Top of the Charts: Good firms, loyal partners and a Chinese spy-thriller

Published on Public Finances and the Economy

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Morning all,

It’s back to business as usual at TOTC. And we are very perky indeed here at Resolution Foundation HQ.

Reason for perk 1: conference season is not only over but it involved Abba – as most things worth doing in life do.

Reason for perk 2: apparently so is austerity*

Reason for perk 3: the Budget is happening nice and early on 29th October – not disrupting our Halloween plans. Or probably saying very much at all.

If you’re worried about excessive RF perkiness then fear not, it won’t last. Next Tuesday we’ve got an entire conference dedicated to why British workers’ pay has been a disaster since Obama was busy winning the White House. When it comes to decent pay rises, or a decent leader of the free world, it’s worth remembering that yes we once could. Sob.

As a slight counter to the (well deserved) bad rap that Trumpian America gets these days, this week’s selection of top reads bring you lots of positivity from our stateside friends – good firms, good partners and, er, good data analysis. Plus a reminder that big brother China is watching you…

Have a good weekend,


Director, Resolution Foundation

*It’s not – see below


Millennial loyalty. Our Intergeneration Commission detailed the economics behind the intergenerational equity story but what about the cultural shifts? Fascinating new research finds that the US divorce rate fell by 18% from 2008-16, and it appears that this can be explained by a generational shift in marriage age. The suggestion is that millennials are marrying later, so they’ve had more of a chance to assess their compatibility and this seems to lead to fewer of them getting divorced. The report concludes that “the US is progressing toward a system in which marriage is rarer, and more stable”. The big win from this isn’t the happily married millennials (who don’t like sex anyway so they’ve got bigger problems), it’s the reduced calls to our office from people after the other Resolution

Inherit less, work more. People hate inheritance tax – not surprisingly given that it’s a tax on dying and riddled with exemptions for people with even a half decent accountant (as an RF paper detailed back in May). But maybe we’ve been ignoring the single best argument for the tax – that it discourages work-shy snoozing by those expecting a big inheritance. A new (and techy) paper finds that higher inheritance taxes induce potential inheritors to work more, as they know they’re not going to receive such a big windfall when their elders pass away. Now it is based on German data, but even allowing for the whole protestant work ethic thing the conclusion is clear: if we want to grow our economy, strengthen our tax base and upset the Daily Express, this is clearly the way to go…

Public investment. We all know we’ve got a problem with low business investment. And the short-termism of big public firms anxiously watching their share price day to day often gets a good dose of the blame, not least from private equity firms arguing that private ownership means they can make the long term investments that public companies under pressure from shortsighted shareholders fail to do. This argument is what a new paper from the Fed roundly demolished by asking, do firms really invest more if they’re privately owned rather than publicly listed? The answer is no. In fact the paper finds that in the US public companies invest more, that firms going public then tend to increase investment in R&D in particular, and firms that get bought out and go private then invest less. If you want to read more on this I’d highly recommend Gillian Tett’s comment piece today.

Opportunity mapped. I love a good map. Ideally of mountains, but I’ll take one of human opportunity and progress as a close second.  Raj Chetty and collaborators have produced an extraordinary stream of empirical papers on social mobility in the USA over the past decade. Now a brilliant new interactive website, Opportunity Atlas, takes all that data on people’s chance of progressing out of poverty if they grew up in certain neighbourhoods and overlays it onto a map of the States. It allows to you to chart geographical variation in everything from household incomes to poverty, rents, job growth and demographics. If only we had this for the UK it would be a researcher and policy maker’s dream.

The big hack. We Brits love to read a good mystery thriller – how else do we explain 10 million of us tuning in for the deeply rubbish Bodyguard? So all of us should enjoy a great Bloomberg long-read about how China used a tiny chip to infiltrate America’s top companies (and possibly government). Just wait till The Donald hears about this one on Fox and Friends…


Chart of the week – the end of austerity?

Dancing aside, the big takeaway from Theresa May’s conference speech this week was that austerity is over. Lots of people will be glad to hear that – after all Labour want to see a lot of cash splashed on public services, tuition fees and the rest while the freedom fighting wing of the Conservative Party want to crack on with slashing taxes. There’s only one slight problem – austerity ain’t over yet, as the chart below shows.

There are obviously lots of ways to define austerity, but the level of day to day spending on public services to pay (otherwise known as RDEL) is one that most ordinary punters would recognise. And far from austerity ending, spending is due to fall every year throughout this parliament. This of course masks big spending increases in health, which is likely to mean even sharper cuts across other departments, such as local government. So austerity isn’t ended, it’s here to stay. Told you not to worry about the perkiness lasting.