Losing to the French, snitching on a Colombian, and dreaming of Rome

Morning all,

If last week was all about the ONS’s data releases, this week the National Audit Office was centre stage. A stream of (mostly) damning reports into the state of public services were published this week. That’s where all the headlines you’ve been seeing about the state of HS2, the NHS, homelessness and potholes have come from. And perhaps we’ll hear more about them in the Treasury’s “state of our spending inheritance” assessment that’s due next week?

But the ONS *did* release some interesting data on “excess” household saving since 2020 – get our take on it here. And keep an eye out next week for new research from us on how we can make Britain’s wealth landscape fairer…

This week’s reads range from Romans to toads, with a detour in the middle to UBI, while COTW embraces Olympics fever.

Have a great weekend,

Mike Brewer

Interim Chief Executive
Resolution Foundation

Rollicking Romans. I’ve recently learned of the sheer proportion of people (read: men) who often have the Roman Empire on their mind – and this trend emerged *before* the trailer for the new Gladiator film. Well, this intriguing new paper is for the Empire enthusiasts among you. The authors examined economic growth within Roman Britain. The accepted wisdom states that economic growth in the ancient world was basically down to agglomeration – meaning that people and businesses began clustering together, allowing them to function more efficiently. But this paper shows that the economy in Roman Britain at times grew by roughly 0.5 per cent per year from productivity gains alone. Yes, agglomeration was important for the economic growth of the Roman British economy, but there was also a consistent increase in baseline productivity. That’s a swell trick; we should try it sometime…

Productive Porsches. You know what has been going gangbusters? The UK auto industry. This recent study describes the massive increases it has seen in real output per worker since 1980 – 13-fold – far higher than the gains among manufacturing overall, which saw only a four-fold increase. The authors pinpoint three factors driving this: greater foreign ownership, the EU’s single market – which means more export opportunities but also tougher competition – and “improved industrial relations” or, more bluntly, fewer working days lost to strikes (anyone here old enough to remember British Leyland?). Further good news is that these productivity gains were shared with employees: the wage premium for working in the automobile sector over other manufacturing jobs doubled from 8 per cent to 17 per cent. The catch? If unions and workers had maintained the bargaining power they had in the 1980s, then that wage premium would be 38 per cent.

Guaranteed gains? There’s been a lot of chat on X about a new, very expensive, and extremely thorough, study on UBI, which, it’s fair to say, has come as a shock to some UBI advocates. In a randomised experiment, 1,000 low-income Americans received $1,000 a month for three years – that’s an average boost to income of over a third. Receiving this no-strings-attached cash led recipients (and their partners) to take longer finding a new job (if they were unemployed), or to work a bit less, such that their total income went up by only $800 a month on average. This is exactly what economic theory tells us would happen (for a great UK example with a very different population, see HMRC’s evaluation of the Covid grants to the self-employed).  What’s disappointing some commentators, though, is that people didn’t use the money to get more training or schooling, or set up their own business. What’s more, the extra cash had no lasting impact on their health. Reading the qualitative work too, the sense I get from this study is that when you’re on the breadline money makes your life a lot easier. Plus, it allows people to make the sort of choices that others might take for granted.  It turns out life (for non-robots anyway) isn’t all about work and entrepreneurial endeavours – quality of life matters too.

Still got spirit. Ready to feel old? A seminal piece of research on inequality, The Spirit Level by Kate Pickett and Richard G. Wilkinson, came out 15 years ago this month. It showed that people in unequal societies are in worse physical and mental health, more stressed, take more drugs, are less trusting and more violent, and have children that do less well at school – and it argued that these are caused by inequality. Back in 2009, this book brought the topic of inequality firmly into the British mainstream – sure, there were sceptics and critics, but it was also cited approvingly by both David Cameron and Ed Miliband. The authors have just updated their original analysis. The new stats are certainly stark: the authors now say inequality also leads to worse opportunities for children and works against key environmental goals, on top of the original ‘charge sheet’ against inequality in their first book. But, before it gets too bleak, don’t forget we’ve already laid out the path towards widely shared prosperity, with more growth and less inequality (with a video explainer here).

Toady tattle-tale. If you remember nothing else from this edition of TOTC, let it be this: in Colombia, if you snitch on someone that’s called ‘being a toad’. This study looks into the anti-social norm of demonising third-party sanctioning of unfair, opportunistic behaviours – think of a school swot dobbing in an unruly classmate. That norm can powerfully undermine desirable social outcomes (like not cheating). One interesting aspect is that most participants in the study felt like it was silly to sniff at snitches, but they also expected their fellow participants to cry foul on tattle-tales, so acted accordingly. All in all, it’s a ribbit-ing read.

Chart of the week.

We couldn’t go through a whole TOTC without mentioning the Paris 2024 Olympic Games, which officially start tonight.  But this is TOTC, not The Athletic, so this week COTW brings you a new sport for the Olympics – the City Economics Pentathlon – featuring two traditional powerhouses of the sport – London and Paris. It starts well for London: we have a significantly higher employment rate than Paris (although still below the UK average). But while Londoners are more into working, Parisians are more productive in the work they do (Gross Value Add per worker). The third event is the relay, where the capitals pass the productivity baton on to their ‘second cities’ (Greater Manchester and Lyon) – and Paris takes the lead!  So, 2-1 to Paris, with two housing events to go. This is not looking good for London. But remarkably, properties in the UK capital are actually marginally less cramped than Paris, bringing the capitals neck and neck as we approach the final hurdle. But, oof! It looks like Paris has built *a lot* more homes per 1000 people between 2010 and 2020. So, gold to Paris, but will it be able to defend its title against LA in 2028? Keep reading TOTC to find out…