Of UK wages, robotics and the gig economy

Today we advance on the UK wages data knowing that the pick-up in inflation we have been expecting is now coming to fruition. Albeit that today’s wages numbers only bring us up to date of the 3 months to October so we will be experiencing lagged data. Yesterday also reminded us of two things. Firstly how poor the economics profession has become at predicting inflation and that there is invariably an “Early Wire” of them in currency markets as some find themselves being more equal than others. Interestingly the economist Douglas McWilliams has put up a defence this morning.

….and most people think Cebr forecasts are usually right!

Our Doug seems to be a passionate supporter of one of the new forms of measuring GDP or Gross Domestic Product if this from Business Insider in March 2015 is any guide.

Douglas McWilliams, one of the world’s leading economists and a former advisor to UK Chancellor George Osborne and London Mayor Boris Johnson, was allegedly filmed smoking crack in a drugs den in Britain’s capital city.

He is also is facing trial for allegedly assaulting a prostitute on New Year’s Eve after she refused to take crack with him.

Sometimes you really could not make it up.

Meanwhile we see two things from the world of football. Firstly that price inflation is rampant and secondly that capital controls in China may not being doing so well. From BBC Sport.

Chelsea have reportedly accepted a bid of £60m for Oscar – he’ll leave for China in January.

The war on cash

This seems to have developed a new front in what might be called the South China Territories but has been immortalised in song as a land down under. From news.com.au

Speaking to ABC radio on Wednesday, Revenue and Financial Services Minister Kelly O’Dwyer flagged a review of the $100 note and cash payments over certain limits as the government looks to recoup billions in unpaid tax……“The whole point of this crackdown on the black economy is to make sure we close down any potential loopholes,” she said. Despite the broad use of electronic forms of payment, Ms O’Dwyer warned there are three times as many $100 notes in circulation than $5 notes.

What could go wrong? Well there are echoes of the disaster that demonetisation has become in India here.

There are currently 300 million $100 notes in circulation, and 92 per cent of all currency by value is in $50 and $100 notes.

Also there is the issue that this is also presented as a boost to banks and savers will then have to put more money with them as another move favours the “precious”. Oh and I would wager that the unofficial economy in Australia is a lot more than 1.5% of GDP.


As we look to the future of wages growth it is hard not to wonder about the effect of improved robots on the situation. Just over a year ago Bank of England Chief Economist Andy Haldane offered this view.

For the UK, that would suggest up to 15 million jobs could be at risk of automation.  In the US, the corresponding figure would be 80 million jobs.

For some jobs this will depress wages although of course it may well boost others. There is a cautionary note which is that Andy has a very poor forecasting record which I am sure any respectable AI style robot could improve. The Resolution Foundation has also considered possible benefits from this general trend and theme.

Given high employment, terrible productivity performance and low investment, the UK arguably needs more automation, not less.

Today’s UK numbers

There was in fact some good news from the wages series.

Between August to October 2015 and August to October 2016, in nominal terms, total pay increased by 2.5%, slightly higher than the growth rate between July to September 2015 and July to September 2016 (2.4%).

So both a higher number and an upwards past revision. This was driven by the fact that wages rose by 2.8% in the month of October alone driven by an 8.6% rise in construction wages and a 4.4% rise in the wholesale sector ( retail and hotels). This meant that real pay would have risen in October as inflation also dipped slightly but the more general pattern is stationary.

Over the same 3-month period, real AWE (regular pay) grew by 1.7%, the same as the growth seen in the 3 months to September

Of course the wages numbers look much worse if we use the RPI or Retail Price Index as our inflation measure where we find ourselves knocking around 1% off the numbers above.

The next number can be seen in two ways.

Total hours worked per week were 1.01 billion for August to October 2016. This was 5.0 million fewer than for May to July 2016 but 7.3 million more than for a year earlier.

Some are reporting this as a post EU vote hiring freeze. It does show a possible change in our previously booming employment position but of course with GDP growing does in fact show a rise in likely productivity.

Whilst the unemployment rate remained at 4.8% there was in fact a small but welcome fall in unemployment.

There were 1.62 million unemployed people (people not in work but seeking and available to work), 16,000 fewer than for May to July 2016 and 103,000 fewer than for a year earlier.

However the claimant count or registered unemployment did rise by 2400 in November which may be a sign of something but this number is not only experimental it comes from a series which no-one has any great faith in.


There is much to consider in all of this and the undercut to another pretty good set of UK labour market is those who are excluded such as the self-employed who do not appear in the average earnings numbers. Some insight into conditions in the gig industry have been provided by Izzy from FT Alphaville as shown below.

The interviewer stressed I would be earning a standard rate of £7 per hour plus a £1 per delivery bonus for every order completed, but frequently emphasised that I would probably be taking home as much as £12 per hour because of surge incentives. …………In total I did five shifts, and earned an average of £8.10 per hour. The London living wage is supposed to be £9.75, according to London authorities. The national required living wage is £7.20 but goes to £7.50 in April next year.

There were various other issues such as compulsory weekend shifts and Izzy’s view that to get surge wages you had to be available 24/7. As to efficiency the app drained her phone battery quickly and there was also this.

Outside of the office lay heaps of bikes atop of each other, most of them cast loosely aside the building. There appeared to be absolutely nowhere to secure a bike properly — which I thought strange for a cycling courier service.

Actually this resonated with me but from a different industry as my brother has worked as a driving instructor on as franchise basis where companies produce earnings forecasts which are somewhere between misleading and outright fantasy in practice. Both have a type of fixed cost as Deliveroo requires the rider to but branded corporate clothing and driving instructors have a period to which they must commit to pay the weekly franchise fee.

If we return to the official picture then the Resolution Foundation has provided some perspective with this.







18 thoughts on “Of UK wages, robotics and the gig economy

  1. While, of course, not wishing to dispute anything that derives from that titan of heroes, Andy Haldane, may I suggest that he takes a look at a history book before forecasting huge numbers of people losing jobs to technology. If that is too much, he could try googling Luddite.
    Things move on, Mr Haldane. People adjust. Other jobs open up. That is how it has worked for millennia.

    • “That is how it has worked for millennia. “…..

      no , it has not

      the industrial age is a mere 300 year long so far

      and if no action is taken , we’re be back to kings and serfs – some would posit thats already set in stone

      it is a fact that well paid jobs are disappearing and being replaced by breadline pay ones

      just because some media idiot coined the nick name “gig” does not take away the fact these “jobs” are piece work like of old .

      I for one , would not like us to go back to 1930’s Britain

      read Harry Harrison’s Scifi book ” Homeworld” – thats were we are going


      • Henry Ford knew that mass production was useless without the mass ability to buy that production.
        It’s 30 years since I read Harry Harrison.

  2. Given high employment, terrible productivity performance and low investment, the UK arguably needs more automation, not less.

    hmm, then I read the CBI wants immigration targets abolished

    Face it Shaun , the average UK employer regards training , machinery and workers as costs to be avoided

    the British Biker industry suffered UK management – two states

    1, we’re making money – no need to invest

    2, we’re loosing money – we can’t afford to invest

    I’d say thats the default for all UK /CBI firms

    also the Fab Five of the Rover Group – another shining example

    Sir Fred ?


    PS: if there’s only low paid jobs – who can afford all those expensive consumer goods ?

    Borrow off the house ? but as time goes on they cant afford houses – thats happening now

    So in the end consumerism will die – then what ?

    • Hi Forbin

      Whilst the demise of the UK motorbike industry was a text book case in how not to do things we do still have some niches ongoing. For example Aston Martin announced this earlier. From the BBC.

      “Aston Martin buys land in south Wales for new factory where it will make luxury DBX cars http://bbc.in/2hsxzvn

      Specialist engineering of the sort that we do also for Formula One is an area we should look to exploit.

      The sad bit is that we have lacked a plan for years and in fact decades. What is mean is starting from schooling and encouraging engineering as a subject.

    • “So in the end consumerism will die – then what ?”

      As Johnny Rotten said all those years ago – “Anarchy for the UK, it’s coming sometime maybe I’ll give a wrong time stop a traffic lane.Your future dream (ongoing greedy consumerism and capitalism?) is a sharpened scheme “

  3. Hi Shaun,

    Yet more numbers of dubious quality and usefulness. None more so that the statement of worked hour per week. I cannot under any circumstances believe we can measure the total hours worked per week to better than few a % and most likely the error is significantly more than that. A change in monthly hours of 5 million is not even half a percent and that also will also be subject to uncertainty. Do these things ever get presented with measures of uncertainty or error?

    One thing I think I could agree on is that the increase of the gig economy and the increasing use of technology (under the broader guise of globalisation) is going to cause even greater social and subsequently political upheaval than we are currently witnessing. How long until the establishment find a good reason to not bother with elections. I think wrongly attributed to Mark Twain but nonetheless a good quote “if voting made a difference we’d outlaw it”. The other way of course is simpler and that a war.


    • Hi Dave

      I take your point about a number for hours worked which relies on a survey of a much smaller number. However it is at least a consistent measure which people will understand as opposed to the rather vague definition of full-time work which varies according to what the individual thinks it means.

      As to elections being abandoned I think that the trend to being asked to vote again like what happened in Ireland is on that road…

  4. Great blog, Shaun, as always.
    You wrote: “Of course the wages numbers look much worse if we use the RPI or Retail Price Index as our inflation measure where we find ourselves knocking around 1% off the numbers above.” If you use the RPI as the deflator, instead of the annual real wage gain being 1.7% in both July-to-September and August-to-October, it is 0.5% for both periods, so you knock a little more than one percentage point off the growth rate. If, like me, you think the RPIJ was a generally commendable reform that largely corrected a formula bias in the RPI, then the annual real wage gain was more like 1.2% for July-to-September, rising to 1.3% for August-to-October. Either way, everyone can agree that there is no way that these wage estimates should be deflated by a CPI series that excludes house prices, and that doing so makes the real wage gains look larger than they are. Everyone in the UK should get together in support of the RPI and RPIJ, faced with deterioration and elimination. The CPI in no way constitutes an acceptable deflator of nominal wages and neither does the CPIH.

    • Hi Andrew and thanks

      I completely agree and the only thing I would add is that something along the lines of the Household Inflation Index proposed by John Astin and Jill Leyland would also make a suitable deflator for this purpose. Whichever of the choices we use the number ends up being lower.

  5. ‘Douglas McWilliams, one of the world’s leading economists and a former advisor to UK Chancellor George Osborne and London Mayor Boris Johnson, was allegedly filmed smoking crack in a drugs den in Britain’s capital city.
    He is also is facing trial for allegedly assaulting a prostitute on New Year’s Eve after she refused to take crack with him.’

    Fine tuning the drugs and prostitution imputed components of GDP? Or just trying to boost both at the same time?

    Fine blog Shaun.

  6. and today the FED raised interest rates

    oh Mark Carney wherefore art though ? (snigger)

    “Oops! …I Did It Again”



  7. Hi Shaun
    Has Yellen just played her “Trump card.”
    If the US dare to slowly raise rates next year, we
    will either have other central bankers albeit wearing
    incontinence pads, forced to follow. Alternatively if
    the US is forced to reduce rates again we will at
    least now that things are in a complete mess for
    a VERY long time!


    • “have other central bankers albeit wearing
      incontinence pads, forced to follow.” ha ha I like it.

      It could go either way, if trump pushes his anti China tariffs and scales back his infrastructure plans there going to be an almighty thump, if he goes the other direction it’s going to be boom boom boom with lashings of growth/inflation served up. He doesn’t seem like a man who goes for compromises so I’m not expecting a middle way between those two polarities.

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