Roger Farmer's picture
Affiliation: 
University of Warwick
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:
Strongly disagree
Confidence level:
Extremely confident
Comment:
I would be surprised if there is much disagreement from the panel on this question. If there IS disagreement, I would be keen to understand the reasoning from dissenters that leads from government mandated wage increases to persistent increases in the quantity and/or quality of the goods and services produced by the UK economy on an ongoing basis — my preferred definition of productivity. A one-off increase in measured productivity — as a result of additional effort — is a possibility but not a possibility that I give much credence to. And to those arguing otherwise I would add — I have a bridge to sell you.

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

Answer:
Wage increases cannot increase productivity in and of themselves
Confidence level:
Extremely confident
Comment:
Measured labour productivity is a non-stationary process. The same is true of total factor productivity (TFP). The Shapiro-Stiglitz hypothesis might (and I stress might) account for a one-off increase in unmeasured effort that would be measured as a productivity advance. I see no plausible causal chain that would lead this channel to lead to continual improvements on an ongoing basis — as would be needed to explain continual productivity growth.

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:
Keeping the primary deficit under control is the most important component of a sound fiscal policy. It also matters whether deficits are used to fund public capital, which has the potential to pay for itself, as opposed to government consumption, which does not. I am not concerned about the level of debt, as long as the debt to gap ration remains within reasonable bounds.

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:
Neither improved nor harmed
Confidence level:
Not confident

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:
Reduced
Confidence level:
Not confident
Comment:
It's hard to know the counterfactual. The fact that the debt was in the public discussion probably influenced spending. The National Institute makes a good case for flexibility. Importantly, moving ahead, there needs to be an open public discussion about the costs of the government's ambitious climate agenda.

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