The People have spoken – Heaven help us!

As you may have gathered, I am not happy about the referendum result.  The Leave majority was only 2% of the electorate (1.3M), with almost 30% not voting.  (I admit that the lack of any turnout threshold, or of any majority threshold, is in line with The Venice Commission guidelines on European referenda.

There was no need to hold a referendum.  It was cynically called by Cameron, for purely “party political advantage”, which showed “poor judgement” (as former *Conservative* cabinet minister Michael Portillo said on BBC TV

Referenda are a poor way to make decisions on complex political and economic issues:

Unlike the most recent referendum in any part of the UK (Scottish independence in 2014), no vote was given to 1.5M largely pro-Remain 16-17 year olds.  Exactly like the 2011 UK Alternative Voting system referendum, the public debate was “bad-tempered and ill-informed” (  At the start of the campaign even I did not understand all the issues properly, yet I have 2 degrees and once published a magazine article critical of the Common Agricultural Policy.  So, I have few illusions about the EU.

o How many voters actually know how the EU’s democracy works?  None of the ones I spoke to, nor the ones I saw interviewed on TV.

o How many people know whether the UK will be forced to accept freedom of movement of EU citizens, in return for access to the EU single market?  Absolutely nobody, because that can only be decided by negotiation, after leaving the EU.  I have to say this is not looking promising, and even some leading Brexiteers (Ms Leadsom) concede that it may not be possible.

o How many people understand why an unnecessary Brecession is so likely to follow Brexit?  Not many people understand even the basics about economics.  I understand little more than the basics myself.

o How many voters grasp how their lives have been improved by EU legislation?  Precious few, I can tell you, and I’ve argued with intelligent and educated Brexiteers.

o How many people understand the legal differences between an economic migrant, and a refugee?  Surprisingly few, on either side of the debate!

o Did any Brexiteer actually know that the net cost of EU membership was only half that of NATO membership last year?

o Do Brexiteers know where EU spending in the UK goes?  I doubt it, but Agriculture, Higher Education, and poor regions of the UK are likely to be hit hard by Brexit.

So, on the basis of lies and exaggerations we’ve voted to crash the economy, reduce the UK’s diplomatic influence, cut worker’s rights and environmental protection, and break up the UK.  Why did we do it?

Some have argued that the protest vote was justified:  I profoundly disagree.  The protest by the low-paid and unwaged is self-harming (putting the far right of the Conservative party into power), and incoherent (no specific issue is highlighted).

Voter demographics and social attitudes (Lord Ashcroft Polling

o The older the voters, the more likely they were to have voted to leave the EU (65+ – 60% leave).  I saw elderly women in Essex on C4 News saying that they voted to leave, and how great it was in the 1950’s before the EU.  Strangely they forgot to mention low wages, smog, rationing, conscription, the Suez crisis, and illegal back-street abortion.  If they think they can vote to go back to 1950 (as the negative view of multiculturalism, feminism & the Green movement held by leavers would suggest) they will be disappointed.

o The less education you had, the more likely you were to vote to leave (students 80% remain, graduates 57% remain, higher degree graduates 64% remain).  I think that tells you something about the quality of the debate.  Those who knew least voted to leave.  Yes, the UK has “had enough of experts” telling the unpalatable truth.

o The less income you had, the more likely you were to vote to leave.  The low-paid and unemployed who think they voted Leave for more jobs and higher wages are in for a shock.

o Just under half of voters “always knew” which way they would vote, so presumably did no time-consuming research before deciding.  (Sometimes I wish I had not wasted days on this.)

o Leavers claim that they voted (in order, most important first) on sovereignty, immigration, and lack of control over EU expansion.  Having spoken to Brexiteers I can confirm that they are very ill-informed on these topics, as are most people.  I can only conclude that they have been influenced to vote against their own interests by the tabloid press.

If Leavers think they can #takebackcontrol by throwing away our influence on EU legislation (which we would still have to conform to if we want access to the single market), reduce the number of people coming here to work (without trashing the economy still further), and block the (very distant) threat of Turkish accession from outside the EU, they will be sadly disappointed.

As a result of their vote Leavers will find agricultural production moving abroad, and rising food prices, because farmers cannot get access to cheap seasonal labour, also due to a decline in the value of the pound.  They will find future staff shortages in social care and the NHS.  The prospects of continuing Turkish help in managing Syrian refugees just became even more remote.

The control of huge trans-national issues (pollution, refugees, climate change etc) requires powerful trans-national institutions.  The 17th century nation state is unfit for purpose, we need a European super-state, just as much as we sometimes need migrant workers.

The Inequality Trust says that the protest vote was about low wages, which were not due to globalisation.

“By 1988 the UK had already become a deeply divided country with extremely high levels of inequality and this did not dramatically increase up to 2008.   As globalisation took off, it doesn’t appear to have caused further large increases of inequality in the UK. … People from areas with lower wages were more likely to vote to leave, whilst those with higher wages were more likely to vote remain.”  I believe that leading figures in the Leave campaign (such as Ian Duncan Smith) cared so much about low pay that they voted against the National Minimum Wage in Parliament.

Some Brexiteers have cited EU corruption, or onorous EU regulations, or lack of EU democracy as reasons to leave.  We also have some of the most blatant corruption in the world in Britain, you may recall the Hillsborough and Levison enquiries (read “How Corrupt is Britain” by David Whyte).  The reason we know so much about EU corruption is that the democratically elected and powerful EU Parliament became aware of corruption and forced the entire EU Commission to resign in 1999.  Obviously the job is not complete, and corruption remains an issue in the EU, just as it does here.

Similarly I can assure you from personal experience that the UK Civil Service can compete with any in the world in drafting “onorous” legislation, to protect workers, consumers, or the environment.  If we had passed more “onorous” legislation for the banking sector, we might have been spared the 2008 crash.

If you don’t know how the EU democracy works, do a bit of reading ( and  That criticism might have been justified years ago, but the power of the EU Commission has been much reduced.  As of 23/06/16, 29 EU laws out of about 400 laws (7%) were rejected (permanently vetoed) by the democratically elected EU parliament in the last 365 days.

Others have said that they don’t want to be ruled by “rich posh people in Brussels”.  I’m sure that Old Etonians David Cameron and Boris Johnson, and former banker Andrea Ledsome, would sympathise.  Indeed, many MPs are highly paid lawyers, from rich families.  The proportion of MPs who were manual workers has fallen to it’s lowest recorded level since 1979.

The referendum vote was an unnecessary act of economic and political self-harm, particularly harmful to the poor communities where the majority voted Leave.  If things go as badly as expected, then the next generation of pro-EU voters would have to apply to join the Eurozone, a worse position than we were in until 2016.  Given that 1.5M new pro-EU voters join the electorate every 2 years that is only a matter of time, unless of course life outside the EU really is as wonderful as Brexiteers believe.

What polices could mitigate/avoid income inequality?

In the UK the April 2010 Equality Act imposed a duty on Government Departments when drafting legislation to take into account any potential impact on inequality.  Great policy, it’s a shame that it took the Labour government so long to formulate!


Only month after this act was passed into law, the Labour government was replaced by the Con-Dem coalition.  That new government then scrapped the public sector equality duty component of the 2010 act, before it was intended to come into effect (in April 2011).


The Scottish government has stated that they plan to re-introduce this duty.


This of course is only one such possible policy measure.  The OECD outlines several possible policies:


Eliminate gender inequality in employment.

Promote good quality (permanent, full time) jobs with opportunities for staff development.

Reduce labour market segmentation (by improving the ability of workers to move between different occupations, different areas and different industries).

Provide training, and re-training, throughout the working life of the workforce.

Redistributive taxation and state benefit policies.


Who are the NEETs and why?

The NEET concept and definition is discussed here: “Knowledge of the word spread after it was used in a 1999 report by the Social Exclusion Unit (SEU”, so the term was less well known when the stretching of the UK’s national income distribution apparently became permanent around 1992.


Andy Furlong has written on Scottish NEETs, as a meaningless classification.

“Not a very NEET Solution: representing problematic labour market transitions among early school-leavers”

The abstract says “…it is an ill-considered concept that places an undue and often misleading emphasis on voluntarism.”


He also wrote this paper (which I was able to read in full for free):

Furlong, A. (2007) “Supporting the Transitions of Vulnerable Youth: UK Perspectives”, in The Japan Institute for Labor Policy Training Report No. 5.


“First, modern youth transitions take much longer to accomplish …” “… today many young people fail to get established in the labour market by their mid-20s …”


Guilty as charged, M’Lud!


“Second … transitions have become much more complex.” “… people move between education, training, unemployment and jobs. In this context the term ‘yo-yo’ has been used to describe modern youth transitions (EGRIS 2001).”


Been there, done that, got the T-shirt.


“Third, this complexity and unpredictability leads to a situation where young people can feel that they are constantly confronted by risk.” This perception may be incorrect, but can still cause anxiety.


“Fourth” the complexity and uniqueness of each young person’s transition from full-time compulsory education makes it hard to learn from others, and can lead to self-blame.


“Fifth ” despite all the changes in youth transitions and their apparent unpredictability, pre-existing “… patterns of inequality have been maintained.” So that would include any extra inequality created during the 1980’s. Inequality indirectly influences the outcome of the prolonged “yo-yo” transition from compulsory education, it’s not at the forefront of the minds of NEETs. The practical things that are salient to them are explained in the following study.


All the participants in the following study were born after the inequality boom of the 1980’s, and would have grown up with it. The small 2014 study of NEETS aged 18-20 tends to confirm that the emphasis on most NEETs having a choice to stay at home is indeed “misleading”.

As in recent media coverage (BBC Radio 4 “Woman’s Hour”), the majority of the 7 NEET (and 13 recently ex-NEET) interviewees were female.


Barriers to entering EET included:

  • physical/mental illness,
  • looking after for someone else,
  • lack of flexible working conditions,
  • family breakdown,
  • pregnancy,
  • distance to work/college (in a rural area),
  • college fees,
  • lack of practical support,
  • lack of careers advice,
  • indecision as to which way to go, and
  • poor school attainment (due to special educational needs, discipline problems, health issues, or bullying).


Those who had recently entered education, employment or training had often done so through considerable personal effort and initiative. The complex and prolonged transition from full-time compulsory education was also emphasised here.


Only one of the group had a graduate parent. More typical was the one leaving Local Authority care.

How bad is UK graduate unemployment and underemployment?

Graduate unemployment 3 years after graduating has been under 4% since 2006 (the class of 2003).


Graduate median salaries were £5,500 above the median for the working population in 2012-13.


Of those in employment, 80.5% were in professional jobs in November 2014.


In 2014 there were 5.1 graduates working full time for every one working part-time, a year after graduation.


So, there may be some underemployment in terms of occupations and working hours, but little unemployment.


“More UK graduates are in work than at any time since the recession, new figures suggest.


Researchers asked almost 82,000 people who graduated in 2011 about their occupations in November 2014.”


ie these figures relate to the 3-years after graduation follow-up study.


“The last time that graduate unemployment was this low was in 2008, among graduates who left university in 2005, according to the figures.


Graduate prospects were worst in the 2010 survey when only 86.4% of were in work, three years after leaving university in 2007.


A total of 3.5% of this group were unemployed.”


Survey date Degree finished In Work (FT or PT), +/-Study Further Study (FT or PT), +/-Work Unemployed Other eg travel
2014 2011 87.9% 6% 2.6% 3.5%
2012 2009 87.1% 6.7% 3.2% 3.0%
2010 2007 86.4% 6.5% 3.5% 3.6%
2008 2005 89.7% 5.5% 2.6% 2.2%
2006 2003 89.3% 4.9% 2.3% 3.4%

* In Work includes those starting work that month.

Work/Study: Those doing both designated one of them as primary.


“In November 2014 the median salary of those graduates in full-time work in the UK was £26,000 and of those in employment, 80.5% were in professional jobs.


More than three-quarters (76%) of the graduates said their course had prepared them well for their career and two-thirds (66%) said it had been good value for money – but this group were at university before fees trebled to £9,000 a year in 2012.”


Some more details on the 1-year follow-up study here:


“In 2013/14, there were 424,375 UK and EU leavers (398,105 UK, 26,270 EU) whose destinations were known (427,870 in 2012/13).


Over two-thirds, 71% (303,300) of leavers (both full-time (70%, 244,045) and part-time (76%, 59,255)) were working, either in the UK or overseas, a slight increase from 70% of leavers in 2012/13.


A further:

6% were working and studying,

12% were involved in further study,

6% (full-time 6%, part-time)

3% were unemployed (the same as in 2012/13) and the remaining

5% were involved in some other activity, such as taking time out to travel or something else”


So there were 5.1 full-time workers to every part-time worker.


“The annual survey of the Association of Graduate Recruiters (AGR) indicates a 13.2% increase on 2014 in vacancies being offered by graduate recruiters.”


“The median starting salary for graduates in 2014-2015 was £28,000 – up from £27,000 in 2013-14 and a continuation of the steady increase from £25,000 in 2010-2011, £26,000 in 2011-2012 and £26,500 in 2012-2013.”


“The most recent SPI report (2012/13) gave annual median income as £21,000 before tax and £18,700 after tax.”




Does inequality deter young people from entering education or employment?

Apologies to young people if this seems like a stupid question. The more obvious brakes on entry to education/employment now could include:


From 1998, student loans for tuition fees

A continuing mismatch between the qualifications available and the needs of the job market

A continuing lack of vocational education (and funding for it)

A lack of employers willing to train new recruits (particularly public sector ones post-recession)

Lack of well paid and secure employment, due to cyclical/structural changes in the jobs market (structural= technology/globalisation/immigration?)

Not enough older workers retiring, or being laid off in the latest recession (the IFS says this relationship is a myth – “Releasing Jobs for the Young? Early Retirement and Youth Unemployment in the United Kingdom, James Banks, Richard Blundell, Antoine Bozio and Carl Emmerson, IFS, July 2008)

Job mobility issues, particularly relating to house prices in the SE


Due to lack of time, I’m going to skip research on this question for now [but see my next blog posting about the evidence] and use my own personal experience of 4 years of youth worklessness during the worst period for UK youth unemployment – the 1980’s. I don’t think that NEETs were/are really aware of the increase in inequality during the late 1970’s to early 1990’s. Like the proverbial frog in the pan of water, the heating was gradual and (unlike the frog) you got used to it.


Changes to higher education funding, and the removal of government subsidy for youth employment in times of recession have made things worse since the 1980’s. Had I not benefitted from a year of subsidised work, and 5 years of free university tuition (partly under the Scottish system), I might never have had a decent career.

How serious, and how recent, is the problem of youth worklessness?

As mentioned in yesterday’s posts, globalisation and technological change led to an increased demand for technological skills across the OECD nations in the period 1977-1991, which in turn led to higher incomes for a tiny elite and a lesser reduction in incomes for the lowest skilled. With other changes (demographic, taxation, etc), this led to a rise in overall OECD household income inequality (as measured by Gini coefficients, which are not very revealing, but widely used).


Turning now to young people not in Employment, Education, nor training (the “NEETs”, or “workless”), this is a serious issue because early unemployment can lead to a lasting damage to personal income, and wellbeing, even over 35 years later (Blanchflower and Bell 2011).


The best statistics we have on unemployment by age (the ONS Labour Force Survey) only go back to 1992. That data shows an initial rate of 11.9% unemployed and not in education in 1993, dropping to 6% in May 2004 and rising again to 10% in 2011. Those figures exclude those not actively seeking work and also not in education, which in 2011 took the total up to almost 20% (see next link).


A TUC pamphlet on this topic (“Touchstone Extras #7. Generation Lost: Youth unemployment and the youth labour market”) uses various proxy measures to get a rough figure for earlier rates:

The raw number of young unemployed (by different measures) started in 1969 very low by current standards (0.03M?), went up sharply between 1975-77 (0.3M), before the recession that started in 1979–80 saw it rise to 1.25 million. It then fell at the end of the 1980s, but remained above all pre-1979 figures. The 1991–3 recession saw a further rise, but did not have as bad an effect on youth unemployment as the earlier recession.


Over the same period (1969-2011), ONS data tells me that the proportion of the population aged 16-24 has changed relatively little (12.3% to 12.0%, ranging from 14.0% in 1981 down to 10.6% in 2002). I shall thus ignore population change and stick to raw numbers.


Youth unemployment (and thus presumably youth worklessness) is not new, and is better than it was in the early 1980’s (when I graduated for the first time).

Where does increasing UK household income inequality come from?

I have already mentioned household break-up (due to divorce) and increasing income amongst the richest UK households during the period 1977-1991 (ONS report).–12–december-2008/the-distribution-of-household-income-1977-to-2006-07.pdf


A 2011 study “Divided we Stand: Why Inequality Keeps Rising” by the Organisation for Economic Co-operation and Development (OECD) investigated economic inequality amongst workers in OECD countries.  The main reason for increasing inequality seems to be an increased difference between the demand for, and supply of, particular skills.

That probably applies to the UK, and explains the ONS finding above.

It also blames:

  • failures of education for poorer households (I would add “lack of vocational education”),
  • lack of retraining during later life,
  • insecure and part-time work,
  • lack of opportunity for women (but only worth 1 point of Gini coefficient),
  • lack of good quality jobs,
  • labour market segmentation (certain careers are only open to certain types of worker), and
  • less income redistribution through taxation (perhaps the general switch to indirect taxation of expenditure).
  • More assortative mating (the phenomenon of people marrying people with similar background, for example doctors marrying doctors rather than nurses).


This list may be long, but it is not exhaustive, nor is it focussed exclusively on the UK.

One thing I omitted to mention in my first draft of this post is the possibility of policy measures to avoid/mitigate income inequality.  I will consider this in a later posting.



What has happened to UK household income inequality historically?

UK ONS figures suggest that the income growth of the middle 1/5 of households (only) has tracked national GDP since 1977, in contrast to the trend of declining incomes (relative to GDP) in the USA.—2010-11/rpt–middle-income-households.html


However (for reasons which emerge below), the following report tells a different story for household incomes across the entire distribution:–12–december-2008/the-distribution-of-household-income-1977-to-2006-07.pdf


“Income inequality is relatively high in the UK compared with many other European countries.”


It says that 1977-1991 was “a period of substantial change to the income distribution”, whereas 1992-2002 was “a period of relative stability”. It continues: “During the 1980s there was a substantial increase in income inequality caused by increased inequality in the distribution of income …”. “No shit, Sherlock”? (if you will pardon the expression!)


“Between 1977 and 1996/97 the proportion of retired households in the bottom income quintile group decreased, while the proportion of children living in households in the bottom quintile group increased.” So that’s an increase in inter-generational income inequality (a term that I have just invented).


“The extent of inequality within an income distribution is commonly measured by the Gini coefficient [see my previous post on measuring inequality]. On the basis of this measure, inequality increased substantially between 1977 and 1990, with the most rapid increase taking place in the mid and late 1980s” … In the discussion of alternative measures of inequality and why they disagree with each other: “much of the increase in inequality was due to income growth at the top of the income distribution” …”the households which benefit from growth in income from employment are predominantly in the middle and upper part of the income distribution. Consequently, in periods of rapid growth in employment income, these households ‘pull away’, while during periods of low or falling employment income other households, those predominantly reliant on benefit and pension income, have a chance to ‘catch up’.”


Others (in the OECD) have mentioned an increasing disparity in the way certain skills are rewarded in the economy. This seems broadly consistent with the ONS report.


The income growth at the top of the income distribution explains why the ONS report based *only* on the middle 1/5 of households fails to reflect the full story.

More here:



What is economic inequality?

What is economic inequality?

Wikipedia says: “Economists generally think of three metrics of economic disparity: wealth, income, and consumption”.  Let’s leave aside how much people freely choose to consume, and look only at their underlying wealth and income.

As Wikipedia says, the balance between income and wealth changes with career progress.  For most people, the majority of their wealth is not inherited, and is thus a product of household income.  Income thus appears to be the main driver of inequality.

Note: breakup of households (due to increasing divorce rates) is also believed to have a significant effect on household inequality, as you might expect.

Income can be measured at the level of the individual, or (more meaningfully) at the level of the household.  The household is the same level at which the ONS measure income inequality.

Issues remain about how to compare full-time workers with part-time, and comparing self-employed with employees.  Using household income (partly) overcomes these issues.

Inequality can be compared before or after taxation, and can opt to take into account public services.  These would make figures even harder to understand.

So, IMHO concern should be focussed on net income inequality at the household level.  Ideally this should include income from capital, asset transfer (eg inheritance) and savings.


How do you measure economic inequality?

… There are various numerical indices for measuring economic inequality. A widely used one is the Gini coefficient , but there are also many other methods  The Gini measure has a number of shortcomings.  It is not intuitive, it does not indicate the income level at which the inequality exists, it gives peculiar values under certain demographic conditions, and negative income/wealth values also generate strange values.  However it does have general acceptance and it takes account of all income inequality.

Note: attempting to understand the integral calculus involved in the Gini coefficient can cause headaches – stick to the graphical description!

Why worry about economic inequality?

It is generally agreed that economic inequality (however defined, and measured) is bad for social cohesion, and bad for economic growth.

The corrosive effect on social cohesion seems self-evident.  That would also seem to suggest a potential problem for democracy, as economic disposession leads to the rise of political extremism (and potentially an imminent disastrous British exit from the European Community).

The problem for economic growth is that if all the nation’s capital is in the hands of an oligarchy, then there will be a shortage of disposable income for the consumption of anything except luxury goods (and not that many of those).  Without retail spending, and house purchase, the UK economy will tend to stall.
(This growth based on unsustainable spending is far from ideal, but at present that seems to be the reality.  Others have argued for prioritising economic stability over growth.

Several OECD reports warn about the damage to social cohesion and economic growth.

May 2015“In It Together: Why less Inequality Benefits All”

A 2011 study “Divided we Stand: Why Inequality Keeps Rising” by the Organisation for Economic Co-operation and Development (OECD).

In the UK the Office for National Statistics has a statistical theme of household income inequality, which at least suggests some concern about this issue in central government

Prominent individual sociologists have also expressed concern.  Professor Danny Dorling of Oxford University is an example:

As have a number of prominent economists:
(includes a podcast)