Priced out

The news of the latest rise in UK unemployment this morning was immediately followed by some instant analysis from the NIESR, a very reputable economic organisation.

It pointed out that one of the big problems for the UK labour market is that rises in the minimum wage are pricing so many young people out of work. Which seems strange at first because you don’t tend to think of the UK minimum wage as being very generous at all.

But it was the follow up comment that made things clearer. The minimum wage increases in recent years have not come with a balancing rise in productivity.

And as economists know and as Paul Krugman famously explained “productivity isn’t everything but in the long run it is almost everything”.

The long term consequences of the UK’s productivity crisis are becoming increasingly obvious and the attempts by Labour to turn it around are too slow, too little and too timid.

This is the real crisis of the British economy, we were already well down the international league table and we have been wallowing in pathetic levels of productivity growth for at least 16 years and probably much longer.

With higher productivity would come growth, more tax receipts, higher wages and more jobs.

Almost everything else is really just fiddling at the edges, or redistributing the same cake in slightly different sized slices.

To my utter despair some of the policies being pursued by this government are even slowing any productivity growth. Including limiting immigration severely when we know it is good for us and shackling our brilliant university sector with low student fees and limits on their foreign students.

It is the price of populism, and it is disastrous. God alone knows what would happen if Reform ever formed a government.

Jonty’s Jotting

From Jonty Bloom Media Ltd

Economics, trade and Brexit, not necessarily in that order but the dog always comes first.