Economics

Minimum wage rise could worsen ‘job struggles’ for young people

“Will” should be substituted for “could” perhaps.

Britain’s inflation rate reached a peak of 11.1% in October 2022 as world food and energy prices shot up in the wake of the Ukraine war, although it is now sharply lower at 3.8%. Still, even our peak inflation rate was higher than others, and today it is nearly twice the 2.1% in the eurozone and higher than the 3% in the US. Probe deeper and over the past four years prices overall have risen by 25% in Britain. Particular culprits have been food price inflation – up 38% – and energy prices – up 55%. We know why those prices rose, but not why they rose more and have fallen less quickly than elsewhere – and why, leaving them aside, the same is true of core inflation.

The chancellor’s oblique reference to supply chain volatility hints at the explanation. In essence, we can thank the excessive deindustrialisation of the 1980s which, by punching huge and expensive holes in our industrial capacity, forced British manufacturers to source the supply of key components abroad. Brexit then made one of the most important areas for that sourcing of supply more expensive again.

A technical paper in last autumn’s Bank of England quarterly bulletin – “A portrait of the UK’s global supply chain exposure” – spells out the degree to which the non-existence of key capacity has made British manufacturers rely more on inputs from other countries, particularly in the food and petrol refining sectors. A similar pattern exists in the service sector. In short, Britain has built an economy reliant on too many international middlemen. The relationships can be direct, indirect or simply through second-tier suppliers being forced to outsource abroad as well. And, as economist Brett Christophers explains in his book Rentier Capitalism, too much of the British economy is dominated by monopolistic companies that extract value rather than create it – and easily pass on any inflationary input costs from these global supply chains. What Reeves was trying to say is that 45 years of free market economics, embrace of globalisation and Brexit exposes Britain to proportionately more inflation.

So, track his argument.

Inflation elsewhere is lower than here. Because Muh Fatcher we buy more of our stuffs elsewhere rather than making it here. Therefore our inflation rate is higher because we buy all that stuff from where inflation is lower.

She argued that support for Milei was largely driven by opposition to Peronism, the populist political movement that has dominated the country’s politics for decades.

“There’s a strong anti-Peronist feeling, so people don’t want to go back to that [Peronist governments] … I also get the sense there’s something almost psychological about it – as if people feel that if this [Milei] doesn’t work, it’s like the last chance [for Argentina],” said Fernández.

Peronism, followed by hte Kirtchners, has pretty much screwed the place. Radical action is the only possible cure.

More than $70tn (£53tn) of inherited wealth will pass down the generations across the world over the next decade, widening inequality and highlighting the need for intervention by the G20 group of leading nations, a group of economists and campaigners have warned.

If three people inherit from the one person then that’s a reduction in inequality, not an increase. You need the one perso inheriting from three to increase inequality…

The rest of it is just the usual noncey stuff.

So, those American patriotic millionaires who run around saying tax me more.

In the US you can invest in municipal bonds. The interest is income tax free. Of Federal, and for instate issues for instate taxpayers of instate income tax.

So, how many patriotic millionaires, who insist upon being taxed more, invest in munis?

Spud talking approvingly of Steve Keens mortgage revision ideas:

Policy 2: A new Affordable Housing Authority (AHA). This institution would provide zero-interest mortgages to median and below-median income earners. At current prices, a typical buyer borrowing at commercial rates (say 7 per cent) would spend over half their income on repayments and thus be refused a loan. But with a 0 per cent loan, the exact same household would spend roughly 26 per cent of its income, below the housing-stress threshold. The AHA would be funded by government money creation. Repayment would cover the principal only. This would cut banks out of a market they currently refuse to serve anyway.

The way to reduce prices is to stimulate demand.

This is just so cuntishly stupid it’s unreal.

Argentina is a very special case. The country has been repeatedly racked by debt defaults and economic crises and its voters have been susceptible over the years to leftwing populism, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, promising muscular policies to wrest back control of the economy from the establishment on behalf of the people.

Hayek is populism now.

But this is The Guardian of course:

In truth, the evidence suggests neither left nor right populists tend to fare well when faced with real-world challenges (though of course each charismatic individual claims to offer something unique).

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head tends to be 10% lower in countries run by populist leaders than in similar economies with more mainstream regimes.

That’s not actually the fun part of the paper. Rather, the left populists fuck up more and faster than right populists. Funny of The G not to note that, eh?

Labour has been urged to break a manifesto pledge to scrap youth rates of the minimum wage amid a dramatic rise in the number of young people out of work and education.

In a report sounding the alarm over a sharp increase in the number of 16- to 24-year-olds who are not in education, employment or training (Neet), the Resolution Foundation urged Labour to change course to avoid them being “priced out” of entry-level jobs.

Not just teh lower youth rates, but the min wage at all, higher NI, employment protections…..

Further sins? Why was the chance missed to change course having opened the Treasury books on their first day and having found a genuinely shocking level of cheating? No funds existed to pay for 40 new hospitals and roads without budgets, and Labour claimed Jeremy Hunt’s national insurance tax cut was not financed, while every public service was burned out, with councils tipping into bankruptcy – not through fecklessness but through sabotage.

Because if taxes had been rising – they had – and yet there was no money then the Tories hadn;t been not spending, had they?

Away from trade policy, the White House continues to pursue unfunded tax cuts and trash the economic institutions usually considered the cornerstones of credibility – including the Federal Reserve.

Over time, that must surely undermine market confidence, including in US Treasuries (government bonds)

As far as bond markets are concerned unfunded spending is unfunded spending. However it arrices it increases the volume of bond issuance. It arriving via unfunded tax cuts or unfunded spending committment doesn’t make much difference now, does it?

Boom time for US billionaires: why the system perpetuates wealth inequality
As the super rich grow even richer, inequality expert Chuck Collins says the system is broken – but it can be fixed

Without having read the piece yet I’m going to go out on a limb and suggest that he might be an expert in why inequality is a bad thing…..

“[The wealthy] have bought their jets, they’ve bought their multiple houses and mansions, but now they’re buying senators and media outlets,” Collins told the Guardian in an interview. “We’re now entering this other chapter of hyper-extraction where the wealthy are preying on the system of inequality.”

My word, how did I guess?

he is a member of the Patriotic Millionaires

Surprise!

“It’s the distinction between individual behaviors and a system of rules and policies,” Collins said. “We should be concerned about an economic system that funnels so much wealth upward to the billionaires.”

Ah, a twat then. Because the distinguishing feature of this capitalist free marketry is that you get rich by producing value for consumers. And if you’re not going to count that richness going to consumers then you’re going to get everything wrong, aren’t you?

Last week, as part of its revisions to legacy gross domestic product figures, the ONS made a draconian cut to its estimate for the household savings ratio in the final quarter of 2022, hacking it by 4.1 percentage points to a little over 5 per cent. The near-halving of the ratio amounted to one of the largest downgrades by the statistics office in the past three decades. The ONS also made deep cuts to its estimates for the years 2022 to 2024.

Because you don’t, in fact, know the numbers you think you know that you’re doing your planning from.

Calling Sir Cowperthwaite to the white telephone, A Herr Hayek is on the line.

Come harvest time, foreign workers are our salvation across many areas in the agricultural sector. This year the government made 43,000 seasonal visas available for agricultural workers via six approved agencies, including the one Krastanova works for, Fruitful Jobs. “What we’d term ‘local’ won’t do it for minimum wage, or indeed any wage that makes using them financially tenable for us as a business,” Cran-Crombie says.

You’re paying too little as against the other options available.

Which tells us soemthing interesting about the past too. We’re told that the proles were driven off the land by enclosure and then they just had to work for The Man in the factories for a pittance.

Whereas something rather more truthful would be that the factories paid – in cash and working/living standards terms – better than the fields. Which is why people flooded from one to the other.

Not in the EU it doesn’t:

To deter them, Zucman suggests a form of exit tax, known as an “anti-exile” shield, that would require those who leave to continue paying their dues for another, say, five or ten years, which he says is possible given a greater willingness in recent years for countries to exchange bank information.

It’s a restriction on the movement of labour and capital. Not allowed.

Research by the Centre for Social Justice estimates that by 2026 there will be more than a £2,500 gap between earnings and combined benefit income. A full-time worker on the national living wage is expected to earn £22,500 after paying income tax and national insurance. An economically inactive claimant on universal credit for ill health with the average housing benefit and PIP would receive around £25,000, rising to £27,500 for those awarded the highest rate of PIP.

Not really sustainable, is it?

Sure, of course we don’t want the ill or disabled to be dying in gutters. But there also has to be some sort of incentive to go our to work.

It’s not sustainable….

As I’ve written recently, Britain should explore public funding models akin to the BBC licence fee – collectively supporting AI systems serving public purposes rather than commercial imperatives.

Err, yes, Love. You go and have a nice lie down now….

Donald Trump signed a proclamation on Friday that would impose an annual $100,000 fee on H-1B visa applications, dealing a potentially major blow to the US tech industry, which relies heavily on workers from India and China.

The US commerce secretary, Howard Lutnick, said at a Friday press briefing that “all the big companies” had been briefed on the new fee.

“A hundred-thousand dollars a year for H-1B visas, and all of the big companies are on board. We’ve spoken to them,” Lutnick said at an Oval Office event with the US president.

“If you’re going to train somebody, you’re going to train one of the recent graduates from one of the great universities across our land. Train Americans. Stop bringing in people to take our jobs,” he said.

It’s all long been more than a bit of a scam. Not sure this is quite the solution but blowing up the current position isn’t wholly bad shall we say.

It needs a national economic and environmental strategy, such as those that guide China and Singapore. In fact, Reeves should create a Department for National Strategy to lead public green infrastructure investment that will revive private investment in a weakened, risk-averse economy.

Planning!

Labour should transfer that role to a new Inflation Control Office, which could use taxes, price controls and even rationing to lower inflation.

Price controls! Rationing!

East Berlin circa 1957 or so, no?

Speaking after the Guardian revealed the British public have been paying a “privatisation premium” of £250 per household per year since 2010, he described the mass privatisation of UK industry as a “failed experiment”.

“This report shows that privatisation has been one of the key drivers of the cost-of-living crisis and growing inequality … the Conservatives were the architects of this failed experiment, but the Labour government has done virtually nothing to change course.”

Or, perhaps, we should take him at his word? Britain’s problems are less than a £ a day per household. Should be easy enough to solve, no?

The annual rate of house price inflation has turned negative for the first time in more than 18 months.

The average asking price of a property coming to market in September is £370,257, according to the property search website Rightmove. The figure is 0.1 per cent lower than at this point last year.

House prices have been falling relative to median wages for several years now. As they obviously will when interest rates rise.

The argument we need to have a wealth tax to reduce asset prices – La Gazza – therefore fails. Not that that will stop them all shrieking….