely to have another child, and took six fewer days of parental leave. This daughter preference leads to different effects based on the level of education for the mother. The motherhood penalty for less-educated mothers is smaller and does not depend much on the gender of the first child. But 10 years after childbirth, highly educated mothers with sons see an extra 10 per cent earnings hit, compared to those with daughters. The authors say that this is because mothers with daughters are more likely to switch to public sector roles which earns a wage premium. So those lucky Finish mums of daughters get the favoured gender child and better pay! Meanwhile a stark reminder from the ONS this morning that the motherhood penalty in the UK is still large (a stonking 42 per cent five years after the birth of the first child).

Something for the weekend | Gloomy forecasts?

Whatever you are reading this weekend spare a thought for the Treasury Ministers and officials digesting Round 1 of the OBR’s economic and fiscal forecasts which landed in their inboxes today. The mood music isn’t great, with talk of a markdown to trend growth, bond yields pushing up borrowing costs by around £4 billion,and lower tax receipts. Here’s what you need to know.

The OBR is likely to recognise the UK’s weak productivity performance since the pandemic by knocking down its forecast for ‘trend’ growth (with every nudge down of 0.1ppt costing as much as £10bn…). This paper from Josh Martin explains what lies behind some of that under performance, highlighting the role of measurement problems and decarbonisation. Remember, the OBR have assumed for a while that the UK will recover some of its pre-financial crisis vim and vigour, so this is more about long-run disappointment than the latest data…

Expect more gloom on the labour market. We’ve previously suggested that the ONS unemployment rate could hit five per cent in the coming months. Recent ONS data has suggested that the labour market is steadying following spring jitters around the big employer National Insurance rise. But the Bank’s Decision Maker Panel yesterday suggested that employment growth continued to weaken over the summer, and that the outlook for next year has worsened.

Finally, while attention is focused on OBR forecasts for 2029-30 – when the fiscal rules bite – it’s important to know what’s happening to the public finances right now. The latest OBR commentary suggested that tax receipts are coming in £6.1 billion below forecast. They’ll need to make a judgement on whether this might follow through into future years. Not happy reading I’m afraid!

Chart of the week

Last week, we looked at who voted Labour. This week, we’re crunching the Conservative party’s polling. Their vote share collapsed in 2024 to historically low levels – but where did their voters go instead? Chart of the week shows how people who voted Conservative in the 2019 election (29.3 per cent per cent of the electorate) chose to cast their ballots last June, sorted by age. More than half of the Conservative’s core 65+ voting bloc remained loyal – and in fact their most popular choice after sticking with the Tories was simply to not vote at all. Young ex-Tory voters – as expected – were most likely not to vote, with nearly one-in-three declining to take advantage of their democratic right. Switchers to Lib Dem was the most consistent across all age groups (5 – 6 per cent), while switching to Reform was lowest among pensioners (12 per cent) and highest among 35 – 44-year-olds (21 per cent). Though pesky middle-aged voters were also the most likely group to switch to Labour. Have a new ‘’squeezed middle’’ become the swing voters to watch?