How Trump’s America can solve our crisis on the homefront

Afternoon all,

It’s been an action packed week – with lots of chat but not many answers. So to help things along we’ve got a concrete suggestion. You may have heard we’ve got a civil servant CRISIS. 10,000 are already working on Brexit – but another 5,000 are needed. Department of Education staff are being asked to volunteer for a posting to the frontline Defra to help our farmers. Now, there’s lots to be said for this Countryfile/Dads Army cross over, but there is an alternative.

While we’re worrying about having too few civil servants, across the pond 800,000 public servants are sitting idle while the government shutdown rolls on. It’s time to go all 1941 and get the yanks involved in a European mess. A deal to borrow thousands of their civil servants means we can a) staff our ports and still have some education admin b) keep Trump happy as he loves a good deal and c) keep everyone else in America happy, as Trump will have no civil servants to get anything done. So that’s Global Britain off to a flying start.

If we can get that deal done this afternoon, we’ll all deserve the weekend off to peruse this week’s selection of reads.

Have a good weekend,
Torsten
Director, Resolution Foundation

Gold paving. Everyone knows people move to the city to get higher wages from the streets paved with gold, but new research by star economist David Autor (video presentation) reassesses this common wisdom. He finds that while high-skilled workers get a bigger pay premium than ever from working in dense urban areas, this bonus has mostly disappeared for the low-skilled. Why so? His answer hinges on the decline of manufacturing. This means that low-skilled jobs in cities are now similar to those available in towns and the countryside (Pizza Express is in central Leeds, but also in Skipton and Ilkley). In related UK work we found cities that attract high tech sectors grow the number of low paid jobs – but do not boost the pay of those jobs.

Local elections for local people. A new study looks at 3,700 election leaflets to see which emphasise ‘local ties’ for a candidate. A highlight is a Green candidate for Brent Central shouting about the fact that she was ‘conceived in Harlesden’. In 2017 Labour leaflets were more likely to bang on about the candidate backstory compared to Tory leaflets. That’s because the Tory campaign was all about how strong and stable the PM was, and Labour people were less enthusiastic about Corbyn at that point. So how local you are depends not just on where you’re born but on what you think about your own leader…

Log on, Log Off. As well as ‘absolute scenes’ in Parliament this week, Brexit hysteria is trashing social media. But Brexit or no Brexit, is the rising use of social media bad for your mental health – not least given the evidence we touched on a few weeks back about surging mental illness amongst the young? There’s plenty of research making this case, including this well-argued piece by Jean Twenge that looks at our first ever Facebook-generation (born from 1995 onwards). But new evidence (£) – (free here) – questions some of the methodologies behind such research, and says that digital technologies have little effect on adolescents’ well-being. So that’s all clear as mud. Here’s a less scientific, but possibly more helpful, thought – no-one ever died from not Facebooking something…

Trade wars. The great China-US trade war is currently in a sort of truce. But how do economic shocks affect the demand for protectionism that got this whole thing going in the first place? A new paper asks people what kind of policy response (like higher tariffs or cash transfers to those losing out) they favour in the face of different shocks affecting jobs (from technology to outsourcing to another country). The conclusion: news of job losses significantly increases people’s wish for government action, especially for protectionism rather than transfers. I suspect the balance between a wish for increased protectionism and other domestic policy responses (training, transfer payments) would be different in Europe. But its worth noting that in this US study even Clinton supporters start to favour the tariffs of a Trump voter if they’re primed with a scenario where production is sent overseas.

It’s the demographics. Is there a single explanation for some of the big trends that are being debated in political economy circles at present – such as why large firms are accounting for more of our economies, why new firms are springing up more slowly than in the past, and why has labour’s share of income fallen (in many countries but not the UK)? A new working paper (see open-access version and helpful blog discussion) has an impressive go, arguing that changes in population growth play a decisive role. In a world when the labour force is growing, new firms are needed to absorb the rising number of workers. New firms tend to be smaller and younger, pushing down the market share of bigger firms. But today population growth is down and we’re getting older, so fewer new firms are needed, while larger firms tend to use fewer workers for a given output. This argument that the big picture shift at present is population change, rather than technological shifts, is well worth pondering further.

Chart of the Week helps to answer the question, how has record employment changed the UK? It comes from a new RF report digging into the post-crisis jobs surge. In it, we bust a few labour market myths, such as the idea that it’s all been about low-paid jobs (actually higher-paid occupations have expanded the most). Another popular myth is that London has hoovered up all the job gains. Yes, the capital’s rising population means that it has accounted for large chunks of our expanding workforce. But the very biggest changes in employment rates have actually taken place in traditionally low employment urban areas outside London and the South East. South Yorkshire and Merseyside lead the pack.