What newsnightis Paul Mason talking about? BBC economics editor is ignorant about economics
I FIND this very difficult to understand. Paul Mason is the economics editor for Newsnight at the BBC. And yet he appears to know very little about the subject of economics. I’ve not lived in Britain for decades so I’m not really sure whether this is normal for the BBC or not. He tells us that this generation is going to be poorer than the last one:
This generation of young, educated people is unique – at least in the post-1945 period: a cohort who can expect to grow up poorer than their parents.
Either he’s got some very secret information about what future economic growth is going to be like or he’s spouting nonsense.
Yes, yes, I know, having to pay back student loans, can’t get on the housing ladder, blah blah. But that’s pretty much insignificant compared to hte effect of economic growth. For such growth compounds you see?
There’s something called the rule of 72. If growth in something is 1% a year then after 72 years then there’s a doubling of that something. If 2%, then 72/2, or 36 years to the doubling. 3% then 72/3 or 24 years.
We usually think of economic growth as being an increase in GDP: it varies a little bit but between 55% and 60% of GDP ends up as the labour share of income: what the workers get in wages in effect.
So, if economic growth is 1% a year in 72 years’ time then the workers’ wages will roughly have doubled. If economic growth is 2% then in 36 years, if 3% then 24. The current best guesses are that the trend growth rate (that is, what’s the average of booms and busts like the current recession) is a bit above 2% for the UK and probably below 3%.
So, over the working lifetime of the current graduates we expect wages, and yes, this is real wages after inflation, to double in something between 24 years and 36.
To say that people who are going to be earning twice what their parents do are poorer is, well, it’s nonsense, isn’t it?
So, those of you who do watch the BBC. Is it actually necessary to be ignorant of economics to get a job reporting on economics at the BBC?
Posted: 2nd, July 2012 | In: Key Posts, Money Comments (2) | TrackBack | Permalink
