4 Oct 2013, 2:40pm
reflections:
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  • We’re back to paying people to dig holes, and paying others to fill them in again with IDS

    Apparently George Osborne had to deny Matthew d’Ancona’s report of him saying 1

    “You see Iain giving a presentation,” George Osborne, right, is reported to have observed during a turf war, “and realise he’s just not clever enough.”

    I think this is a bit harsh on IDS. There seems to be a general shortage of brainpower in the political sphere, or a general shortage of cojones in levelling with the electorate. I suspect here are more fundamental problems than the skivers and strivers rhetoric allows.

    Apparently the unemployed are going to be given a 35-hour a week detention for being unemployed, or do community service/workfare. Lest it be said I’m picking on the Tories, Rachel Reeves of Labour delivered herself thusly

    But this policy is not as ambitious as Labour’s compulsory jobs guarantee, which would ensure there is a paid job for every young person out of work for over 12 months and every adult unemployed for more than two years.

    Compulsory jobs, eh? Labour seems to believe more an more in its overwhelming power to control things, from the price of electricity to the jobs market. The Condems claim the problem started with the previous lot…

    The Tories argue that the number of households where no member has ever worked doubled under Labour from 136,000 in June 1997 to 269,000 in June 2010. They claim that in the decade to 2010, 1.4 million people had spent nine out of the previous 10 years on out-of-work benefits.

    Now the Ermine is not a bleeding heart liberal. In the decade of plenty under Labour no doubt many people did come to the same conclusion as I did, that work is overrated. Some people wouldn’t or couldn’t save up first to buy themselves out of the rat race, so they do it on other people’s dime. And yet even I think it’s time to stop, and think, and ask more searching questions about what it means that 1.4 million people spending 90% of a decade on out of work benefits. According to the ONS we have thirty million souls in employment, so we are talking 5% long-term unemployed, out of an unemployment rate of 7.7%. The traditional viewpoint of unemployment is it is something that people cycle through every once in a while, after all, an Ermine has been unemployed for 2% of his working life 2.

    And yet when when you look at the stats and two-thirds of the unemployed have been on out-of-work benefits for many years then something else is going on. This could be explained by –

    1. many of the unemployed are lazy bastards and chose this as a lifestyle
    2. sickness and pestilence stalks the land such that 1 in 20 of the workforce is seriously ill or disabled – God help those of pension age in that case
    3. our economy has changed and cannot gainfully employ 5% of the workforce due to them not fitting the requirements an employer needs

    or some combination of all three, and maybe factors I failed to spot.

    I favour an increasing amount of 3. There are undoubtedly some lazy barstewards about. But not enough to explain two-thirds of the unemployed being long-term unemployed IMO. I suspect the answer is that globalisation, outsourcing and automation has raised the bar on what is required of an employee – after all the Flynn Effect is apparently traceable to the fact that an industrial economy requires its workforce to infer the particular from the general, extrapolate and make mental models of an increasingly complex and abstract world.

    James Flynn on the Flynn effect – increasing IQ over the 20th century (hat tip to Greg).

    Flynn asserts that IQ scores at the end of the 19th century would be averaging 70, on the verge of mental retardation, if ours are normalised to 100. However, as technology progresses, requirements presumably increase, and the bar for employability is probably scanning across the bell-curve of IQ distribution, leaving increasing numbers of people behind. IQ is not the only parameter employers need, but there’s less call for sheer physical strength, for instance, of even skilled craftsmanship. Humans are adaptable, but not infinitely adaptable, and I think we are beginning to lose the race.

    And there, I believe, is where politicians are failing us. We pay them to lead, and to adapt our societies to changing conditions, be that increasing industrialisation, global warming or societal changes. And adapting to a world where there is not enough work for people, in particular if an increasing number of people are becoming unemployable, is as much a political issue as it is of one of ‘fairness’. After all, it is perfectly possible to postulate a world where all the work is done by machines 3. Such a world would not be divided into workers and shirkers. If we are on our way to a society when fewer and fewer people produce the GDP in association with machines then none of these get people back to work initiatives will work, for the simple reason that there aren’t enough jobs that match the abilities across the working-age population. Do we even need everybody in work for the economy to grow? After all, Britain doesn’t need me to be in work – although I am technically ‘economically inactive’ I don’t know what the Government thinks I am doing with my investment portfolio.

    At the moment the discussion on unemployment is predicated on an assumption that nearly anybody is employable – hence all the emphasis on

    ‘Claimants will attend a local centre full-time for up to 6 months, with support and supervision to look for work and apply for jobs,’ Mr Duncan Smith will add.

    ‘No attendance. No benefit. That is only fair.’

    There’s a hidden assumption, there, IDS. And that is that, assuming everyone were willing, and took your training to the best of their ability, that the economy can find gainful work for all these people. I am not so sure, in which all you are doing is the equivalent of Depression era digging holes and filling them in again.

    There are similar fallacies in the under-occupancy levy, leading me to suspect a lack of smarts at the Dept of Work & Pensions. I’m all for the principle that if you want to to live in a bigger house than you need, that you pay for it yourself, and if you live on the public purse then you don’t get to do that automatically. However, changing the housing benefit terms without having looked to see if what you’re asking people to do – downsize to social housing that fits their household size – is possible is just as bloody unfair as people living large while taxpayers have to scrimp and save. It wouldn’t have been beyond the wit of man to say that if you refuse the offer of a smaller sized place then your housing benefit gets docked, rather than we will take the money off you but tough luck, buster, we can’t offer you a smaller house, so you’re SOL on that one. On the other hand, I don’t find it unreasonable to ask people to move out of damned expensive places like London – after all I had to.

    Perhaps it is time for us to ask ourselves what a successful first-world human economy looks like in the 21st century. Maximizing the amount of consumer goods and services in the country, with all the attendant damage to the environment is one option. Is the 35-40 hour five day week the optimum? Do we need to maximise GDP? Is the world changing, an increasing competition in the workplace? Can we design a society to maintain living standards in the face of that, and if not, what are the alternatives? What do we mean by living standards anyway? Modern Britain  seems to have a high material living standards compared to a few decades ago but shockingly high levels of stress and job insecurity, unhealthy physically inactive lifestyles and an increasing difficulty of doing something most people want to do – have children and perhaps get to see them grow up.

    I don’t know what the answers to any of that is, but I do know that from observation the assumption that 1950s and 1960s levels of employment are possible looks less and less tenable to me. This debate needs to be widened out from skivers and strivers, to ‘what would an economy with 100% strivers look like? How about 100% skivers (a bit like Solaria, or Japan in 100 years)

    The former looks too much like that hole-digging and hole-filling to me. Labour attempted that – throw money at problem and hope some of it sticks to the sides on its way down the drain. We ended up with a lot of middle-class welfare jobs and diversity outreach coordinators, basically white-collar hole-digging and filling. Unwinding that is causing much hurt and loss of employment now, but it shows how much make-work covered up for some fundamental problems – there just doesn’t seem enough work for everyone in Britain now. Telling the unemployed that it’s possible for all of them to get jobs is bollocks.

    We need to understand, or at least debate what we think we are up against, preferably not in a sectarian black-and-white way. Understanding of the physical world has helped make Britain a rich nation; more understanding of the human world can hopefully make us a rich society. At the moment we seem to be having a shouting match based on a Calvinist work-is-inherently-good-for-you lines. It may be the the collective viewpoint of Britons is that paying people for futile work is how we prefer to allocate resources, but at least let’s know that’s what we are doing here 😉

    Notes:

    1. hat tip to the Indy
    2. 6 months, after graduating, out of a 30-year working life
    3. A young Ermine addled his growing mind with far too much science fiction, and I am sure Isaac Asimov’s Solarians featured one such world
    4 Oct 2013, 4:56pm
    by Neverland

    reply

    I’m sorry I think this post is just not true

    To be clear I regard the conservative party and its evil twin UKIP with extreme distaste

    However we have had around 1-2 million immigrants in the last decade and the majority of them have gone into low grade service/manufactring/agricultural sector jobs (again a majority of which are in the SE) that could just as easily have been filled by UK citizens

    The reason that these jobs were filled by foreigners is threefold:

    – Employers preferred to hire foreigners because they were younger, probably keener, certainly better educated and more acquiescent too. Indeed many of the employers in question are foreigners or their children

    – the UK citizens would have faced a massive marginal tax rate in taking those close-to-minimum wage jobs with the loss of benefits they would have suffered, i.e. they had little incentive to take them

    – the UK citizens that could have taken those jobs live in the wrong part of the UK (simply not in the parts of the UK close to London)and the risk for them in completely upending their lives and moving was massive compared to a very limited upside

    So now we have three visions for how to address this

    Conservatives – Make the lives of the under/unemployed so miserable they will get on their bikes and live in bedsits/sheds in the SE for NMW

    UKIP – throw the foreigners out

    Labour/Lib Dems – Maintain the status quo with some largely pointless schemes to show something is to be done

    Other possible solutions:

    – build 300,000 homes a year around the M25 for the next 10-15 years to make the cost of property decrease so much that moving to a job in the SE is always worthwhile

    – make the taxation differential between the SE and other parts of the country so large that businesses are encouraged to move outside the SE

    I don’t see either of those alternatives being tried in my lifetime however

    I expect it applies equally to the UK.
    From: Competitive Advantage Through People: Unleashing the Power of the Work Force by Jeff Pfeffer
    ‘In an article reporting the declining position of the United States in world trade in telecommunications equipment, the New York Telephone company reported that “it tested 57,000 job applicants in 1987 and found 54,900, or 96.3%, lacked basic skills in math, reading, and reasoning.” A human resource planning document prepared at the Bank of America in 1990 reported that “Chemical Bank in New York must interview 40 applicants to find one who can be successfully trained as a teller”; “at Pacific Bell in Los Angeles, 95% of the 3,500 people who recently took a competency test for entry-level jobs not requiring a high school education failed”; and “at Motorola, 80% of its applicants cannot pass a simple 7th grade English comprehension or 5th grade math test. At Bell South in Atlanta, fewer than 1 in 10 applicants meet all qualification standards.”’

    5 Oct 2013, 1:57pm
    by Grumpy Old Paul

    reply

    @Neverland,
    “- build 300,000 homes a year around the M25 for the next 10-15 years to make the cost of property decrease so much that moving to a job in the SE is always worthwhile”

    A hobby horse of mine which seems to enjoy support from people across the political spectrum but no real action from politicians.

    Creating 300,000 homes per year for rent around London could be achieved by a combination of new builds, conversions and acquisition of property at auction by local authorities or housing associations. I don’t even care if it’s done by private equity or house builders provided it’s regulated properly and rent controls are in force.

    Here are a few other advantages that such a program would have:

    – Job creation including unskilled and skilled manual work which is in short supply
    – Reduced housing benefit costs
    – Improved job mobility
    – Second order cost reductions resulting from reduced crime and mental illness

    So far as I can see it’s a “no-brainer” which says something about our politicians.

    BTW I’m highly amused by conservatives getting upset by successful investors who don’t share their political beliefs.

    Just speaking of one sector of economic activity: agriculture, simply because that is what I know about. If we want an economically and environmentally sustainable food system there is plenty of work to be done. It needs people with brains and cunning, but it also needs people who are just plain willing to do hard work.

    At the moment this doesn’t stack up economically if you want a half decent income but if the powers-that-be made some fundamental, though utterly feasible, changes to agricultural and food policy, then it would be a whole different story.

    The future won’t be run by machines as energy will be too dear (sorry Mr Ermine). It will be run by people, but at present people are strightjacketed by too much specialisation, brainless media, daft regulations, and a singular lack of vision on the part of the people running the country. It takes a whole lot of effort to overcome that little lot.

    Elephant in the room. The politicalistas have no power to change things.

    Which party was responsible for the i-Pad, the digital camera, 15 minute cataract surgery, cheap food, ultra-reliable autos, warm housing, etc etc – the cultural feather bedding which nearly suffocates, but not quite enough to stop our interminable belly-aching?

    Austerity?

    Ha ha!

    Mrs Ermine fret not about dear energy.

    Soon we will have electric cars which people will want to buy and probably new sources of energy (here in Switzerland geo-thermal is likely the way forward).

    Thing is, the pattern has been that technological innovation has surprised and surprised over the last few hundred years and there is no reason to suppose that is going to suddenly stop.

    Now if the problem is that we all need something to worry about to distract from the futility of living (beyond the biological pleasures and fulfillments from family and friends), then I think that energy cost is as good as anything else, (global warming, population explosion, chemical weapons might be worth a look)

    The UK spend 2 billion pounds a year on bottled water -a recession, but not as we know it…….

    The fundamental problem is unskilled manual labour isn’t productive enough to pay for a western lifestyle.

    Saying the solution to that is retarding productivity in a sector such as agriculture is completely wrong. EVERYONE pays for the loss of productivity through higher food costs. The driver of economic growth is productivity improvements forcing people from field to factory and then later factory to services. In the western world about 3% of the work forces can provide all food and raw materials. 20% manufactured goods leaving the rest to provide services. If we only toned down the extent of consumerism 15 hour weeks or 25 weeks of holiday per year would be possible. Its basically what the ermine’s have done but they’re taking all this time in a huge 40 year block.

    As for what to do for those who can only offer unskilled labour. A negative marginal rate achieved through benefit reform. Education. A realisation that you can’t afford the south east corner of England, foreign holidays or new cars if all you have to trade is unskilled labour.

    @all – some great different angles o this one and I’ve learned a lot on this, which is part of the joy of this blog! Neverlnd’s summary is about as succinct as it gets though I’m still not clear whether the immigration and jobs issue is a cause or an effect. The high house prices and cost of living in London probably do mean that servicing London’s needs will increasingly have to be done by non-UK labour

    Re higher energy costs oil is an almost ideal package of high energy density, not too hazardous to handle and rapid to refuel. It’s also hard to get a handle on the scale involved with replacement – David McKay’s Sustainable energy without the hot air shows quite what a big ask that would be.

    @Mucgoo we do pay a high price for that cheap food, just in other ways. Take a £2 Tesco chicken. It’s undoubtedly an impressive achievement in some ways. And yet the costs are shocking. There’s the annimal welfare issue but even for consumers that don’t have a problem with that there are serious public health issues with intensive farming because packing animals closely together to increase profitability means antibiotics have to be used to suppress disease, which has a knock-on effect on human health due to antibiotic resistance. The results of our fondness for cheap food aren’t pretty either – it’s turning us into increasingly fat bastards.

    Interestingly The Telegraph’s Roger bootle makes a similar point to several of the points raised in the comments

    For there is a mismatch between the sorts of jobs that pay well and the skill levels of an increasing number of people in this country.

    For low-skilled and poorly educated people, now in competition with much better qualified and better motivated equivalents in other, cheaper, parts of the world, as well as in competition with machines, computers and robots, the present may indeed be worse than the past – and the future worse still.

    This doesn’t look like it’s going to a good place 🙁

    7 Oct 2013, 8:16pm
    by BeatTheSeasons

    reply

    When Mucgoo talks about “retarding productivity in a sector such as agriculture” you have to ask what we mean by ‘productivity’. The current methods of farming produce far less food per acre than more labour intensive versions, and the food is worse quality.

    @ermine
    Externalities are always horrendous to deal with. I don’t like the use of antibiotics on livestock. There’s a huge difference between battery farming and full on labour intensive methods though. Cheap food killing us is best dealt with through tax .

    @beats
    It could refer to both. We don’t have an arable land shortage. That’s why we can use method optimizing labour productivity rather than land productivity. I then went on to talk about the declining share of agricultural labours, despite our food output increasing over recent centuries, so clearly implied.
    You do have the option of buying higher quality food.

    10 Oct 2013, 11:06am
    by BeatTheSeasons

    reply

    @mucgoo

    Thanks for coming back and explaining in more detail.

    To go full circle back to the original point of the article, labour probably doesn’t need to be quite as optimised as it is now because there are a lot of economically inactive people supported by the state. Whereas land is artificially cheap – there are employment taxes but no land taxes, for example.

    As for having the option to buy higher quality food, I suggest you read the Ermine’s subsequent post about sweetcorn. In the UK the choice is between 1 day old veg from your allotment/garden or 1 week old veg from a shop. Few people care about that, which is cultural. And the reason Tesco gave up on France and Spain, where good quality food is widely available.

    I’m not a communist/socialist but it does frustrate me that people focus purely on the simple economics of farming rather than the bigger picture.

    That TED talk is truly superb. Fascinating. Worrying. (e.g. How could one negotiate with the Taliban and get them to consider their views if they can’t use logic, empathy and abstraction? Then they do their best to prevent the next generation being able to do so either.)

    As for the UK’s growing problem:
    – We somehow need to create skilled jobs, be they intellectual or craft.
    – We need to train people properly, intensely right into people’s 20s, but then continuing thereafter. Either in universities or actually getting companies to do it.
    – Hopefully, that will reduce the demand for unskilled jobs, so that the people who have to do them get a living wage.
    – We need to rebalance things so that carers, teachers etc. are valued more. (Both in status and cash.)
    – We need to reduce the hours worked by people!

    How do we do all this? No idea.
    How do we do this without loads of new people appearing to distort the unskilled area again? No idea.

    @BTS I was surprised when researching the second article to find out just how stale fresh food is!

    @Greg it is quite remarkable – and quite a tribute to the plasticity and adaptability of the human brain.

    In the UK it seems to me we may have sufficient skilled jobs, it is the mismatch of the workforce to the skills that seems to be leaving people behind. Compounded by the transience of employment so employers seem to train people less. I did transiently consider working as a grunt RF bench tech in Cambridge – that sort of job seems common enough and was a route for some voluntary redundancy folk from The Firm who couldn’t quite make ends meet.

    Reducing the hours worked by people could work, though we’d all have to become a damn sight less consumerist/acquisitive. I still feel sore about never getting the two-day week that was quite seriously imagined while I was at primary school, presumable from Keynes’ Economic possibilities for our Grandchildren. The the 1973 oil shock happened and it’s never been the same since…

    I disagree, I think we have _far_ too few skilled jobs.

    Perhaps we currently don’t have enough skilled _people_, so if these new skilled jobs magically appeared overnight they would be done badly, but people have the potential to be skilled.

    I recall (with the help of Google to get it right) Gordon brown saying “Today the British economy has just 9m skilled jobs. By 2020 it will need 14m highly skilled workers; and of 3.4m unskilled jobs today, we will need only 600,000 by 2020” back in 2006. Of course, since then the number of unskilled jobs has risen (to more than 5m IIRC). If only there had been some action to make it so, rather than just words saying it will happen. We can’t compete with the globe’s cheap labour, we have to find another way!

    Perhaps one option is to make the UK an academic powerhouse, pulling in (paying) foreign students in as well as raising the standards of our own, and allowing the very best to stay afterwards. (i.e. the opposite of what the Tory philistines are doing.) UK universities could be a powerful brand, we have many solid ones and we can use the pointy roofed ones as flagships. I mean real investment – 4-5% of GDP, with support for the spin-offs that are produced. It’s not like the money gets eaten!

    Look at the damage being done:
    http://www.eua.be/publicfundingobservatory
    Hover over the bar chart. It is pitiful.
    We spend less than 0.5% on Universities but they still manage to scrape to superb global rankings.

    Note that one think the UK is good at, according to the OEDC’s report, is allocating skilled people to skilled jobs.

    Here’s a good take on the recent Nobel prize for economics:
    http://www.telegraph.co.uk/finance/alex/?cartoon=10378773
    😀

    @greg you’ve certainly taken Flynn’s thesis to heart, it’s an interesting concept that the work makes the skills as opposed to the skills or at least aptitude being a prerequisite for working at a skilled level.

    Throughout my career I have seen a slow degradation in employer training particularly at the 20-30 y.o. level but I can also say that I’ve never seen people that were simply too slow to grasp principles ever redeemed. However, it is possible the Flynn effect is an aggregate thing. I only experienced a narrow cross-section of the working population, largely in R&D and IT.

    One question that came to mind seeing the public finding is that the last year has seen student fees triple, which was presumably accompanied by central funding falling by that much?

    I’m interested to know what are these skilled workers Britain is so short of?

    In looking for that Gordon Brown quote I came across this CIPD report in Table3 there is a 4% of households without anyone in work in 1968 compared to over 18.8% now, which has to be telling us something!

    I’ve taken it to heart because it makes _sense_. It fits in with my own experiences but more importantly, it fits in with history. The open, (relatively) tolerant, (relatively) free societies produced the moral and scientific progress, be they the Greeks, the Caliphates or the West.

    It’s a shame that companies feel it is more efficient to poach employees after other have trained them rather than do it themselves. Perhaps that’s an instance of the tragedy of the commons? If it is, then laissez faire will not help and governmental action will need to be taken.

    Yes, the fee increases were compensated by funding cuts. As for research, that was just maintained at flat cash.

    As for the skilled jobs, I don’t know: nuclear engineers, self-aware city design, space tech, nano materials, bioengineering, new forms of art, literary analysis, anything. We just don’t know what could be done. I mean, who would have predicted web site designer as a career in 1980?

    There aren’t a fixed number of jobs doing a single set of tasks.

    We want companies like ARM – let others make the chips somewhere else, where mundane or even fairly technical tasks can be done cheaply, but have a group of elites that come up with the creative part here.

    If we made the country a high-functioning powerhouse where ideas are born rather than stuff dug up or stuck together, we could add enough “value” to not work 40 hour weeks while living a comfortable lifestyle. People doing less “high” jobs would be ok as there would be less competition.

    To get there will require a huge investment in eduction, both abstract and technical. We need to ignore people like this prat ( http://blogs.telegraph.co.uk/technology/willardfoxton2/100011290/the-government-wants-to-teach-all-children-how-to-code-heres-why-its-a-stupid-idea/ ) as part of the past.

    Boosting university research immensely could be an effective way of doing this, with significant funds for commercialisation and spin-offs. (Note that research should not be chosen on commercialisation estimates.)

    I myself have a small share in a laser technology IP and receive (small) royalties from a company in Germany that is bringing it to the market with more affordable designs. Why couldn’t a British company do that part? We’re not taking the tech any further as we’ve had the rug pulled from under us and it’s tangential to our interests anyway. What if there was a set-up ready to pick up the baton and continue the research? As an aside, I’m sick of being treated like crap and will be leaving the field soon, though not to finance which sadly tempts a lot of us away to be net negative contributors to the world.

    @Greg interesting that the Flynn effect squares with your experiences – it doesn’t with mine. Through my career, the less capable generally stayed less capable. On the aggregate level this may work, and your illustration of open societies and cultural progress is reasonably compelling. So I perhaps shouldn’t infer the general from the particular 😉

    There aren’t a fixed number of jobs doing a single set of tasks.

    I have a predilection to find the lump of labour fallacy a fallacy in itself given what I’ve seen in my working life, though I can follow the intellectual rebuttal. I’m not sure our economy is flexible and balanced enough to pick up the demand. For instance this Economist article posits that my early retirement damaged Britain’s productive capacity by taking 8-13 man years of productive work out of it, and indeed by becoming a rentier I also take away. By reducing my consumption I also take away offered demand to the economy.

    To that I’d counter I’m not bed-blocking the employment market!

    To get there will require a huge investment in education, both abstract and technical.

    To do that would mean overcoming a very deep culture of anti-intellectualism in Britain. I agree it would be worth doing, but that culture seems to run very deep. It’s probably less bad now than when I was at school, so it’s changing. We just don’t seem to admire smarts in the same way as, say, the French or Germans seem to do. I’ve never really understood where this bias came from. But that’s probably why your laser firm is in Germany, although the lack of decent technical training and technician skills in Britain due to underfunded vocational tertiary education doesn’t help!

    Willard Foxton is a tosspot 😉 I learned coding in 1974 at my grammar school at sub-O level age on a teleprinter terminal using punched paper tape connected via an acoustic modem to some mainframe at the North East London Polytechnic. Not because I expected to work in the field – I didn’t for the first 20 years of my working life, but because it was there and it was fascinating to be able to marshal data in a world where the calculator was a new consumer product and slide rules and log tables were still in common use.

    more than a decade afterwards on my MSc I learned the principles of coding properly and separating form from function. It helped be throughout my career to analyse data. I’m still amazed at how poor analytical skills are – at The Firm people would use Excel to try and parse tens of thousands of records in office jobs where a database and SQL would have worked so much better. Some people never got as far as learning to use named ranges and absolute references in Excel, which is hardly rocket science.

    So yes, you don’t teach kids to code so they can program ‘puters all their life. You teach them to code in order to teach them how to think – to break complex tasks into algorithms, to ask questions of what exactly do they want to know, and whether this is tractable from the data they have to hand. It makes them think about epistemology. So Willard needs to shut his gob and open his mind.

     

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