Monday, 22 August 2016

The gender pay gap - new evidence

This morning a new report by the Institute for Fiscal Studies on the gender pay gap is being released. It comes along some new evidence about the structural reasons for the pay gap.

The new evidence and reports make fascinating reading, not least because they attempt to identify the point at which the pay of female workers diverges from that of male workers in companies. This point appears to occur at the time of child birth when women traditionally take up child care and either drop out of employment temporarily, or work part time. Once the children reach the age of 20, women who go back to full time employment the wages of women never reach the wage levels of their male counterparts.

If this points to the need for structural changes such as providing better child care for families and/or more flexible parental leave, this is certainly not the whole story. Interestingly, even before women take up maternity leave, the wage gap to their male colleagues is already 10 percent.

Once women are working part time, their chances of progression are also significantly reduced which points to a dilemma. We know that part time workers are actually more productive compared to their full time workers, but that does not seem to translate into better pay or equal opportunities to be considered for promotion.

If this all sounds gloomy and hard to tackle, however, it is worthwhile remembering that there is some good news too. The gender pay gap itself has reduced from about 28 percent in 1993 to 18 percent to date. Much of that is due to the increasing number of women in high paying jobs. So, whilst women's pay now increases faster than men's pay in general, the gap still exists. In addition, women in low pay jobs with no promotion opportunities do not experience any pay differential to their male colleagues in similar positions, which again illustrates the critical role of promotion and progression in generating the pay gap in the first place for higher paid workers.

It seems to me that to make progress on this issue, several things need to happen. First, the government should continue to provide additional flexibility for parental leave. The cultural shift in providing child care jointly by both parents still has not materialised, but incentivising both parents to contribute to this appears essential.

Second, the legislation to compel companies to provide transparency about salary structures amongst their work force is welcome as well. It will produce additional evidence and allow boards to take a hard look at how they perform on the issue of pay.

Last but not least, progression and promotion needs to be de-coupled from the amount of time you work, and linked to productivity, which would ensure that part time workers gain opportunities to progress as well.

Legislation is unlikely to make inroads into this problem, what is required is more a cultural shift at the work place.

Sunday, 31 July 2016

The other Brexit narrative

As the new British Prime Minister intones that Brexit means Brexit, quite a few people still scratch their heads and ask themselves what it actually all means. The biggest headache for the British is now to determine where this magical nirvana outside the European Union is actually located and, once they have found it, to figure out how to get there.

Recriminations abound how we all got here and there are theories a plenty on the social media sphere, so here is, for good measure, mine, why Britain made for the exit.

On the face of it, Brexit was all about leaving Europe. However, in the midst of the campaign Nigel Farage mentioned that he would be very happy indeed to give up economic growth for better quality of life. His comment went largely unnoticed, but it shouldn't have. It was a remarkable admission by a, for good or ill, national politician for two reasons.

One the face of it, his admission to be willing to see less economic growth for better quality of life in Britain would be suicidal for any mainstream politician. Economic growth is the engine of progress. It pays for hospitals, schools and public services. To understand how dominant this narrative actually is look no further than David Cameron's promise to develop a 'well being and happiness strategy' of his government to replace the common indicators of national wealth which went ... exactly nowhere. Once in office, it's the treasury figures that drive everything. They determine whether departments have a bit less or more to spend, whether another school can be built or another foundation stone for a hospital can be laid.

So, why was Farage's comment not ridiculed? One may argue that he stands outside the mainstream debate anyway. But that is just lazy thinking. More likely, the mainstream was missing something out here that Farage had spotted and I believe it is the confluence of two issues. The first is the ineffectiveness of growth to translate into increases in real income for the working classes up and down the country. Britain was, up to the Brexit vote, strictly speaking, booming. Economically it was one of the most successful countries in the OECD. Yet, none of that growth meant any better life for the people in Yorkshire, Manchester or Birmingham who were on rock bottom agency pay. If the link between growth and wages had been severed however, there was little reason to pursue growth for the sake of it.

The periphery of economic growth
The second issue was linked to globalisation. The growth argument is tightly interwoven with the globalisation narrative. In an increasingly connected world, we will become ever more mobile with our portable skills moving from one employer to another when it suits us. We, the workers, in this picture, are just as rootless and transferable as the companies are. But the fact of the matter is that this only applies to a tiny minority of young professionals (mostly male) before there establish families. People do not move around like things, they cannot be put on a shipping container and send off to far away shores if things go belly up in one place. It's this discrepancy between the mobility of capital (and companies) and people's rootedness in places that creates the friction in the globalisation gearbox and Farage put his finger on it long before anybody else did.

Where the growth narrative and the globalisation narrative meets it creates some incredible wealth, with a singular dynamic (metropolitan) elite of professionals benefiting from it. Where they jar, they create some real misery like the forgotten towns and cities on the periphery. Farage's comment, as always, was prescient, rather than backward looking, as his detractors have it. He spotted the losers in the globalisation race, for whom growth does not mean better living standards. Once the link was broken, the Kaiser was naked. Why pursue growth for the sake of it?

And this is the location where some counter-narratives are meeting and producing some very odd alliances indeed. One is, rooted in the anti-growth debate of the 1970s, articulated by the left-leaning anti-globalisation campaigners who warn against the economic and ecological consequences of ever more growth. The second is that which refuses to accept the inevitability (or indeed desirability) of progress. Both counter-narratives together, go to the very heart of the capitalist system and it is ironic (London) and tragic (Stoke-on-Trent) at the same time that Britain is the battle ground on which this argument is to be had.

Thursday, 21 July 2016

Trump's 'facts and lies'

As the Republican Convention in Cleveland is getting under way, there is a lot of soul searching in the US. Some of the big beasts in the Republican Party have decided to stay away, and even some of those who attend the Convention have decided to give only half hearted support to the man who got more votes in the primaries than any candidate in the history of the Republican Party.

America and the Republican Party appear to be deeply divided about the virtue and credentials of the man who calls others 'liars', 'rapists' and 'criminals'. On one side, there are those who think Trump speaks truth to power (or 'the establishment') whilst on the other side, there are those who believe that he has irreparably damaged American democracy. So who is right? What's the problem if Trump uses harsh language, or is a loudmouth? Isn't that just part and parcel of the rough and tumble of free speech? Here is why I believe that Trump is bad for democracy.

The public debate in the US has always been throughout history a fairly robust affair. One reason is the first amendment which guarantees free speech. The right to say what you think has often been understood as a justification to say anything you want. So why should politicians not exploit the space free speech provides to the fullest extent?

There are two ways to say that you disagree with somebody. You can either say that you believe that the other person got their facts wrong, and thus appeal to an independent measure of truth, objectively (or more correctly: inter-subjectively) established. Or you can say that you think that the other person is lying. The latter is not a statement about the truth or falsehood of what somebody says. It is a statement about the motivation that person allegedly has when they say what they say. Motivations are however not subject to independent verification. Statements about what motivated somebody to say something can not be validated by an appeal to some objective (or inter-subjective) measure.

Donald Trump - in conversational mood.

That makes statements about other people's motives statements of belief, rather than statements of facts. And questioning the moral commitment of your opponent strikes at the heart of their legitimacy to contribute to the public debate. Suspecting somebody to be morally corrupt disputes their right to be heard. It resembles the claim that somebody is 'un-American' which tore apart the democratic fabric of the US in the 1950s. And remember, questioning the motivation of somebody is not something that can be verified or refuted by a fact. It pits one statement of belief against another.

Thus, saying that somebody is lying, i.e. willingly, out of moral degeneracy, puts the debate beyond public verification and therefore beyond forms of public reason. No fact checking will ever formally establish whether Hilary Clinton is a wicked person or not. Nor can any fact checking ever establish whether or not she was animated by evil motives when she was not as forthcoming about her use of the private email server as she should be. Contrast this with the argument that Clinton may or may not have known that the use of her private email server was improper. That is something that an investigation may establish as a fact, if evidence exists.

The difference between the two types of arguments above is that the latter is one that can be decided within the realm of facts, and is therefore located within politics, whereas the former is firmly anchored in questions about morality, something that is impervious to political argument.

Trump has made it clear that he wants to engage in shadow boxing in the realm of moral rectitude, clearly in the knowledge that questions about politicians' motives cannot be decided either way. He hopes that if he only repeats claims about the alleged lack of moral rectitude of his opponents often enough, something will stick. His strategy is to drag political debate where it cannot be fact checked. But a democracy that leaves behind its measures of what constitutes truth and reality is lost at the sea of moral claims. It's is where meaningful debate ceases and public reason as an arbiter in political discussion dies.

Sunday, 17 July 2016

Why more taxes on the rich may be a dead end

The debate about inequality has reignited the discussion on taxes. The picture emerging from any analysis of tax revenues is a stark one indeed. Essentially there are two disparities that stand out. The first is the widening gap between the taxes paid by small and medium sized enterprises and those paid by multi-national companies. Figures for the US illustrate this point well. The effective tax rate multinational companies in the US paid on their profits has been 24 percent in 2015 (The Economist, 9th July 2016), yet the official tax rate stands at 39 percent. This means that small enterprises which do not have the advantages of being able to move their profits into low tax havens or to use tax loopholes to shield their profits from tax are effectively paying a higher rate on their profits than the largest top 50 firms.

The second area which contributes to a sense of injustice in tax matters is personal income tax. This debate has been galvanised by the revelations about the superrich hiding their assets in tax havens through tax avoidance or tax evasion, depriving governments of legitimate tax income. So far, the UK government has tried to tackle the disparities in the tax system by taking people at the bottom of the income scale out of tax altogether, raising the income tax allowance.

Whilst reducing the tax burden of the poorest is welcome there are signs that the increasing income and wealth gap creates some limits on what can be achieved through tax policy on its own. The danger is that lowering the reliance of the government's income tax base on tax payers at the bottom of the scale whilst increasing its reliance on top tax payers creates unacceptable volatility in tax revenues in the long term. Take the example of California. On paper, income tax policy in the sunshine state is one of the most radical in the West. The rate of income tax stands at 13.5 percent (on top of federal levy of 39.6 percent). That makes income tax levels in California one of the highest in the Western world, something to be celebrated in the books of campaigners for equality.

However, it also means that about 45 percent of all income tax revenues are now coming from a very small number of superrich people who happen to have their tax base in California. The top 1 percent of tax payers pay almost half of all income tax in the state. Since other taxes are subject to strict regulation and cannot be changed easily, California's lawmakers have little room for manoeuvre when things go belly up. If only a few of the top 1 percent of tax payers decide to leave the state, this creates a considerable gap in the government's coffers rippling through to education and welfare policies with a vengeance.

High dependence levels on very few tax payers, whilst welcome in terms of creating more equitable levels of income, thus looks like a poor mechanism to create stable and effective government revenue streams, which in turn are essential for public services and infrastructure investment. Narrowing the tax base may therefore increase volatility at the expense of tax revenue certainty which is so important for long term strategies to tackle inequality. It seems the debate on how to best address inequality needs a few more ideas.

Tuesday, 5 July 2016

The problem with experts

The referendum on Britain's membership of the European Union is sometimes perceived as a revolt against experts and the political elite. In an interview, one of the lead campaigners for Brexit, Michael Gove, dismissed economists by pointing out they did not predict the economic crisis of 2008 and hence had a bad record of success.

Whilst some of the unease ordinary people have with experts overlaps with their disquiet about political classes, the problem with experts has additional dimensions that are mainly a product of our dependence on them. There is hardly any area of life where we do not gratefully and dutifully submit to the recommendations of experts, be it medicine or plumbing. Yet, at the same time, we also resent and relentlessly question the basis of their authority.

At the core of the argument against experts stands doubt about the source of their knowledge, expertise. In a world where everything is available at a click of a button on Wikipedia, expertise is seen as little more than accumulated and stored wisdom about how to do something, which is practical knowledge. What is unacknowledged in this view of the sources of authority is the fact that practical knowledge sits on a mountain of theoretical knowledge, which developed through formulating and testing models of how best to do something. This theoretical foundation is however constantly shifting ground, which in turn requires careful assessment and recalibration of opinions within a community of practitioners, be they plumbers or dentists. It is this dynamic nature of expertise that people feel uncomfortable with, as opposed the desired stability and certainty.

In a sense, the refusal to recognise the dynamic nature of expertise is a reflection of our impatience with knowledge production. As the referendum demonstrated, people wanted to know 'the facts' in a world where facts are socially constructed and constantly challenged. The hope that experts could pronounce authoritatively on the legitimacy or truth of those 'facts' will always remain just that. It mirrors the disenchantment of many people with political strife: the demand that politicians just find common ground and agree on something that can then be implemented. That view neglects the critical role of strife and argument in knowledge production as well as politics. To argue about something is to strengthen the foundation of whatever might ultimately emerge as the best way forward.

Saturday, 25 June 2016

The revolt of the dispossessed

The vote in favour of Brexit appears to have surprised everyone, not least the Brexiteers themselves. As politicians across the political spectrum in Britain and Europe scramble for answers to the question 'what next', the reactions from those in the Brexit camp and those in favour of staying in the EU could not have been more different. After a strangely sombre Boris Johnson addressed the media yesterday, trying to look presidential and like a PM in waiting, the Brexiteers have now gone into hiding. As the BBC correspondent Norman Smith noted, not one of them could be reached for comment at this critical moment and as the economic warnings of Remain campaigners come true. The reason is clear. Neither Johnson nor Gove ever had a plan of what to do next. Their campaign was predicated on questionable assumptions and base prejudices against immigrants. Now, that clear policies and a coherent strategy is required, they are nowhere to be seen.

Gurnos Estate in Merthyr Tydfil with a life expectancy of 58.8 years 

As for the other side, consider Nicola Sturgeon's response to the recent vote. Her cabinet made it clear that they will explore how to keep Scotland in the EU, something that conveniently overlaps with her overriding policy goal to take Scotland out of the UK. It helps that she has also quickly reassured Europeans who live in Scotland that they are welcome there. It is this inclusive political tone by Sturgeon that is such a far cry from anything Johnson can ever muster. 

As for the actual culprit in the room, the vote has made one thing crystal clear to anybody who wants to see it: Jeremy Corbyn has not got a chance in hell to ever make it to Downing Street. Whilst his anti-capitalist rants carry some favour with a small vocal left wing group in London, it cuts no ice in the traditional Labour heartlands which reel from cuts to local services and feel left behind. In that sense, the revolt of the poor in Merthyr Tydfil and Yorkshire was just as much a revolt against the Westminster elite as one against a Labour Party that had cocooned itself in anti-capitalist rhetoric and shadow boxing with their Blairite wing. If Britain is heading for a snap election in about a year's time, the Labour Party will likely to disappear from large parts of the country as an electoral force. 

Saturday, 11 June 2016

Why 'Leave' are winning

If you had asked me 6 months ago what the outcome of the EU referendum would be, I would have ventured an unambiguous answer: 'Britain will vote to remain in the European Union'. How wrong this answer would look today. The latest poll puts the Leave camp 10 points ahead of Remain.

Whether or not you believe the polls, everyone agrees on one thing: it's going to be close. Very close indeed. And it shouldn't be. So how did we get here?

There is now a consensus that the gravest threat to a Remain vote is the rapid decline of Labour in its heartlands. The Guardian and the BBC recently travelled into these areas where deprivation, long term unemployment and general hopelessness have dominated the political landscape since the 1980s. South Wales is a good example. Asked why they support Leave, the answers come thick and fast. And they are all of one kind: immigration. Whilst there used to be hesitation to discuss this issue, covered by the thin veil of British politeness, now people openly voice xenophobic and at times even racist prejudices.

Their opinions are peppered with flagrant falsehoods such as: 'immigrants get a grand in cash when they get here' or 'they get free housing', or 'most of them scrounge on benefits'. But the tenor is remarkably similar. The message is simple, straightforward and repeated up and down the country. And it is one that comes from one source alone: UKIP.

Neil Hamilton, of 'cash for question' fame, now sits in the Welsh Assembly for UKIP
Foto: WENN

Although the Labour Party does not want to hear it, its voters are abandoning Labour in droves. More and more Labour supporters have moved to the far right, taking the electoral fortunes of their party with them into an abyss of xenophobia and narrow-mindedness.

Why did this happen? And why now? There are essentially two reasons for this. The first is that UKIP has gone unchallenged for decades when it peddled its falsehoods and distortions about foreigners and migrants in the UK. The Conservatives felt largely insulated from the UKIP threat due to the first-past-the-post electoral system. And the Labour Party thought the UKIP message to run counter to the ideals of solidarity and mutual support that defined the party in the post-war period. So no one thought it worthwhile spending political capital on challenging the UKIP narrative (with the valiant exception of Nick Clegg, anyone remember him?).

The referendum changed this drastically. It gave Farage and his minions a national stage to articulate publicly the simple message that had already sunk into the nation's (sub)consciousness: It's the migrants' fault.

The second reason is of tactical nature. The Leave campaign settled early on a simple message and managed to define the terms of the debate: control, sovereignty, immigration. It shaped the content and nature of the terms by positively associating false choices like 'control' versus 'Brussels' with democracy. There are too many ironies in this to list them all here, ranging from the claim that the British political system is a beacon of democracy (House of Lords anyone?) to ignoring role the EU has played in democratising large swathe of the post-communist and post-Franco landscape since 1975.

Defining the terms of engagement is the key ingredient for political success and the Leave campaign understood this well. Once the campaign started Brexiters could rely on a solid foundation of animosity towards others, xenophobia and outright racism that was put in place long time ago by UKIP. All they had to do is to bring in their harvest of division and resentment.