Opinion – Low wages are ‘return to pre-industrial Britain’, says Bank of England economist | Business | The Guardian

The Guardian reports that Andy Haldane, Chief Economist of the Bank of England, saying that the rise in self-employment and drop in union membership mirrors weak workforces of pre-1750 era. More critically, trade union membership in the UK is expected to continue to decline, across all age groups.

Source: Low wages are ‘return to pre-industrial Britain’, says Bank of England economist | Business | The Guardian

This is an extremely interesting article. If you’re a socialist, perhaps you would argue that the demise of organized labour is a weakness and individuals are being exploited? On the other hand, many self-employed people regard themselves as entrepreneurs – but as Haldene highlights very few of these self-employed people employ other people.

So we should argue that the growth in self-employment makes the UK more competitive, compared to country’s like France where the labour sector is completely unreformed? Well, no, unfortunately, there are too many market intermediaries that distort the market. The employment agency sector is dominated by a number of large firms that are distorting true market competition. Ideally, we need true almost zero cost based selection of the self-employed, via the web. Many large agencies profess to having expertise but it’s questionable where they add value. For example, both central and local government engage vast numbers of self-employed contractors, using these biased channels of selection – this is part of the austerity challenge.

Another area of market imperfection is in relation to multiple experts being able to compete with large firms of consultants – the latter often charge GBP5k plus for partner level expertise and will frequently deploy inexperienced consultants, sometimes just out of university.

For greater insight, look at the following highly rated blogs:

Let me ask an open question:

If the Tory party truly represented small businesses and free competition, surely they would reform the supply model and replace large agency contracts?



One response

  1. As Dr Alf knows there are further distortions because when the Government cites unemployment figures it counts 2/3rds of the new jobs being created as “self employment”.

    These for the most part are not jobs at all but are Companies House, Cardiff records of people who have been made redundant, fired or decided to register a company in parallel with full time working as “insurance ” for when the axe falls or the pressure gets too much.

    These so called businesses have mostly never traded ,never paid anyone any money but were used by people who had been made redundant to claim “Working Tax Credit” by dint of recycling redundancy payments into a business bank account and then pretending to trade or remaining in start up mode.

    The Treasury put a stop to the worst abuses but the Government uses these Companies House registrations to lower the unemployment rate and pretend that this represents “success” in economic management.

    Local authorities on the one hand pretend that they are victims of “savage cuts” but to a man refuse to employ interims directly, choosing instead to work through recruiters who have umbrella companies.

    This love of using middlemen is not accidental,is very costly and creates the opportunity on an industrial scale for financial irregularity and corruption.

    However no-one looks at why this should be or at the bank accounts of those engaged in decisions about which middlemen to appoint.
    The NHS is even worse and has 3 procurement organisations plus NHS supplies and chooses to use Big 4 management consultants,strategy houses and ex NHS employees.

    At the bottom end employers are using migrant labour to do unskilled work,work that British workers are unwilling to do,or do fast enough plus of course illegal workers who will work for as little as £2.50 GBP an hour in the garment or fast food trade.
    Many UK workers are lazy and unproductive so employers pay them very little as a result but pay themselves extremely well.

    Mrs May as a weak and ineffective leader has failed to deal with executive pay for fat cats which creates a situation in which these low paid workers refuse to be more productive and poor employers refuse to set an example whilst punishing the workers for not working properly.

    This creates a Mexican Standoff and drives the trend towards more automation,RPO,machine learning and AI.

    The political class do nothing leaving the Guardian and people like Haldane to cry crocodile tears.

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