Wednesday, 15 July 2015

Great Analysis Deserves a Wider Audience

From the Cobden Centre, here.  I quote:

'What this exposes is that the principal determinant of productivity is not the relative skill and dedication of workers as suggested by the OECD’s figures, but the cost of employment.

An employer after paying employment and income taxes can less easily afford to pay a living wage in France and Italy. It seems bizarre that official indicators of productivity ignore employment costs, which is after all far more relevant to prospective employers.'


So, is that it then for witless Osborne's 'living wage' bollocks?

9 comments:

The Stigler said...

I've said this for a while about France. Their productivity is high because people don't take low-paid jobs. So, average wages look great because they don't include all the €0 earners.

Mark Wadsworth said...

Yes, Tim Worstall keeps saying the same thing. As does The Stigler.

It's not just extra payroll taxes, it's also the effect of the national minimum wage and strict employment laws (which are kinds of hidden taxes on employment), so as a result you get higher unemployment but the smaller number of people working earn more money and/or are more productive/profitable.

So when I'm in government and employment increases rapidly, total wages will go up but average wages plus payroll taxes paid (which will be nil of course) might even go down a bit as the people coming (back) into employment will probably earn less than incumbents.

Random said...

"as a result you get higher unemployment but the smaller number of people working earn more money and/or are more productive/profitable."
Right. It's the paradox of productivity. We don't need everyone to produce output for everyone. But becoming a Luddite is not the answer.

Bayard said...

"So, is that it then for witless Osborne's 'living wage' bollocks?"

No, because the point of the "living wage bollocks" was to force employers to pay their workers more so that they could contribute more towards their rents and so cost the state less in housing benefit, without the Backbone Of The Tory Party (urban landlords) suffering a drop in income.

Lola said...

Bayard. That's rather what went through my mind..

Ben Jamin' said...

Of course it should be economic well being isn't captured in GDP figures, and jobs that don't create any well being, like accountancy are.

So, like most things statistical, productivity measured by GDP needs to be treated with extreme caution.

After all, the USA does pretty well on all productivity levels (per hour and per capita), but is it's "way of life" better than France?

Incidentally, I think the UK and France are about the same on GDP per capita.

So, they just work less hours for the same result as us.

As better indicator, how about median discretionary income per hour?

I bet the UK would barely beat Greece given that measure :)





Ben Jamin' said...

BTW, although somewhere like Germany has better productivity than the UK, their average wages are somewhat lower.


Personally I think the best economic indicator of a Country is how clean they keep the streets.

Ben Jamin' said...

From the report.

"Government, which is an economic cost, should be eliminated from all estimates of production by removing the sector from GDP entirely".

Oh dear, oh dear.

The Stigler said...

BJ,

"Personally I think the best economic indicator of a Country is how clean they keep the streets."

The problem is that you can get model cities. If you read about North Korea, they stick all the most loyal, smartest people in Pyongyang, and spend money making it look nice, so when the occasional tourist or dignitary arrive, they might be fooled into thinking it's a good country.

And I don't know any country with so much graffiti as in the Netherlands. It's horrible how much there is. But, successful country.