Author: Tejvan Pettinger

Labour shortages

Labour shortages

Labour shortages occur when employers struggle to fill labour vacancies because of insufficient labour applying for the jobs. Labour shortages can occur in geographical regions or in occupations with special requirements in terms of skill or function. Labour shortages can also be seasonal in industries like retail (Christmas) and agriculture (harvest time) Reasons for labour shortages Geographical shortages. An area with a booming economy, but poor housing can experience labour shortages quicker than the rest of the economy. In the UK, London has strong employment demand but suffers from high rent…

Should we be concerned about a falling savings ratio?

Should we be concerned about a falling savings ratio?

In the Bank of England’s latest forecast for the UK, they predict reasonably good economic growth in term of real GDP. At the same time, forecasts for average real incomes are more pessimistic. The Bank of England suggests UK economic growth will be maintained by consumer spending – spending which will partly be funded by a decline in the savings ratio. Essentially, real wages are forecast to stagnate (or grow slowly), but higher spending will be financed by lower saving.

Savings ratio UK

Definition of Household savings ratio: The percentage of disposable income that is saved. (1) Total savings = Disposable income – Household consumption UK Saving Ratio Latest UK household savings ratio: Q3 2016 = 5.6% (Feb 2017) The Bank of England have forecast a fall in the savings ratio during 2017 because of the effects of depreciation in the Sterling pushing up prices. If the forecast is correct it could push the savings ratio down to levels not seen since 2008 – just before the  pre financial crisis.

US economy under Obama 2009-2017

US economy under Obama 2009-2017

Barack Obama served as President from Jan 2009 – Jan 2017. When Obama came to office in Jan 2009, the US economy was in a deep recession, with falling real GDP, high unemployment and rising levels of government borrowing. As President, Obama oversaw a moderate fiscal expansion which helped to promote economic recovery and falling unemployment. Given the depth of the 2009 recession, some argue the recovery was relatively weak. But, compared to the Eurozone, the US economy performed relatively well, with unemployment falling to pre-recession levels. However, despite a…

Economies of scope

Economies of scope

Economies of scope occur when a firm can gain efficiencies from producing a wider variety of products. These efficiencies can involve lower average costs. It can also involve increased revenue from being able to increase sales in new, related markets. It is similar to concept of economies of scale – where higher output leads to lower average costs. But, there is a difference. Economies of scope is not about producing the same good at lower average cost, but using its size and resources to produce similar or related goods. Examples of…

Automation – benefits and costs

Automation – benefits and costs

Definition of automation Automation refers to the process of automatically producing goods through the use of robots, control systems and other appliances with minimal direct human operation. Within manufacturing industries, automation has led to increased labour productivity as fewer workers are needed to produce the same number of manufactured goods. A perceived downside of automation is that it leads to jobs being displaced in traditional areas of work – in particular, ’blue collar’ manufacturing jobs. Less visible is how the process of automation leads to the creation of new jobs in…

Rational expectations

Rational expectations

Rational expectations is an economic theory that states – when making decisions, individual agents will base their decisions on the best information available and learn from past trends. Rational expectations is the best guess for the future. Rational expectations suggests that although people may be wrong some of the time, on average they will be correct. In particular, rational expectations assumes that people learn from past mistakes. Rational expectations has implications for economic policy. The impact of say expansionary fiscal policy will be different if people change their behaviour because they expect…

Inefficiencies within Greek economy

Inefficiencies within Greek economy

Over Christmas and the New Year I visited Greece – landing at Athens airport then hiring a car to Kalamata. After writing many articles on the economic troubles of Greece, it was interesting to visit in person. Whilst enjoying a holiday, I was always aware – in the back of my mind – the Greek economic crisis and I was looking for signs or anecdotal evidence of why Greece has struggled from…