Earnings, Employment, Productivity and Consumption. Understanding the Great Recession: From Micro to Macro. Richard Blundell

Transcription

1 Earnings, Employment, Productivity and Consumption Understanding the Great Recession: From Micro to Macro Panel Discussion, 24 th September 2015, Bank of England Richard Blundell University College London and Institute for Fiscal Studies Thanks to Cormac O Dea, Helen Miller and Wenchao Jin

2 In contrast to previous recessions, real output per hour remained largely stagnant since Quarters since the labelled quarter 1979 Q Q Q1

3 In contrast to previous recessions, real output per hour remained largely stagnant since Indexed to Q Output per hour worked Q Q Q Q Q Q Q Q1 Output per worker

4 Changes to total output, employment and hours worked since 2008Q1 104 Indexed to Q Output Total hours Employment 2008 Q Q Q Q Q Q Q Q1 Source: Cribb and Joyce (IFS, 2015)

5 Mean weekly real earnings fell strongly adjusted for RPIJ inflaoon and indexed to 100 in 2008Q LFS ASHE 85 Source: Cribb and Joyce (IFS, 2015), and Jin (2015)

6 Earnings and producovity growth Output per hour compared to mean hourly earnings in LFS (GDP deflated) since 2008Q2 105 Indexed to 100 in 2008Q Output per hour worked Mean hourly earnings Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 InsOtute for Fiscal Studies Source: Cribb and Joyce (2015), and Jin (2015)

7 Change in real median hourly wages by age group since 2008 Cumula:ve change in real median hourly wages from 2008 to % 0% - 2% - 4% - 6% - 8% - 5.8% - 2.6% - 2.7% 0.2% - 10% - 9.0% InsOtute for Fiscal Studies Source: Cribb and Joyce (2015)

8 Change in real median hourly wages by sex since % Cumula:ve change in real median hourly wages from 2008 to % - 2% - 4% - 6% - 8% - 7.3% - 2.5% - 10% Men Women InsOtute for Fiscal Studies Source: Cribb and Joyce (2015)

9 Female employment stronger than male employment since the recession Employment rate (age 16-64) (%) 80% 75% 70% 65% Male Female 60% 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 InsOtute for Fiscal Studies Source: Cribb and Joyce (2015)

10 Employment rate for older workers: women aged Euro area (13 countries) Germany (unol 1990 former territory of the FRG) Spain France Italy United Kingdom Source: Blundell, Green and Jin (2014)

11 Falls in Real Earnings even greater acer allowing for composioon changes in mean real hourly earnings 1.5% 1.1% Average annualised change 1.0% 0.5% 0.0% - 0.5% - 1.0% - 1.5% 0.7% 0.6% 0.6% 0.5% - 0.4% - 0.6% - 1.0% - 1.2% Actual change ComposiOonal effect Underlying change Source: Cribb and Joyce (IFS, 2015) and Blundell, Green and Jin (2014)

12 Household earnings and net incomes to (non- pensioners in working households, by percenole point) 5% CumulaOve income change 0% - 5% - 10% - 15% - 20% Gross household earnings Net household income (BHC) PercenOle point InsOtute for Fiscal Studies Source: Living Standards, Poverty and Inequality: IFS, 2015

13 90/10 raoo and top 1% income share 5 10% RaOo of income at the 90th and 10th percenoles (90/10 raoo) /10 raoo (LH axis) Top 1% share of income (RH axis) 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Share of household income held by the top 1% of individuals InsOtute for Fiscal Studies Source: Living Standards, Poverty and Inequality: IFS, 2014

14 Non- and semi- durables per head 125 Quarter before recession = Quarters since start of recession InsOtute for Fiscal Studies Source: Crossley, Low & O'Dea (2015)

15 150 Durables per head Quarter before recession = Quarters since start of recession InsOtute for Fiscal Studies Source: Crossley, Low & O'Dea (2015)

16 Business investment has been very slow to pick up 8 6 Change since 2008 Q1, bn business investment InsOtute for Fiscal Studies

17 Prospects Younger workers and families are acong as if they expect a long- run fall in relaove living standards evidence from consumpoon and saving. Real wages, producovity (and investment) have been slow to pick up we can expect the palern of lower real wages at the bolom to cononue, but with fairly buoyant employment due to increased supply. Most actual falls in real earnings have happened but cononuing strain on the tax- credit and benefit system and fiscal contracoon implies large benefit cuts

18 Prospects (cont.) Lille evidence of earnings progression for lower skilled and part- Ome workers longer term earnings growth will mostly come from high- skilled occupaoons, with perhaps some at the very bolom. Increasing inequality across the earnings distribuoon, and increasing pressure on the tax and benefit system. SOll much to do in focussing on older workers in general, on return to work for parents/mothers, and on entry into work. There are soll some potenoal big gains here, for example, as (higher skilled) women age in the workforce. ProducOvity (and human capital) is soll the key.

19 Extra Slides InsOtute for Fiscal Studies

20 RaOo of BA (equiv.) median wage to that of A- level (equiv.) Remarkably no cohort effects! BA premium stayed constant, even through the recession.

21 Business investment has been very slow to pick up 15 Change since 2008 Q1, billion Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q4 Business investment Household consumpoon: durable goods Household consumpoon: non- durable goods InsOtute for Fiscal Studies

22 Percentage Change in Food Expenditure: UK 0.04 Change in Food Expenditure by Cen:le and HH type: 2010 to All HHs Pensioners w/o children with children InsOtute for Fiscal Studies Notes: Understanding Society Source: Blundell and Etheridge, 2014

23 Self employment as a share of total employment 16% Self- employment as a share of total employment 15% 14% 13% 12% 11% 2004 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q3 InsOtute for Fiscal Studies Source: Authors calculaoons using Labour Force Survey (ONS series MGRQ and MGRZ).

24 Earnings for employees and the self employed Percentage of employees / self- employed individuals 25% 20% 15% 10% 5% 0% Self- employed Employees Earnings (per week, April 2014 prices) InsOtute for Fiscal Studies Source: Figure 2.14 of Cribb and Joyce (2015) Earnings since the recession

25 Employment and unemployment rates since 2007 Employment rate (age 16-64) (%) 75% 74% 73% 72% 71% 70% Employment rate (LH axis) Unemployment rate (RH axis) % 8% 7% 6% 5% 4% Unemployment rate (age 16-64) (%) InsOtute for Fiscal Studies Source: Fig 2.1 of Cribb and Joyce (2015) Earnings since the recession

26 ParOcularly strong growth in private sector Private sector employment (million) Private (LH axis) Public (RH axis) Q1 Public sector employment (million) 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 InsOtute for Fiscal Studies Source: Fig 2.2 of Cribb and Joyce (2015) Earnings since the recession

27 NEET rate among young people 60% 50% 40% 30% 20% 10% GCSEs or above without GCSE Degree level or above GCSEs, A- levels, FE without GCSE 0% Source: Blundell, Green and Jin (2014)

28 Recent cohorts are also less likely to own a home 80% Born Born Born Homeownership rate (%) 70% 60% 50% 40% 30% 20% 10% 0% Age Source: Figure 3.13 of Living Standards, Poverty and Inequality: 2014 InsOtute for Fiscal Studies