As we look at the UK labour market today let us start with something which in one way is good news and in another poses questions. From Reuters last week.
Manchester United winger Jesse Lingard has signed a new contract that will keep him at Old Trafford until 2021, the Premier League club said in a statement on Thursday.
Lingard, who will earn up to 100,000 pounds a week according to British media reports, has an option to extend the deal by a further year.
Firstly congratulations to Jesse and for once it is nice to see an English player benefit from the largesse of the Premier League these days. There is invariably hype in the exact numbers but he seems to have approximately trebled his wages which will do there bit for the average wages series in the future. However those who watched an outstanding display by Juventus last night in the Champions League as they put Barcelona to the sword have been mulling the concept of relativity. From @Football_Tweet
– Paulo Dybala earns €3M a season at Juventus. – Jesse Lingard earns €6M a season at Man Utd.
we return to a familiar question which is how much of the wages growth is in effect a type of inflation?
The impact of Robots
If we look ahead on a more general level then we can expect to see not only more robots in our economy but more advanced ones appear. Not quite as advanced as the ones in the Foundation saga of Isaac Asimov that I am currently reading again but considerable advances are being made. According to Bloomberg such improvements are likely to have an impact on labour markets and wages especially.
Robots have long been maligned for job-snatching. Now you can add depressing wages and promoting inequality to your list of automation-related grievances.
Industrial robots cut into employment and pay for workers, based on an new analysis of local data stretching from 1990 and 2007. The change had the biggest impact on the lower half of the wage distribution, so it probably worsened America’s wage gap.
The exact results are as follows.
One additional robot per thousand workers reduces the employment-to-population ratio by 0.18 percentage points to 0.34 percentage points and slashes wages by 0.25 percent to 0.5 percent, based on their analysis.
Food for thought as we look forwards in years and decades and of course ground which many of the best science fiction writing has warned about.
The quantity data remains pretty strong as you can see.
There were 31.84 million people in work, 39,000 more than for September to November 2016 and 312,000 more than for a year earlier.
There was an additional kicker to this as we got a glimpse into a potentially improving situation regarding underemployment as well.
with an increase in full-time employment (positive 146,000) partly offset by a fall in part-time employment (negative 107,000)………….strong demand for labour is translating into a shift from part-time to full-time employment, and an increase in the average hours worked per week by both full time and part-time employees.
Here is the analysis of hours worked.
Average hours worked per week increased from 32.0 to 32.4 in the 3 months to February 2017, the highest since July to September 2002, largely due to more hours being worked over the Christmas and New Year period compared with recent years.
Fewer part-time workers are looking for full-time work.
Data released today (12 April 2017) show that this measure continued to contract with the proportion falling to 12.6%, down from 14.2% a year ago (and down from a peak of 18.4% in 2013). This proportion is now at its lowest since March to May 2009, but still well above its pre-crisis average of 8.3%.
So it looks as though the situation regarding underemployment has improved as well although the data is only partial and let us finish this section with the unemployment numbers.
There were 1.56 million unemployed people (people not in work but seeking and available to work), 45,000 fewer than for September to November 2016 and 141,000 fewer than for a year earlier.
What about wages?
These were the same as last month in terms of growth.
Between the three months to February 2016 and the three months to February 2017, in nominal terms, total pay increased by 2.3%, the same as between the three months to January 2016 and the three months to January 2017.
Actually there was a rise in the month of February by 2.9% on the year before so maybe a hopeful hint of a pick-up! We will find out as we go through the bonus months of March and April. One thing we do know is that both Sky News and the Financial Times ( “UK wages have grown at their weakest pace in seven months,”) have not checked this.
The official numbers on real wages are below.
adjusted for inflation, average weekly earnings grew by 0.2% including bonuses and by 0.1% excluding bonuses, over the year, the slowest rate of growth since 2014.
So we have something of a discontinuity as we had some real wage growth in February it would appear. Let us cross our fingers that it continues but sadly it seems unlikely ( the comparison is flattered by bonuses falling last year). Of course even if we use the figures for February alone then real wage growth was negative if we compare it to the Retail Price Index.
Also the exclusion of the self-employed from the wages data gets ever more shameful.
self-employed people increased by 114,000 to 4.78 million (15.0% of all people in work).
Can we increase tax on income from wages?
After the debacle of the U-Turn on higher National Insurance contributions from the self-employed there have been arguments that the UK is unable to ever raise more taxes from income. It was interesting therefore to see some international comparisons from the OECD today.
The average single worker in Belgium faced a tax wedge of 54.0% in 2016 compared with the OECD average of 36.0%…..Belgium had the 4th highest tax wedge in the OECD for an average married worker with two children at 38.6% in 2016, which compares with the OECD average of 26.6%.
Not the best place to be single and childless it would appear! But now the UK.
The average single worker in the United Kingdom faced a tax wedge of 30.8% in 2016……..The United Kingdom had the 22nd lowest tax wedge in the OECD for an average married worker with two children at 25.8% in 2016,
So in theory we could if we wished to reach the peak that is Belgium. The Anglosphere ( US, Australia and Canada) if I can put it like that has similar numbers to the UK although the Kiwis stand out at only 17.9% for a single person. The lowest is Chile at 7%.
Interestingly with its debt and deficit problems income in Japan is slightly more taxed than here.
I would like to take a step back and consider the last couple of years. Remember the number of economists and media analysts who warned about what they called “deflation” and sometimes they shouted it so loud it was “DEFLATION”? Well it morphed into this.
By late-2014, an increase in nominal wage growth and low CPIH inflation, led to average real earnings increasing by 1.7% in the 18 months to mid-2016. ( Office for National Statistics).
This of course boosted the economy mostly via the retail sales boom but also in other ways as I pointed out on the 29th of January 2015.
However if we look at the retail-sectors in the UK,Spain and Ireland we see that price falls are so far being accompanied by volume gains and as it happens by strong volume gains. This could not contradict conventional economic theory much more clearly. If the history of the credit crunch is any guide many will try to ignore reality and instead cling to their prized and pet theories but I prefer reality ever time.
If there was a musical theme to the deflation paranoia then it was “clowns to the left of me, jokers to the right” from Stealers Wheel. Please do not misunderstand me I am talking about the so-called experts here not those influenced by them. Sadly we seem to be heading into a period where something they wanted ( higher inflation) will slow the economy down. I wonder how the inflationistas will spin that?