Awful ads, AI at work, and what Donald does for fertility

Afternoon all,

It’s time to steel yourself for the end of recess, the return to politics, and the slow run in to what will be a deeply consequential budget.

But not just yet. Distract yourself from the imminent hubbub with our mixed bag of reads – ranging from the irritation of online advertising, to the persistence of gender pay gaps, and what naming your first child ‘Donald’ says about you.

Have a good weekend,

Mike

Tough tasks. It’s not taken long for a certain Acemoglu to feature in my TOTC, but that almost feels inevitable in any economic research newsletter. His latest (co-authored) paper looks at the task model ­­– which breaks down the production process into the underlying tasks that need to happen – and shows how it helps us think about technological progress, like AI, as well as understand why different sorts of workers do well or poorly in the labour market. The idea is that tasks can be done by either people or (broadly) machines, and that technological developments can influence this in different ways. Some technological developments make either people or machines more productive in certain tasks, but without affecting our choice of whether the task should be done by people or machines. These are great for productivity, and don’t tend to harm workers. A second sort of technological change is the standard automation one, where machines become newly able to do things that people used to do (think robots in car manufacturing, or spreadsheets in accounting). This sort of change can be very bad for some workers, while only slightly improving productivity. Finally, some tech creates new tasks that need to be performed – and this is great news for humans if those are ones that we are especially good at (think: computer programming, at least until AI makes them all redundant). It’s so refreshing, amid tech bro crystal-balling, to read something on AI that is relatable to the work we do.

Gaping gaps. More than 60 years after the publication of The Feminine Mystique, one of the clearest manifestations of why gender inequality persists – men still earn more than women. This paper digs into the details, asking how gender wage gaps have evolved for young British workers between 1972 and 2015. The focus on younger workers is helpful: it means the research can look at very recent cohorts, and largely sidestep the impact that parenting has on wage gaps. The good news is that wage gaps have narrowed for non-graduates, and at the lower end of the wage distribution, in no small part as a result of the introduction of the minimum wage. But young graduates actually experienced a *larger wage gap* in 2015 than they did in 1972. This seems, frankly, wild, but the authors suggest that it’s because relatively few women were graduating from university in 1972, and they tended to be particularly talented and high-earning people (jargon: “positive selection”). The remaining puzzle is why wage gaps persist despite the fact that young women are consistently more academically successful than men. Occupational gender segregation is doing a lot of the heavy lifting on that front. Why do women choose lower paid fields? The authors speculate that fear of harassment in male-dominated industries and prioritising flexible work (in anticipation of child-rearing) may play a part.

Awful ads. Who doesn’t love to complain about the seemingly-random “targeted” ads that fill up our social media feeds. This paper explored how much people actually dislike adverts by arranging for a group of Facebook users to go ad-free. Surprisingly, the researchers found that those seeing ads as usual rated their experience of the site just as highly as those that didn’t. So, even if there are some really annoying ones, we must find some adverts to be useful, perhaps (dare I say it) because of the user profiling that lies behind them. If you’re not convinced, well, there’s always ad-block.

Numerous names. I recommend checking out this very satisfying piece of research which reveals that, historically, the name of a first child can indicate the eventual number of children in a family. As early as 1850, there is a relationship within white American families between the name of the first child and the number of subsequent kids. But such a relationship did not develop among black families in the US until 1940, and among the Norwegian population it began in 1910. So, what do different names portend? Donalds, Harolds and Gladyses tended to warrant the beginning of smaller broods, while Peters, Mollies and Nancys could be confident of having plenty of younger siblings to baby-sit later in life. The trends provide some insight into the fertility transition and at what point in history family planning began to take hold. Plus, if you know anyone who’s just welcomed a baby Oliver or Matilda to the world, you might want to anticipate many more baby showers in their future…

Affluent Americans. As some people have been observing, the UK is a lot worse off than the US these days. There have been two interesting papers recently digging into those bulging coffers stateside. Firstly, this paper observes that the distinction between capitalists and workers is breaking down – in the sense that the people who receive the highest rates of income from capital tend also to be among the highest earners from their labour as well. This is similar to what we see in the UK, where people claiming capital gains include some where the capital gain (traditionally supposed to be selling an asset that has become more valuable) is effectively a way of taking a salary. And this paper digs into the top 0.0003 per cent of that wealth, by analysing the Forbes 400 rich list both before and after 2008. It finds that there was more ‘self-made’ wealth before the global financial crisis, and that, although wealth growth slowed for most after 2008, for the top 0.0003 per cent it was three times higher than the GDP growth rate.

COTW

The big economy debate in UK politics this week seems to be whether the Government has received the worst inheritance since the Second World War, or been bequeathed an economy that is in fact going gangbusters. This debate turns in part on whether you mean the state of the government’s finances – definitely in a bad state – or economic growth – doing fine in 2024, albeit after 16 years of stagnation. But what matters for most people is their take-home income, and the Government’s inheritance on living standards is the focus of COTW – taken from our latest Living Standards Outlook. Projected living standards growth ­– in a world where the new Government doesn’t announce any policy changes – over the next six years is VERY lopsided. Gangbustin’ three per cent growth this year (2024-25) ­– fuelled by the strong catch-up pay rises and Jeremy Hunt’s cuts to National Insurance ­– is followed by a dire two per cent total growth over the next five years as we slip back into our low-productivity world and further freezes to tax thresholds. But these forecasts are not set in stone – the central task facing the new Government is to beat them. An extra percentage point of annual real wage growth (i.e. taking us back to pre-financial crisis trends) would up income growth from five to a respectable eight per cent. It would also help create the fiscal space to cancel damaging benefit policies like the two-child limit, benefit cap and Local Housing Allowance Freeze, and doing that would immediately lift 600,000 children out of poverty. So, one of the challenges for the upcoming Budget is turning the Government’s growth aspirations into specific policies that will help it beat the forecasts, and deliver a period of rising living standards and falling poverty that Britain so desperately needs.