Wanted sons and unwanted calories

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Afternoon all,

We’ve come a long way between TOTC editions. Not only is the state underwriting wages for those without work to do, but it’s about to start paying out grants of up to £7,500 to the self-employed even if they’ve never been so busy.

The sheer pace of claims going into Universal Credit (477,000 in just 9 days is more than in any entire month during the financial crisis) is an important lesson about the nature of this crisis – an incredibly swift hit to economic output in some employment-heavy sectors. The broader lesson for economic policy makers is never assume the next crisis will be the same as the last. Just because unemployment rises were far smaller than everyone expected during the financial crisis, doesn’t mean we shouldn’t have been prepping for big surges this time.

For reads this week we’ve tried to focus the majority on non-coronavirus material – because you can definitely have too much of a very depressing thing. But if you want more on that front there’s a new section of the RF website bringing together everything the team have been producing to try and do our bit amidst these grim times.

Have a good weekend, and keep safe.


Comfort eating. With large amounts of (higher income) Britain working from home there’s a lot of worrying about what being in isolation will do to our health. Less walking to and from work might well mean we have to watch what we eat. But does calorie counting work? The answer from a recent paper is yes, but that we’re not very happy about it. The study looks at the impact of the US’s 2010 Affordable Care Act, which (among other very important things like subsidising health insurance) mandated chain restaurants to include calorie counts on their menus. The good news is the change was correlated with a small reduction in average BMI. The less positive – but perhaps unsurprising – news is that reported measures of life satisfaction were also reduced. For good or ill it was only the “healthy weight” people who found the calorie counts a downer, not those who were already overweight. (Eating disorders charities in the UK have also criticised similar suggestions, pointing out that menu calorie counts can be a dangerous trigger for people with certain conditions.) So, counting the calories is good for our collective health, but it’s bit of a killjoy when we want an occasional treat.

Researching research. There’s widespread agreement that research and development by private companies isn’t just good for individual firms but has wider ‘spillover effects’ that benefit the rest of us. New research reinforces that consensus by suggesting that there is $4 of social benefit created for every $1 of research and development funded by firms. But the authors are much less in line with the policy-making consensus when they wade into the debate over how best to encourage firms to spend on R&D. Using tax credits to reduce the cost of R&D for firms is all the rage, but the authors argue that given a fixed supply of researchers, this has a relatively weak effect on the volume of R&D undertaken. Their answer? Increasing the supply of potential researchers and inventors – with more, and more diverse, students studying STEM subjects.

Sons and daughters. Do we still prefer to have sons rather than daughters? Personally, as I’ve got one of each at home amid current work overload it’s the volume rather than the gender that’s the issue. But the more scientific answer from a recent paper is that this trend is in decline. In the past century families have preferred having sons to daughters: families in which the first child is female have been less stable (i.e. the father doesn’t stick around) and couples in which the first child is female have had a higher fertility rate (presumably they keep going until a son turns up). However, comparing more recent times (2008-13) to the 60s and 70s gives a more positive story. The effect on future fertility of having a female child first has now flipped into being negative and families are now spending more on female children than male children (largely due to higher educational attainment). The study also suggests one driver of this: a shift in bargaining power within couples towards women – ‘son preference’ seems to be largely a male phenomenon. Shock.

History lessons. Most of us have never lived through a pandemic, but the world has. On the economy we took a look at the impact of three previous pandemics on growth and the public finances early this week (summary: the effects are likely to be big and long-lasting). But what about the impact on social and political trends? An article published this week looks at what happened during the Spanish Flu pandemic of 1918-19, especially to social trust. The authors provide yet another good reason for getting our response to this pandemic right, by showing that where government institutions were ineffective in dealing with the pandemic, this (combined with broader social disruption at that time), led to long-term deteriorations in public trust. The authors’ warning: if governments try to limit the economic damage by going light on measures to contain the outbreak, this could come at a high price of less social cohesion in the future.

America first alone. We’re obviously focused on the UK’s economic response but Wednesday saw the US Senate pass an unprecedented $2 trillion stimulus package (much bigger and much faster in arriving than in the financial crisis). Front and centre of the package is a $600 increase in unemployment benefits for all workers that claim them – a serious increase on the average payment of $385 per week. This explainer looks at the specifics (and critics) of the scheme, which broadly adds $600 on top of whatever unemployment benefits workers are due (which varies widely across different States) until the end of July. Crucially this is the US taking a very different approach to our own, and those of most of Europe: paying people more to be unemployed in the States vs paying them to stay employed in firms that don’t currently have work to do on this side of pond. My strong view is that the European approach is the correct one. However, it is worth noting that the US approach offers more support to those who do lose their jobs than we are doing – that’s the group left out by the big government income support schemes this week (see COTW).

Chart of the Week

So where do the government’s two big policy responses (the Coronavirus Job Retention Scheme and more recent Self-employed Income Support Scheme) leave those whose incomes are being hit by the crisis? COTW explores this question and shows that those within the schemes will see unprecedented help. Someone previously earning up to £37,500 can expect to retain over 80 per cent of their income if they’re self-employed or an employee that remains with their firm but not doing any work . However, the losses for those outside of the schemes are stark. An employee having their hours halved faces losing almost half their income too – they’d be better off having no hours work at all. And while the self-employed get a large grant even if they haven’t seen their income fall, those employees who end up unemployed will be reliant on the benefit system. Someone previously earning £30,000 will need to get by on barely a fifth of their previous income. So lots done by the Chancellor, but some big gaps still to fill.