SPEAKER 1: This is a production of Cornell University.
SPEAKER 2: Thanks very much for inviting me. It's very, very nice to be here. I want to talk about the working fight that I and many other people in Europe and now in the States have been doing for the Russell Sage Foundation, including several people at Cornell.
So let me start by telling you a little bit about the project. The Foundation, as many of you will be better aware than I, published Low-Wage America not so long ago, talking about the future of low-end work in the US, in the new, brave, globalized world, and a pretty grim picture it painted, both in terms of relative income and other aspects of working terms and conditions.
What some people at Russell Sage were interested in was the following question. Certain functions have to be performed in any economy-- cleaning hotel rooms, hospitals, serving in shops, whatever it might be. Does performing those functions always have to mean that people have a lousy, low-paid, dead-end, poor-working-conditions job? Or is it different in some countries? Do other countries with different histories, different institutions, different government policies produce something different? The self-same functions are performed in a less low-paid, less dead-end way.
And so they commissioned five national teams to work on this, and I'll be talking a little bit about the projects in a moment. They commissioned a British team. This sounds like the beginning of a joke. There was an Englishman, an Irishman, and a Scotsman.
They commissioned a British team. Or, as I should say these days, a UK team, excluding Scotland for most of the time. A French, German, Danish, and Dutch team. And I'm not sure what to say, as a sort of corporate effort, rather than the findings of one person.
The European projects are over now, and Russell Sage are about to publish a book on each of the five countries-- Low-Pay UK, Low-Pay France, et cetera. The English book was slightly delayed, largely because the front cover went wonky. It showed a pair of hands buying bread which clearly could never be produced in Britain, where you only produce white sliced loaves and pay for it in euros, which was rather unfortunate, so we had to get the cover changed.
We're now halfway through a second phase of the project, where some of the original European team, a very large number of the original European team, have got together with a group of American scholars, one of whom has just arrived and is sitting in the corner there, to do a European-American comparison. And I suppose we're halfway through that, slightly more than halfway through that.
What I want to talk about today is a mixture of what we did in the European projects, and some speculations-- I can't call them more than that-- coming out of the current European-American comparison. Just a few words about the European projects, the five countries I've mentioned. The reason for the many trips that David mentioned a moment or two ago, other than just the natural self-indulgence of academics who like travel when other people are paying for them, particularly if they're getting upgrades, was to try to get a common research design for all five countries so that we could maximize comparability. And to a large extent, I think we succeeded on that.
The work is a mixture-- the desk, you know, the usual sort of desk research on the historical evolution of low pay in each of the countries and an analysis of its causes and its consequences, and then a series of case studies. And these sectors were the ones that Russell Sage were particularly interested in, again, to get a comparison with what they knew and had done on the US. And so we looked at low-end occupations in the five sectors listed there.
The hospitals, it was nurse assistants, cleaners, or equivalent types of things in the different countries. Hotels, room attendants. Food processing, the operatives on the line. Assistants in retail, where essentially we looked at two sorts of retail, electronic and food. And call centers, operatives in call centers, looking at, probably, at least in British terms, the higher end of call centers-- that is, incoming calls to utilities and financial organizations.
The incidence of low pay in each of the five countries varied quite dramatically. We had a common definition of low pay, which was you're low-pay if you're earning less than 2/3 of the-- effectively 2/3 of the median, median hourly pay. And you'll see the huge difference between countries there.
The US, top of the league with the proportion of low-paid workers. Denmark, right down there at the bottom, 8.5%. The UK, unsurprisingly, pretty close to the US in the proportion of low-paid workers. France, pretty low. The Netherlands, significantly lower.
The big surprise to some of us, who until this project didn't know much about the German economy, was Germany is right up there in the percentage of low-paid workers. And as some of you probably know better than I in this room, the German scene is changing in front of our eyes, in fact, and that number rises with each update, annual update of the numbers that we get. And I'll have quite a lot to say about that later. It's a particular shock to a Brit like me who for most of his career was trying to explain why Germany was the high-paid country in Europe, too expensive to visit, et cetera, et cetera.
The trends, as well as the levels, are very different across the countries as well. This is since the mid-'70s, and in that period, high level of low pay in the US, but no trend, of course. There had been a big increase in the incidence of low pay in the years not long before that.
Denmark, very low incidence of low pay, no trend. The UK, a pronounced trend rise from the mid to late '70s, though some argued about precisely when it started. Some of us date precisely to the day in 1979 when Mrs. Thatcher entered Downing Street. Others put it a little earlier. And that trend rise went on until the mid-'90s. Since then, it's plateaued.
The Netherlands, the trend derives from the mid-'80s to the late '90s. Not much since then. The French, as always, the ones to buck the trend. A fall from the early '90s. And Germany, a very pronounced rising trend from the early '90s.
Two underlying questions that informed this research, the first one I've hinted at already. Do national institutions make a difference? A particular thing the Russell Sage Foundation were interested in, reflecting some of the argumentation in the earlier work they'd sponsored, was particularly, do national institutions affect the mix of high and low road strategies? This terminology I used to believe in, I now find slightly vague and slightly discomforting, I'm afraid. But I'll say something now, if only to make some sarcastic comments about it later.
The sort of idea is that cost-cutting was enabled in a country like the States by, obviously, union decline, the erosion in the value of the minimum wage, et cetera, encouraging, possibly, firms to pursue a product strategy which was dependent on cost and price competition. And there used to be a view-- still is amongst many people-- that there's a relationship between your product strategy and your production process. And to put it at its crudest, the higher value added, the higher spec your product strategy, the more skilled your production process, and therefore, the more likely there is to be higher pay.
And this, I think, was of particular interest to many of the researchers when we started this project. Did certain institutions encourage, in different countries, more or less encourage firms to pursue that high-spec, high-value-added product strategy, with the consequences I've suggested? I've come to a really pessimistic conclusion about that sort of literature, which I'll come back to later. But that was certainly one of the original underlying questions.
And another underlying question, the second bullet point up there, was, is there some sort of inevitable trade-off, that a lower incidence of low-paid work might be associated with a higher incidence of unemployment? In other words, you know, the standard thing, you pays your money, you takes your choice. I suppose it used to be represented in a caricature sense by some macro people at one time by contrasting continental Europe with the US, the big countries of continental Europe, viz., France and Germany, rising trend in unemployment over the long period since the mid-'60s, but no significant increase in inequality, at least until recently.
We're talking of a literature of the early '90s now, whereas in the States, not such a significant, if any, trend rise in unemployment, but a huge increase in inequality. And I think that question, or that sort of tradition, informed the second question up there. And clearly, I'll return in detail to those questions later.
But two preliminary partial answers. If we're talking about product strategy and the nature of the work, I think our case study people found it very, very difficult to find any significant differences, by and large, between the countries in these sectors in the nature of the job and how it was performed and how it was done and how it was designed. So if that's a proxy for the skill intensity of the production process, the provisional answer is not a very encouraging one there.
There were some exceptions. Food processing workers in Denmark, clearly a very different production process, highly competitive, highly capital intensive sector, and well-paid. And interestingly, in hospital work. Nurse assistants in the Netherlands and Germany, very different sort of set-up there, which was the [INAUDIBLE] but not so much with job design, but occupational design, that essentially, nurse assistants would just apprentice nurses. It was just something nurses, proper nurses, did in their younger days, part of the rite of passage, rather than a segmented dead-end job in its own right.
So there were some exceptions, but by and large, the nature of the work didn't seem to vary that much.
The provisional answer on this trade-off-- if you have a low incidence of low pay, you're going to get high unemployment-- a crude provisional answer would be the one there, that where European labor market institutions do appear to produce a relatively low incidence of low pay, it doesn't seem inevitably to lead to fewer employment opportunities. I mean, the obvious example would be Denmark, which as you saw from that earlier slide, has a very low incidence of low pay, has actually the highest employment rate of any of the countries in the study, and the lowest unemployment rate.
The Netherlands, which has a significantly lower incidence of low pay, does at least as well as the US and the UK in employment rates. The country which is the obvious example, for those who want to believe in this sort of trade-off, is France, of course, and I'll come back to that again later. So those are just provisional answers, and I'll come back in more detail.
What I want to do now is to use the UK as an illustration of what I think are some of the general issues which emerge, though, of course, they're general issues but very specific answers in the individual countries. And in the case of the UK, we can split it between what I lovingly call the Thatcher and Major years there, the years of a conservative government, the two prime ministers, Thatcher '79 to 1990, Major 1990 and much to his surprise 1997. He expected to lose the general election of 1992, and by all accounts was not only surprised but disappointed when he won.
The Blair and Brown years-- in the old days I'd have called this a Labor government-- I think we call it a New Labor Party, which to use the language of industrial economics, moved into the product slot originally inhabited by the conservatives, a rather unusual way of winning a general election. But that's effectively precisely what Blair did in '97. He has now gone off to become God and an ambassador for world peace and a very high-paid consultant, and we now have Brown in office.
The Thatcher and Major years are the ones which coincided with the-- perhaps it wasn't coincided-- with the very large rise in the incidence of low pay in Britain. There isn't time to analyze in detail precisely why that happened. What I want to pick out are some of the obvious institutional factors, which will then be relevant for the broader European case and the European-US comparison.
And the first thing, in terms of the labor market background, Thatcher came in in 1979, when unemployment was always rising. And in the first two years of her period of office, '79 to '81, there's what a former Middle Eastern leader would have called a mother of a recession, by far the deepest recession that Britain had experienced in the post-second war years. Unemployment doubled in two years, and on the then way we calculated unemployment figures, exceeded 3 million at a time when the labor force was about 23, 22 or 23 million.
It continued to rise until 1996, albeit at a more gentle rate, peaked in '96, and there was a dramatic fall in what was called the loss and boom after the then-chancellor of the exchequer, Nigel Lawson, now forgotten, his daughter Nigella is now better known for the cookery programs on British TV. Slightly more appealing than he was.
That boom didn't last for long, and then there was another pronounced recession right at the end of the '80s, with unemployment peaking in '91 to '92. It fell much more rapidly on this occasion, fell more or less the same time as GDP growth picked up. And since then, unemployment has been falling more or less on trend until recently, where there are signs of it just edging up a little bit.
So we've now had a long period of falling and relatively low unemployment. The Thatcher years coincided not just with an increase in the incidence of low pay as we've defined it, but of a massive increase in earnings inequality more generally. Both ends of the distribution floated away from the middle quite dramatically, and huge movements even within deciles. I sometimes have to remind myself that as a university teacher, I'm still in the top decile of earners. It doesn't seem like it when I talk to my ex-pupils one year out of college who work in the city. It's an unappealing sort of conversation when you hear about their earnings power.
So a general increase in earnings inequality. And there's not time to go into the debate as to why that occurred generally, all the sort of stuff we got on skill bias, technical progress, or whatever other reasons there might have been for an increase in the relative demand for more educated labor, et cetera. At the bottom end, it's pretty clear what was going on. All sorts of institutions which might have artificially, if you like, kept low-end pay higher than it otherwise would have been disappeared, and disappeared pretty quickly and pretty dramatically.
Massive reduction in the power of unions, however you want to measure it. Density, trade union density, in fact peaked in '79 at about 53% in the UK, and has fallen effectively every year since. The only reason it seems to have more or less bottomed out at probably, today, no more than about 25% is because trade unions have stopped removing deceased members from their registration rolls, and it seems to be keeping the numbers up a little bit. And the fall in the power of unions was particularly evident amongst unions, perhaps unsurprisingly, representing those workers with relatively little power at the bottom of the labor market.
Although, at that time, a national minimum wage was a distinctly unwelcome Gallic phenomenon, as far as the Brits were concerned, not the sort of thing we were terribly interested in, there were many institutions which did protect low-paid workers. We had a system of wages councils, which were designed to protect workers in industries and sectors which were very badly unionized and thought difficult to unionize. And at their peak, they probably represented 3.5 to 3.75 million workers, and set minimum terms and conditions. Their teeth were drawn in the mid-'80s, and they were finally abolished in the early '90s.
We had a thing called the Fair Wages Resolution, which I mention because I think it becomes relevant for some European points in a few moments. The Fair Wages Resolution related to companies who were tendering for government business-- construction companies wanting to build the 18th lane on the M25, clothing companies wanting a contract to make military uniforms, whatever it might be. And as a condition of tendering, they had to pay a fair wage, and I'll define that fair wage in a moment.
The Labor government in 1975, in an act called the Employment Protection Act, extended the Fair Wages Resolution to the whole of employment, which potentially could have had really quite a significant effect, but for the fact the Labor government didn't last that long, and left office in 1979. Mrs. T abolished both the Fair Wages Resolution and that section of the '75 act very shortly after she came into office.
Independently of regulations, we did have multi-employer bargaining. When Thatcher came into office, most of private sector manufacturing, which was still relatively extensive in '79, had multi-employer bargaining, the engineering sector agreement. They were not legally binding sectoral agreements, as they were-- almost were in Germany, but they almost had that force. Everyone obeyed them.
So sector by sector, the multi-employer bargain set minimum terms and conditions. Effectively, it was a sort of minimum wage by sector for those sectors which had this sort of bargaining. And there were some service sectors, private service sectors, which had them.
Sounds odd to today's ears, but retail banking had a multi-employer agreement. All those multi-employer agreements disappeared, effectively, in the 1980s. The fair wage was, incidentally, defined as the rates set by a multi-employer agreement if there was such a relevant agreement-- otherwise, the going rate for similar work.
The other big thing that Thatcher did and Major did was toughening up on social security, out-of-work benefits, both in terms of their generosity, or reduction of their generosity, in a whole variety of ways I don't have time to go into, but also toughening up on their administration. There weren't duration limits as there were in the States, but they were getting tougher with people drawing benefit and not taking jobs.
So major institutional change, in other words, in the Thatcher-Major years. Since New Labor has come into an office, it come into office in '97, the incidence of low pay in the UK has not increased, but nor has it reduced either. And in fact, in my view, New Labor have essentially adopted policies to maintain this higher level of inequality that had emerged during the conservative years.
They are obsessed with promoting high rates of labor force participation. Part of that has to do with cost competitiveness at the lower end. Part of it's to do with something slightly more religious and moral, at least in Blair's eyes, which I'll come to in a moment.
They really do believe in flexible labor markets. Blair toured the country giving legacy speeches, and I was foolish enough to go to one of them. And essentially, what he said was-- a trade unionist was sitting next to him nodding when he said it as well-- was, forget about power in the workplace, you chaps. Now you don't have that anymore. Employers are all powerful. There's flexible labor markets in as many dimensions as you want to define. The only power you've got is in the market itself, because we're going to give you lots and lots of human capital to make you powerful.
Again, I'll return to that later. That means that in attitudes towards trade unions, there's not been a significant change. They're slightly more friendly towards trade unions than the Tories were. There was an act in 1999 which eased trade unionists' position a little bit. But in essence, the legislative position hasn't changed that much, and nor has the government position.
Blair's major thing was that second bullet point there, the New Deals. He seemed to believe in a sort of social contract. He, I think, genuinely believed that the government had a duty of care to those of the citizenry who were otherwise going to fall into poverty. But he also believed that citizenry had a duty to make a contribution to society in return.
The odd thing is that-- or perhaps not odd, perhaps not [INAUDIBLE]-- the striking thing is that he seemed to have a strong belief that the most viable way of repaying your side of the contract, as it were, to society was through paid work. There are all sorts of other things you can do for society, but it's paid work which is important. And that in a sense, was the essence of the New Deal, was that-- again, I don't have time to go into detail. But essentially, it was still based upon the days when we were worried about relatively high unemployment, getting people back into contact with the world of work, whether from unemployment or inactivity. We didn't quite have the massive number of prime-age males who were officially declared to be disabled, permanently disabled, as the Dutch did, but we did have a large number of people who fell into that category for convenience of social security. So get those back into the labor market as well.
The essence of the New Deal was when you had been collecting out-of-work benefit for a particular period of time-- the precise period of time varied depending on sort of category you fell into-- you were called into what used to be called the Unemployment Benefit Office, is now called in good Orwellian language the Job Center Plus, to have a friendly interview with a civil servant, often behind bulletproof plate glass. And you'd develop a career plan.
You're talking about some guy who's semi-literate, who's been unemployed for three years, developing a career time path, with nodules and things. And once you developed your career plan, you would then be sent off advised for the most appropriate person. And that, in the end, would lead to the offer, preferably, of a proper job. If not a proper job, a subsidized job. If not a subsidized job, something on a work experience scheme, a charitable scheme, or whatever.
And then, if you didn't take that offer, you were in trouble. If you were under 24, you would just lose benefit, which is why we have some people and earners that [INAUDIBLE] in the official figures, because they have lost benefit in this way. The legal position for [INAUDIBLE] work is not quite so clear, but effectively it was forcing people back into work, at low rates of pay, usually.
Blair would then say, if you get into work, and you are low-paid, don't despair, because if that leads into poverty, which of course will depend upon your household circumstances, we'll look after you with generous in-work benefits. Meanwhile, it's the first foot on the ladder. And as you get experience and get used to working again and do well and work hard, you'll clamber happily up the rungs of the ladder, and before you know it, you'll be wanting to buy houses in the same square in Islington as [INAUDIBLE] and myself. That's the slight problem with it, because, of course, the vast majority of people, the evidence tells us, stayed on the bottom rung of the ladder. And if they didn't, they fell off, only to be pushed on again subsequently.
This represents, though, a huge change in our social security system, which I think hasn't really been given quite the attention it deserves. Meanness and increased meanness and harsher administration and out-of-work benefits, much more stress on in-work benefits and massively generous in-work benefits. Basically, the problem with all such benefits is the withdrawal rate and potential work disincentives. You know, if someone earns more, do you withdraw pound for pound for benefit?
And the way they sorted that is by having a low withdrawal rate, which meant very, very generous benefits. I mean, to give you what is admittedly an extreme example, roughly speaking, average annual earnings for a full-time worker in Britain today is about 25,000 pounds. If you happen to be an unmarried parent, usually a mother, with two dependent children, you'll now have to earn 46,000 pounds a year before you stop drawing benefit. So it's quite a dramatic change in the social security system.
It seems odd, therefore, given what I've stressed thus far, that for the first time we introduced a national minimum wage in 1999, two years after we came into office. As we'll see in a moment, though, that national minimum wage was introduced at a very low level, and I think it is consistent with the policy I've been describing, getting people into work more or less at any price. It's based upon the assumption that if you introduce it at a very, very low level, you're probably picking up those employees, or those workers, who are being monopsonistically exploited, where the employers can probably afford to pay more, so there won't be much danger of a big employment effect. And indeed, that's been the experience in Britain thus far.
And we should have something at a low level to pick up the exploiting employers. Why should social security [INAUDIBLE] taxpayer subsidizes it? And indeed, there's a moral hazard there. You encourage them to behave like this.
Just to illustrate that-- I'll pass over for the sake of time this particular slide. If you can read that, this is the adult national minimum wage. We have three different rates. This is for people 22 and over, the highest rate. This is the adult national minimum wage as a proportion of median and mean earnings.
So you see, taking median as a proportion of median earnings, it's less than 50%. Actually, the latest uprating has probably pushed it slightly above 50%. These numbers are a bit out of date. And of course, if you take it as a proportion of mean earnings, the gap between those two lines [INAUDIBLE] is some pretty graphic illustration of the increased inequality at the top end in Britain.
So it is relatively low level. This chart is almost indecipherable, which I apologize. But let me just pick out a couple of points, again, for reference in a moment or two. What this is, is it's taking the obvious categories of male full-timers and part-timers, women full-time and part-timers, and looking at their gross hourly pay, decile-- or percentile by percentile.
And it's showing you the typical story, that full-time men-- that's a terrible expression, isn't it? Part-time men, full-time men. Male full-timers do better than the yellow line. Female full-timers, there's been a persistent refusal to close the gender gap since the big closing in the 1970s. Part-timers of both genders do really, really badly, by and large, but female part-time start losing out probably up around there.
But if you look at the national minimum wage, it's-- if I can actually find the damn thing-- it's this line down here. That's our definition of low pay in this project, for all employees, is that line. So again, a graphic illustration of how low our national minimum wage is. If it's difficult to fit those charts in, I can obviously get copies made, and you can have them later.
So that's a very, very brief story of what I think was happening in Britain, emphasizing the sort of institutions that I think were important in the development of low pay in my country. So let me briefly move on to the European-US story. And what must be evident, I think, from the chart I put up more or less at the beginning, showing the different incidence of low pay in the different countries, is it's unlikely to be a simple US-European comparison. Institutions differ massively across Europe, as does the incidence of low pay.
I think what's coming out of the work-- as I say, not done by just me, but many other people-- are some reasonably clear conclusions. Macro factors appear to play very little-- macroeconomic factors appear to play a small role in explaining differences between countries, both in terms of levels and trends. We've done all sorts of things [INAUDIBLE] the Dutch leader guy called [INAUDIBLE] have done all sorts of things, looking at GDP per capita, the change in GDP per capita, labor productivity change, labor share, value added, all sorts of things. And it's very hard to see much relationship there.
There's one big exception to that, and again, it's Germany. German unification had such a huge shock effect that it's that that has changed many of the institutions, which as I hope I'll demonstrate in a moment or two, is the proximate cause of all the problems Germany is starting to face. But it may well not have happened but for unification.
It also has to be said, incidentally, that no other European economy could have faced the shock at all of unification. It's, in one sense, quite a remarkable story.
Interestingly, the European countries differ quite a lot in both the, as it were, natural course of labor supply at the bottom end, what's been happening there, and government policies towards labor supply at the bottom end. Again, hard to see any patterns coming out between differences there and differences in the incidence of low pay or the trends. Things like increasing female employment rates, which have been rather different from country to country, don't seem to have much of a role. Immigration, which of course has become a huge issue in many Western European countries, both before and after the accession of the former command economies in 2004, it's having an impact, but it doesn't seem to explain differences.
To just give you a crude illustration, if you took four of the countries, and studied Denmark, the Netherlands, France, and the UK, immigrants comprise much the same sort of percentage of the labor force in those four countries. It ranges between 4% and 6%. Very, very different experiences, though, when it comes to low pay and all of the rest.
Social security and income support-- out-of-work benefits, if you like-- the argument there is that ought to have quite a big impact because, put crudely, the more generous social security arrangements are, out-of-work benefits are, the higher the reservation wage is, and therefore the lower the likelihood of low pay. Well, social security arrangements do differ dramatically. The two extremes are Denmark and the US. Denmark with unbelievably generous social security payments, out-of-work payments, the US almost equally unbelievably ungenerous out-of-work payments.
So that fits the pattern quite well, doesn't it, of the incidence of low pay? But it's a much, much messier picture if you look at the countries in between those two extremes. And again, I'll come back to that briefly in a moment or two.
What we're, I think, claiming to be possibly the most important feature here is what we're terming the inclusiveness of a country's labor market institutions. This is a little bit circular in some ways, but there's a crude definition of what we mean by inclusiveness. It's some set of mechanisms with some degree of formality which extend the terms and conditions-- and again, I stress terms and conditions rather than just pay, because other things matter in the world of work than just pay-- which extend those terms and conditions negotiated by workers with strong bargaining power to those with less bargaining power.
Of course, you're in the effluent if there aren't any workers with strong bargaining power at all, and again, that may be a feature I'll come back to in a moment.
And at first sight, you might think this has got something to do with trade union density. Well, I'll put up the density figures for the sake of convenience. Massive differences between countries, of course, in trade union density. Surprisingly, the US is not the outlier here. Look at old France down there. 6% of the workforce were trade union members in 2003. Denmark, 71%. UK, DE, of course, is Germany, and the Netherlands, very close to each other. The US, of course, low.
Common phenomenon of falling union density over the period depicted in that chart. And in the final column there, very, very big differences. But what really struck us was bargaining coverage. You don't have to be a union member to be covered by a collective agreement. That's the key thing. And a key here to multi-employer agreements, you know, that if you belong to an employers' association and they negotiate with the union for national rates in your sector, you may not be a union firm, but your workers are still covered by a collective agreement.
And what you see there-- take the 2000 figures-- are massive differences in coverage. The two outliers now, of course, are the US and the UK. And you'll note there that the coverage figures for 2000 are very little different to the union density figures, a percentage or two points.
Remember, on these numbers, US union density was 12%, coverage 14%. UK union density was 29%, coverage 30%. In other words, if you take this as a crude indicator of exclusiveness, the US and the UK have got pretty exclusive industrial relation systems. Whatever the unions have negotiated for their members, not being extended much beyond that.
Note also a massive fall in coverage in the UK there between 1980 and 2000. That, essentially, is the numerical representation of the demise of the multi-employer agreement I was talking about earlier. Germany, coverage, again, is falling by the day. That number, 68, would be much lower. But a big, big fall in coverage.
Look at the coverage there in the remaining three countries there. France with 6% union density, 90% coverage. And I'll come back again to that as well.
Again, I'm going to pass over this one for a moment. So this inclusiveness is going to be achieved in different ways in different countries. Industry-wide agreements are clearly important. In Denmark, union membership pretty well does it, but not totally.
In other countries, it's employers' associations extending collective agreements that have been made for one particular subset of the workforce. In other countries, it's legal or quasi-legal mechanisms extending what has been agreed for one sector into other sectors. And I'll come back to those mechanisms very briefly in a moment.
Even in the countries, or many of the countries, which are pretty inclusive, there'll still be some weakest left behind, and of course, in some countries, four of the countries in this study, minimum wages are there, at least in theory, to provide a floor for them. And the inclusiveness might be supported by the three things I mentioned there-- product market regulation of certain forms will improve union power, improve their bargaining capabilities. Employee protection legislation might do that.
What also matters, of course, is not just what's formally there, but whether these agreements are effectively enforced at the plant level. And that's where straightforward union presence seems to come in, and where France loses out. They've got high coverage, but very weak union presence at the organization. So the workers get the pay, but they pay for it in-- our case studies suggest in often deteriorating working conditions, massive increase in intensity of work and that sort of thing.
So that's the complex of things we're starting to think is important. Just very, very briefly, Denmark gets its inclusiveness from very high unionization and from solidaristic bargaining. It's the only country which has genuinely solidaristic bargaining. They believe in low differentials and make sure that they happen, by and large.
The French, low unionization, but extension not just by law, but by social coverage, and a very high minimum wage to protect the weakest. But as I say, there's major problems with enforcement.
The Dutch, very similar to the French. But the Dutch also have a sort of corporatist, or we introduced a sort of corporatist bargaining system to try to meet the employment-unemployment problems in the late '80s, early '90s. And they actually negotiated a reduction in their minimum wage, a tripartite negotiation-- real value of the minimum wage. And they also got agreement, tripartite agreement, to use temporary contracts where the workers are not covered by many of the formal extension agreements. And that's, in a sense, what explains the rising, or the trend rise, in low pay in Holland in the '90s.
Germany, inclusiveness has declined massively, absolutely massively. And what almost seems to be happening to the outsider in Germany is the emergence of a segmented labor market, almost-- this incredibly strong manufacturing export sector still with the workers doing pretty well in it, but a weaker and weaker service sector.
What's happened there is the engineering agreement no longer sets a pattern. There's a sort of pattern agreement for the whole economy. Collective agreements are and always have been legally binding in only a few industries.
There's falling employer density now, which means that coverage is reduced. If the employers don't belong to their relevant employers' association, they won't pay the nationally agreed rates. And they're refusing to agree to extensions of agreements.
Also, massive use of various forms of irregular employment to avoid some of the terms of the agreements-- outsourcing many jobs, agency work, and so on.
And then we've got the UK and the US, and these, of course, I said are the least inclusive systems, for pretty obvious reasons. One big difference, of course, between the UK and the US is we've got a massively-- I've said our minimum wage is mean. It isn't if you compare it to the US minimum wage. I mean, I just jotted down the numbers. Our minimum wage is currently five-- where is it? Five pounds, 52 an hour for adults, which sounds pretty good compared to the American minimum wage. But it's still-- my earlier arguments still hold.
So that's the way some of our thinking is going on. There's no one single thing which is going to clearly explain the differences in the incidence of low pay and these trends. But if we're going to pick on one really important thing, it is this exclusive-inclusive distinction is what certainly some of our minds are turning to.
I'm going to skip, although I'm happy to talk about if people want to ask questions. I'm going to skip the trade-off point, and come onto possible-- you know, why was there no clear trade-off? I'm quite happy to come back to that if people want-- and spend what little time remains to me talking a little bit about what we can learn in response to the original Russell Sage question, which was the $64,000 question, which was essentially looking at the lousy jobs that these various functions entailed in the US. Does it have to be like that? What can we learn from Europe?
Well, not for me to say, but I'm not sure Russell Sage are not a little bit disappointed, actually, in what they can learn. But let me just make a few comments. One striking but ultimately unsurprising thing is that the composition of low-wage workers, who they are, is remarkably similar across countries. It's just there are fewer of them in some countries than others, and in absolute terms, they do rather better in some countries than others.
But it's the obvious candidates, I'm afraid, by and large-- the young, part-timers, immigrants, the less-educated, and of course, women. But it's not quite as simple as that. To go back to the UK, it's very striking that if we look at that trend rise of the incidence of low pay in the UK, between the mid-late '70s and the mid-'90s, there was no trend rise for women at all. It was relatively high and it remained relatively high, the incidence of low pay. There was a big trend rise for prime-age males. The incidence of low pay amongst prime-age males doubled, effectively, between 1975 and 1995, from between about 6% and 7% to 13% on our definitions of low pay.
So although it is a problem concentrated on particular groups, it's still a significant problem-- I use the UK here as an illustration-- for, if you like, the standard prime-age male worker. And of course, that's usually, if you take poverty as a household definition, where the poverty relation starts to come in in real force.
And that's true, I think, of most of these countries, with one exception, which, again, is Denmark. I'm caricaturing to an extent here, but a huge proportion of the low-paid, in our definition, in Denmark turn out to be students. And nobody cares about students. That's just a natural sort of phase they go through in their life, just earning a few extra bob here and there. And in one sense, you can see the point. They're not going to be doing it forever.
Another interesting exception is Germany, which I think is an interesting exception. I said it tended to be the less-educated. Actually, quite a lot of the relatively well-educated in Germany fall into the low-paid. This relates to the fact that the Germans do tend to be well-educated as a whole, but you can educate as many people as you like, but if there are still crap jobs, somebody is going to be doing them.
And that's, I think, a lesson that Blair and Brown could learn in Britain. They believe, with a vengeance, that if you increase people's human capital, everything will be fine. They can all get a good job. They don't seem to understand that jobs are designed by employers, and if they continue to design lousy jobs, somebody is going to be doing them even if they have degrees.
So the composition, with the sort of exception, again, relatively similar across countries. The really, really important thing from a US context, if people are concerned with the living conditions of low-paid workers, as opposed to their prospects and the dead-end nature of their work, the really, really important difference is whatever the differences in private wages, it's differences in the social wage which are really, really important-- that, if I can find some numbers very, very quickly, what I mean by that is health insurance, holidays, pension entitlements, all of those things. And those things-- health insurance, pensions, vacation pay, paid vacations-- there's an EU directive that every EU worker now by law has to have 20 days a year of paid vacation, which would seem quite generous for the US.
Parental leave, usually maternity leave, but some paternity leave paid for, et cetera, whereas the figures that I've got here, over 25% of the low-wage workers in the US have no health insurance, public or private. That would be unheard of in any of the European countries. Over 25% of the low-paid workers in the US have no paid vacation or holidays. That would be unheard of in any of the European countries. And over 50% of the low-paid in the US have no paid sick leave entitlements. That would be unheard of in any of the European countries.
So if you're talking about the current living conditions of the low-paid in the US, and Russell Sage want to learn some lessons, there is a very easy lesson to do with government regulation or government subsidy. Some of the social wage is paid by the government, of course, in these European countries. Some is a requirement the government impose on firms. Now, clearly that has tax and secondary consequences, but you know, there is something that could be done there. Europeans, I think, are genuinely shocked by what they see in the American labor market in that respect, genuinely shocked.
Dead-end, what's striking there is that there is a contrast between Europe as a whole and the US. Mobility out of low-wage work is higher, statistically significantly higher, in Europe than in the US.
Now, that isn't to say it's a pretty picture in Europe. A huge proportion of people leave low-wage work to inactivity completely. Those who do get out don't exactly get into the stratosphere. They've still got a crap job. It's still lousy pay. It's just not quite within our low pay definition. But there is more mobility in Europe, and that's something I think we haven't yet quite worked out why that should be. Nobody's worked out why it should be.
What other lessons could we suggest to the Russell Sage Foundation, other than academic caution? Well, the academic caution first. Institutional borrowing is clearly difficult to impossible. What becomes clear is you can't borrow just one thing usually.
You know, you see something attractive about the French system or the German system. Well, not anymore the German system, but the Danish system. You can't take it on its own. Very often, it's all or nothing. And I think it's taken a lot of people who do this sort of comparative policy quite a long time to fully take that on board, that it can be all or nothing.
Successful institutions, of course, may not be sustainable indefinitely. So I suppose if an American wanted to take consolation from all this, he could say, well, it's just temporary. You lot in Europe will be just as bad as us in due course. There's a historic inevitability about it.
I mean, some of those in this room can remember spending a lot of their time working out why the Japanese and the Germans did jolly well in all sorts of dimensions. We don't do that any longer. Currently, the great fashion is for the Danish flex security model. Is that sustainable?
Well, it's quite interesting that if you go back to the trends I put up earlier, where there has been no trend increase in low pay, they have had relatively stable institutions, Denmark and France. Now, France is under immense pressure.
But I don't, myself, think there's an inevitable decline. The British have had very unstable institutions, but they're unstable essentially only for one reason. We had a government which wanted them to change. I mean, there were clearly exogenous circumstances which made it easier for the government to engineer that change, but they needn't have changed.
The German institutions have proved to be unstable, hence the rise in the incidence of low pay there. They've been subject to a shock, an almost unprecedented shock, the unification shock. So I don't think there's a sort of inevitable system Darwinianism at work there. I think, in that sense, countries do have a choice.
But what I think one also learns is if there's an institutional set of institutions which seem to be benign, in terms of minimizing the amount of low pay, increasing mobility out of low pay, and making the conditions of those in that category as benign as possible, it's much easier to destroy those institutions than it is to build them. Very, very easy to destroy institutions. And this is what I think policymakers, certainly in my country, ignore at their peril. You should be very, very careful before you destroy something.
If I talk about what lessons I think one could learn for Britain, which until Germany came on the scene, was thought to be the closest comparator to the US, I think there are some positive and there are some negative lessons to learn.
First, the two negative lessons. We live in a country which is obsessed with training and education. This is why the amount of public spending on it falls per head year by year. Rhetoric and reality yet again in conflict.
But you know, Tony Blair came out with this cogent policy statement during the '97 general election campaign, "education, education, education," and the policy has been just about as well articulated since. We now no longer have a Department for Education. We're so active in policy, it's been split into two. One of them is called the Department for Children, Schools, and Families, which is known now as the Department of Curtains and Soft Furnishings, which shows you the demoralization of the civil servants involved.
But there is this strong belief in, I suppose, a very crude interpretation of human capital theory, that all will be well, both in terms of national competitiveness and distributionally, if we can just give everybody an education. Well, I don't buy that. I'm not saying we shouldn't give everybody an education. It may be a necessary condition for people doing well. But unless you can do something to change the quality of jobs, then I'm afraid it's not going to be a prey to improvement. Somebody is going to be doing the lousy jobs, maybe different people.
The quality of demand, I think one of the things for me as we come towards the end of this project, is I want you to buy the idea that there's a lot of scope in increasing the quality of production, high-spec production, high-value-added production. That will change the production process. It will be more skilled, more productive, and therefore better paid.
I still partly buy it, and I think it's incredibly important for countries like the US and the UK to have as high a proportion as possible of this economic activity in high-value-added production. But I don't think it's the solution, A, because I don't see massive moves that way, whether independently by the business sector nor by governments who are against intervention encouraging the business sector. But I don't think necessarily it changes the production process in the way that we once thought. Put crudely, I think you can still have very high-spec products with very low-skill production processes.
Two more positive things for the UK, which may have some relevance for the US-- as an economist, I used to be very skeptical about the national minimum wage. I worried about it having big employment effects, and I didn't buy the argument often put by trade unionists that it has a good shock effect. You know, it's the old story. If you push up the national minimum wage and a firm has 100 workers who are currently below it, and they're being paid the value of their marginal product, the workers are in trouble, but so is the firm. They may sack the workers, but there's no firm anymore.
So there was always this shock idea, that if you shove up the national minimum wage, it would force some firms to become more productive. I didn't used to buy that. I'm not sure I do. But certainly the experience in Britain today, to date, with the national minimum wage, is that it hasn't had much of an employment effect.
That's not to say it's been entirely benign. The earnings distribution has spiked at and just above the national minimum. And that isn't just the low-paid below that threshold being pushed up there. It's other people being pushed down. Firms have reacted to the higher costs imposed by the national minimum wage by knocking out various salary scales, by cutting out overtime premia, or reducing overtime premia and shift premia. So somebody is paid, in a way, a national minimum wage.
Notwithstanding that, I think I've now come around to the view, because I can't think of much better, that certainly in the British context, it's worth keep pushing that national minimum wage up and taking the risk on employment. I'm reasonably comfortable about taking the risk on employment because if people have got really lousy jobs, I'm not sure it's not a risk worth taking from their own point of view. It's not just "I'm not one of the threatened ones, therefore I don't care." I think it is a risk well worth taking.
And it's a risk the government are clearly very reluctant to take. Our national minimum wage, unlike yours, is uprated annually. But they've put it up-- it goes up each October, and they've announced the rate from October this year, and they're putting it up by 21 p an hour. So I think the government are being-- that's for the adults. They're putting up by 17 p an hour for the developments and for juveniles by 13 p an hour.
Now, I think that's mildly overconservative. It seems to me pretty obvious that your national minimum rate could be pushed up pretty substantially, and it's worth taking the risk as well.
The other thing that I think one can do, and I know it's at least in some eyes very un-American to talk about the public sector. But all our countries have a relatively large public sector, not just in terms of its direct economic activity-- its direct production, if you like-- and its labor force, but in terms of public purchasing. Huge percentage of GDP is actually public purchasing in any country, and that's a huge lever for any government who really is serious about wanting to improve working conditions. That's, in a sense, what the Fair Wages Resolution I mentioned right at the beginning of my talk was all about. You're not going to get government business unless you pay a fair wage. This can be extended to terms and conditions.
And I find it amazing that in countries, certainly in Europe, which claim to be reasonably socially concerned, they're not using the public sector in two ways. One is a model employer. Quite a large percentage of the low-paid on our definition actually work directly for the bloody government. But also as a purchaser, and if there really is a political will, there's a huge amount that could be done there, and I think that's also a lesson that can be learned for the States.
And there I'll stop and apologize, because I didn't plan to go on as long as that. Thank you.
SPEAKER 3: Will you take questions?
SPEAKER 2: Yeah, of course.
SPEAKER 4: Well, I mean, thank you for your presentation. I guess I have two main questions related to the European part of your research, or European part of this research project, and your presentation. My first question is, to what extent you would actually [INAUDIBLE] institutional changes that have been taking place since, I guess, late 1970s, and you focused mostly on the UK, to the particular change of government that took place there. And I think the same story could be said for Germany or some other countries that have gone through this shift from moderate left socialist to more center-right, getting very conservative kind of governments.
Or to what extent you would talk about maybe what you might call a historical institutional perspective, you know, like going to the British case, you have a [INAUDIBLE] tradition that [INAUDIBLE] and so on, juxtaposed to in some continental countries, we have very strong social security schemes. And if so, if you would buy into this sort of argument, why are we not seeing that much difference between Germany and UK, or some continental countries and UK, ignoring the political changes that took place, the unification and so on?
My second question is, would you accept the sort of argument that some political pundits have been making and the kind of distinction that they attribute to the working class, the outsiders and the insiders, insiders being those workers who have some sort of privilege in the system, and that these new leftist governments that have been coming to power in the 1990s mostly focused their benefits on them? And the outsiders, meaning most of the immigrants or low-educated who don't even get to vote, are sort of excluded. And so how much of this is a political story? And I'm really interested in this notion of [INAUDIBLE].
SPEAKER 2: Well, your first question-- I'm no political scientist, he said in cowardly manner, but it's a huge question. If I understood it correctly, it starts with the question, were the sort of institutional changes, let's say, for Britain, I described, purely a matter of political party preferences? Or was there something more profound underlying it?
The easy answer is to say yes, this was Thatcherism. It was political party preferences. But she did get into office on the program which everybody knew about, so it wasn't just her preference.
And I've seen people construct from that a sort of inevitability argument, that developments of one sort or another have been such that radical change was needed if the country was to survive, and Mrs. T was the catalyst for this change, if you'd like. And it'd be hard to deny that there's some substance in that sort of argument. My own take on it is the UK did have major economic problems at the end of the '70s. Business had decided radical change was needed.
But those problems were soluble in other ways, and those other ways would have included not necessarily retaining our institutions unreformed, but retaining the essence of our institutions. And that what happened in Britain was there was no opposition, that Thatcher had built this doctrinaire position over a period of-- [INAUDIBLE], over a period of 25 years, long before Thatcher was even considered as the Tory leader, with the Institute of Economic Affairs and a particular thinking about free markets and so on. And they took their time to mature.
But then they grasped their chance when [INAUDIBLE] remember the governing Labor party was in total and utter disarray. There wasn't an opposition. The German example, I think that's interesting, because, I mean, again, I think you could construct a similar type of argument for alternative solution, but they had a much bigger shock to deal with than the Brits had.
But I think the interesting thing for certain parts of continental Europe is in many dimensions, America and Britain did it first, Reagonomics and the Thatcher supply-side revolution. And there was almost a missionary movement to continental Europe, [INAUDIBLE] saying, there's only one way to do it. You must change your institutions. These things-- your institutions won't work. They're silly and they're old and they smell of [INAUDIBLE], out of date [INAUDIBLE] and things like that.
So I think there was actually almost a political pressure on continental Europe. You know, I've been, at conferences, often addressed by my ex-supervisor from LSC. Well, he's, in very bad French, telling the French they've got to change in this sort of way, et cetera. So I think it was more complex.
Your second question, remind me what it was. Sorry, I've forgotten [INAUDIBLE].
SPEAKER 4: It was about, like, distinctions that you get.
SPEAKER 2: I'm not sure about that process. I don't see too much of that happening here in Britain. I don't see that conscious distinction.
What you have seen in Britain is, I think it's possible to argue, and this is a hypothesis, because no one's done the research on it properly yet, but some people here may remember a literature of the late '60s through the '70s, labor market segmentation literature, [INAUDIBLE] the Netherlands and all of those people. And I don't think they ever proved an extreme form of labor market segmentation. [INAUDIBLE]
Nor did we for Britain. I do have a feeling that we might be getting closer to a segmented labor market, in that sort of way, and that might well create two different types of the working class.
So one sign of that is that occupational mobility has diminished dramatically in Britain. Some people then say that's the same as social mobility diminished dramatically. That isn't true. You see a rather different type of thing in Britain, and again, I'm not sure what [INAUDIBLE].
There is, I think, a [INAUDIBLE] amongst some commentators-- and these are not so much academics as journalists, who are much more influential, by and large-- that we have a sort of hopeless working class, that the lowest three SEGs, as they're called, I suppose, these days, that those who are going to get out of it, have got out of it. The rest seem to be stuck, and there are all sorts of interpretations of that.
But probably the scariest number I can give you that is a little bit deliberately journalistic, is I started university in the mid-'60s, when the age participation rate in higher education in Britain was 6.5%. [INAUDIBLE]. Today, the age participation rate in higher education is, in England, 43% at age [INAUDIBLE], 55% in Scotland, not [INAUDIBLE] has it?
Gives the lie to human capital, in my view. The percentage of the stock of university students coming from the working class, the three lowest socioeconomic groups, is precisely the same today as it was in 1965. Now, in absolute terms, of course, there are more working class kids at university. But I still find that an incredibly scary figure when we're talking about what's happening to those [INAUDIBLE].
SPEAKER 5: Yeah, I have a couple of observations and a question. I mean, it's a very detailed presentation. I had made some notes and I said, he's missing all this. But then you talked about it [INAUDIBLE].
Do you not see that there is a lot of de-skilling, because as the technology is advancing and there's mechanization, the operatives of those machinery or production processes are basically-- you know, they are just say, OK, you press this button to press that button. You don't have to be skilled to do that. You probably get on-the-job training and so on.
So with this lot of de-skilling that we find now in a number of jobs is also partly responsible for the low wage, because if you don't produce much, the chances are you're not going to get more than what you produce. Well, you don't get what you produce anyway. But you get less if the job that you're working at is not high-productivity job.
In my view, even though people are getting education and so on, they are still in the particularly retailing sector. Now, in the retailing sector in the US, there is a lot of labor market segmentation. You have women who are working in that sector. You have blacks who are working. You have immigrants. And you have a large number of students working in the retail as part-timers or, I mean, they're in and out.
But when you add up all those numbers, in the case of the US, it does give you a sizable number of these kinds of people who are manning this sector, a low-paid sector. Many will not get out of it, apart from students and so on. As you rightly said, the mobility out of it is very low, and has these dead-end jobs.
So one was my observation on the de-skilling. And the other is the comment. I was wondering how-- at least, not in your presentation, you didn't address the issue of the economic systems in US versus Europe. They're totally very different, and hence, it would explain why there are certain extreme results that you get in the case of the US and not in European countries, as you rightly said, with their social protection.
I mean, in the US, forgive me, this is basically a private sector economy, market-driven, and the role of the government in regulating certain things does not gel, except the government is now playing a role in bailing out the banking sector. OK, I mean, that's where perhaps there is some kind of market socialism coming in. But that is, in a way, to protect certain interests. You know what I'm trying to-- yeah, exactly.
So I think this might just be-- perhaps it is there in the report. But I think it is very important to allude to that, and that would show why, for example, in Denmark, you are getting the kind of results you get, because it's a very different system. And if you had added Sweden, perhaps you would have got similar to, or maybe more than in Denmark. So I don't know about Sweden, why it's not included. And perhaps that could.
And if the philosophy-- you see, it's a question of what the ideology is, of not only the ruling party of a particular social economic system, but dynamics they want to produce. So if it is based on inequality, then obviously there has to be a certain class that would be in that dead-end jobs. But on the other hand, even if they are in dead-end jobs, in the case of the UK, you have the tremendous social protection, that if you're working, even in a low-paid, you would get in-work benefits that would bring you [INAUDIBLE]. In the past, it used to be income supplementation, to bring you to that level which does not exist. So I think some of these nuances may explain some of the surprises that we find in these results.
SPEAKER 2: [INAUDIBLE] question on, has technological change de-skilled? I find this a mystifying-- and it's something that we haven't been able to address, [INAUDIBLE] at least in what we call by definition the one-off [INAUDIBLE].
Any communists here would probably be slightly surprised to hear what you were saying, because there seems to be, in my trade, a ready acceptance that recent-- about in the last 25 years-- recent technological change has been upskilling. Certainly that's what the British government, and certainly I think what the American government believes. And sometimes, you see macroeconomists stating this as though it's a law of nature, whereas it's pretty obvious that in fact, it's an empirical question, whether any given bout of technical progress is upskilling or de-skilling, and you can construct examples of either.
I honestly find myself puzzled by this literature, because I've spent much time poring over the empirical work done by my applied colleagues, who believe that recent bouts of technical change have been, on average, upskilling, [INAUDIBLE]. And I don't believe they've got the evidence for it, but they think they have. It all seems to come down to the fact that premiums for various types of computer use are high and have gone up and so on, which seem to me to prove buggerall, quite frankly.
So I would be neutral, either way. I could give you lots of practical examples where the technical change has been upskilling, lots of practical examples where it's been de-skilling. So I would be neutral on that one, and I didn't believe in my trade [INAUDIBLE] the evidence they think they've got.
But it's a worrying thing, because certainly my government, and I think the continental governments-- I can't speak to American government-- take it as granted that the demand for skill is rising and rising and rising, and the technological progress is one reason for this. And I just think that's nonsense. I think it's a very stupid way of basing policy.
And linked to that, you made some comments about the sort of people in certain types of jobs. And this sort of amplifies something I was saying earlier, in fact, about why I was skeptical about human capital [INAUDIBLE] out of this, that my research center does skill surveys. We've done [INAUDIBLE] internationally representative surveys and employee surveys.
And we can get a very peculiar measure of the demand for skill, there, where we ask employees a battery of questions. First battery of questions are designed to get to the issue, did you need the highest qualification you've got to obtain your present job? And the second battery of questions are, do you need what you learned when you were acquiring that qualification to do your present job? And of course, you get many more people saying yes to the first question than they do to the second.
But if you took that first question as a measure of the-- at least as far as employees see it-- the demand for skill, we can gross it up to get an aggregate figure, [INAUDIBLE] nationally representative survey. And we have ready-made [INAUDIBLE]. And we have an equivalence system where we can categorize people [INAUDIBLE] national vocational qualification 4 or 5 whether it's academic or vocational, which is bachelor's or above, 3, which is our A-levels, [INAUDIBLE], 2, which is the equivalent of our five-year state secondary exam, GCSE or equivalent vocational, 1 which most European countries wouldn't recognize as being worthy of breathing [INAUDIBLE], and no qualification whatsoever.
And on this last survey, in 2006, the labor force is currently about 28 million in Britain. On that measure of demand, there was an excess supply of people at 4 and 5 of 1 million, an excess supply of people at 3, 2, and 1, quite significant [INAUDIBLE] on those. The only category for which there was an excess demand was workers who had no qualification whatsoever. There appear to be 5.5 million jobs on offer demanding no qualification, more than we have people in the labor force with no qualification.
The government paid for this survey, and I don't expect to get funding for--
When we present it, this is-- sometimes you have to laugh or cry, it depends on the [INAUDIBLE]. But when we were having a meeting presenting the provisional results, so pompous [INAUDIBLE], various government departments sending their representatives. And the person who's been leading the research was presenting this table showing precisely what I've described.
And I could see the civil servant, a woman from the then Department for Education and Skills, clearly getting hot under the collar. And finally she could take it no longer, and she banged the table, spilling her water, and said, look! What you academics don't understand is this business-- this government is not in the business of paying for research which is inconsistent with its policies.
I just wished I had a tape recorder. On your second question, yes, I think in the study we are taking account of the difference in economic systems. And I think our system is not too close to yours. Perhaps you would say, we do have, still, this tradition of providing, in terms of national assurance of various types, which you don't have. I think we are pretty close to yours.
Again, is your economic system inevitable? [INAUDIBLE] Because that's really the important question the Russell Sage funders of this project have got to ask. If they really-- my own personal view, I'm not sure that my colleagues [INAUDIBLE]. My own personal view is if Russell Sage want to take real messages of hope from this, there are messages of hope, but it requires some pretty bold political action, which is not going to deny good old US capitalism. But it's going to take a very bold [INAUDIBLE].
SPEAKER 3: On that note, I think we should probably decide whether to laugh or cry by--
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Ken Mayhew is a fellow and tutor in economics at Pembroke College, Oxford University, and a Luigi Einaudi Scholar.
This lecture was recorded as part of the Provost's Series, which offers the Cornell community the chance to watch videos of lectures by renowned authors, professors and public figures throughout the academic year.