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And we'll take the low road

Fri, 21st Sep 2018

On 15 September, economist Mariana Mazzucato tweeted:

Great 2 days in San Francisco for West Coast launch of Value of Everything [her new book]. But the number of suffering homeless people on the street was much greater than I have ever seen and left bitter taste. Only one word can describe it: barbaric. Humans in 21st capitalism deserve better.

Her equally eminent colleague at UCL’s Institute for innovation and Public Purpose, Carlota Perez, the analyst of great technological surges, replied:

@MazzucatoM Homelessness, precarious zero hours and gig economy contracts plus the many that have dropped out of the workforce make a mockery of the current celebrations of full employment in the US and UK. We had better start looking at real reality in the face

Their vignettes made a deft counterpoint to a piece the same week by Sarah O’Connor, the FT’s first employment correspondent for decades, entitled ‘Workers have right to gig economy that delivers for 21st century’. It carried the self-explanatory subhead, ‘Flexible working is touted as the future but too often resembles an exploitative past’.

It is worth reading, and sits easily (or make that ‘profoundly uneasily’) beside recent books like James Bloodworth’s Hired: Six Months Undercover in Low-Wage Britain or Jeff Pfeffer’s angry Dying for a Paycheck. Beside the daily tribulations of those trying to make a living in the new precarious economy, she made the wider point that for many of them the tech-enabled ‘flexible labour market of the future’ resembled nothing so much as the bad old piecework system of the past.

Quite starkly, the labour market is dividing in two. In future a minority will enjoy high-paid, full-time, jobs, while the lot of a growing segment of the working population will be self-employment, part-time and gig employment with little security and precious few prospects. Worryingly, as O’Connor wrote,

‘The UK’s low-paid sectors are 20 to 57 per cent less productive on average than the same sectors in Belgium, France, Germany and the Netherlands. Take the low-productivity activities that have recently been “reshored” to the UK, from manufacturing screws to stitching £7 dresses. A developed economy that finds itself sliding back down the global value chain is an economy where something is going awry’.

What’s going awry shouldn’t come as a surprise. In 2012 Guardian economics editor Larry Elliott and Dan Atkinson summed up their view of the situation in a book called Going South: Why Britain Will Have a Third-World Economy by 2014. Widely brushed off as a exaggeration at the time, the book may have got the date wrong, but otherwise the jeremiad looks depressingly accurate. One of the points the authors made was that given the option the UK economy unerringly took what looked like the easy way out in the short term only to find that in the long term it simply reinforced the narrative of decline.

Not one but two examples of this lethal addiction figured in the press last week. The first was by Elliott himself, who brought his 2012 analysis up to date by noting that it took a rather special interpretation of success to qualify UK labour-market flexibility as such. He pointed out that in the much less flexible market of 1975, at least work paid – unlike today, when it is anything but a reliable route out of penury: as witness the fact that two-thirds of the UK poor live in households in which at least one person works. True to form, employers have seized on the negative, cost-cutting possibilities of ultra-flexibility with relish, accentuating the downward slide that Elliott-Atkinson identified in 2012. Britain, Elliott wrote last week, ‘now appeared to be permanently locked into a low-wage, low-skill, low-productivity economy, in which workers compensate for a lack of earnings power by taking on more debt’.

Meanwhile, back in the FT, economics editor Chris Giles was mercilessly rehearsing the sorry story of British devaluation, the nation’s fall-back macro-economic easy way out. In 1948, he recounted, one pound bought more than $4 and DM13.5. That compares with today’s $1.30 and the equivalent of DM2.2. Over the 70-year period, only Canada has grown more slowly than the UK among the G7, and we have underperformed the eurozone since it was formed in 1999.

Cheaper sterling is ‘no route to prosperity’, concluded Giles, qualifying the most recent in the series, the 20 per cent depreciation of sterling since late 2015, as particularly disappointing. There has been no boost to exports, and no import substitution. Confirming the week’s low-road consensus, he noted that a mini revival in manufacturing employment is overwhelmingly in making simple, low-productivity products such as food or metal goods such as radiators, cutlery and screws’; all in all, ‘the latest depreciation is challenging to be the worst in British history’.

That was all in one week. And we haven’t even mentioned Brexit. It was left to O’Connor among our doom correspondents to attempt to pull something positive out of the wreckage. The ‘good news’, she opined bravely, was that ‘the best possible time to reform a labour market is when unemployment is low and bargaining power is naturally on the rise’. With the labour market at its tightest since the 1970s, surely now was the time to drag the labour market into its higher pay, high productivity future. ‘Brexit uncertainties are not a reason to drift and dither, but an impetus to act’.

Mmmm. Well. She’s right in theory, of course. But in a week which has picturesquely reminded us that we seem unable to implement a railway timetable, let alone a political one, all one can really say is: good luck with that.






 

 


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