Skills are a risky investment

[What follows was written for a UK audience, but most of it fits the USA as well.]

A shortage of skills is a source of perpetual anxiety within Britain’s political class. Here’s Tory backbencher Dominic Raab, a few months back in the Telegraph:

The next great problem is our chronic skills gap, which saw Britain plummet down the international rankings in maths, literacy and science. Labour’s arbitrary goal of getting 50 per cent of youngsters into university led to the proliferation of what one of its ministers called “Mickey Mouse” courses, which have benefited neither the students nor the economy. A 2005 Ofsted report found that almost half of those in their twenties said their education had not prepared them for their first job. Far from blaming Europe for this, Michael Gove is rightly learning from it – promoting innovative Swedish-style free schools and a more German emphasis on vocational training.

If we put aside the sniping at Labour and the currying of Gove’s favour, most of this could actually have been written by any of hundreds of politicians from any party at any time in the past thirty years: the schools aren’t delivering the goods, and we don’t do near as good a job at vocational training as the Germans. The skills gap feeds an endemic collective anxiety, the root of the county’s endless obsessive-compulsive re-engineering of its education system – because, surely, finding the right curriculum, the right way to teach, to test, or to select and motivate and cull teachers, is the key to setting this situation right. As for vocational education and apprenticeships, the on-going, multi-party failure in that area could lead one to believe that our Oxbridge-educated leaders can’t bring themselves to really care about something so far from their collective experience: true, perhaps, but like the anxiety about primary and secondary education it misses the point.

The real problem, Continue reading

The richer get richest

Margaret Jacobson and Filippo Occhino of the Federal Reserve Bank of Cleveland provide a nice charting of changes in

* the shares of income going to labor (wages, salaries) and to capital (profits, interest) from 1947 to present, and
* the concentration (i.e., inequality) of income within each share, from 1979 to present.

The data are for the USA. The share of income going to labor has been declining for some time – since 1970 or 1980, depending on which data series you use.

Since capital income is more highly concentrated (most working age adults have labor income, but little or no capital income), an increased capital share produces increased inequality even if nothing else changes. But, also, there’s been increased concentration (inequality) within both the labor and capital shares.

Increased inequality within the labor share is well known. It is also well known that, in the distribution of overall (labor+capital) income, the top 0.1% have seen a much larger growth of their income than the top 1%, who have in turn seen a larger growth than the top 10%; and since those top slices of total income all get large shares of capital income, increased inequality within the capital share is no surprise. It’s nice, though, to see it plotted and explained so clearly.

Employee ownership meets outsourcing

(Cross-posted on Open Democracy.)

John Lewis’s outsourced cleaners are striking for a living wage. Recent developments are covered by Liberal Conspiracy and London Progressive Journal. The dispute has been going on for a while: here’s Polly Toynbee in the Guardian last September.

You might be inclined to file this under obvious – where in the world are cleaners not outsourced and underpaid? With John Lewis, though, it points to an important general problem with the viability of employee ownership of businesses (for readers not in Britain, the John Lewis Partnership is owned by its 81,000 employees; it is a successful operator of department stores and supermarkets.)

John Lewis employees at the annual bonus announcement

Since the 1950s, economists have speculated that a profitable employee-owned business would not grow as much as the same business would if it were owned by capitalists, because the incumbent workers would not want to dilute their individual shares of profits by adding new worker-owners. Continue reading

GMO giant hires retired cops to hunt down farmers

The glories of the intellectual property imperium! (from Occupy Monsanto)

GMO giants DuPont have contracted dozens of retired law enforcement officers to begin patrolling farms in the US next year to spot any potential intellectual property theft.

DuPont Co, the second-largest seed country in the world, is hoping to find farmers that have purchased contracts to use their genetically modified soybean seeds but have breached the terms of agreement by illegally using the product for repeat harvests. Should farmers replant GMO seeds licensed by DuPont, they could be sued for invalidating their contracts. (

This reminded me of my teacher Sam Bowles talking about guard labor (I Google and am glad to find that he still talks about it). Excessive supervision that pays for itself by keeping down wages, prison guards, etc: a great deal of labor is devoted to just watching people who, in a better structure of motivation, would not need to be watched at all.

(To say nothing of the fact the the part of guard labor that consists of prison guards is devoted to keeping prisoners out of the labor market, so that’s everybody’s effort wasted: on this see Bruce Western and Katherine Beckett, and John Quiggin. But I digress.)

Further Googling tells me that Bill Totten, who has a company that distributes open source software in Japan, has made just the same association between IP protection and guard labor.

Skills and the response to crisis

My paper with Andrea Filippetti is now available from Birkbeck’s Centre for Innovation Management Research. Bottom line: European countries with a combination of good short-term unemployment insurance and vocational training participation were less likely to see reductions in private sector investment in innovation in the first year of the financial crisis: having just one of these was no help, and job security, the bête noire of neo-liberalism, made no difference. Another way of putting it is that, in this particular case (investment in innovation, during the financial crisis), it is the security part of the flexicurity model that provides the benefit. This is consistent with the logic of Estevez-Abe, Iversen & Soskice’s chapter in Hall & Soskice’s Varieties of Capitalism.

Economic liberalization depends on strong states

Julia Cagé and Lucie Gadenne find that

tariff cuts lead to lower tax revenues as a share of GDP. The drop is highest in poor countries that don’t have the capacity to compensate for lost tariff revenues with domestic taxes.

This is an important point in itself, and illustrates a more general principle that many of the benefits of economic liberalization depend on strong states. Continue reading

Open access publishing and not-for-profit publishing

Is the UK government’s new requirement of (slightly delayed) free access to publications based on government-funded research a blow to the extortionate power of commercial academic publishers, or will it just entrench them further? Continue reading