Michael Wickens's picture
Affiliation: 
Cardiff Business School & University of York
Credentials: 
Professor of economics

Voting history

National Living Wage and the UK economy

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Question 2: Do you agree that the new NLW will have a muted effect on wages and prices?

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Answer:
Disagree
Confidence level:
Confident
Comment:
Higher labour costs where there are no improvements in productivity will lead to price increases. If these are followed by pressure for higher wages, a wage-price spiral could ensue and lead to a higher level of inflation.

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Question 1: Do you agree that the new National Living Wage is likely to lead to significantly lower employment?

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Answer:
Agree
Confidence level:
Very confident
Comment:
Employment is likely to fall in the short term but not the long term. If wages are raised without an accompanying rise in productivity labour becomes more expensive and jobs lost. The short term effects are likely to be felt most in the low productivity and low skill jobs. These higher labour costs are likely to be passed on in higher prices which could return average real wages to near their former level. If wages are then raised starting a wage-price spiral the upshot would be a higher rate of inflation. A lower real wage together with capital labour substitution that raises labour productivity could restore employment in the longer term.

Brexit and financial market volatility

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Question 2: Do you agree that the possibility of Brexit significantly increases uncertainty and volatility in financial markets and the economy in general?

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Answer:
Agree
Confidence level:
Very confident
Comment:
But only in the short to medium term until the uncertainty is resolved

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Question 1: The value of the pound fell sharply this week. Do you agree that the public debate on Brexit can be expected to (continue to) lead to a substantially higher level of exchange rate volatility in the upcoming months?

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Answer:
Agree
Confidence level:
Extremely confident

Market Turbulence and Growth Prospects

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Question 2: Do you agree that the falls in share prices, low oil prices and the slowdown in some emerging market economies will have a significant negative impact on the UK’s economic recovery?

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Answer:
Disagree
Confidence level:
Not confident
Comment:
Being a net oil importer and not being greatly dependent on exports to emerging markets, the UK is in a relatively favourable position. The main downside has been the effect of China's slowdown on iron and steeel prices which have made UK production less competitive. Though even this will benefit the UK consumer in the longer term. The fall in stockmarkets reflects a composition effect arising from the contributions to the index of oil and steel stocks, together with the effects of greater uncertainty. The latter will pass soon.

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