Please explain to me like I’m a 5 year old. How do we fix the economy?

[bushproblems]

The job market is shocking, the minimum wage rise has not pushed up the salaries in the next bracket, food is so expensive and working hard no longer feels like it provides the rewards it used to.

Im earning more than I have in my life, but I feel poorer than I did 10 years ago when I was just above minimum wage.

I get that employers have more costs so the profits of a company won’t trickle down like it did, but what, or who, can fix this?

Im feeling very despondent about the future for me and for the younger people in my family

The 30 free childcare hours and the availability of GLP-1 for the obese should help - both of which are pretty recent developments.

I’d maybe increase it to 40 free hours of childcare as that would at least cover 4 full days of work plus commuting time, and allow parents to work more than just ‘very part-time’.

polices may indeed affect them differently, but my point is many of the voters don't understand how it affects them and react only to the soundbite.

I agree that's a big problem. I just don't think having a knowledge/understanding test is workable.

For referendums, I think I like Irish model of having an official booklet with the best cases for each side, relevant facts, etc. But even then it means it will be the view of the official class that gets into that booklet.

"Clever and knowledgeable people think X" might be because they are clever and knowledgeable. But it might be because clever and knowledgeable people are also almost always urban, educated, affluent, etc. and have the biases and sectional interests that comes with that. If you ask them to write the booklet, those biases are bound to come through even if unwittingly.

That's before you even get to fashionable luxury-belief nonsense that our institutional classes are prone to fall for.

The value of a business degree has gone down in the last 40 years (as with most degrees). Plus it’s one thing earning 3 times the national average (£110k I guess?) 40 years into your career and quite another to hit that pay in your 20s or early 30s when you need to save up to buy a property, start a family, and whatnot. There are graduate jobs paying the same starting salaries as my graduate cohort was earning in 2012. Wage stagnation in the UK is an absolute scandal.

This - the minimum wage is creeping towards the (frozen) student loan repayment threshold. All those zilennials who went to university weren't being stupid - they were told at the time that having a degree was the new bare minimum for entering the professional workforce. By the time they'd finished those degrees employers were claiming that there were too many grads around and that none of them were good enough, somehow. A lot of it was down to cash-grabbing by universities.

The idea of the student loan repayment threshold is that it should be set far enough above the minimum wage for you to only make repayments on the "additional" salary you earn as a result of having benefitted from doing a degree.

When I was a fresher the average graduate salary was about £25k. That was nearly a decade ago. It's still £25k. That's not the fault of people going to "mediocre" universities or studying "mickey mouse" subjects.

No.

It just shows that you don’t know the first thing about economics.

Yes, it’s so depressing.

Whether this ‘fixes’ the economy depends what you want from an economy.

If what you want is growth, though, and employment, and public services, your approach has quite a few risks.

A couple of examples only:

Pay the poor more. This can work (as people become more expensive it’s only worth employing them in high-value roles, driving investment to increase productivity). But it can also drive firms to not hire at all (either becuase they can’t afford to run at all, or because the best option is now to automate entirely). So instead of lots of low-paid people you now have a few better-paid people and lots of unemployed people. Many now worse off.

Pay the rich less: our public services are utterly dependent on taxes from the top 10%. If I’m Goldman Sachs or Google Deepmind, I need expensive humans for my business. If I can’t get them in London (becuase I’m not allowed to pay them), I’ll set up that team in NYC or California instead. UK tax take down, schools and hospitals budgets cut.

It won't "fix the economy".

All it will do is make everybody poorer in the aggregate sense, which is basically what Labour is managing to do right now with their policies.

What the UK really needs is a centrist techonocratic government that is willing to make the hard economic choices: less consumption (welfare, pensions, healthcare) and more investment (education, childcare, transport, infrastructure, housing).

Labour is not going to make these choices, so the path of travel is managed decline for the next few years. This opens the doors wide open for Reform (they are even more incompetent but as populists they will tell the electorate what they want to hear, without having any real solutions to the complex structural problems that the UK is facing).

Welfare for working-age people is an investment, though. How are people meant to reenter the workforce otherwise? By bucking up their ideas? That's been tried. Doesn't work.

2 things to watch.
Gary's economics and the video of David willets talking about how baby boomers pinched their children's futures.

This is not investment.

It is consumption. And does nothing to improve productivity. It just entrenches state dependency, which is exactly where the UK fails at this point in time.

Investment into childcare (for example) improves productivity because it nudges more women into work (because in many cases they stay home due to wages not being able to cover childcare costs).

Gary has little clue about economics in general. He just wants to monetise his online presence.

David W video is reasonable (and he is also correct).

People need a certain standard of living and health to sustain work, making welfare an investment. Welfare has additionally become necessary even for those in work because salaries are so low in real terms that they have to be subsidised by the state.

It's the same as healthcare being an investment. No point throwing money at a course of treatment only to send them home to an uninhabitable home which they can't afford to heat, where they can't afford to eat a healthy diet.

Or say someone has a nervous breakdown. They go on UC for, say, six months - money is tight, but they manage. They recover enough to return to work. Now say the UC is slashed. They lose their home, all their problems have compounded and are inescapable. They're fucked. Are they more or less likely to reenter the workforce now? Welfare for the working-age population is an investment.

The fact is that working-age benefits claimants are demonised enough that these benefits would have long been got rid of were it politically expedient to do so. Pilliorying benefits claimants is an easy win politically. The fact is that there are economic benefits to providing a safety net which enables people to get back into the work force after falling on hard times. If lots of people seem to have suddenly fallen on longer, harder times it isn't because of moral failings, it's because of wider issues (such as unaffordable housing, low salaries, barely-there healthcare) which make it too practically difficult to remain productive.

Do you, opening poster, really think that if anyone of us on mumsnet had the answer to how to fix the economy we'd spend out time posting on here, rather than, you know maybe fixing the economy?

You have this backwards.

Salaries in the UK only feel "low" because housing and energy costs are so high.

But you cannot pay yourself more than you earn (your actual productivity). If you try this, you will just end up with higher inflation.

Instead of investing into the capital infrastructure in order to reduce housing and energy costs (which is the optimal thing to do), the UK is stuck in a welfare doom loop where the taxpayer subsidises the wages of lower income wage earners, while the costs related to the supply side (housing, energy) keep increasing, leading to increasing amount of money being spent on unproductive welfare payments (consumption) instead of investment.

That welfare doom loop needs to be broken. There is no other way to fix productivity.

All I can think of is tax wealth more. Because taking money from those already on the bones of their arse is not going to achieve anything.

Rejoin the customs union at the very least.
Cut taxes
Speed up our investment in energy infrastructure so we can bring energy prices down (this should be number 1 really)
Massively reduce welfare spending (including getting rid of the triple lock)

But even if we assume that all benefits claimants are out of work (which they aren't) and that they are all capable of work (which they aren't), where are all the jobs they are supposed to fill? The ratio of vacancies to unemployed means this isn't a "get back to work" issue. Agree that housing and energy need to be addressed ASAP but every time someone tries to regulate these things but there seems to be a complete unwillingness to meaningfully do so (eg. reliance on private housebuilders to somehow generously supply enough social and affordable housing). Also, a lot of the problem is the UK's service-based economy, which creates too few indirect jobs compared to, say, the manufacturing sector.

2.5 jobseekers (that is people on benefits actively looking for work) to every vacancy.
There are not enough jobs for people who are desperate, let alone bumping the disabled off of benefits and adding them to figures too.

The issue with welfare is in fact the pensions triple lock. The real value of salaries isn't protected, nor the real value of working-age benefits - it's just that it is political suicide to point this out, much less do anything about it. The pensions triple lock is being paid for by people who cannot afford an adequate standard of living for themselves, and who know full well that the same thing will not be available to them by the time they have "paid into the system" for years enough. It isn't sustainable.

Surely the only cold-hearted, economical argument for the state pension is that it should motivate the workforce to keep going in the knowledge that they will receive the same support at the end of their working lives. Otherwise, we pay the state pension because it is cruel and inhuman to leave elderly people in poverty. However, a lot of us - say, those aged 45 and under, I don't know - know that it is vanishingly unlikely that we will get a state pension. So the social contract has been broken. Ideologically I'm not about cold-hearted economics, but I find it very strange how the state pension is the one sacred expenditure that people are willing to except from their attack on welfare spending.

Madness. I met a couple yesterday through my work getting £1700 (UC and PIP ) a month in benefits with the husband working part time and getting £1200 a month in wages. Only around £370 of that UC was towards rent. It's completely unsustainable.

It makes sense that benefits costed to provide (just about) for children might actually exceed a full-time minimum wage salary. That's exactly the point: salaries are so low in real terms that working people cannot afford to have children. Heaping further poverty upon the children of benefits claimants is not the solution.