Sorry this is late – I have just realised the original did not post.
Scoop It A2 Micro board – tagged ‘minimum wage’
Month: February 2015
From the desk of Mr Carr……………..
Mr Carr has kindly put together this macroeconomics digest:
Half Term Macro-Economic Update
Inflation fell from 0.5% to 0.3%. Combined with a 2.1%pa rise in wages, this confirmed rising real living standards. However with the effects of falling oil and food prices stripped out, it is about 1.3%
Unemployment fell from 5.8% to 5.7% (LFS) the lowest since 2008 – a drop from 2.7m to 1.86m in two years with 103,000 new jobs created in the last three months of 2014, twice as many as forecast. The number of vacancies has reached 718,000 and the proportion of the labour force in work has also reached a record.
The balance of payments deficit reached a record 6% of GDP last year. This is only viable as long as investment from overseas into the UK continues, which it is doing in the form of foreigners buying expensive property and offices or foreign firms taking over UK businesses.
Government borrowing is on course to meet its target of £91.3bn for 2014-5 following higher than expected tax receipts last month. However total public sector debt (the “national debt” ) reached £1.46 trillion, 79.6% of GDP.
The CBI upgraded its UK growth forecast from 2.5% to 2.7%. However growth is taking place with little increase in productivity and this is one reason why earnings and tax receipts remain low and the budget deficit is higher than was predicted. Output per person in the private sector is roughly similar to what it was 6 years ago, rather than being about 15% higher which is what we would have expected had normal trends been followed. Productivity is in the news as Chuka Umunna, the shadow business secretary suggested UK workers were only 80% as productive as French. In 2013 we were actually 14% less productive than France, partly because our labour laws are more flexible, making it easier and cheaper to hire and fire workers. As a result France has invested more in machinery (capital deepening)- 22% of GDP invested in France versus 16% in the UK. However unemployment was almost twice as high in France and GDP per head about the same at $45,000. Productivity is not easy to increase, particularly in the short run, requiring investment, improvements in education and training, infrastructure, competition and R & D.
Chinese inflation fell to 0.8% providing more evidence that the Chinese economy is in slowdown. Although part of the explanation is due to falling energy prices and low food prices, some is due to low international demand causing over-capacity in the Chinese manufacturing sector.
Advice for potential Economics UCAS applicants
Geoff Riley, one of the founders of Tutor2u, has written a guide for those considering application to UCAS for economics courses in October of 2015. It is well worth a look and can be found by following this link:
http://beta.tutor2u.net/economics/blog/ucas-guide-to-economics-courses-offers-2015
The Economics of the Premier League – A Case Study in Cartels?
In most industries if the producers grouped together and then sold their product in co-operation it would be a cartel, and illegal. Indeed, as this link shows when a group of French hotels did so they found themselves in real trouble with the authorities:
http://www.theguardian.com/world/2005/nov/30/france.travelnews
However, you could argue that a group of football clubs has done the same thing, and reaped huge financial rewards:
http://www.theguardian.com/media/2012/jun/13/premier-league-tv-rights-3-billion-sky-bt
The case of the premier league’s recent sale of television rights is an excellent example of an inelastic good and the benefits to producers of working together, rather than in competition.
Quantitative easing
To gain a better understanding of quantitative easing (QE) follow this link to watch a film from The Daily Telegraph website:
http://www.telegraph.co.uk/finance/economics/11361414/Economics-explainer-what-is-QE.html
The debate on whether QE has had a positive effect on the real economy or whether it has simply inflated prices in asset markets might well prove inconclusive but you need to be able to evaluate the policy, so follow these links for some arguments in favour and against QE:
In favour
http://www.theguardian.com/business/2014/apr/17/uk-better-off-quantitative-easing
Against
http://www.economicsuk.com/blog/001733.html
In summary
http://www.economist.com/node/21558596
Overall it might take time to understand the full consequences of QE, particularly on inflation. However, some have argued that thanks to the liquidity trap created by very low interest rates the Bank of England had no alternative.
Trade Unions
To help prepare for the debate and develop your understanding of trade unions.
Monopsony Power in Labour Markets
Please review the following to help develop your understanding of monopsony power in labour markets.
Wage Determination
Here are a few resources to help develop your understanding of wage determination in labour markets.
Fiscal rules and the conduct of fiscal policy
Having thought a little bit about fiscal policy and fiscal rules in recent lessons this article from the IPPR website provides an excellent overview of the conduct of fiscal policy in recent years and the best way to implement fiscal rules in the future:
http://www.ippr.org/juncture/how-to-conduct-fiscal-policy-in-the-next-parliament
The UK National Debt
After our discussion today relating to the UK national debt there are some resources which might be useful.
Most frightening first is the UK national debt clock here:
For a more positive spin on the national debt this short discussion might be encouraging:
http://falseeconomy.org.uk/cure/how-big-is-the-problem
For an historic perspective on the national debt then this article, from Prof Robert Neild, University of Cambridge, is interesting:
http://www.res.org.uk/view/article5jan12Correspondence.html
For the BBC’s analysis, try this:
http://www.bbc.co.uk/news/business-25944653
This is really useful as it looks at different types of deficit and surplus.
Economics Department Blog 