"Now we're short of bus drivers!"

From The Daily Mail:

The driver shortage across the UK has now spread into the bus network as public transport staff swap bus routes for work as truckers.

The wage increase promised to attract new HGV hauliers has led public transport staff to make a change, impacting the number of journey's on offer and resulting in the axing of others. Bus drivers can earn £32,500 on average, but can now earn up to £78,000 behind the wheel of a lorry instead.

Well of course, this was bound to happen. Anybody who's mastered the skill of negotiating buses through congested cities and along narrow country lanes (as well as the stress of idiot passengers and trying to stick to the timetable) will master lorry driving within a couple of days.

So then wages for bus drivers will go up a bit, and more people will train up to be bus drivers, ex-bus drivers will go back into bus driving etc.

In free markets, this sorts itself out, usually much sooner that you'd expect. And on another bright note, my assumption that the petrol queues would fizzle out after two weeks appears to have been correct. I went for 'two weeks' because that is the typical gap between visits, there is of course a wide spread.

Fun With Numbers

From The Daily Mail:

Why it pays to do maths A level: Analysis shows qualification adds £6,000 to a salary in just six years compared to geography or biology



So, if a child is considering whether to do A-Levels, and if so which subject, they should choose Maths?

Nope.

To a large extent, this is confusing cause and effect and ignoring self-selection.

Some people are more numerate than others; and those who are are, are more likely to earn more . Either because their job required advanced numeracy (very few jobs, if truth be told); because numerate people are more likely to be more efficient and hence be promoted; or because they are clued up enough to choose a job/career that will pay more in the long run (so they waste a few years studying or doing a low-paid apprenticeship in exchange for higher pay later on).

People who are numerate are also more likely to do a Maths A Level, obviously, even though the maths involved is insanely arcane and probably only of use in 0.1% of jobs.

So... numerate people are more likely to end up in higher paying jobs. They will be over-represented among applicants (which they would have been anyway); will be slightly better at them (as they would have been anyway); and employers will tend to prefer applicants who have done 'hard' A-Levels (however pointless, and as much as I love numbers and maths, even GCSE is way more than most people ever really need in real life).

Or to turn the question round, a child is not so numerate. Should they choose Maths A-Level and almost certainly fail? Hell no. Better to pass in something else a bit softer.

Adam Ruins Everything: Why you should tell co-workers your salary

He makes a good point here about information assymetry:

The explanation is probably the same as last time.

From The Independent:

Real wages across the UK declined for a sixth consecutive month in August. Growth in pay packets continued to lag behind a jump in inflation triggered by a dramatic fall in the pound since the UK voted for to leave the EU.

Official data on Wednesday showed that basic wage growth was 2.1 per cent during the three months to the end of August when excluding bonuses, unchanged from the previous three-month period and marginally higher than the 2 per cent pencilled in by analysts, but well below inflation.

Figures earlier this week showed that inflation had hit a five-year high of 3 per cent in September, piling fresh pressure on the Bank of England to raise interest rates next month...

“Pay packets are taking a hammering,” said TUC general secretary Frances O’Grady. “This is the sixth month in a row that prices have risen faster than wages. Britain desperately needs a pay rise. Working people are earning less today in real-terms than a decade ago...”

Wednesday’s data also showed that job creation across the UK is continuing, albeit at a slightly slower pace. The number of people in work rose by 94,000 during the period, about half the increase in the three months to July but still a relatively strong rate of growth.

Last time we had headlines like this, somebody delved a bit deeper and worked out that wages for existing jobs were increasing as normal, in line with inflation but that all the extra jobs tend to be lower wage jobs, which drags the overall average down.

Which sort of makes sense; if a local manufacturer pays good wages, then people have extra money to spend on coffee, dragging average wages down You wouldn't expect loads of coffee shops to open up first paying low wages and then magically a manufacturer to set up business there, dragging average wages up

This effect also explains why UK productivity/productivity growth is so low. The reverse applies in France, which has much higher unemployment, but average productivity of those actually in work is much higher than in the UK.

The Germans have a different mentality and score well on both counts, of course, but then again, they have ghastly anti-capitalist measures like explicit and implicit rent controls, which is why they are all so desperately poor.

The Guardian on top form

From The Guardian:

Damning government report shows depth of public sector pay cuts

The new report found a 3% drop in median hourly earnings between 2005 and 2015 for workers in 32 public sector occupations whose salaries are set by the government on the advice of independent pay review bodies.

It found median hourly pay fell by an even greater amount – 6% – during that period for workers across the board, as the recession of 2008 hit wages hardest in the private sector.

Economic Myths: "The £2.2 billion cost of the skills gap"

From The C Suite:

The skills gap is costing UK businesses more than £2 billion a year in higher salaries, recruitment costs and temporary staffing, according to research from The Open University.

The Open University Business Barometer – which monitors the skills landscape of the UK – finds that 90 per cent of employers have found it difficult to recruit workers with the required skills in the last 12 months, and some have had to inflate salaries to attract talent above market rate, costing at least £527 million alone...

Sigh.

1. In relative terms, that figure £2.2 billion is dwindingly small and spuriously accurate.

2. It's not really a net cost - higher wages are a benefit to more employable people; we can safely assume that the extra wages are a fair chunk of the extra output generated by those people, of which the employer keeps his cut.

3. Of course employers would prefer to pay lower wages. But if you take their non-logic to the ultimate conclusion, you might as well say that all wages above the National Minimum/Living Wage are the "cost of the skills gap".

4. Their non-logic seems to suggest that wages would be lower if more people were more employable (more education, skills, experience etc). Common sense tells us that countries wit a poorly educated populace have overall lower wages than those with a better educated populace.

5. Duh.

Fun with numbers: Falling unemployment vs falling median wages.

From the BBC:

UK unemployment fell in the three months to January but there was a sharp slowdown in wage growth.

The Office for National Statistics (ONS) said the unemployment rate fell to 4.7% - it has not been lower than that since the summer of 1975.

However, wage growth has slowed significantly to 2.2% from 2.6% in the previous three-month period. Wages are rising above the rate of inflation, which is currently 1.8%, but the gap has narrowed...

Chris Snowdon at the IEA reconciles this apparent contradiction:

A one per cent drop in median earnings, as shown in the FT graphic, does not mean that people have been slogging away in the same old job on lower wages than they received before the recession.

Nor should it be inferred that life is rosier in France and Spain where median earnings are slightly higher than they were in 2007. When it comes to wage data, you only count if you have a job. The unemployment rate in France is twice as high as it is in Britain. In Spain, it is four times higher.

Understanding changes in the labour market helps us to explain the counter-intuitive finding that median incomes have risen since 2007 while median wages have fallen. Part of the reason is that people who were previously on benefits have found work, thereby raising their own incomes, but have disproportionately taken jobs that pay less than average, thereby lowering the median.

In general, this has made people better off. If, on the other hand, the economy had shed large numbers of low-skilled jobs, the median income would have risen mathematically without benefiting anyone.
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His article also mentions this:

But whilst there is no evidence that wages are falling, it is true that they have fallen and that whilst median earnings are rising they have still not returned to the levels seen in 2007. 

That is what the Financial Times chart actually shows and the FT offers several reasons for this, including the relatively high inflation rate between 2008 and 2011, but averages can be misleading and there is one statistical explanation that is so important that the ONS dedicated a whole webpage to it in 2015.

There is another obvious explanation for that. Let's assume our employer has been allocating £100 of pre-tax profit ('value added') to wage costs since 2007.

Back in 2007, the maximum he could pay out was £100 less 17.5% VAT less 12.8% Employer's NIC:

£100/1.175 x 1/1.128 = £75.49

Fast forward to 2017, the maximum he can pay out is £100 less 20% VAT less 13.8% Employer's NIC less 3% Workplace Pension contributions (assuming the median employee has opted in, which is questionable but let's run with it):

£100/1.20 x 1/1.138 * 1/1.03 = £71.10.

Those tax changes would cause a +/- 6% decline in reported total wages over the period, or 0.6% a year on average.