Jagjit Chadha's picture
Affiliation: 
National Institute of Economic and Social Research
Credentials: 
Professor of economics

Voting history

Towards a High-Wage, High-Productivity Economy

Question 2: What is your evaluation of the following statement: “A well-designed government-stipulated wage increase can lead to higher productivity”?

Answer:
Neither agree nor disagree
Confidence level:
Confident
Comment:
If it is well-designed then policy will meet its objective. But I wonder if the objective of government set wages is productivity? It is not: it is to offset the monopsony of employers and ensure a more equal distribution of income.

Question 1: Which of the following statements most closely reflects your understanding of the relationship between productivity and wages.

Answer:
Wage increases can in some cases increase long-run productivity
Confidence level:
Confident
Comment:
Wage increases are very much a function of labour productivity but that in itself depends on the level of worker skills, capital employed, capacity utilisation, the quality of management as well as other factors. If wages are raised and there is an accompanying improvement in the management of the firm then it might support in increase long run productivity by, for example, encouraging investment in skills. It has to be part of a strategy.

Post-Covid Fiscal Rules for the UK

Question 3: Which of the following variables should fiscal rules target to best improve the performance of the UK macroeconomic policy going forward.

Answer:
No explicit target
Confidence level:
Very confident
Comment:
We need to remember that fiscal policy is an instrument of policy, like Bank Rate. And therefore should not be subject to a binding target. The target of policy should rather be related to some measurable aspect of the society's social welfare function.

Question 2: What impact has the sequence of fiscal rules adopted in the UK since 1997 had on the conduct of fiscal policy in the UK?

Answer:
Harmed
Confidence level:
Confident
Comment:
Because the rules are tied to Parliamentary terms they set up a game between government departments as part of the political cycle and with the voting public, which demands certain expenditure constraints e.g. the triple lock or commitments to lower income tax. It is probable as a result that fiscal policy has not been as helpful to the development of our economic structures as it might otherwise have been. The economic imperative and the political cycle rarely coincide.

Question 1:  What impact has the sequence of fiscal rules adopted in the UK since 1997 had on the level of UK public debt? 

Answer:
No impact
Confidence level:
Confident
Comment:
The rules have acted as a bureaucratic device to limit expenditure in government departments and meet an adding up constraint in expectation. But shocks, news and political preferences have been the main driver of the level of public debt. The rules have been changed so regularly nobody outside of government thinks they place a constraint on policy over and above what H M Treasury would have chosen anyway.

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