Home Economics Today's Crazed Economic Lunacy Comes From The TUC's Frances O'Grady

Today’s Crazed Economic Lunacy Comes From The TUC’s Frances O’Grady

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This economics thing, people have been trying to figure it out for quite a long time now. Diocletian, for example, tried to fix the prices of everything, from bread to labour, and thereby entirely screwed the economy of the Roman Empire. Many people have repeated that mistake over the intervening century and all too many think we should do that again. That it’ll lead to the same outcome, screwing the economy, doesn’t seem to matter to those proposing it.

At which point a little clue as to what has been learnt over these past few millennia. Look upon these works of intellectual effort ye mighty and tremble:

Supply and demand

This is a theory because of course it is. We can even disprove it in certain very limited circumstances. So limited that we’ve a special name for those items which don’t work like this – Giffen Goods. We have even positively identified two goods which are in fact those Giffens, wheat noodles in North China and rice in South China. It’s a reasonable supposition that it applies to the basic caloric stodge in any habitual diet. Potatoes in agrarian Ireland, tortillas in central America and so on and on.

One thing we know is over in that group of the 99% of the world that does work like that pretty picture is human labour. If it becomes more expensive people will ask for less of it. If there’s more of it about then the falling price leads to more of it being employed. Sure, it’s only a theory but so’s gravity and however much we wish it weren’t so boobs still droop.

At which point we get this proposal from Frances O’Grady of the Trades Union Congress:

As firms slash entry level jobs by a quarter , job guarantee schemes – “proper ones, not Mickey Mouse schemes” – particularly for young people, will have to be put in place. It should mean, she adds, an increase in the minimum wage to £10 an hour, plus an end to zero-hours contracts and “false” self-employment where workers have no rights.

Those rights that come with employment contracts cost – therefore they reduce the number of jobs. Hey, we might think that lack worthwhile – on either side actually – but it is a cost that leads to less employment. Zero-hours contracts reduce the cost of staffing for peak periods and tehreby increase the number of people employed during them. And a £10 minimum wage is an increase in the cost of employing people.

All those three costs weight more heavily upon entry level jobs for of course they do. That’s the end of the labour market where they actually bite in the first place.

So, the complaint is that entry level jobs are in real short supply right now. Our solution is going to be to raise the cost of employing someone in an entry level job. This is going to be about as successful as going braless to beat boob droop, isn’t it?

We’d be better governed if those who would govern were aware of what is and what is not economic lunacy.

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