Very topical after yesterday’s class discussion

Ex-steelworks to make wind farm parts in plan for 6,000 green jobs

Britain has only two blade factories at present, with some blades and other turbine parts imported

ASHLEY COOPER/BARCROFT MEDIA/GETTY IMAGES

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The government will invest almost £100 million creating new wind turbine ports in northeast England, with a big renewables company announcing plans to make crucial parts in Teesside.

Two new wind ports, one in Teesside and another in north Lincolnshire, will create capacity for seven companies to make parts for the offshore wind industry, whose capacity the government has vowed to quadruple by 2030. The projects are set to create 6,000 new jobs.

As part of the announcement the government said that GE Renewable Energy, a multi-billion pound manufacturer, will build a new wind blade factory at the Teesside site, which is a former steelworks. The factory is due to open and start production in 2023.

Its blades will be supplied to the Dogger Bank wind farm off the northeast coast, which is set to become the largest offshore wind farm in UK waters, and will power up to six million homes.

The government is investing £20 million in the Teesworks Offshore Manufacturing Centre, and £75 million in the Able Marine Energy Park on the south bank of the Humber. The investments comprise more than half of a £160 million fund announced last year.

“During the Industrial Revolution over 200 years ago, wind powered the sails of ships from the Humber and Teesside trading goods around the world,” Boris Johnson said. “Now the Humber and Teesside will put the wind in the sails of our new green industrial revolution, building the next generation of offshore wind turbines while creating 6,000 new green jobs.

“Our multimillion-pound investment in these historic coastal communities is a major step towards producing the clean, cheap energy we need to power our homes and economy without damaging the environment.” The government is determined to demonstrate its commitment to green energy before hosting the COP26 climate change summit in Glasgow in November. This week John Kerry, President Biden’s climate envoy, held talks with Johnson, Rishi Sunak and Alok Sharma, the summit’s president.

Johnson has adopted the language of a “green industrial revolution”, a phrase that played a large role in Jeremy Corbyn’s 2019 election campaign, since November when he unveiled a ten-point plan to create 250,000 new green jobs with £12 billion of government money.

Yet despite Britain having more offshore wind farms than anywhere else in the world, ministers fear the benefits of increased capacity will go to other countries, which build more parts.

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Britain has only two blade factories already, one in Hull and another on the Isle of Wight, with some blades and other turbine parts imported. Nacelles, which house turbines’ generators, are often made in Europe, especially Denmark and Germany. Foundations are frequently imported from China and other countries with cheap labour.

Sources said that the government investment was designed to increase capacity for manufacturing those parts in the hope that private sector investment will soon follow.

Kwasi Kwarteng, the business secretary, said: “To ensure our businesses, supply chain and high-skilled workforce can fully share in the sector’s success, today’s investment in the Humber region and Teesside will put the UK in pole position to land new offshore wind investors.”

Hugh McNeal, chief executive of the RenewableUK trade association, said the GE Renewable Energy plant would transform the former steelworks site, adding: “This announcement marks the start of the next generation of offshore wind manufacturing.”

Nice short piece on the regions & industrial policy

By David Smith in the Sunday Times; I've highlighted key bits:

Andy Haldane, the Bank of England’s chief economist, gave an interesting speech in his capacity as chairman of the government’s industrial strategy council — reminding us that the government still has such a strategy. Speaking at St James’ Park, home of Newcastle United football club, he had some killer facts on regional income disparities.

The gap between the richest region — London and much of the southeast — and the poorest — typically the northeast and Wales — is 150%. Having narrowed between 1900 and 1980 but widened since, it is now back to the levels of the early 20th century. Regional income disparities are twice those in France and three-quarters larger than in Germany.

Haldane, who says he has been engaging in “deep hanging out” across the country in recent years, identified six factors that determine whether a place is “left behind” or not. They are: transport and connectivity; schools and education; housing and shelter; high streets and social spaces; good work and fair pay; and money and finance.

Haldane, who has tested his factors around the country, provides the example of Ashington, the town in Northumberland that was the birthplace of footballing legends Bobby and Jackie Charlton and Jackie Milburn and has its own dialect, Pitmatic.

Ashington, said Haldane, failed on all six factors. It has no train service, thanks to the Beeching cuts of more than half a century ago, and is less well-served for public transport than 70 years ago. The local school now performs well but in the town “too many people are stuck in the educational slow lane”. Its high street, despite a recent makeover, “remains a shrine to bookies, charity shops and high-cost credit providers”.

When it comes to jobs and pay, Ashington has one of the world’s most advanced paint manufacturers, but it employs only 150. Youth unemployment is above the national average and, though unemployment overall is lower than since the last pit closed in 1988, there is income insecurity. Finance is available, but much of it at punishingly high interest rates. Housing availability is an issue, as is housing quality.

What can be done? Industrial strategy is part of it, as you would expect from Haldane, but so are infrastructure and connectivity, education and skills and other factors. There is a lot to be done, and I’m not sure our politicians are capable of it.

Automation & Jobs - Update:

Good material on policy for the anticipated changes in labour markets. Great for essays, micro and macro:

With rapid advances in automation and artificial intelligence in recent years, many are worried about a jobless future and sky-high levels of inequality. But the large-scale technologically driven shift currently underway should be welcomed, and its adverse effects should be managed with proactive policies to reinvest in workers.

Jan 16, 2018 CHRISTOPHER PISSARIDES ,  JACQUES BUGHIN, Project Syndicate

LONDON – Ever since early-nineteenth-century textile workers destroyed the mechanical looms that threatened their livelihoods, debates over automation have conjured gloom-and-doom scenarios about the future of work. With another era of automation upon us, how nervous about the future of our own livelihoods should we be?

 A recent report by the McKinsey Global Institute estimates that, depending on a country’s level of development, advances in automation will require 3-14% of workers worldwide to change occupations or upgrade their skills by the year 2030. Already, about 10% of all jobs in Europe have disappeared since 1990 during the first wave of routine-based technological change. And with advances in artificial intelligence (AI), which affects a broader range of tasks, that share could double in the coming years.

Historically, job displacement has occurred in waves, first with the structural shift from agriculture to manufacturing, and then with the move from manufacturing to services. But throughout that process, productivity gains have been reinvested to create new innovations, jobs, and industries, driving economic growth as older, less productive jobs are replaced with more advanced occupations.

The internal combustion engine, for example, wiped out horse-drawn carriages, but gave rise to many new industries, from car dealerships to motels. In the 1980s, computers killed typewriters, but created a host of new occupations, from call-center service representatives to software developers.

Because the far-reaching economic and social benefits of new technologies tend to receive less attention than job losses, it is worth noting that automation technologies are already demonstrating a capacity to improve lives. This past November, Stanford University researchers showed that an AI system outperforms expert radiologists in detecting pneumonia from lung X-rays.

In an era of stalled productivity growth and declining working-age populations in China, Germany, and elsewhere, automation could provide a badly needed economic boost. Higher productivity implies faster economic growth, more consumer spending, increased labor demand, and thus greater job creation.

onetheless, any discussion about AI-based automation must also take public anxieties into account. Even though new occupations will likely replace those lost to automation, wages may take time to catch up to the reality of higher labor productivity.

In the early nineteenth century, wages stagnated for almost 50 years before picking up again. That may have been an extreme situation. But for lower-skilled workers, the transition underway today could prove just as wrenching. With fears of increased inequality already growing, governments will need to rethink policies for providing income and job-transition support to displaced workers.

Looking ahead, policymakers and businesses should keep five imperatives in mind. The first is to embrace AI and automation without hesitation. Even if it were possible to slow the pace of change, succumbing to that temptation would be a mistake. Owing to the effects of global competition, hampering technological diffusion in one domain would simply dampen overall prosperity. In fact, we recently estimated that northern European economies could lose 0.5 percentage points of annual GDP growth if they do not keep pace with their neighbors in adopting AI.

The second imperative is to equip workers with the right skills. Future-of-work debates often overlook the question of how the labor market will evolve and either improve or exacerbate the skills mismatch that is already acute in developed countries. According to recent OECD research as much as one-third of workers in advanced economies are either underutilized or unable to handle their current duties.

The jobs of the future will require not just more cognitive skills, but also more creativity and social skills, such as coaching. We estimate that, unless workers’ skill sets are upgraded, today’s mismatch could double in severity within ten years, resulting in major productivity losses and higher levels of inequality.

Upgrading skills on a large scale will require coordination among parents, educators, governments, employers, and employees, with a focus on lower-skilled individuals. Unfortunately, in the past two decades, public spending on labor markets, relative to GDP, has declined by 0.5 percentage points in the United States, and by more than three percentage points in Canada, Germany, and Scandinavia.

The third imperative is to focus on augmented-labor opportunities. Unlike older industrial robots, newer technologies can interact safely and efficiently with humans, who sometimes need to train them and will increasingly have to work seamlessly with algorithms and machines. For example, a doctor’s practice will be greatly enhanced by diagnostic algorithms. Policymakers and businesses should seek to maximize this kind of complementarity across all sectors.

Fourth, businesses will need to innovate and capitalize on new market opportunities at the same pace that human tasks are being replaced. For example, in the first wave of robotics, countries such as Germany and Sweden displaced auto-sector jobs by adopting CAD (computer-aided design) robots; but they simultaneously brought other jobs back from Asia, and even created new downstream jobs in electronics. Similarly, AI offers countless opportunities for innovation and tapping into global value chains. By seizing these opportunities quickly, we can ensure a smoother transition from old to new jobs.

Finally, it is imperative that we reinvest AI-driven productivity gains in as many economic sectors as possible. Such reinvestment is the primary reason why technological change has benefited employment in the past. But without a strong local AI ecosystem, today’s productivity gains may not be reinvested in a way that fuels spending and boosts demand for labor. Policymakers urgently need to ensure that strong incentives for reinvestment are in place.

Automation has been given a bad rap as a job killer. Nevertheless, to ensure that its benefits outweigh its potential disruptions, private- and public-sector actors must exercise strong joint leadership – and keep the five imperatives for the new age of automation at the top of the agenda.

CHRISTOPHER PISSARIDES

1 Commentary

Christopher Pissarides, a Nobel laureate in economics, is Professor of Economics at the London School of Economics.

JACQUES BUGHIN

Writing for PS since 2016 
2 Commentaries

Jacques Bughin is a director of the McKinsey Global Institute and a senior partner at McKinsey & Company. 

Good material on declining labour participation

Some of this stuff is absolutely bog standard - I was taught it [ahem] a few decades ago... I have highlighted the key points for you - you CAN use these as quick anlysis/evaluation in an unemployment essay:

What we know and don’t know about declining labor force participation: A review

Eleanor Krause and Isabel V. Sawhill Wednesday, May 17, 2017 Brookings Institute

• Download the report

For decades, the portion of prime-age men (ages 25 to 54) in the labor force has been in decline. More recently, the labor force participation rate of prime-age women has stagnated and also declined. This paper addresses the consequences of, and reasons for, these declines, especially among men. A subsequent effort will address appropriate policy responses.

Women’s increasing workforce participation through the late 1990s largely masked the precipitous decline in male participation rates. Men’s rates have fallen about 8 percentage points over the past 60 years. On both fronts, the U.S. is also falling behind other advanced economies. U.S. prime-age female participation fell from 6^th to 17^th of 22 OECD member countries between 1990 and 2010. Over the same period, the decline in the prime-age male participation rate was the second most severe of the OECD countries, and is now the third lowest among the 34 member countries. The U.S. trends are particularly pronounced for non-Hispanic black men and less-skilled adults. There is now an 11 percentage point gap in participation rates between men with a college degree and those with a high school degree or less—whereas 50 years ago, the two rates were very similar.


Explanations for these trends tend to focus either on the demand for workers or the supply of labor. Trade and technology have reduced the demand for certain types of work, particularly less-skilled labor in fields like manufacturing. Of the two, most economists believe that automation has played the larger role. Manufacturing’s share of GDP has remained relatively stable but, thanks in part to productivity improvements, the sector now employs only two-thirds as many people as it did 30 years ago.

Technological change has widened the wage gap between skill levels. While a man with a high school degree earned about three-quarters of the wages of his college-educated counterpart in 1980, he now earns about half as much. At the same time that technology has made certain jobs obsolete, new jobs are being created in other areas (both high-wage managerial and technical jobs and low-wage service sector jobs), but these new jobs often require different skills or pay lower wages.

On the supply side of the labor market, the problems include not only a lack of skills, but also high reservation wages [the lowest pay that unemployed workers will consider viable, close to our "replacement ratio"], poor health, and the availability of disability insurance or other forms of unearned income. The trend away from work has coincided with a startling increase in premature mortality as reported by Anne Case and Angus Deaton,^[1] and high rates of disability and pain as reported by Alan Krueger.^[2] The extent to which these are a consequence or a cause of the drop in labor force participation remains unclear.

Disability receipt has risen sharply, though most experts believe this can explain only a fraction of the decline in participation rates among prime-age men. More employment among women might also help explain the drop for men, but the men who are out of work are less likely to be married or to have children than those with families. Time use surveys indicate that men without work are not spending significantly more time on housework and child care than their employed counterparts. Instead, they are engaged in leisure activities, like playing video games.


In “What we know and don’t know about declining labor force participation: A review,” Brookings Senior Fellow Isabel Sawhill and Research Assistant Eleanor Krause argue that there is likely a high degree of interaction between each of these factors. A man might initially lose a good-paying manufacturing job to outsourcing or automation, then search for a new position while collecting unemployment insurance, and find nothing he deems acceptable. He might be averse to taking a job as a home health aide, seeing it as “women’s work,” or he might be unwilling to take a large pay cut. Perhaps he then becomes discouraged or depressed, may even turn to drugs or alcohol, and finally applies for SSDI based on a history of arthritis or a bad back.

In sum, there appears to be a growing gap between the skills demanded by today’s employers and those supplied by the labor force, though other factors also contribute to this decline. As the demand for less-skilled labor declines, the relative wages of less-skilled workers also decline. Some dislocated workers are able to relocate to communities with stronger job markets, some pursue training programs to learn new skills, some accept lower-paying positions, but many leave the labor force altogether. 

Reversing the decades-long decline in participation rates, and the rising inequality associated with declining wages for the less skilled, will require a major investment in education and training as well as better adjustment assistance for workers in declining fields. Reforming social insurance programs to deal with longer periods of joblessness and to provide more flexibility for individuals with disabilities and family care responsibilities might also enable more people to work.


There is still a lot that we don’t know about America’s declining labor force participation rate, and it is only one symptom of what may be a fundamental transformation in the economy that requires new and updated policies as a response.
To learn more, read the full paper here.

Ideas for strong conclusion on policy

Give the poor a tax cut - Moneyweek 28th April

We have yet to see the full manifestos of the main political parties for the general election. But none it seems will be offering any significant cuts in the burden of taxation. That’s a shame because, as a new study shows, cutting taxes on the poor is a good way to boost economic growth. 

Owen Zidar, an assistant professor of economics at the University of Chicago Booth School of Business, looked at tax cuts in the US for the postwar period, then at their impact on different states. He found that a lot more jobs were generated in the poorer states for each tax cut than in the richer ones. “Tax cuts that go to high-income taxpayers generate less growth than… cuts for low and moderate income taxpayers,” he concludes. “In fact, the positive [overall] relationship between tax cuts and employment growth is largely driven by tax cuts for lower-income groups and the effect of tax cuts for the top 10%… is small.” The explanation is that the poor spend a lot more of any extra dollar they receive and that generates more demand. And, at the margin, each cut has a bigger impact on the incentive to work for people lower down the earnings ladder.

It is unlikely the results would be any different in the UK. Tax cuts would have more impact in Newcastle than Newbury, in Swansea than Swindon.  If the economy remains resilient, and the budget deficit keeps coming down, there are three areas where we could focus tax cuts as the money becomes available. First, we should carry on raising the starting threshold because that takes people out of the tax net. The previous coalition government made progress on that, taking it all the way up to £11,500, from less than £7,000 when Labour was last in power. That took four million people out of the tax net completely. But that is no reason not to go higher – there is no greater incentive to work than to pay no tax at all on your earnings.

We should look at cutting the standard rate as well. That was last cut way back in 2007 when Gordon Brown reduced it from 22% (although he threw in a few stealth taxes to make up for it). That is a long time, and other taxes have come down all around it. In particular, the corporation tax rate is scheduled to come down to just 17%. It doesn’t seem right that someone raising a family on £30,000 a year should pay a higher rate on their earnings than Tesco or Barclays – or the self-employed person next door who has turned themselves into a company. Why not match up the basic and corporate rate?

Finally, when public finances allow it, we should look at taking VAT back to 17.5%. It was pushed up to 20% in George Osborne’s first budget as an emergency response to a deficit that threatened to spin out of control in the wake of the crash. But while VAT is an efficient tax, there can be no question that it falls mostly on the poor, simply because they spend a greater share of their income. The emergency has surely now passed, with the deficit back to manageable levels. That makes it a good time to start getting back to the old rate.

There are other moves that could be made. If tax cuts for the poor help create jobs, why not target them where work is most needed? Wales is one of the poorest parts of the country, so why not let it have a slightly lower rate of income tax? The same could be true of the northeast. And Scotland, of course, already has the power to reduce income tax – it is just that the SNP does not use it. Tax cutting has not featured enough in the election campaign so far. But if it does, let’s hope the promises focus on cutting taxes for the poor – because that is where it will have the greatest impact.

Humanoid robots are nearly here - and jobs are at risk:

Cloud-Brained Humanoid Robots Are Right around the Corner

By VW Staff on February 12, 2016 10:19 pm in Economics, Videos

Cloud-Brained Humanoid Robots Are Right around the Corner

Published on Feb 3, 2016

A new generation of humanoid robots are coming in the 2020s, says innovation and industry 

expert Alec Ross. They will care for our aging populations and revolutionize manufacturing. 

Ross’ book is “The Industries of the Future The Industries of the Future

Read more at BigThink.com: http://bigthink.com/videos/alec-ross-…

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Transcript – The robots of the cartoons and movies from the 1970s are going to be the reality 

of the 2020s. And there are two real drivers behind this. First is mapping belief space. 

Historically it’s been really difficult to be able to instruct robots to do things like grasping. 

Grasping might seem like a pretty straightforward thing to do but it’s actually very complex 

mathematically and algorithmically to be able to instruct robots how to do that. And so what 

this mathematical breakthrough in mapping belief space has done is it has taken what are 

historically very complex tasks for robots and made them easier to do. The second thing is 

cloud robotics. So if C-3PO right now – if he walked over here and interrupted this Big Think 

interview he would say, “Oh my. Excuse me.” And get out of the frame. And as he did this 

there would be a lot of hardware and software whirring in that gold gleaming body of his. 

In reality the C-3PO of the 2020s will be a cloud connected device. And so what he would 

do if he stumbled into this interview is he would ping the cloud and he would get instructions 

from the hive mind that is there algorithmically. And he would then know to excuse himself 

to do so in English and to then go clunk away.

So what does this mean? What this means is that the robots of our youths and of our 

imaginations don’t have to have millions of dollars of incredibly sophisticated hardware and 

software in them. They can be relatively lightweight dumb devices so long as they’re 

connected to the power of the cloud. So what’s the significance? Okay, so they’re cheaper. 

So what? The big significance here really goes to labor. So let’s think about the difference 

between humans and robots and their costs. Humans don’t have a lot of cap ex but they 

have a lot of op ex. So the upfront costs, you know, maybe your employer buys you some 

business cards. Maybe he gets you a computer for work or something like that. Not a lot of 

cap ex. Not a lot of upfront costs. But a lot of op ex. Every two weeks you want to get paid, 

right? A lot of salary. A lot of op ex. Robots come with diametrically opposed cost structure. 

It’s a lot of cap ex. You’ve got to buy the robot but then relatively little op ex. You can work 

them 24 hours a day. They aren’t going to join a union or get sick and they don’t expect a 

salary. And so what’s happening right now is we’re seeing new equilibrium points in terms 

of the tradeoff between the relative cost of a cap ex intense, op ex light robot and a cap 

ex light, op ex high labor of humans. I saw this in all places in East Asia in the football field 

size factories of Foxconn, the Taiwanese company that makes all of our smart phones. And 

Terry Gou, the CEO of Foxconn who employs 973,000 people has decided he’s not hiring 

any more humans. He’s just buying robots. And so I think that this is fascinating stuff as the 

robots of the cartoons and movies become the reality of the 2020s. 

Read The Full Transcript Here:http://goo.gl/L5DUSL.

The Industries of the Future