Booze, sexists and massive misperceptions

Afternoon all,

Welcome back to Top of the Charts – hope everyone’s had a good August and holidays/empty offices have refreshed reading appetites. I’ve enjoyed a glamorous drizzly break in Cornwall – the drizzle part of which I hold each and every one of you who moaned about the heatwave personally responsible. To cope with the sub-optimal weather a drink or two may have been consumed, which I’m glad to say one of our readings this week confirms won’t exactly kill me. I’m afraid we bring less good news if you’re a woman born in Alabama or Tennessee….

Best,

Torsten

Director, Resolution Foundation

ps. If anyone’s had any brilliant ideas for things they think we should cover in Top of the Charts or tweaks we should make to the format please do get in touch. Comments/feedback (almost) always appreciated.

pps. Last week’s The Briefing Room on Greece’s post-financial crisis was a sobering reminder of a true economic and social disaster. In the run-up to the anniversary of Lehman Bros collapse (which we will not be toasting), it’s worth revisiting. And while you’re there, you can feast your earbuds on our own Daniel Tomlinson in this week’s episode examining another crisis – housing.

Drink up. The joy of one particularly long motorway queue this summer reached new heights when the radio started blasting out news reports that there is “no alcohol safe to drink”. A serious study had found that despite us all telling ourselves that a glass a day reduces the chance of heart disease “the level of consumption that minimises health loss is zero” (increased chance of cancer for instance outweighs any heart related benefits). Hence the alarming headlines. But hold off from emptying the wine cellar – we bring better news in a response from David Spiegelhalter at Cambridge University who has dug into the data behind the study to ask ‘what exactly is the increased risk’. The answer is that having one drink a day rather than none increases the chance of an alcohol related problem by only 0.5%. David helpfully converts this into gin for us and concludes, “That’s a total of 400,000 bottles of gin among 25,000 people, being associated with one extra health problem.” As he snappily concludes “there is no safe level of living, but nobody would recommend abstention.”

Dull kids. While it turns out drinking a little isn’t that dangerous, we know from various studies (and from members of the youth that work at RF towers) that young people today are doing a lot less of it. This is part of a wider move away from sex, drugs and rock and roll (although the latter has been replaced by other musical genres apparently). New research argues that the reason for this is that kids spending all their time on electronic devices stops them hanging around on street corners, bored out of their minds and looking for anything to liven things up a bit. So there is an upside to screen time.

Sexist roots. It’s not news that women work and earn less in more sexist places. Some might argue that women should just move to less sexist places. The first rebuttal to that argument is of course why should women have to move, but a second comes from a new study (summary article here) that finds that women born in more sexist places (the study compares US states) have lower lifetime earnings and work less EVEN IF they move to a less sexist place. So women born in the Deep South of the US still do worse than a woman born in New York, even if both move to California. The authors put this depressing finding down to women internalising sexist attitudes, such as how much society values women working, from their place of birth. When it comes to sexism they argue, we really can’t escape our roots.

You’re wrong. The Perils of Perception, a book out next week, asks why we don’t get close to knowing basic facts about the world around us – like the levels of immigration, teenage pregnancies or unemployment. See it as the latest contribution to the post-truth era debate. Obviously you should read the book (which more helpfully also covers what we should do about it), but while you wait much of the survey results that underpin the argument have already been released in a kind of league table of which country’s populations are most wrong. The winners: Italians, who think that 30% of their country are immigrants, when the actual figure is 7%. Before any Americans amongst you start crowing, your compatriots thought 17% of the US population are Muslim (it’s around 1%). Obviously the Swedes do best (they always do). Mildly controversially the author argues that Italians are most wrong because they’re so emotionally engaged – while the Swedes are a bit less touchy feely and happen to have had Hans Rosling bash some facts into them.

Revolting industries. For some time we’ve been meaning to cover the ongoing and hugely interesting debate in academia about why exactly the industrial revolution began in 18^th Century Britain – rather than at a different time or place. This has turned into the economic history profession’s equivalent of the Rumble in the Jungle, which the Economist this week usefully summarises. To (hugely) simplify the argument that is going on is between those that believe that Britain had relatively high wages compared to the rest of Europe back then, meaning that capitalists had a big incentive to invest in machines, and those who argue Britain wasn’t a high wage economy. This latter group instead believe that it was frustration of capitalists with existing low productivity techniques and quality that led to new inventions – which low wages allowed them to turn into big profits. Now our focus is generally on the here and now rather than what was going on over two centuries ago, but this argument about whether higher wages encourage investment in productivity-boosting machines matters for us today – after all it’s crucial to what you think is the long term effect of the big hike in the national minimum wage that is currently taking place: will it cost jobs as opponents claim or encourage investment so that maybe we’ll get back to our cars being washed by machines rather than underpaid Romanians?

This week’s chart…. is a reminder that policy makers should do a lot more to scrutinise tax reliefs that litter our tax law. Back in 2008 a new tax relief was introduced to encourage people to set up companies (or to diffuse a political row at the time, depending on how cynical/right you are). It was imaginatively called “Entrepreneurs’ Relief” and allows people selling their own companies to pay a lower rate of capital gains tax (10% rather than 20%). At the time it was meant to cost £200m a year. Now a decade on, because more people claimed it and the coalition government made it even more generous, it actually costs ten times that – £2.7bn a year. Despite costing a cumulative £22bn over the past decade there has been no evaluation of the relief and there is in fact no evidence that most would-be entrepreneurs know it even exists – although soon-to-retire company owners and tax accountants obviously do. As we set out earlier in the week it’s time the Treasury looked again at the relief that saw the 6,000 biggest beneficiaries get an average of £450,000 in 2015/16. It’s a rubbish relief.