As the summer term draws to a close, many questions remain unanswered about how young people can catch up on the learning losses from nearly half a year of school closures. Supporting education and skills – ‘human capital’ – is a critical area for UK policy-makers.
Ahead of next week’s end of term and the start of the summer holidays for UK schools and the House of Commons, this has been a busy few days for economic news, government pronouncements and high-profile public policy reports:
- Inflation and the labour market: The Office for National Statistics (ONS) released the latest data on prices, wages and jobs – keenly awaited for what they might reveal about the state of economic recovery from the Covid-19 recession and the potential threat of rising inflation.
- Regional inequality: The prime minister made a speech about his supposed flagship agenda of ‘levelling up’ the less prosperous parts of the country – and also had some things to say about football and racism.
- Food and prices: Two independent reviews were published: Henry Dimbleby and colleagues with a government-commissioned proposal for a national food strategy; and the House of Lords Economic Affairs Committee on the Bank of England’s monetary policy programme known as ‘quantitative easing’ (QE).
At the Economics Observatory, with our initial focus on coronavirus and the economy broadening to other big policy challenges, we have a number of pieces providing economic insight and research evidence to inform public debate around all of these issues.
Food poverty, rising prices and regional inequality
In relation to government hopes of doing something about longstanding regional inequalities, we’ve looked at differences in productivity across the nine English regions and the three devolved nations.
We’ve also published several pieces on variations in the economic impact of Covid-19 across areas of the UK, including urban-rural differences and the effects on specific places – Manchester, Northern Ireland, Scotland and Wales. And at the Bristol Festival of Economics late last year, we asked where next for the levelling up agenda – a question that remains highly uncertain despite this week’s speech from No. 10.
Last month, Huw Dixon (Cardiff), one of our lead editors, examined the prospects for higher inflation in the UK over the coming years, concluding that fears of a return to 1970s or even 1980s-style price rises seem to be unfounded. This week, in a post on the National Institute of Economic and Social Research (NIESR) blog, he looked at the details of the latest ONS data – which, among other things, reveal that fares on the Eurotunnel between Folkestone and Calais had the highest month-on-month inflation in June, rising by more than 35%.
The House of Lords report considers the Bank of England’s response to the Covid-19 recession and, in particular, concerns that its use of QE to support the economy could have damaging side effects, including inflation. For more on this topic, you can find several Observatory pieces explaining central bank actions in the crisis, including ‘monetary financing’, negative interest rates, Modern Monetary Theory, US Federal Reserve policy and the potential need for a new constitution for central banking.
The topic of this week’s other notable report – on the UK’s food strategy – is also something on which the Observatory has had a lot to say, notably a series of pieces on obesity, poverty and public policy, brought together by one of our lead editors, Rachel Griffith (Manchester and Institute for Fiscal Studies, IFS). There is a growing body of evidence from economic research on the health benefits of sugar taxes and bans on junk food advertising, as well as how cash benefits and food vouchers can help to reduce food poverty among children.
Human capital
This week on the Observatory, our broad theme has been ‘human capital’ – what it is; how to measure it; and why it needs to be a key focus for a wide range of policies as we seek to rebuild after the pandemic.
On Wednesday, Saite Lu (Cambridge) outlined what economic research tells us about the role of investments in people’s knowledge, skills, abilities and health in improving productivity. Surprisingly, the empirical evidence of a strong positive link between human capital and economic growth is limited, but measurement challenges may help to explain this.
Earlier in the week, Christine Farquharson and Angus Phimister (IFS) looked specifically at measuring the human capital of children – the academic, social and emotional skills that they acquire during their upbringing that undoubtedly play a critical role in their later lives.
As often discussed on the Observatory and elsewhere, school closures and other pandemic restrictions have had many damaging effects on children, not least the learning losses from missed lessons and remote education. One proposal for addressing the potentially long-term impact on young people’s human capital has been small group or one-to-one tutoring, online or offline, in addition to the standard curriculum.
This week on the Observatory, Lee Crawfurd (Center for Global Development) examines the possibility of offshoring online tutoring to lower-wage countries, which could allow for much wider access. Such an option may help to keep costs down and increase the supply of tutors, but it raises questions about teaching quality, particularly as the evidence on the effectiveness of online tutoring is weaker.
Our final piece this week asks what can be done for another group disadvantaged by their comparative lack of human capital: workers in low-wage jobs, who have limited opportunities for training and raising their earning power. Richard Blundell (University College London and IFS) points to a body of evidence on how people can be helped to get better jobs by developing their ‘soft skills’.
Tasks that involve soft skills include problem sensitivity (the ability to tell when something is wrong or likely to go wrong); coordination (being able to adjust your actions in response to others); taking responsibility for outcomes of other workers; working in groups or teams; and consequence of error (understanding where your mistakes have big spillovers on others).
Richard calls for a system of national accreditation of such skills, as well as improvements in digital infrastructure, to help to upgrade people’s human capital in the post-pandemic economy.
Beyond the virus
In the first issue of our new magazine, we outline ten big questions the UK faces in the Covid-19 recovery. Most are not limited to these shores – so it was valuable this week, via an IFS event, to hear from top French economists Olivier Blanchard (Peterson Institute) and Jean Tirole (Toulouse), who were invited by President Macron to chair a commission on three long-term, structural economic challenges: climate change, economic inequalities and demographic changes.
In the first presentation of their conclusions outside France, Jean and Olivier described the main conclusions of their report, alongside Richard Blundell, a member of the commission, and Carol Propper (Imperial), one of the authors and another of our lead editors.
A further report out this week came from our friends at the Royal Economic Society (RES), who highlight the lack of women’s representation within UK economics departments from the undergraduate level through to full professors. For example, among economics students from the UK, women represent 27% of undergraduates, 31% of master’s students and 32% of PhD students in economics; and among academic economists in the UK, women comprise 33% of lecturers, 27% of senior lecturers/readers and just 15% of professors.
Efforts to address this imbalance and other diversity challenges were discussed by Stefania Paredes Fuentes (Warwick and RES diversity champion) on the Observatory recently.
Finally, football: the outcome of the Euro 2020 final was of course a great disappointment to all England fans, but I hope visitors to the Observatory have enjoyed the series of pieces by James Reade (Reading) and colleagues on the shifting probabilities of teams lifting the trophy and the tongue-in-cheek question ‘is football coming home?’
With the World Cup only a year away, we hope to welcome James and his fellow sports economists back for a new Observatory series then – and perhaps before that, some economic analysis of other big sporting events, including the Olympics. In the meantime, I’m pleased to note that, by some fluke, I turned out the winner of the Reading Euro 2020 ‘score-casting’ game.
