Glory be, Eoin Clarke gets one right!

Difficult to believe I know but:

The graph above shows the percentage increase in the number of NEETs by region from Q2 2010 to Q2 2011. The North East of England experienced a 21% increase while the North West suffered a 28% increase. The East of England also suffered a 21% increase in NEETs. We should draw breath there. These figures in themselves require sober reflection about the state of our economy. The abolition of EMA and the tripling of tuition fees are to these young men and women hammer blows to their life chances.
But the key finding of this research is that the South East of England and the South West of England have escaped a significant rise in their NEET problem. Of course, this is to be cheered. But why the regional disparity? Should we be concerned when one part of the UK excels while another languishes? At the very least one would hope that common agreement could be secured that the NE, NW and East of England require specially tragetted assistance to combat this problem.
So, what should we do about this?
The first thing of course is to recast the argument. What we have here is proof that the price of labour is roughly market clearing in the SE and SW and well above that market clearing price in the NE, NW and E. More specifically, the price of 16-24 year old labour.
This is similar to our optimal currency area problem: call it the optimal wage area problem. So, just as with our optimal currency are solution, that is, don\’t let your currency areas become too large so that they do in fact become a problem, we can see a solution to our optimal wage area problem. Don\’t let the wage area become too large.
And we do have too large a wage area. We have national wages for must public sector workers, we have a national minimum wage. Yet we have evidence that wages are above market clearing such in some areas and at or about them in others.
The solution therefore is not to have national wages nor national minimum wages. Shrink the size of the wage areas and vary the wages to suit local conditions.
Or, in short, abolish national pay bargaining and the national minimum wage.

12 thoughts on “Glory be, Eoin Clarke gets one right!”

  1. Reducing employers’ NIC, while a good thing (just roll it and NI into a revenue neutral increase in income tax) isn’t going to address geographical differentials. Unless you mean to have different NIC levels for different bits of the country?

    Aaargh! We want to discourage more complex taxation with cattle prods, if not ball ammunition.

  2. But Eieio Clarke hasn’t got it right, not even once. How can “The abolition of EMA and the tripling of tuition fees are to these young men and women hammer blows to their life chances.” when by definition they are NOT in Employment Education or Training (NEET)

  3. blokeinfrance

    i think the point is that they would be if it weren’t for the aforementioned reforms.

    of course, that is a weak argument in some respects. whilst the EMA abolition ight already be having whatever effect it will have, nobody has yet been affected by the tuition fee increase.

    also, the regional variation rather spoils the point too… as the changes to education funding are affecting all regions, so there is obviously much more to it.

  4. I don’t believe the changes to EMA and tuition are having much effect at all. I suspect the increase in the NEETs is simply an illustration of how there are no longer any unskilled jobs to mop up those youngsters who are qualified for nowt, and the employers are only interested in the kids with reasonable literacy and numeracy.

  5. “Surreptitious Evil // Aug 31, 2011 at 12:41 pm

    Reducing employers’ NIC, while a good thing (just roll it and NI into a revenue neutral increase in income tax) isn’t going to address geographical differentials. Unless you mean to have different NIC levels for different bits of the country?”
    No I don’t mean that. I mean cut it for jobs paying less than e.g. £10k pa to encourage more jobs for people everywhere.

  6. @blokeinfrance: EMA is nothing to do with employment, it’s pocket money paid to neds to get them to stay in school and off the dole.

    So they do, natch, and muck up the classes for those who are actually trying to learn, and were looking forward to 5th year when the aforesaid neds might be gone.

    Abolishing it doesn’t help the neds (they weren’t being helped anyway) but it sure holds back the others.

  7. @ Monty
    Yes, but the reason why there are no unskilled jobs is the National Minimum Wage. A lot of jobs don’t require literacy – the unfortunate victims who died in Morecambe Bay could not read or write in English,most Californian fruit-pickers are only literate in Spanish.

  8. John77, I think the NEETs can be split into two general groups. First are the kids who are thick as two short planks, but decent, keen to learn and hold down a job, presentable, trustworthy. The minimum wage is damaging their chances, because their labour isn’t worth the minimum wage. I am in favour of reducing that threshold so those kids can get an entry level job. Or scrap the mimimum wage and give them a top-uo benefit.
    The second group are the cheating, skiving, arrogant toerags with a poxy attitude, and no experience of personal hygiene. No employer in his right mind would ever allow them onto his premises, even if he was paid a princely sum to do so. They would wreck his business. The minimum wage has no impact on this group at all. They should get no benefits.

  9. Eoin disproves his own point. If increasing tuition fees and abolishing EMA hasn’t increasedthe number of NEETs in the South of England, then clearly tuition fees and EMA aren’t at the heart of the problem – something else is.

    And, as Timmy says, if the problem is regional variation then it makes more sense to look at those regional issues.

  10. Unimportant Quibbler

    Shame Scotland isn’t available for comparison — not directly comparable, but it would shed light on the EMA/tuition fees impact.

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