Nicholas Oulton's picture
Affiliation: 
London School of Economics
Credentials: 
Senior Visiting Research Fellow

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:
Strongly agree
Confidence level:
Very confident
Comment:
Restricting immigration, particularly of the low skilled, is one way to raise both wages and productivity. Firstly, economic theory (the Solow model) suggests that the level of wages will be higher, the slower the growth rate of the labour force. Reducing immigration will lower the growth rate of the labour force. The reason is that slower growth of labour increases the long run capital-labour ratio, leading to higher wages and productivity. Secondly, as a matter of fact since 2007 faster growth of labour has been associated with slower growth of productivity in the Western world. Though this cannot be expected to be true at all times and places (the Solow model predicts no association in the long run), I have argued that since the global financial crisis foreign demand for exports from countries like the UK has been constrained. So our higher growth rate of labour explains our poor productivity performance, relative to countries which by one means or another control immigration. In other words, reducing immigration can raise both the level and growth rate of productivity, and so raise the level and growth rate of wages.

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

Answer:
No opinion or other
Confidence level:
Very confident
Comment:
It all depends on the cause of the wage increase. If the wage increase is just by government decree and is not accompanied by any other policy intervention, then this is highly unlikely to raise productivity.

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:
Public deficit
Confidence level:
Confident
Comment:
I take this to mean the current deficit. There is now a consensus that more public investment is needed. But there is a big gap here: how should proposed investments be evaluated so that they yield a positive social return? The endless debates over the merits of HS2 show the problem. There is little transparency, methodologies are unclear, and forecasts of future benefits are dubious and seem designed to yield the desired answer.

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:
The reduction in capital spending during and after the Great Recession was a big mistake. Though whether this was due to a fiscal rule or discretion is not clear.

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

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