Macroeconomics: UK economy, IB Economics
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Macroeconomics: UK economy, IB Economics
A brief overview of relevant articles for IB and A-Level all relating to the UK economy
Curated by Graham Watson
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Strikes and wet weather cause UK economy to shrink

Strikes and wet weather cause UK economy to shrink | Macroeconomics: UK economy, IB Economics | Scoop.it
Official figures show the UK economy contracted by 0.5% in July, more than economists predicted.
Graham Watson's insight:

Oops! The UK economy shrank by 0.5% in July, apparently because of strikes and wet weather, although there are worrying signs from the  construction and retail sectors. And, if July was wet, then surely the same is going to apply to August as well?

 

All of which poses the question: is the UK on the point of entering a recession?

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Cost of living and strikes weigh on UK growth

Cost of living and strikes weigh on UK growth | Macroeconomics: UK economy, IB Economics | Scoop.it
The economy grew only slightly in the first three months of the year, as high prices kept purse strings tight.
Graham Watson's insight:

Again, the UK economy has tiptoed past a recession with economic growth, if you can call it that, being 0.1% in the first quarter of the year (Jan-March). It's another poor performance, coming a day after the Bank of England was cautiously optimistic.

 

Strikes and bad weather have played a part in this. And some people have had the temerity to suggest that Brexit might also have played a part. 

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Rail strikes planned in March and April suspended

Rail strikes planned in March and April suspended | Macroeconomics: UK economy, IB Economics | Scoop.it
Rail workers across 14 train companies were due to walk out on 30 March and 1 April.
Graham Watson's insight:

It seems as though the rail strikes are off, for the time being, with the Rail Delivery Group (RDG) and the RMT agreeing to work towards a settlement. 

 

And this will be good for economic growth going forward. 

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UK economy rebounds as Rishi Sunak says confidence is returning

UK economy rebounds as Rishi Sunak says confidence is returning | Macroeconomics: UK economy, IB Economics | Scoop.it
The economy grew by more than expected in January, helped by higher school attendance.
Graham Watson's insight:

The green shoots of recovery in the UK too? Well, perhaps not? 

 

Yes, the economy grew by 0.3% in January, according to the ONS, but it appears that it was largely due to a number of odd factors, the return of Premier League football, slightly lower levels of strike action and marginally higher school attendance, presumably in allowing parents to go to work.

 

And yet, the economy declined over the three month period November to January, so proof that responding to 'snapshots' of data isn't a good idea. Particularly, when many think that increased strike action in February is going to weaken growth figures for this month. 

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Pay rises at fastest pace for over 20 years, but below inflation

Pay rises at fastest pace for over 20 years, but below inflation | Macroeconomics: UK economy, IB Economics | Scoop.it
Wages rose at their fastest growth since 2001 excluding the pandemic, but still lag behind rising prices.
Graham Watson's insight:

A nice indicator of the difference between nominal and real values with macroeconomic implications. Yes, nominal pay is rising at its fastest level for 20 years but real pay is falling. 

 

Further, drill down and there are significant discrepancies between public and private sector pay, and hence obvious reasons for the current level of strike action, although remarkably unemployment remains largely unchanged. 

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The only course left for Sunak’s friendless government is to settle these strikes now | Polly Toynbee | The Guardian

The only course left for Sunak’s friendless government is to settle these strikes now | Polly Toynbee | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it
The Tories have even lost the support of their cheerleaders in the rightwing press, says Guardian columnist Polly Toynbee
Graham Watson's insight:

How Polly Toynbee sees the current state of play surrounding public sector strikes, with public support for many of the strikers, not least nurses, and many of the government's claims about the cost of granting public sector workers larger pay rises having been debunked. 

 

You don't have to agree with all of it but it seems to be a politically tone deaf hill to want to die on, although the current Prime Minister might like to point out that most of these difficulties reflect mismanagement of the economy over an extended time period. 

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The strikes are a baleful legacy of a 12-year obsession with tax cuts and a small state | Will Hutton | The Guardian

The strikes are a baleful legacy of a 12-year obsession with tax cuts and a small state | Will Hutton | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it
David Cameron first took aim at public sector workers in 2010. Continued Conservative policies have brought them to their knees
Graham Watson's insight:

Interesting, and entirely accurate assessment of the state of public sector pay, which highlights the fact that even if nurses got a inflation increase plus 5%, it would still mean that their real pay has fallen relative to 2010. 

 

And let me run that by you again, a sector which is struggling to recruit has less lower real pay than in 2010. And think about that in terms of what that might mean for other areas of the public sector - why would talented people opt for a career in the public sector, in areas such as education and so on, if they're going to be faced, over time, with real pay cuts. It really is cakeism of the very worst sort. 

 

I don't deny that there are aspects of the public sector that are inefficient, but to seem to hold them responsible for all of the nation's economic woes is remarkably short-sighted. 

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Who is striking? How walkouts on Wednesday 14 December will affect you

Who is striking? How walkouts on Wednesday 14 December will affect you | Macroeconomics: UK economy, IB Economics | Scoop.it
Rail disruption and another Royal Mail walkout - what you need to know by the BBC’s Zoe Conway.
Graham Watson's insight:

A fascinating article - if only because the choice of image isn't accidental, and I think unfair on striking workers. Why not show what's happened to the real pay of nurses, relative to private sector pay? However, this is a classic example of shaping the narrative - and I don't like it. 

 

However, this Zoe Conway article details exactly what strikes are taking place this week, but it doesn't show what's happened to real pay for public sector workers, both in general terms and relative to the private sector. 

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Days lost to strikes hit highest in over a decade

Days lost to strikes hit highest in over a decade | Macroeconomics: UK economy, IB Economics | Scoop.it
The Office for National Statistics says 417,000 working days were lost to industrial action in October.
Graham Watson's insight:

A lovely example of why you should look beyond the headlines - whilst the Office for National Statistics is undoubtedly right about the number of days lost to strike action, it's still exceptionally low in historic terms, when compared with the rest of the past century.

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Is the UK really facing a second winter of discontent? | Industrial action | The Guardian

Is the UK really facing a second winter of discontent? | Industrial action | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it
Comparisons with 1979 are misleading – strikes over pay now are smaller in scale and focus, and stoked by inflation
Graham Watson's insight:

What are the prospects of a second Winter of Discontent? Richard Partington suggests that comparisons are inappropriate because the number and scale of the current strikes mean that there's little resemblance between today and the 1970s. It's an interesting piece of economic history, but I can't help reflecting that if you don't want to draw comparisons, don't publish a piece with a headline like this.

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Timetable of trouble: the wave of strikes set to hit the Tories this winter | Industrial action | The Guardian

Timetable of trouble: the wave of strikes set to hit the Tories this winter | Industrial action | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it
Rampant inflation and government policy has brought matters to a head: so where is disruption going to hit and what are the unions asking for?
Graham Watson's insight:

The Observer looks at the prospects for a "Winter of Discontent" - outlining all of those industries, largely in the public sector, where trade unions are engaged in strike actions. 

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Workers face twenty years of low pay, TUC warns

Workers face twenty years of low pay, TUC warns | Macroeconomics: UK economy, IB Economics | Scoop.it
The union body says UK families are at breaking point as pay fails to keep up with rising prices.
Graham Watson's insight:

If it's conference season, the major parties have met, the Lib Dems have hired a private function room in the back of a small pub, and now it's the Trades Union Congress' turn.

 

The main theme of the speech by its boss, Frances O'Grady is the squeeze on real wages for workers, contrasting a falling share of national income going to labour and a rising share going to shareholders in the form of dividend payouts, and the rising income inequality associated with this.

 

And to be fair, she's got a point - it seems as though real incomes haven't been squeezed as consistently since the Napoleonic era - and yet, for all that the current government are looking at restricting the ability of trade unions to strike. 

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‘Storm coming’: Britain in a mess as ruinous energy bills meet austerity | Energy bills | The Guardian

‘Storm coming’: Britain in a mess as ruinous energy bills meet austerity | Energy bills | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it
Talk on picket line in Felixstowe and high street in Ipswich says new PM has just weeks to tackle crisis
Graham Watson's insight:

Richard Partington looks at the implications of the ongoing cost of living crisis for UK households, noting that real pay is failing to keep pace with inflation, and the distributional implications of rising prices, as well as the implications for inequality. It is this that is seen as the trigger for the recent wave of strikes in different sectors of industry, and the effects of the cost of living crisis have been exacerbated by previous years of austerity. 

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Record numbers of British workers are sick. No wonder the economy is too. But there is a cure | Larry Elliott | The Guardian

Record numbers of British workers are sick. No wonder the economy is too. But there is a cure | Larry Elliott | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it
The Tories have failed to pursue the obvious answers to this crisis, punishing ill people and NHS strikers instead, says Guardian economics editor Larry Elliott
Graham Watson's insight:

In the wake of the latest labour market data, Larry Elliott argues the government needs to take two simple steps to get more people back into work: tackling strikes in the NHS; spending more on healthcare. 

 

However, is this good economics? It's easy to suggest that throwing money at this problem is going to resolve this, but it has an opportunity cost, and there might also be questions about efficiency. 

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Pay rises above inflation would be a terrible mistake, says Hunt

Pay rises above inflation would be a terrible mistake, says Hunt | Macroeconomics: UK economy, IB Economics | Scoop.it
The chancellor says the impact of the junior doctors' strike on NHS patients is "regrettable".
Graham Watson's insight:

To what extent are pay rises for junior doctors inflationary? It's a question probably best not addressed by an unpopular former Health Secretary almost universally hated by medical professionals would be my guess. However, it raises some interesting questions about the prospects of a wage-price spiral and something more fundamental about the nature of healthcare more generally. 

 

The issue is that healthcare suffers from "Baumol's cost disease" a phenomenon that argues that where it's difficult to measure productivity, such as in healthcare, wages often don't keep pace with productivity gains/inflation. The problem is that this means that these wages become less competitive over time to the extent that I can't see an argument for almost anyone becoming a nurse, or even in doctor in the current environment.

 

Factor in a government unprepared to be honest with the nation about the future, and the fact that healthcare costs and the demand for healthcare professionals are inevitably going to rise, and it might seem like we have an almost irresolvable situation. Or is any government going to argue for higher taxes - particularly property and wealth taxes, or bringing self-employment tax rates in line with everyone else - to fund this? I suspect that the current government are seeing AI as the panacea, but suspect that this is going to see a shift in demand from one type of labour to another.

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What has happened to pay in the UK?

What has happened to pay in the UK? | Macroeconomics: UK economy, IB Economics | Scoop.it
Workers are calling for improved pay to tackle the cost of living crisis, but how have wages changed?
Graham Watson's insight:

In the current environment, with many people striking, the BBC looks at the issue of what has happened to average earnings and highlights the fact that real pay has failed to keep up with average earnings in a number of sectors, notably teachers and nurses. And it's this that has precipitated the current round of strike action. 

 

However, what has caused this? This is a much more interesting question and you might want to have a think about the factors that lie behind it. 

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Will the wave of strikes ever end?

Will the wave of strikes ever end? | Macroeconomics: UK economy, IB Economics | Scoop.it
It's not surprising that 2023 has been met with more industrial action, but how can both sides end it?
Graham Watson's insight:

A broad brush look at what the current wave of strikes mean for the UK economy, with Faisal Islam suggesting that there's a reasonable possibility of compromise, but that this can't be taken for granted. It's a reasonable read, putting industrial relations into some sort of context. 

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Business is doing nicely, thank you, while workers get steadily poorer | Phillip Inman | The Guardian

Business is doing nicely, thank you, while workers get steadily poorer | Phillip Inman | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it
With prices soaring but wage rises still well below inflation, employees in the UK are getting the rawest deal in Europe
Graham Watson's insight:

Phillip Inman's piece in today's Observer highlights the growing inequality of income distribution between firms and workers, arguing that the current crisis has continued to see returns to capital rising and returns to labour (i.e. wages) being squeezed, with many workers, especially in the public sector, seeing real incomes falling.

 

In this environment, the Stock Exchange reaching an all-time high looks like a sick joke, given that British workers are losing out, both in real terms and relative to workers elsewhere. No wonder so many of them are striking. 

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Sunak and Hunt face a rerun of the 70s’ winter of discontent. It didn’t end well then | Larry Elliott | The Guardian

Sunak and Hunt face a rerun of the 70s’ winter of discontent. It didn’t end well then | Larry Elliott | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it
Ted Heath and Jim Callaghan paid a big price for taking on the trade unions, and once again voters are blaming the politicians
Graham Watson's insight:

Larry Elliott's take on the ongoing strike action - he suggests that we're on the brink of another 'Winter of Discontent' but that circumstances have changed, so that the unions have a stronger hand than they've had for a while, and that, at the moment, public opinion is with them.

 

He also bursts the current government narrative that the the 'independent' pay review bodies can't be overruled, although it seems that his Chancellor, and former Health Secretary, Jeremy Hunt, has done exactly that in the past. 

 

Thus, it would seem that the government is in a bind. In effectively trying to impose an incomes policy at a time when we've got the richest Prime Minister ever, and when people are well aware of how public sector pay has been squeezed over time, the government isn't courting favour. And when we last had a Winter of Discontent, it didn't end well for the party in government. 

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Will slowing price rises stop rows over pay?

Will slowing price rises stop rows over pay? | Macroeconomics: UK economy, IB Economics | Scoop.it
Workers are battling for higher wages, while the government and employers want to temper increases.
Graham Watson's insight:

Simple answer to a simple question: no. And why should they? 

 

If I were a public sector worker, I would be on strike, pointing out the number of pay freezes that I've endured in the past decade, and trying to ask people to look beyond the government's "independent pay review" body defence, by suggesting that circumstances have changed dramatically since they reached their judgment and thus that the proposed pay increases are unfair. I'd also be looking at comparing what has happened to MPs and ministers salaries over the past decade, and private sector pay, with public sector pay. 

 

Objectively, looking at all of these factors helps explain why so many workers are on strike and presents a compelling case. The narrative that public sector pay increases will drive inflation is, for the most part, utter tosh. 

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Factcheck: are UK strikers greedy, unrealistic and putting others in danger? | Industrial action | The Guardian

Factcheck: are UK strikers greedy, unrealistic and putting others in danger? | Industrial action | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it
This is an extract from our First Edition newsletter
Graham Watson's insight:

As a counterpoint to lots of coverage of the current wave of strikes, it's worth reading the following analysis from yesterday's Guardian. Did you know for example that real private sector pay is 4.3% higher than it was in 2010, whereas real public sector pay has fallen by the same amount.

 

Factor in the overblown claims about how increasing public sector pay would be inflationary, which it isn't relative to the current effect of energy prices and you might have a different view of industrial action. 

frankline's curator insight, January 24, 2023 8:24 PM

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It is soaring energy costs fuelling UK inflation – not humble pay rises | Richard Partington Economics correspondent | The Guardian

It is soaring energy costs fuelling UK inflation – not humble pay rises | Richard Partington Economics correspondent | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it
The government says it wants to tame public sector pay to fend off a highly unlikely wage-price spiral
Graham Watson's insight:

Richard Partington states it in no uncertain terms: UK inflation is a function of higher energy prices, and the impact of rising wages on inflation has been minimal. 

 

As a result, he condemns the attempts of the government to create a narrative about the possibility of a wage-price spiral driven by higher wages, not least in the public sector. 

 

For me, the most interesting data relates to the number of days lost to industrial action - look closely. The government are going to claim that the country is being held to ransom by striking railway workers and postal workers, and announce new legislation to curtail their right to strike. But the evidence - and objective evidence - suggests that, overall, there's little in the way of need for this. 

frankline's curator insight, January 24, 2023 8:27 PM

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If it’s unions against these infantile ministers, I know who will win | Polly Toynbee | The Guardian

If it’s unions against these infantile ministers, I know who will win | Polly Toynbee | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it
The UK government’s amateur grandstanding will end in a humiliating climbdown, says Guardian columnist Polly Toynbee
Graham Watson's insight:

Polly Toynbee writes on the current wave on industrial action, and whilst I don't agree with all of what she says, it's an interesting attempt to reframe the narrative surrounding this. 

 

To my mind, it is clear that the government are stoking the current disputes in the hope that come the 2024 General Election, they will be able to play the union card, in arguing that voting Labour will effectively be handing control of the economy to the trade unions. 

 

The reality is that all of those striking have seen their real incomes decline, the proposed pay deals are well below those being offered in the private sector, and many of them were promised better pay deals by former Prime Minister, Boris Johnson, during the pandemic. Of course, like any of his promises, he probably had absolutely no intention of fulfilling them.

 

So don't buy the demonisation of the trade unions, and think about each on a case-by-case basis. For example, the rail unions certainly have a case on pay - however, the sector is overstaffed and inefficient; thus, there probably are grounds for compromise here.  

frankline's curator insight, January 24, 2023 8:25 PM

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UK strike levels soar as public sector workers face worst pay squeeze | Economics | The Guardian

UK strike levels soar as public sector workers face worst pay squeeze | Economics | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it
Wage growth continues to lag behind rising inflation as unemployment rate rises slightly
Graham Watson's insight:

The Guardian's take on the latest labour market data and the news that real pay is falling. Given the discreprancy between public sector pay and private sector pay, it's unsurprising that there's so much strike action at the moment. 

frankline's curator insight, January 24, 2023 9:02 PM

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Scooped by Graham Watson
Scoop.it!

‘Great British Railways is dead’: rail industry at lowest ebb since the days of Railtrack | Rail industry | The Guardian

‘Great British Railways is dead’: rail industry at lowest ebb since the days of Railtrack | Rail industry | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it
Grant Shapps ‘revolutionary’ GBR plan faces huge challenges
Graham Watson's insight:

This Guardian looks at the current state of the railways, and the proposed Williams-Shapps rail review. The general mood is one of pessimism, with most people frustrated by the lack of clarity, the slow progress on infrastructure and the return of strike action. All of these things have supply-side implications. You might be able to work out what they are. 

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