Cheap AI and expensive roses 7 February 2025 Ruth Curtice Afternoon all, I’m bringing you a newsletter of two halves today – trade wars and Valentine’s Day. Who said diplomacy was dead? While personally I’m more excited about the release of the new Bridget Jones movie (also happening next week) we’ve got the economic low down on the most romantic day of the year for you below. Plus, TVs as tutors, awesome AIs and our take on tariffs for Chart of the Week… Here at RF we’ll be cheering on high-flying Torquay United as they take on Eastbourne Borough in the National League South. Have a great weekend, Ruth Chief Executive Resolution Foundation Teaching transmission. Boy am I glad my kids don’t get this email… Watching more TV improves children’s grades. At least according to this analysis exploring how the transition from analogue to digital TV impacted 11-year-olds’ test scores. The research finds a positive effect on student’s scores – more pronounced for boys, in deprived areas, and for those with lower attainment in earlier exams. That might be because TV time displaced time spent on risky activities like drinking (the NHS reported nearly one-fifth of children aged 11-15 drank alcohol in the last month in 2022), with greater reductions in risky behaviours seen for children in poorer areas. So maybe this really tells us more about the need for access to safe leisure activities for kids, especially in deprived areas, than it does about the brilliance of TV? Now, we wait and hope for follow-on analysis on the impact of TikTok doom scrolling … Predictable professions. Secure work isn’t just about being confident you’ll have a job next month, but about knowing what hours you’ll be working next week. This publication summarises 12 months of research on broadening access to flexible and predictable work. Working from home might be becoming the norm within your social circle, but it remains unavailable to two-in-five across the UK. By the authors’ reckoning, there are 10.5 million frontline workers (from nurses to cleaners and builders) without access to flexible and predictable work, while only 6 per cent of shift-based workers get a say in their working hours. Increasing workers’ autonomy across a broad range of sectors is not one-size-fits-all, but one recommendation in the report is for ‘fair-pay agreements’ to improve earnings in the social care sector. What a good idea! If you want more on this, stay tuned for groundbreaking new RF research on earnings volatility on 4th March. Desperately Seeking Deepseek. Any other AI amateurs adrift among the AI news this week? Here’s your expert write up. Why did this Deepseek release cause such a kerfuffle? It offered the same service as Chat GPT on an open-source system that’s * 96 per cent ~* cheaper to run. And suddenly the BIG bets that had been placed on AI being not only useful but also incredibly hungry for processing power, didn’t seem quite so smart. Ready for the sizeable caveat? “We do not know where DeepSeek is hosting its models, who has access to that data, or where that data is coming from or going. We don’t even know who funds DeepSeek”. So, proceed with caution. Persistent poverty. Here’s a big picture look at how difficult it is for larger families to escape poverty. It spans 14 countries across Western Europe between 2004 and 2019 and suggests that larger families have a higher risk of regularly falling back into poverty – which makes sense, given their higher costs and greater barriers to work. What’s particularly interesting is the change in the likelihood of poverty for families with four or more children. The likelihood of poverty increases regularly up to the third child, but much more steeply from the fourth child onward. This suggests larger families might face either a progressive erosion of earning capacity, or inadequate income support. Across Europe, systems appear to be failing larger families. Something for the Weekend? | Valentine’s Day Next Friday is Valentine’s Day – those of you who forgot can thank me later. But Valentine’s Day isn’t just a chance to show gratitude and affection to the people we love, it can also be a cold hard economic indicator. Estimates (hold your noses high-brow economists…) of last year’s spend range from £1.37 billion to £2.1 billion, with chocolates making up one-in-four of all gifts given. Romance isn’t all about fuzzy feelings – partnering up is an economic proposition too. Research has shown that being hot helps you earn more money (bad news boys, the effect is more pronounced for men, with an almost 10 per cent pay penalty for blokes deemed undesirable). Unfortunately, people tend to marry “across”, which is bad news for equality – wealth weds wealth, it tends not to share. But what about all the upcoming romance? With consumer confidence reported as being on the floor, a national romantic Friday might boost hospitality spending. But if you’re looking for cheap roses, the bad news is that flower prices are rising again, after a brief period of deflation. Anecdotal evidence suggests avoiding the Liverpool Street Station flower stall if you wish to avoid cracking into your savings. Chart of the week President Trump 2.0 has got off to a tariff-fying start (h/t to my colleague Emily Fry). Tariffs threats on the US’ main trading partners have swiftly turned into action, followed by temporary pauses for Canada and Mexico. The President has also hinted that the EU is in his sights. So, what should the Government do? Chart of the Week, taken from a must-read RF blog this week, suggests that the UK could be sheltered from the storm. First, Trump seems to object to countries that the US has a goods trade deficit with. According to the US at least, the US is in surplus with the UK. Second, the UK exports more than twice as many services as goods to the US. This should inform the UK’s response – stay calm, don’t retaliate and don’t escalate. As a medium-sized open economy we’re not immune from the global economic headwinds that a tariff war would bring. But we should avoid joining the fight if we can, as Jeremy Hunt said this week, and build firmer services-focused trading relationships around the world from the EU to Singapore.
