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We start with a warning about turning on the radio – whenever I’ve risked it this week I’ve kept hearing the words John Major and poll tax. It’s like the 1990s all over again. Even Noel Gallagher seems to have re-emerged from some Brit-pop time machine and Brexit definitely has a mid-90s vibe to it. The only reassurance that we are in fact in the 21st Century is that it’s Strictly stars, rather than Members of Parliament, winning the most high profile snog awards these days. What a time to be alive.
To perk us all up, this week’s selections have a far more positive vibe. We bring you news of happy Uber drivers, good news for rich idiots, forward planning in Doncaster and the growing political divide between the have-docs and the have-yachts.
Have a good weekend,
Director, Resolution Foundation
Happy Ubering? This week Uber has been in the news yet again after drivers went on strike to demand a fare increase, reduction in commission taken by the company, and an end to ‘unfair’ driver deactivations. But is working for Uber, and in the gig economy more generally, a satisfying job for participants? A recent study (summary here) from Oxford’s Martin School takes a look at wellbeing among London’s Uber drivers. Uber enabled the work but it’s by serious people and has a balanced conclusion, finding that drivers experience higher life satisfaction than other London workers on similar incomes but also higher levels of anxiety. Views among drivers are also polarized between the majority who enjoy flexible work (a majority came from a previous permanent job), and minority who don’t, would prefer fixed hours and hence feel dissatisfied and anxious. Turns out it’s complicated finding a 21st-century labour market that works for everyone – although giving all drivers a bit more cash and control would get thumbs up all around I’d have thought.
Have-docs vs have-yachts. Continuing my recent theme on why demography is the new class war, there was a good reminder in Simon Wren-Lewis’s blog last weekend about an arguably overlooked paper by Thomas Piketty and colleagues, published earlier in the year, which looks at evidence from France, the UK and USA on how different classes’ support for political parties has varied over time. The basic question posed – common to all three countries – is why cultural (the Brahmins or have-docs) and economic elites (who have-yachts – get it?) have diverged since the Second World War in their political preferences. Back in the 1940s they could be grouped together. But today the highest-educated tend leftwards in their politics, while rich elites continue to skew rightwards. 70 per cent of Masters-educated Americans backed Hillary Clinton, while more British graduates vote Labour. The paper should do more to separate out the effect of age vs qualifications but it’s still an interesting read about our long term political shifts. The possible consequence? Left parties give you more social liberalism and less economic redistribution than in decades past.
Buying IQ. Less-gifted children from higher-income families end up with more impressive qualifications than more-gifted children from lower-income families, says a study using US data (with a Washington Post summary and an earlier open-access version available). The study uses a new genome-based measure of inherited intelligence to find that only about 24% of high-potential people born to low-income fathers graduate from college. Of people with similar genetic scores born to high-income fathers, 63% graduated from college. In fact more (27%) low potential people born to high-income fathers graduated from college than their high potential but low income peers. It’s not a meritocracy out there people.
Pay power. Perhaps the hottest topic in labour market economics today is explaining the flipside of Britain’s recent jobs boom: if employment is so high, why are wages not rising? We’re now reaching the end of a ‘lost decade’ in which typical real earnings are still lagging behind their pre-crisis peak. This week Bank of England chief economist Andy Haldane outlined his view on the conundrum, including the long-term forces holding down pay growth: flatlining productivity, falling worker and union power, greater job insecurity, and rising automation and firm concentration. At RF we also published our latest analysis of the pay stagnation, splitting the last decade into two separate questions: why pay fell so much post-crisis, and why since 2014 it’s recovered so sluggishly. If you prefer your economic analysis in video form, do catch the highlights of our conference earlier this week on understanding Britain’s pay crisis,
A Nobel for what. Of course you’ll all be aware by now that this year’s Nobel Memorial Prize in economics was jointly won by William Nordhaus and Paul Romer, both of whom were widely regarded as likely winners. But let’s not pretend most busy people have had a chance to read their work – not least because lots of what they are being celebrated for was done decades back. So here’s some cheat sheets for you: 1) The Nobel committee summarise their take on the prize-winners’ work in two essays, in ‘popular science’ and more technical formats, concluding that their work has helped us “examine how the market economy has a long-term influence on nature and knowledge”. 2) Summaries in the prize-winners’ own words – can be found here (for William Nordhaus) and here (perhaps Paul Romer’s most famous paper). 3) Also of interest is a blog explaining the winners’ bodies of research and drawing out links between them.
Jolly Donny. There is a lot of angst out there about our high streets. At their conference Labour claimed to have a plan to save them – and this follows reviews and revival plans galore in recent years from government and opposition alike. Too often such talk involves ignoring the fact that it’s our own preferences to shop at home but eat out that are driving big shifts as much as technology. In contrast John Harris this week offered a much more reflective and nuanced take, focusing on big changes underway in Doncaster – a great case study because its position between the M1 and A1 means that as the retail bit of its high street shrinks Amazon warehouses galore open up. These changes are complex, but the real local economic leadership of the coming decades will involve creatively navigating them, not just hoping the past will return. John’s piece provides examples galore of just that happening in Donny.
Chart of the Week
Further evidence that politicians are moving into post-austerity territory, even if policies are still firmly rooted in the austerity era, came this week with the growing row over Universal Credit. We at the Resolution Foundation have been calling for major reform to it for years, but the future of the new benefit returned to the centre of political debate this week (not least thanks to John Major and his use of poll tax analogies). I’ve written about it here. This week’s Chart of the Week looks at the impact of all key benefit changes since 2015. The takeaway? Yes, cuts to Universal Credit are (disgracefully) falling squarely on the shoulders of the poorest working households. But cuts unique to Universal Credit only make up a quarter of our current benefits squeeze. Food for thought for those who think that scrapping UC will solve all our problems, or indeed end austerity.