If you'd like a beautiful visual summary of some of our work on intangibles, do look at this amazing graphic storyboard from The Beautiful Truth.
The magazine is at this link. The graphics are fantastic.
An occasional blog on economics. Designed for students and those interested in Economics topics.
If you'd like a beautiful visual summary of some of our work on intangibles, do look at this amazing graphic storyboard from The Beautiful Truth.
The magazine is at this link. The graphics are fantastic.
As ever the IFS is brilliant on this, from a July 2024 paper, by Cribb and O'Brien.
1. The overall picture is lagging public sector pay since 2001.
"And taking the long view, real public sector pay at the end of 2023 was still 1% lower than its level at the beginning of 2007, almost 17 years earlier. Real private sector pay was only 4% higher over the same period."
2. Interestingly, public pay has varied an awful lot, with low paid public sector workers doing relatively well.
3. and different professions faring differently.
"Figure 6 shows how pay has changed for some major (and high-profile) public sector occupations: nurses, doctors, teachers and educational assistants compared with the public and private sectors as a whole.5 For comparability (particularly due to discontinuities in NHS England data), we focus on the period since 2010.
Figure 6 shows that pay for most of these high-profile public sector occupations has fallen by more since 2010 than the average for public sector wages. The one exception is educational assistants, a relatively lower-paid occupation, whose average pay grew significantly faster than even average pay in the private sector. That pay growth for teachers, doctors and nurses lagged behind the public sector average is not necessarily surprising due to the pay compression in the public sector documented in the previous section, as these are among the better-paid public sector occupations. The reductions in pay for teachers in the 2010s were particularly large and slightly larger than implied by pay scales, reflecting the fact that the teacher workforce has become slightly less experienced (and therefore less well paid) over time.6 This has happened in other occupations too; for example, there have been significant expansions in the number of doctors over time, leading to increases in the share of doctors who are younger and therefore less well paid (General Medical Council, 2023).
1. I have been worried for some time that the UK labour market has been impaired following the disruption from Covid and the like. To me, there is a risk that U* has risen to more than 4.5% the BoE has estimated (their estimate is on p. 13 of the November MPR).
2. So the labour market data will be crucial on this. What does it say? Fkigure 4 of the release shows a blip up
"Annual average regular earnings growth for the private sector was 5.4% in August to October 2024 (Figure 4). This was up on the previous three-month period (4.9%) and last higher in March to May 2024, when it was 5.6%."
4. Vacancies have continued to fall, and are now roughly at the 2019Q4 pre-pandemic level. Our previous work, however, showed this was inflationary.
We have spent time in class reviewing how firms can adjust to prices by changing no only quantities, but other margins as well. Here's an example from the Next case
Para 396: "in the early 2000s paid rest breaks which sales consultants had received were removed following the introduction of the national minimum wage".
The Draghi report assigns slow EU productivity growth to a large range of factors. He mentions in particular the tech sector
““…the productivity gap between the EU and
the US is largely explained by the tech sector. (p.2)
“The EU economy has traditionally been
strong in all mid-technology sectors” (p.20)
2. So what do the data say? We have used EUKLEMS/INTANProd
as follows.
3.
Split the economy up into
a.
ICT equipment manufacturing: C26. Call this ICT manufacturing
b.
Information services. Sector J: writing software, making movies
etc. call this ICT services
c.
Everything else. Call this ICT using
4.
Write productivity growth as a share-weighted
average of productivity growth in all the sectors
Where the shares are shares in value-added and the same
equation applies for TFP growth.
5.
Average annual growth rates, 1997-2019 are below
for the US, EU9 (9 major EU countries) and the UK
US |
share in GVA |
LPG |
TFPG |
ICTusing |
87% |
1.91 |
0.44 |
ICTmfr |
3% |
12.90 |
10.40 |
ICTsvc |
10% |
4.88 |
1.86 |
Total |
|
2.51 |
0.85 |
|
|
|
|
EU 9 |
|
|
|
ICTusing |
91% |
1.02 |
0.15 |
ICTmfr |
2% |
6.43 |
5.14 |
ICTsvc |
7% |
3.08 |
1.86 |
Total |
|
1.25 |
0.35 |
Total with : |
|
|
|
US shares |
|
1.57 |
0.46 |
with US prod |
|
2.29 |
0.69 |
|
|
|
|
UK |
|
|
|
ICTusing |
89% |
1.32 |
0.20 |
ICTmfr |
1% |
12.00 |
11.30 |
ICTsvc |
10% |
7.67 |
6.72 |
Total |
|
2.08 |
0.98 |
Total with : |
|
|
|
US shares |
|
1.64 |
0.52 |
with US prod |
|
2.35 |
0.71 |
Where the colums are
a.
The share of that sector in the total economy
b.
Average labour productivity growth (LPG)
c.
Average TFP growth (TFPG)
And the row marked total is the weighted average.
The table tells us:
a.
The US has a higher GVA share of ICT manufacturing
and ICT services.
b.
But it also has higher productivity in those
sectors than the EU (but not the UK).
c.
Thus the italics show two counterfacturals
a.
EU and UK productivity growth with the US shares
(but EU and UK productivity growth)
b.
EU and UK productivity growth with the US productivity
growth (but EU and UK productivity shares)
What do we find?
a.
Most of the EU/US gap is not because of industrial
structure. If the EU had the same
industrial structure as the US, it would only close about 25% of the productivity
gap. The problem is that the EU has lower
productivity within those sectors (and low productivity in the ICT-using
sector)
b.
The UK by contrast is closer in industry structure
to the US and has high productivity in these
sectors. The UK problem is low productivity in the ICT using sector.