Deeper thinking on the implications of immigration

You should be beginning to understand that, when reading an article, you may have to compensate for the bias of the writer. For us, the best writers are those that have a clear goal, that allows us to compensate for the bias (think supporters of Hinkley C or Heathrow runway), or those who just want to see the implications of something so they can allocate savings ("investments") without losing money - these are the purest commentators, quite impartial(ish) and often very blunt. Albert Edwards is the latter - anything written by him will cut through the noise - but he is what is called a perma-bear, i.e. he does think we face major economic crisis/crises. What you have to decide is whether he is right or not. Follow the links for further deeper insights:


 Societe General’s perma-bear Albert Edwards is a widely read bank analyst because he looks at the world with an apparent mathematical mind, searching for truth and not considering politically restrictive niceties when providing economic analysis. In trading and investing all that matters is the accuracy of an underlying thesis, dare we call this “truth.”
As Edwards looks at what is obviously a migrant crisis spreading through Europe — with potential to alter the political foundation of the region — he apparently doesn’t run scared from labels such as “racist” or “xenophobe” that can be thrown just for considering logical economics. It is in conducting the if-then math that Edwards notes that migrants entering Europe face “disgusting” job prospects and this is creating a “frankly dangerous” situation.
At the core of Edwards’ thesis is nothing about skin color or religion – it is a thesis based on educational accomplishment, or the lack thereof.

Albert Edwards = QE is not a panacea

In his recently weekly strategy noted titled “Disgraceful, disgusting and dangerous,” Edwards swipes at two targets.


The market structure clueless European Central Bank, a frequent target, is again in his sights. It seems he can’t write a report without whacking them, even when the primary topic doesn’t neatly tie in.


Recent “anemic” economic data out of the US and Europe “confirms what we already knew,” namely that “QE is not the panacea.”


“Some 18 months and €1 trillion later, the eurozone remains in the doldrums,” he notes, as middle-class wages, which drive real economic growth, have generally been slipping around the world. “More concerning perhaps is that the ‘potential’ GDP growth rate has slumped over the past decade or so.”


It is here Edwards makes the connection with immigration, and he starts by recognizing how government economic statistics benefit from it.

Albert Edwards

Albert Edwards – Even a conservative government likes immigration because it boosts economic statistics

From the point of the financial crisis, Germany has significantly outperformed under the Eurozone banner while France and Italy are “standout… underperformers.”


With an eye towards improving economic statistics, the math of impression is considered. The formula for measuring GDP includes a component for calculating the number of people in the workforce. When a workforce is growing, it improves economic statistics. From one perspective, government economists view immigration positively.


Edwards points to a “conservative” government that liked immigration:

Since GDP growth is, by identity, made up of productivity growth (GDP/head) and growth in the working population (headcount), some policymakers in developed countries have grabbed the opportunities that circumstance has presented them to boost their workforce and so potentially GDP growth. The UK did this under Tony Blair’s New Labour Government with a virtual open door policy to immigration, and more recently Germany has welcomed more than 1 million refugees, with more to follow as the refugee crisis continues.

Albert Edwards - GDP formula does not distinguish the output value of each new worker

But what the formula doesn’t consider is the real economic output of each immigrant is, on average, based on how well educated they are.  Edwards points to hard statistics that show “children of migrants are more likely to be unskilled workers and able to obtain employment without having a degree.”


Edwards then looks through Europe and notes that most countries are allowing immigrants to enter the country without discernment. He then considers the UK, which has a different approach that resulted in a higher level of education for its immigrants:

The UK’s excellent record of migrants thriving in higher education also spills across to employment opportunities, with the children of immigrants enjoying a significantly lower unemployment rate (see left-hand chart above). By contrast in the eurozone there is a disturbing correlation between the glass ceiling for educational attainment for children of migrants and their job opportunities. This is a massive problem for as my mum always used to say, the devil makes work for idle hands. This divergence in outcomes can only exacerbate the alienation of an ill-educated and unemployed migrant youth population within the eurozone. Actually let’s not beat about the bush: the educational and job prospects for the children of migrants in many eurozone countries are disgusting, disgraceful, and frankly dangerous.  (Emphasis from Edwards).

Albert Edwards – Looking at logical economics is not a censored activity, yet...

Put all the simple “islamophobic” labels aside, and consider mathematical truth.
In a developed world economy, a well-educated work force is required. When immigrants from a different land and culture enter the developed world with no education, no skills, their job prospects are bleak. This is true of anyone regardless of skin color, religion or native tongue.


It is highly likely that uneducated immigrants are going to find a ticket to poverty and with their “idle hands” exasperate a populist problem like gasoline being thrown onto a bonfire.
That’s logical if-then analysis from a market point of view. Why don’t the elite rulers recognize truth? Is it too complex for them to understand?


Edwards didn’t go this far, but he did note that significant policy decisions need to be made to stem the tide. He notes that, while educated migrants thrive in London, regardless of race or religion it is the uneducated who are “losers”:

So forget about the shocking US income inequality. The failure of early school leavers in the UK to get a job ranks among one of the most disturbing social trends I have ever seen in a developed country and helps to explain why the white working-class workers voted en bloc for Brexit.

For professional investors, traders and economists, using core market logic that doesn’t censor statistical truth is key for a society to manage its problems. Albert Edwards gets it. If the elite rulers don’t get it, this won’t end pretty.

The Deloitte Commentary on Productivity

Some of you have said you aren't sure how to use this sort of material in an essay. Actually, some key points stand out, so I am putting the commentary here, and highlighting the elements you should be able to use in an essay involving the UK's competitiveness, export prospects, import-substitution - etc. etc.


See me if it needs further interpretation:


A personal view from Ian Stewart, Deloitte's Chief Economist in the UK. Subscribe to & view previous editions at: http://blogs.deloitte.co.uk/mondaybriefing/

* One of the biggest headaches for Britain's new government is raising productivity. Productivity, or the efficiency of production, is the main driver of human welfare. Raising it is the Holy Grail of economic policy. As Paul Krugman, the economist and Nobel laureate put it, "Productivity isn't everything but in the long run it is almost everything".

* UK's productivity performance since the Financial Crisis has been dismal. Unlike previous downturns there has been no bounce in productivity since the recession. Among the major industrialised nations only Italy has done worse than the UK in raising productivity since 2007. 




 * If the UK's pre-2007 trend had continued, productivity today would be more than 16% higher. Wages and the standard of living would be significantly higher than today.

* The gap looks even worse measured in terms of absolute levels of productivity. Output per hour in the UK is 25% lower than in Germany, the US and France. 




 * Something seems to have gone badly wrong. As with so many other economic issues, there is no agreement on what. But there are plenty of theories. 

* The most comforting is that the UK's productivity crisis is a statistical illusion. Productivity is calculated by divided output by hours worked. If output is underestimated so is productivity. GDP numbers are prone to revision, often years after the event. If GDP gets revised up – and it often does – the UK's productivity performance will improve. Another angle on this theme is that technology is raising welfare in ways that are not being picked up in conventional measures of economic activity – so, for instance, people getting free music and videos via You Tube or using Google Maps. It may be that mismeasurement is part of the story, but I doubt it explains much of the productivity gap.

* The gloomiest explanation for weak productivity is that today's technologies are doing less to enhance efficiency than those of the past. Its proponents argue that we have banked the big inventions – everything from antibiotics, the internal combustion engine and electricity – and we are in an era of less revolutionary technological advance.

* The most influential advocate of this view is the US economist, Robert Gordon. Gordon invites us to choose between one of today's ubiquitous technologies – the iPhone – and one of the nineteenth century's great inventions, the flushing toilet. His point is that today's innovations are not changing lives in the profound way that the technologies of the nineteenth and twentieth century did.

* But this doesn't work as an explanation for the UK's recent performance. Why would UK productivity have stood still when other countries have seen gains? And why, suddenly, in 2007, would technology cease driving productivity after years of good growth?

* A more plausible theory is that the shrinkage and disruption in the financial sector has taken a chunk out of UK productivity growth. Tougher regulation and an end to the pre-crisis financial boom which artificially raised financial sector productivity have taken a toll. The Economist magazine estimates that productivity in finance and insurance is 10% lower than in 2009.

* There are two other suspects.

* The first is a shortfall in investment. The risks attached to investment have risen since the crisis and the opportunities have dwindled. Companies have tended to hang on to cash and squeezed investment. The deterioration in the UK's stock of assets – from machinery and buildings to highly trained workers and research and development – has made employees less productive.

* The second suspect is, strangely, too many jobs. On this argument the financial crisis has squeezed pay and made the labour market more flexible (think, for instance, of the growth of part time work and zero hours contracts). Jobs are preserved and unemployment stays low. But, because labour is cheap, flexible and plentiful, it removes an incentive for employers to undertake productivity-enhancing investments. The "productivity crisis" and Britain's success in preserving and growing employment are two sides of the same coin.

* The exact reason for the standstill in UK productivity may never be known. That does not mean the UK is stuck with it forever. There are proven ways to raise productivity - improving regulation and state bureaucracy; raising the UK's mediocre record on secondary education and investing in infrastructure. Mrs Thatcher economic reforms of the 1980s are widely credited with having boosted productivity. Between 1991 and 2007 UK productivity rose by 41%, faster than in any other major industrialised nation.

* To paraphrase Marx, the challenge is not to interpret productivity growth, but to raise it.

The Myth of Progress - stretch and challenge evaluation

For those of you inclined to step up to the challenge of reaching the higher levels of Economics, here is an article that challenges the assumption that growth and progress are the norm, and will continue ad infinitum. As you should be aware now, you can have an opinion on whether this is correct or not, but if you do not examine both sides in an essay, but merely state one side of the argument, you are not hitting higher level analysis:


“In the sphere of scientific advance it is undeniable that there is progress:  that is to say, each generation builds on the knowledge acquired by its predecessor, and one by one the secrets of the universe are unlocked and exploited.  Of course, there is no reason why this process should go on forever, and it is quite conceivable that one day educational institutions will decline to such a point that the accumulated results of scientific investigation will no longer be passed on…It is a matter of wisdom, not expertise, of an imaginative grasp of the human condition rather than the search for theories with which to explain it.”


–Roger Scruton, The Uses of Pessimism and the Danger of False Hope

The Myth of Progress

Optimism and hope for the future are not uncommon traits in modern America; a recent study has shown that Millennials, for instance, are more optimistic about the future than their older counterparts by the widest margin since surveys on the matter have begun.  This is hardly surprising if one considers that members of this generation have witnessed nothing but material progress in their relatively short lives.  The US economy, albeit with disappointing recent growth, has remained the envy of the world, and personal wealth has expanded in ways not easily quantified; for example, with just one handheld device, we can do immeasurably more with measurably less.


It is natural, of course, for people to assume that what has happened most recently will continue unabated.  It is difficult, in other words, for us to imagine a future in which the pace of progress stalls, and the material benefits of technological advances diminish.  But this unshakable faith in the future is not a capitalist ideal, but a Marxist one.  After all, since Marx did not believe in human nature, his philosophy assumed a linear progression of history in which human beings would be shaped by the material advances around them.


However, as Mr. Scruton notes above, human nature is very real; because we are fallible by nature, our lives and the world in which we live them must allow for periods of regress as well as progress.  It is, unfortunately, easier for us to destroy than it is for us to create.  There are countless examples throughout history of major declines in living standards.  In the immediate period following the fall of Rome, roads and cities fell into disrepair, and the bodies of the deceased were laid to rest in much shallower graves. Chinese civilization is so old, in fact, that it has witnessed multiple periods of major decline.


To those who say these are mere examples from ancient history, I would point to the century of relative decline for Argentines, once one of the world’s most prosperous peoples. Circa 1900, it was in the midst of the fastest recorded growth on record, and ranked higher than such nations as Germany and France.  Despite being spared the destruction those two nations experienced in two devastating world wars, Argentina is now poor because it squandered its prosperity through a combination of political corruption and policy error. 
 Relative to its peers, it has not recovered:

Consider, also, Venezuela.  After almost two decades of Chavism, – nationalization of industry, confiscation of assets, etc., – capital and intellectuals have fled Venezuela, leaving the populace desperate as their grocery stores are empty and their hospitals are without medicine.  This despite the fact that Venezuela has the world largest proven oil reserves, and has benefited from hundreds of billions of dollars in oil revenue over the last several decades.  Now, GDP per capita is dramatically less than it was 40 years ago:

It is a mistake, then, to assume that material progress is a given when in reality it has been a feature mostly of Western life.  This Gizmodo graphic of all the devices connected to the internet is just one small example of how much of the world’s wealth is concentrated in Western-leaning areas of the world:

In order to preserve our material well-being, it is imperative, therefore, that we understand the nature of progress itself.  Progress is not an inevitability toward which the whole of mankind is advancing, as Marx held.  Rather, it is the product of “the city,” the gathering of individuals from different tribes, religions, and cultures who have set aside those ‘identities of division’, if you will, in hopes of advancing their own material well-being.


As Roger Scruton puts it:


“The city is a community of neighbors who do not necessarily  know each other, but whose obligations come from settlement.  A neighbor, according to the Anglo-Saxon etymology, is one who ‘builds nearby’.  Citizens have settled side by side, and are bound by the many tacit and explicit agreements that they make with each other every day.  The city is the symbol and realization of the new form of reasonableness that emerges when the way of the tribe is left behind.”


Conversely, economic regression occurs when we revert back to the tribalism Scruton describes.  This tribalism is a mindset of us against them that leads to isolation both intellectually and economically.  It is no surprise, then, that the most successful economies are those who open themselves up to the community of ideas, welcoming thinkers and entrepreneurs into their communities rather than isolating themselves out of fear of the different.  The Venezuelas and Argentinas of the world have squandered their material and resource wealth by inadvertently or overtly driving off foreigners and their capital, those who  may be best suited to exploiting that wealth.  They have closed themselves off to foreign trade on the mistaken assumption that the division of labor among nations is a zero-sum game.


The point, of course, is to remind ourselves that progress is not inevitable, and we are fully capable of squandering the advances of our predecessors.  While history shows that we are resilient creatures and have overcome every obstacle from pandemics to world wars, it also reveals that a great number of our setbacks have been self-inflicted.  Therefore, when pondering the future and the policy choices that will shape it, it is necessary for us to be aware not just of what we might gain, but to consider carefully what we stand to lose.

We Need Manufacturing:

Ha-Joon Chang is a Cambridge economist, and a writer for The Guardian. His articles could almost be written with an A level paper in mind - have a look at this one on the importance of manufacturing; it cuts to the core of the problems the UK faces, and many elements of this could be lifted and dropped into an essay (or the conclusion) to give it real oomph. More articles can be found here:

Making things matters: That's What Britain Forgot

The Guardian, May 2016

It’s being blamed on the Brexit jitters. But the weakness in the UK economythat the latest figures reveal is actually a symptom of a much deeper malaise. Britain has never properly recovered from the 2008 financial crisis. At the end of 2015, inflation-adjusted income per capita in the UK was only 0.2% higher than its 2007 peak. This translates into an annual growth rate of 0.025% per year. How pathetic this performance is can be put into perspective by recalling that Japan’s per capita income during its so-called “lost two decades” between 1990 and 2010 grew at 1% a year.

At the root of this inability to stage a real recovery is the serious imbalance that has developed in the past few decades – namely, the over-development of the UK financial sector and the atrophy of manufacturing. Right after the 2008 financial crisis there was a widespread recognition that the ballooning financial sector needed to be reined in. Even George Osborne talked excitedly for a while about the “march of the makers”. That march never materialised, however, and manufacturing’s share of GDP has stagnated at around 10%.

This is remarkable, given that the value of sterling has fallen by around 30% since the crisis. In any other country a currency devaluation of this magnitude would have generated an export boom in manufactured goods, leading to an expansion of the sector.

Unfortunately manufacturing had been so weakened since the 1980s that it didn’t have a hope of staging any such revival. Even with a massive devaluation, the UK’s trade balance in manufacturing goods (that is, manufacturing exports minus imports) as a proportion of GDP has hardly budged. The weakness of manufacturing is the main reason for the UK’s ever-growing deficit, which stood at 5.2% of GDP in 2015.

UK trade deficit with EU hits new record

 

Read more

Some play down the concerns: the UK, we hear, is still the seventh or eighth largest manufacturing nation in the world – after the US, China, Japan, Germany, South Korea, France and Italy. But it only gets this ranking because it has a large population. In terms of per capita output, it ranks somewhere between 20th and 25th. In other words, saying that we need not worry about the UK’s manufacturing sector because it is still one of the largest is like saying that a poor family with lots of its members working at low wages need not worry about money because their total income is bigger than that of another family with fewer, high-earning members.

Another argument is that we now live in a post-industrial knowledge economy, in which “making things” no longer matters. The proponents of this argument wheel out Switzerland, which has more than twice the per capita income of the UK despite – or rather because of – its reliance on finance and tourism.

However Switzerland is actually the most industrialised country in the world, measured by manufacturing output per head. In 2013 that manufacturing output was nearly twice the US’s and nearly three times the UK’s. The discourse of post-industrial knowledge economy fundamentally misunderstands the role of manufacturing in economic prosperity.

First of all, despite the relative increase in the importance of services, the manufacturing sector is still – and will always be – the main source of productivity growth and economic prosperity. It is a sector that is most open to the use of machines and chemical processes, which raises productivity. It is also where most research and development, which generates new technologies, is done.

Moreover, it is a sector that produces inputs that raise productivity in other sectors. For example, the recent rise in productivity in the service sector has happened mainly because it is using more advanced inputs produced in the manufacturing sector – computers, fibre-optic cables, routers, GPS machines, more fuel-efficient cars, mechanised warehouses and so on.

George Osborne talked excitedly about the ‘march of the makers’. That march did not materialise

Second, many knowledge-intensive services, such as research, engineering and design, that are supposed to be new have always been there. Most of them used to be conducted by manufacturing firms themselves and have become more “visible” recently largely because they have been “spun off” or “outsourced”. We should not confuse the changes in firms’ organisation with the changes in the nature of economic activities.

All of those supposedly knowledge-intensive services sell mostly to manufacturing firms, so their success depends on manufacturing success. It is not because the Americans invented superior financial techniques that the world’s financial centre moved from London to New York in the mid-20th century. It is because the US became the leading industrial nation.

The weakness of manufacturing is at the heart of the UK’s economic problems. Reversing three and a half decades of neglect will not be easy but, unless the country provides its industrial sector with more capital, stronger public support for R&D and better-trained workers, it will not be able to build the balanced and sustainable economy that it so desperately needs.

Youth Unemployment Across Europe

Germany the clear winner in the struggle to create jobs for the young.

Saturday 10 September 2016 16.00 BST

The eurozone crisis has revealed economic faultlines across the bloc, as it has become clear that some countries have fared better than others in the straitjacket of euro membership.

Those differences are laid bare in unemployment figures that show the wildly differing prospects for 15- to 24-year-olds at the heart of the single currency union.

Across the eurozone, youth unemployment is running at just over 21%. However, Italy’s Calabria region has a rate of 65%, while Upper Bavaria in Germany is just 3.4%. One union, two different regions – and a chasm laid bare.

Calabria

The construction of the port of Gioia Tauro was supposed to mark a new beginning for Calabria. If things had gone as builders envisioned 20 years ago, when the port came to life following private and public investment of hundreds of millions of euros, this impoverished region in southern Italy would have flourished under a new era of industrialisation, thanks to the massive new infrastructure project.

But things did not work out as planned. Today, dozens of enormous abandoned warehouses line the shores of Gioia Tauro, a port that is barely operating at sustainable levels and that is known as the playground of the ’Ndrangheta, the Calabrian mafia that has transformed the town into the major entry point for cocaine into Europe from South America. Far from being the home to booming new companies, the neighbouring countryside is littered with half-built cement houses among the olive trees and orange groves, a constant reminder of the region’s essential lawlessness.

In nearby Polistena, a parish priest known as a fierce critic of organised crime, Don Pino Demasi, bemoans the statistic that makes Calabria the unenviable standout of all of Europe: it has the highest rate of youth unemployment (65%) on the entire continent, with nearly seven in 10 young people here out of work. He puts most of the blame on the state, which he says has abandoned the south to die.

The ’Ndrangheta, Demasi says, “has become almost an employment agency, where the right to work is conceded as a favour. “The young person in the south has three possibilities faced with this widespread illegality: one is to adapt to the system, the second is to run away, the third is to stay and to be a protagonist of change,” he says.

Antonio Nicaso, an expert on the ’Ndrangheta, says young people are not necessarily drawn to the criminal underworld to get rich, but they want a salary, and can make an income by serving as a “soldier” for the organisation. This involves collecting protection money from small businesses – known in italian as il pizzo – to running fake companies that launder the ’Ndrangheta’s ill-gotten funds.

Other options could include working in a family business or relying on political favours for opportunities.

“If you don’t want to join the ’Ndrangheta, you have to rely on political patronage for other work,” says Nicaso.

The overall employment rate for all adults in Calabria is just 39%, according to official figures, far lower than the national average of 56%. During the financial crisis, from 2008 to 2014, real GDP in Calabria declined by 13% and the GDP per capita in the region is much lower than the average in Italy (€16,177 vs € 26,548).

It is no wonder, then, that Calabria has lost about 3.7%of its population as a result of mass migration out of the region. Typically, Calabrians who leave the region are young people who resettle in northern and central Italy.

“This means that Calabria tends to lose qualified youth who could contribute to the development of the region and instead decide to leave because they are not able to find suitable jobs,” says Maria De Paola, a professor at the University of Calabria.

The causes of high unemployment are plentiful: terrible infrastructure – it takes about six hours to get from Gioia Tauro to Rome by train, because there are no high-speed trains south of Salerno – low rates of innovation and entrepreneurship, political corruption and criminality.

John Dickie, an author and historian, says the once promising port now looks like a “cathedral in the desert. It hasn’t created the kinds of jobs that the state envisioned and so state expenditures were instead scattered very thinly in the form of welfare and other payments that are frequently diverted by patronage politics and sometimes organised crime.”

This week, a former local politician and union leaders said a “mockery” was being made of Gioia Tauro after it emerged that Salerno, a competing port city in neighbouring Campania, would be used as the point of departure for new trains made in Calabria and bound for Peru.

Anti-mafia advocates, like Demasi, and an organisation called Libera have sought to create opportunities amid the chaos and foster the creation of co-operative businesses using assets that have been seized by the mafia, sometimes controversially. The co-ops exist to take a stand against organised crime and encourage the development of socially conscious and environmentally friendly non-profit businesses.

Bavaria

Stefan Wimmer and Ralf Guttermeyer have wanted to be firemen ever since they can remember. Both aged 17, they are now in the rare position of making their childhood dream a career: seven weeks ago, they became two of four apprentices at Munich airport’s firefighting services.

In Upper Bavaria, where the two teenagers live, their chances were always stacked in their favour. At 3.4%, the administrative district in Germany’s south has the lowest unemployment rate for people aged 15-24 in the entire European Union. The number of people on Germany’s workfare scheme, Hartz IV, is also lower here than anywhere in the rest of the country.

Freising, the district of Upper Bavaria which is now home to Munich’s airport, even trumps that: its adult and youth unemployment rates of 2.1% and 1.9% fall way below the 3% which British economist William Beveridge once defined as amounting to full employment.

It is also, incidentally, the administrative district with the lowest average age, 39.7, in an otherwise ageing country. Yet among a population of 590,733, there were last year only 751 young people who were registered as out of work.

Asked if they know any peers who couldn’t find a job, the two teenagers have to pause to think. Wimmer has a friend who took a long time to find his first job, “but, to be honest, that was his own fault”. “In our region, if you apply yourself, then you’ll get a job appropriate to your skills,” said Guttermeyer.

Historically, unemployment in the upper half of Bavaria has fallen and risen in accordance with that in the rest of Germany – just at a higher level. Even before the city of Munich decided to move its new airport to Freising, the region used to enjoy relatively low levels of people looking for work.

Thanks to an unusually broad mix of trades, ranging from car manufacturing to high-end, service-sector jobs, the local job market has, in the past, been able to compensate when certain industries were temporarily in crisis.

Many of the companies in the area are medium-sized, Mittelstand businesses: out of about 15,000 businesses in Freising, only 240 have more than 100 employees. A large number are family-run, and therefore less mobile.

“This is a conservative area,” said Harald Brandmaier, a career advisor at Freising job centre. “They care whether you turn up to work on time, but they also stand their ground and stick with their workforce when the economy hits the buffers for a while.”

When Munich airport opened its gates in 1992, it therefore found itself faced with the peculiar logic of a local economy in which employers could not choose from an army of unemployed applicants, but had to actively compete with other businesses to court the best talent in the area.

Apprentice fireman Guttermeyer, for example, also got a job offer from BMW, who would have paid him a higher starting salary and picked him up from his doorstep in a shuttle bus every morning. In the end, he opted for the airport because it felt more appealing. He now earns €860 per month, rising to €1,000 over the next three years, and rides to work from his parents’ house by motorbike.

At Munich airport HQ, the pressure to sell itself to potential new recruits is palpable. Reception areas are plastered with posters advertising the airport as “Germany’s best employer” and Theresa Fleidl, the head of human resources, emphasises that Munich’s is the only airport in the world with its own brewery and indoor wave-riding pool, located between terminals one and two. “We want to offer our employees a world full of experiences,” she said.

The airport is now the region’s largest employer, housing 550 companies with a total of about 35,000 workers.

A job market with a chronic undersupply of skilled workforce has also forced newcomers to adopt the area’s traditional labour structures. Germany’s much-admired dual education system (in which apprentices are trained jointly by employers and at specialist vocational schools) has grown in Upper Bavaria, not because it was seen as the more responsible thing to do, but because companies, unable to “buy in” a fully trained-up workforce, often had to mould the workers they needed themselves.

Munich airport, for example, offers young people apprenticeship opportunities in real estate management, even though it could conceivably recruit qualified real estate managers from outside the region. “In other parts of Europe, the state tries to push everyone into university, and you end up with doctors driving trucks,” said Fleidl. “Here, we get the companies to educate their employees, and they can get exactly the workers they want.”

Timely article on why GDP data is not an accurate guide

Scepticism is essential when considering a lot of economic discussion; this article on GDP reveals we should not believe slavishly it tells us everything we need to know. If anyone finds themselves interested in the points under discussion, I have a book looking at the history of GDP (it is really quite small), which covers some of the stranger anomalies, and will make you wonder why this one data set can have such a big impact on so many things.

 The Times

Why our economy is one big guessing game

GDP and other so-called definitive statistics are really no more than large-scale surveys

Ed Conway, 9th September 2016

Do you know what GDP is? No, I don’t mean what it stands for: gross domestic product. Nor do I mean what it’s measuring: total economic output/income/spending in the country.

No. What I’m asking is: When you scrape away everything else, where does GDP really come from?

The question feels pertinent because we’re at one of those junctures where there is more focus than usual on economic statistics. Take the latest run of data over the past week or so — the purchasing managers’ indices of the main sectors of the economy and GfK’s consumer confidence barometer. On the one hand, they provide us with tantalising hints that the long-feared post-Brexit slump may not happen. On the other, economists and policymakers warn us to be wary of so-called “survey data”. Far better, they say, to wait until the definitive, official GDP numbers arrive.

Which brings us back to that question: What is GDP?

I only discovered the answer a few years ago when I travelled to the Office for National Statistics’ headquarters in Newport to make a film about how the big number is put together. Half expecting to uncover a giant supercomputer in the basement churning through electronic receipts, instead I found myself inside a mailroom where eager administrators opened envelopes and fed handwritten forms into a scanner.

For even GDP — the greatest, most definitive statistic of all — is really just a survey too. Forms are posted out to a selection of companies where they are filled in and sent or faxed back (“Informed estimates are sufficient for our needs”, says the bumf). Those figures go into a model and soon enough they become GDP. The size of Britain’s economy, the question of whether we are in or out of recession, the fate of governments — ultimately it all hangs on a questionnaire.

It remains one of the great open secrets of economics. The vast majority of what we call official statistics is really built on surveys. Unemployment? Retail sales? Inflation? All survey data. In the case of inflation, a team of 300 people are dispatched around the country with electronic clipboards to collect prices from corner shops and supermarkets. For unemployment, researchers must chase subjects around the country asking them whether they have a job or not.

Of course, the scale of these surveys is far greater than most private companies could manage. The sample base for the purchasing managers’ index survey of manufacturers is 600 firms; the ONS equivalent covers 6,000. Moreover, as time goes on and more data comes in from other parts of government, those initial surveys are bolstered by “real” data from company accounts.

All the same, it is pretty odd. Here we are, decades into the computer age, with all the data we need to give us a comprehensive picture of the state of the economy sitting in Whitehall — VAT returns and HMRC data on income tax. Every day companies collect more and more data about sales and performance which, combined, could provide us with an instant proxy for economic growth. And yet our most important statistics are collected in pretty much the same way they were in 1945.

The smartest thing we could all do is to treat our economic statistics with a little more scepticism

Britain is a laggard on this front. A host of countries, from Canada and New Zealand to most of Scandinavia, have been using such tax data to measure economic growth for decades. Ninety-six per cent of Finland’s statistics come from these so-called administrative sources. The upshot is that businesses spend less time filling in unnecessary questionnaires, the statistical offices save millions in costs and the figures themselves, which are based on the entire economy’s activity rather than a sample of companies, are more reliable.

But here in the UK, thanks in part to a cumbersome legal framework for data protection, we are only now starting to move in the right direction. Come next year the ONS, which still sends out one-and-a-half million survey forms a year, will start incorporating VAT data into its GDP numbers. In future, it might be able to provide on-the-day estimates of economic growth or contraction. Data scraping services can already collect enough prices from across the internet to give a pretty reliable estimate of inflation — and one that’s updated daily, not monthly.

Then again, when it comes to economic data, more is not always better. The big challenge will no longer be how to account for the gaps in the surveys but how to digest billions of datapoints while telling a story that is still accurate.

Even a measure of every pound that Britons spend can only tell you so much. When it was invented in the 1930s, GDP seemed a pretty good yardstick for economic performance. But in today’s economy, dominated by services and, increasingly, the shared economy, it seems less appropriate. How to account for the fact that you can rent your home out as an Airbnb hotel? Does a new, updated iPhone boost productivity or will all that money spent on new wireless headphones represent a waste of economic output?

The smartest thing we could all do is to treat our economic statistics with a little more scepticism. In the words of Charlie Bean, former deputy governor of the Bank of England who wrote a report on the subject, they are more impressionist paintings than old masters, let alone photographs. Something to chew over as we await those “definitive” figures on the Brexit effect.

Ed Conway is economics editor of Sky News