The healthy ageing challenge

The difference between life expectancy and healthy life expectancy might sound like something that is only of interest to healthcare professionals but it actually lies at the heart  of much of our political debate. Questions about the sustainability of public finances, how much tax we will need to pay in the future, how far and how fast public service spending should be cut, intergenerational fairness and even how many immigrants the country needs all depend on the rates of ageing and healthy ageing.

Our long-term fiscal challenge is essentially a health spending challenge. Every year, the OBR produces a report on the UK’s long-term fiscal sustainability which says that upward pressure on public finances means that, even if the government’s public spending cuts are implemented, the country’s debt-to-GDP level will start to rise again in the middle of the next decade. Michael O’Connor put the projections from the most recent report on a single chart. The OBR’s Central projection for public debt (the black line on the chart) is based on a number of assumptions. If these turn out to be wrong, that would change the forecast.  As this chart shows, higher or lower interest rates, different rates of migration and a change in pension policy could all increase or reduce the likely amount of debt over the next 50 years.

OBR key sensitivities

Of all the variables, though, nothing has as much impact as health productivity. The OBR’s central projection assumes that NHS productivity increases by 2.2 percent per year. Over the last 30 years or so, though, it hasn’t come anywhere near that. The OBR estimates health productivity has improved at 1.1 percent since 1979, a rate which, if it continues, will not be enough to counter the health service’s increased costs over the next 50 years. This would therefore push public debt up to around 190 percent of GDP (the pink line on the chart), close to the IMF’s fiscal danger zone.

Increased demand has made healthcare costs outstrip economic growth in most developed countries and most forecasts expect that to continue as populations get older. The OBR refers to the European Commission’s report on ageing which forecasts that the UK’s annual health spending will grow by only 1.5 percent of GDP over the next 50 years. (The OBR believes this is too optimistic.) The IMF, in its recent Fiscal Monitor report, forecast an extra 2.4 percent of GDP by 2030. The OBR’s central projection says another 1.7 percent by 2060 while its low productivity growth scenario has health costs rising by 7 percent of GDP over the next half century. Most forecasters agree that UK health spending will grow faster than its economy over the next few decades.

An ageing population is not the only reason for rising healthcare costs but the prevailing wisdom is that increased life expectancy will add ever more pressure to stretched health systems over the next couple of decades. As people live longer, they will spend longer needing more healthcare and will become in ever increasing fiscal burden on the shrinking proportion of the population of working age.

But this may not necessarily be so. A recent paper by the Campaign for the NHS Reinstatement Bill argues that the demographic time bomb is a myth.

The extent, speed, and effect of population ageing has been exaggerated by the government because the standard indicator—the old age dependency ratio — does not take account of the fact that people aged over 65 years are younger, fitter and healthier than in previous decades. In fact older people have falling mortality, less morbidity, and are more economically active than before. Some forms of disability are postponed to later years.

Old people ain’t what they used to be. People in their 60s are a lot fitter than they were when the retirement age was set. If we redefine what we mean by working age then the picture doesn’t look nearly as bleak.

Most acute medical care costs occur in the final months of life, with the age at which these occur having little effect. It is not age itself, ‘but the nearness of death’ or health status of
the individual in the ultimate period in the last few years or even months before death that matter most.

Jeroen Spijker and John MacInnes, writing in the British Medical Journal in 2013, showed that if we change our definition of old age from age 65 to less than 15 years of life expectancy, our projected dependency ratios don’t look as bad. As life expectancy crisis above 80, people of 65 are no longer classed as old and so the proportion of the population considered to be dependent and beyond working age does not rise as quickly.


But increasing the working age in line with increases in longevity assumes that, as well as living longer people will stay healthy for longer. The gap between life expectancy (LE) and healthy life expectancy (HLE) also determines how much care people will need at the end of their lives. Unless healthy life expectancy increases at a faster rate than life expectancy, the number of years for which people need care will increase.

Figures released last month by the ONS suggest things are moving in the right direction. Life expectancy is rising for both men and women but healthy life expectancy is rising slightly more so the years of ill health each person can expect has fallen slightly.

Screen Shot 2015-08-27 at 15.56.44

Le v HLE1

Source: ONS

The findings of the Global Burden of Disease Study published in the Lancet yesterday were somewhat different. The good news is that the gap between life expectancy and healthy life expectancy isn’t as wide as that calculated by the ONS. The bad news is that it has been getting wider since the 1990s, as it has been in most countries in the world.  People are living longer but living sicker for longer too.

Le v HLE2

Source: The Lancet

The ONS and Lancet figures are based on different methodologies and I hope that some of the medics and health economists who read this blog will explain the relative merits of each one.

What we do know, though, is that life expectancy is increasing as the world becomes more affluent and all countries are faced with ageing populations. If the improvement in people’s health doesn’t keep pace with increasing life expectancy, then the rapidly changing age profile will present a serious fiscal challenge to all governments. But if we can stay healthier for longer too, the pressure on health spending need not be as severe.

The human race is at the start of a great experiment. For most of our history, only a tiny proportion of people survived beyond their 60s. By the middle of this century, the over 60s will be more than 20 percent of the world’s population. We have no idea what the implications of this will be but we will need to find ways of dealing with such a momentous change. One of them will be to keep ourselves a lot healthier for a lot longer.


The Economist has put some of the data from the Lancet report on a chart. It’s those orange bits that cause the problem.


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Gender equity and the demographic time-bomb

Another of those memes that refuses to die is the ageing society as an exclusively European or western problem. Demographic change is a global phenomenon. It may be at its most advanced in Europe but the rest of the world is not far behind.

Last month, the UN released its latest population forecasts. The projections for some Asian countries show the proportion of people over 60 rising at incredible speed over the next three decades. In South East Asia, for example, Singapore,Thailand and Vietnam go from having relatively young populations at the start of the century to age profiles similar to many European countries by 2050.

60+ population SE Asia

This isn’t just an Asian phenomenon either. Emerging economies around the world, having industrialised at a much faster rate than the advanced economies, are experiencing the resulting social change at a much faster rate too. The UN expects demographic change in the countries it classifies as upper middle-income to speed up over the next thirty years. (The definitions are in this document.)

60+ population by income

As countries get richer, people have smaller families and live a lot longer so the proportion of older people goes up.

Some of the upper-middle income countries are ageing at a fascinating rate and will overtake some advanced economies over the next few decades. By the middle of the century, Iran and South Korea will have a greater proportion of their populations aged over 60 than the UK, the US or Sweden, with Brazil and Vietnam not far behind.

60+ population selected

Sweden’s age profile is particularly interesting, showing a gentle upward drift over the next few decades. Those of Norway and Denmark are similar. A study by two American demographers, Thomas Anderson and Hans-Peter Kohler, suggests that this is no coincidence. They found that those countries which have done the most to advance gender equality have also stabilised their birthrates.

Increased work opportunities and the availability of contraception enabled women to choose how many children to have and when to have them. But, say Anderson and Kohler,  cultural norms didn’t change so women were still expected to look after the children and do most of the housework even when they were going out to work. Many women therefore chose to have fewer children or not to have any at all, which led to falling birth rates.

Then something happened. In the late 20th century attitudes began to change in the more developed economies so equality in the home began to catch up with equality in the workplace:

This enormous transformation over several decades is measureable using data on the relative and absolute division of household labor. Using time-budget surveys for the UK and the US, Gershuny and Robinson (1988) for example showed that women’s participation in household work declined substantially from the 1960s to 1980s, while men’s participation increased (though remained much less than that of women). Their findings closely paralleled similar findings for other first-wave developers, like Canada, the Netherlands, Denmark, and Norway, indicating fairly widespread progress during this time period toward a more egalitarian division of household labor in among first-wave developers.

Nearly 12 years later, Bianchi et al. (2000) found the trend toward household gender equity had continued so much so that household work had nearly been cut in half for women in the US since 1965, and doubled for men during this period. An international comparison of unpaid work trends by Hook (2006) revealed similar optimistic results: over-time increases in unpaid work by men in Australia, Canada, France, Germany, the Netherlands, Norway, and the UK. Other recent studies have found similar longitudinal advances in household gender equity throughout Western countries (e.g., Sullivan and Coltrane 2008; Bianchi et al. 2007). Lastly, a comparison of OECD countries shows that by and large, Northern/Western European and English-speaking countries have the smallest gap in the number of minutes women and men perform in unpaid work, while East Asian and Southern/Eastern European countries have the largest (Miranda 2011).

Add in improvements to childcare and the birth rates in some countries began to rise again. Anderson and Kohler call this the gender equity dividend.

The relationship between female labour force participation, gender equity in the home and fertility therefore looks like this:

Screen Shot 2015-08-24 at 16.18.19

In traditional societies where few women are in employment, fertility is high. When firms and governments start employing more women and there is more workplace equality, the fertility rate drops because attitudes within the home haven’t caught up. Once men start taking a more equal share of childcare then it becomes easier for women to work and have children so more of them do. As a result, the fertility rate rises again.

Many Asian societies, they argue, are still suffering from this cultural lag. Institutional equity in workplaces and schools has moved on but attitudes to roles in the home are still very traditional.

Th Anderson and Kohler study is quoted in this week’s Economist piece on the ageing of Asia:

Female literacy is nearly universal, and in Japan and South Korea female college graduates outnumber male ones. Female labour-force participation is also high. But women are still treated in the old ways. Until recently Japanese women were expected to give up work on having children. Working or not, Japanese and South Korean women do at least three more hours of housework a day than their men.

Such cultural lags are associated with ultra-low fertility because if you force women to choose between family and career, then many will choose their career. In Tokyo, Bangkok and other Asian cities, rates of childlessness are sky-high. Women are refusing to marry.

Combine high levels of female education and work opportunities with persisting traditional attitudes and many women choose their careers. Contrast this with some parts of Europe where attitudes to gender roles have moved on.

In Europe the cultural lag closed eventually. Social norms began to shift in the 1960s and have changed more rapidly in the past 20 years. Child care became more widely available. Men started to help with the laundry and the school run. Women therefore found it easier to have both a career and rugrats. In places where this process has gone furthest—France, Scandinavia, Britain—fertility rates are almost back up to the replacement level. In those where traditional male breadwinner/female homemaker roles have lingered, such as Germany and Italy, fertility rates remain low.

It is a persuasive argument and it goes some way to explaining the rapid ageing forecasts for parts of Asia and Latin America, the much slower ageing of Northern European and North American economies and the falling gender pay gap we see in Northern European countries, including the UK.

Even so, bringing birth rates back to replacement level isn’t going to make the problem of ageing disappear. It is caused as much by the top of the age pyramid growing as the bottom of it shrinking. People are living longer and there will be a lot more old people everywhere by the middle of this century. The UN forecasts that, by 2050, almost every country outside sub-Saharan Africa will have a greater percentage of its population over 60 than Britain has now. The rate of change will be most extreme in the emerging economies. As so often seems to be the case with economic data, the Scandinavians are the top of the class and seem to have come closest to getting their demographics under control. Perhaps those countries forecast to experience rapid ageing over the next thirty years should at least take a look at what they have been doing.

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Bank bailouts: Why the US made a profit and the UK won’t

At the end of last year the US government announced that it had made a profit from its bank bailouts. The UK, on the other hand, probably won’t. So what did the Americans do right and we do wrong?

As Leonid Bershidsky explained in Bloomberg earlier this month, conventional wisdom in 2008 was that the UK government was being tougher on the banks.

At the time, Britain’s toughness on rogue bankers was praised and the leniency of the U.S. — which didn’t fully nationalize any big banks — was condemned.

But that’s not how things worked out.

It is at this point unlikely that all of the government’s initial cash outlay of $190 billion at today’s exchange rate will be recovered.

The U.S. government, by contrast, actually made a small profit.

The reason for this has much to do with the relative size of the banks and the country’s economy. The US has some big banks but also a very big economy on which its banks are dependent. The UK has some big banks but it is a much smaller economy and its banks are international.

Bershidsky refers to this fascinating paper by Pepper Culpepper of the European University Institute and Raphael Reinke of the University of Zurich, Structural Power and Bank Bailouts in the United Kingdom and the United StatesIt’s worth reading the whole thing but here are some choice cuts.

Large banks in the United States could not defy regulators, because their future income depended on the US market. In Britain, by contrast, one bank succeeded in scuttling the preferred governmental solution of an industry-wide recapitalization, because most of its revenue came from outside the United Kingdom.

Financially strapped banks could not challenge the government in either country. They had to accept whatever policy the government offered, because only with government aid could they have survived. But healthy banks were not dependent on state aid. Healthy banks in Britain were in a better position to resist the state, and they drove a better deal for themselves than did US banks. As a result, the British government absorbed more risk than the U.S. government and lost its taxpayer more money. In effect, the U.K. provided a costless subsidy to its healthy banks, which benefited from the stabilization provided by the bailouts without having to contribute to their cost. In contrast, the U.S. profited from its bank bailout, because it was able to bully healthy large banks such as JP Morgan and Wells Fargo into a collective recapitalization plan.

Both governments, effectively, insured their banks against losses, providing debt guarantees and capital injections while charging a fee. Insurance is a profitable business if nothing goes wrong. That’s why insurers try to cherry-pick the best clients and discourage the riskier ones. The US government forced all its banks to participate in the bailout, even those banks that were not in trouble. This was, after all, about restoring confidence in the banking sector as a whole. Therefore, so the argument went, even the healthy banks would benefit so they too should pay.

The British government wanted to do something similar but HSBC refused to participate:

The UK government wanted to include HSBC in the recapitalization plan, but HSBC refused. Multiple figures associ- ated with the bailout repeated in interviews with us that the UK government had no tools to force HSBC to take state capital, even though it was the government’s first preference.

So did Barclays:

Barclays never wanted state capital, but when the government negotiated the plan, it was unsure whether it could raise capital privately. Once HSBC quickly announced it would not take state capital,47 Barclays made clear it would go to extraordinary lengths to refinance itself through its share- holders rather than taking state money.48 Barclays kept the option of state capital open until, a few days later, it succeeded in raising the required capital. By then, the govern- ment had announced its debt guarantee programs, which eased funding for Barclays and helped the bank to convince investors to provide capital.

This quote from former Deputy Governor of the Bank of England John Gieve is priceless:

[Barclays] played us very cleverly, in that they managed to negotiate a sum of capital, which they had to raise and that they could raise—from their friends in Singapore and the Middle East and so on. And thereby pass our test, while still getting the benefit of the overall government guarantee.

In other words, they benefitted from the improved confidence in the banking sector that came from the government’s bailout without actually having to pay into it.

To stretch my insurance company analogy, rather than cherry picking the good clients, the British Government was left with the basket cases. The US government, by contrast, was able to charge all its banks fat fees for insuring them and sell off its shares at a profit once the sector recovered. It incurred some losses from the bailout but it more than covered them with its gains, like any good insurer would.

With its payment structure—capital injections and warrants— the US government could recoup its money. It allowed the government to internalize some of the positive external effect of its rescue program. Getting the warrants in the nine major banks generated over $4 billion, and $3 billion of that sum was paid by banks that did not need capital injections: Wells Fargo, JP Morgan, and Goldman Sachs.

How did the US government get its banks to play ball? It bullied them.

US regulators could make Wells Fargo and JP Morgan an offer they could not refuse. In the decisive meeting between the CEOs of the nine major banks and senior US government officials—Paulson, Bernanke, Tim Geithner of the New York Fed, Sheila Bair of the FDIC, and Comptroller of the Currency John Dugan—this regulatory threat was explicit, and it was repeated. In the talking points prepared for the meeting on October 13, 2008, recalcitrant banks got this message: “If a capital infusion is not appealing, you should be aware that your regulator will require it in any circumstance.”43 After Paulson’s presentation of the plan, which reiterated the unpleasant consequences of not accepting the aid, the CEO of Wells Fargo complained to the other CEOs “Why am I in this room, talking about bailing you out?” Paulson’s response was a threat of regulatory consequences: “Your regulator is sitting right there [pointing to the head of the FDIC and the comptroller of the currency]. And you’re going to get a call tomorrow telling you you’re undercapitalized and that you won’t be able to raise money in the private markets.”44 This is an explicit threat from a regulator against a financially healthy bank. The regulator could make trouble for the bank in unsettled markets—the regulator knew it, and the bank’s CEO knew it.

The US regulators are not people you want to mess with.

None of this was because Hank Paulson was a hard bastard and Alistair Darling wasn’t. It was simply a reflection of the relative power of the banks and their governments, as Pepper Culpepper explained in this LSE article:

This different policy was not a matter of different governmental preferences in the two countries. The British government also recognised the virtues of a collective plan that would have forced all large banks to take government money. Yet the British government faced a powerful opponent, over which it held limited leverage: HSBC, a large player in the British market, but a bank based in Asia, which does just twenty per cent of its business in the United Kingdom. HSBC was able to reject the proposal of the Labour government that it take public money, because it was in a position in which UK regulators could do only limited damage to its future prospects. This contrasted with the case of the healthy American banks: JP Morgan earned more than 70 per cent of its revenue in the US, and Wells Fargo 100 per cent. Banks so heavily dependent on the US market were unable to defy the threats of American regulators, given the costs those regulators could impose on them in the future.

The story of these bailouts is indeed one of the power of banks. Yet the power that matters is a function of the economic footprint of banks, not their lobbying strength. The different fate of the two bailouts should lead scholars and policymakers to pay increased attention in the future not merely to the lobbying muscle of banks – what political scientists call their “instrumental power” – but equally to the way in which their role in national economies gives them “structural power” in dealings with government.

In 2008, Barclays, HSBC and RBS were three of the biggest banks in the world. Based on assets, RBS was the biggest, on capital it was HSBC. The US banks were up there too but, relative to the size of their country’s economy, they didn’t loom anywhere near as large, as this chart from Zero Hedge showed.

Screen Shot 2015-08-20 at 17.50.02

A big country can bully big banks. A small one can only bully them when they are weak.

Why did the US make a profit on its bailouts and the UK (and most other countries) probably won’t? In the end, it all comes down to one word. Power.


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British beer – better than it has ever been

London is recovering from a week of beer festivals. The long-standing Great British Beer Festival has been joined in recent years by the Craft Beer Festival and London Beer City, a programme of mini-festivals taking place in pubs across the city. Having them all at the same time doesn’t seem to have created competition between the festivals though. If anything, interest in one seems to fuel interest in all the others – a vast week-long celebration of ale.

Earlier this week, the Telegraph reported that the number of breweries in Britain has tripled over the last fifteen years, reflecting the demand for beer produced by small breweries.

Screen Shot 2015-08-14 at 16.49.37

In the 1970s, there were only four pubs in Britain that brewed their own beer. Received wisdom said that they were anachronistic and would soon go the way of all the others. Beer would be mass-produced by a few big breweries, just like most other consumer products. But the revival of interest in cask beer and the formation of the Campaign for Real Ale in the 1970s started a microbrewery revolution. Shortly afterwards, in 1979, Jimmy Carter deregulated the US brewing industry and American craft brewing took off.


Real ale and craft beer have become divisive terms for some people. There is an element of generational tribalism about all this. In the 1970s, beardy hippies drank real ale. In the 2010s, beardy hipsters drink craft beer. I, from the beardless generation in the middle, enjoy both.

The two terms are not mutually exclusive. Real ale refers to the way a beer is kept and served. It has to be allowed to continue fermenting in the cask or bottle and be served without artificial pressure. Craft beer is a more nebulous term meaning beer brewed by small independent breweries. Because the term originated in the US and American brewers tend to serve their beers under CO2 pressure, a lot of people think craft beer = keg beer. The comments from beer festival drinkers in this Guardian piece are typical.

In fact, a lot of craft beer in Britain is also real ale. I spent a pleasant evening on Thursday working my way through Thornbridge’s range served from casks at Clerkenwell’s Craft Beer Co which, incidentally, always has over a dozen craft cask ales on the go.


Most of the breweries in the UK that describe themselves as producers of craft beer serve at least some of their range as real ale. To blur the line that bit more, some of Britain’s long-established independent breweries are now adopting the term craft beer on the quite reasonable grounds that they have been brewing beer as a craft for years.

Some people complain that the influence of US craft brewers has made us all start drinking very hoppy astringently bitter beers. That may be so but even here there is now a reaction going on. Some craft brewers are now brewing darker and maltier beers. American brewers are even starting to brew milds. The traffic in beer influences is two-way.

One of the first things I noticed about the American brewers, when I first visited craft beer bars there in the 1990s, was their irreverence. Because their brewing tradition had been extinguished by prohibition they had no pre-conceived ideas. They were doing mad things like making English pale ales flavoured with strawberries, porters with coffee and wheat beers with grapefruit. It is the US brewers who must take most of the credit for reviving the India Pale Ale in its original strong and bitter form, as opposed to the blander version we had been left with after the beer weakening during the First World War. Like Halloween, the Americans took an old British tradition and sold it back to us. They then went on to develop the Black IPA which is, of course, a contradiction in terms. Brewing an IPA with dark malts is a ridiculous idea but one that has created a fantastic new beer style. We have the Americans to thank for pushing the boundaries of brewing and encouraging brewers everywhere to create some truly original beers.

The result of all this is that beer in the UK is probably better than it has ever been, in terms of quality, choice and availability. Real ale and craft beer are still seen by some as retro movements, harking back to some idealised form of beer from the past but, if ever this were true, it certainly isn’t now. The newer brewers, especially, are moving away from giving their beers oldie worldie names and logos. These are 21st century products with 21st century branding. British brewing is a modern industry taking beer off in all sorts of exciting new directions. Some people will still whinge about craft beer but you won’t hear me complaining. These days, there is a mind-boggling array of great brews to choose from. Beer has never been so good.

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Another tsar we don’t need

The government has appointed Michelle Mone as its start-up tsar. Presumably that’s different from a self-employment tsar because we’ve already got one of those. The government thinks we need more startups and it has asked Ms Mone to help and encourage more people to start businesses, especially in economically deprived areas.

The trouble is, persuading people to start new businesses might not do much to revitalise depressed areas. A 2008 study by Pamela Mueller, André van Stel and David J. Storey found that new firms created jobs but only in the areas which were already prosperous.

Our first finding is that in some locations increases in new firm formation do indeed lead subsequently to new employment, but in other cases they do not. Our second result is that the impact on employment is greatest in the prosperous areas and least in the least prosperous areas.

study by David Storey earlier this year found something similar. New firms thrive in high wage areas and they fail in low wage ones. In poorer areas, there just isn’t the money to enable businesses to grow. As fast as new businesses create employment for their owners, they destroy it by taking business from others.

As Paul Nightingale and Alex Coad say, the typical British startup is a shop or takeaway that, if it survives, just puts another one out of business. 

The typical entrepreneur is more like someone who starts from an underprivileged position (people with good jobs are less likely to start firms), uses his/her savings to start a low-productivity firm (e.g., a fish-and-chip shop), in an established highly competitive market (e.g., a town with two fish-and-chip shops, but a market that can only support one). As a result, if they are still around in 2 years, which is unlikely, it is only because they have displaced a similar marginal firm.

And their impact on the local economy?

It certainly is the case that a small number of start-ups has a positive impact on the economy, but most of the time, for most of the firms, and for most of the performance metrics, the economic impact of entrepreneurial firms is poor.

A recent report by the Joseph Rowntree Foundation and the Social Market Foundation found that self-employment is no easy route out of poverty:

[T]here is little guarantee that promoting more self-employment will act as a panacea for poor access to work. Much self-employment is low paid. And often, particularly where the underlying factors contributing to poor work opportunities are low skill levels or poor local economic conditions, promoting self-employment does not tend to work as a way of creating jobs. These same factors – low skill levels and poor local economic conditions – also reduce the likelihood of success in self-employment.

If the area where you live is poor, there won’t be many people with the money to buy what you have to sell. If there are no companies taking on people with your skills, there won’t be many willing to hire you as a freelancer. If the local economy is depressed, lots of people setting up shops won’t make it any less so.

For most people, the financial rewards from self-employment are low. Earlier this year, Michael O’Connor, using a FOI request to HMRC, showed just how low.

These charts show the numbers and average earnings for those self-employed people earning below £100,000, grouped by their different circumstances.



About half the self-employed have income from other sources but for those who have no other income, their average earnings are extremely low. It’s not surprising, then, that the self-employed are more likely to be claiming tax credits than those in employment.

Screen Shot 2015-08-13 at 16.18.33Chart via RSA

Encouraging people in poor areas to set up new businesses will simply shift them from one form of poverty to another and may well shunt some of their neighbours who are currently running businesses back into unemployment. There will be the occasional success story which the government will use to show the scheme’s success but the overall impact on jobs and the local economy is likely to be slight. Businesses thrive where there are people with money to spend. Small businesses are most likely to succeed where there are big businesses buying their products or paying their customers’ wages.

Some people have suggested that Michelle Mone lacks the credentials to be the startup tsar. I don’t know enough about her to comment but the choice of tsar is not the problem here. Poor areas don’t have the resources to support new startups. The best business brain in the world isn’t going to change that.

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The fattening of the rush hour

Five years ago I asked whether people were starting work earlier. Based on my own observations and anecdotes from others, it seemed to me that roads and railways were packed with commuters at times of the morning when they used to be almost deserted.

Thanks to an article in the Economist, retweeted in the context of yesterday’s Tube strike, I now have some data to back up my hunch. Since 2001, the number of people using the Underground has increased and so has the length of the rush hour. It’s more like a rush three hours now. As passenger numbers have increased at peak times, the number of  people leaving early or delaying their journeys has also risen. In just over ten years, the volumes have shifted at each end by about half to three-quarters of an hour, so 6.15am now looks like 6.45am used to.


This example from the article reflects many people’s experience:

When Catherine Mulligan, a part-time economist at a non-profit group, commutes from her home in south-west London to her office in Clerkenwell, in the centre, she chooses her departure time carefully. Either she gets on the London Underground early, at around five o’clock in the morning, or she works at home and travels in when the rush hour is over. Such early and late starts may seem an annoyance, but neither is as bad as the alternative. “I avoid the peak hour because it’s hell,” she says.

The worse the Tube gets at peak times, the more people travel earlier or later so the rush hour gets wider. I suspect the data would look very similar on overground trains and buses and that something similar is happening in other major cities. TUC research last year showed that, since 2008, commuting times had increased almost everywhere.

It wasn’t supposed to be like this. Technology, we were told, would turn us all into e-commuters, working from home and connecting by video links. Few people would trudge into work every day. The term e-commuter sounds vaguely old-fashioned now and there is certainly not much evidence of people abandoning the traditional office. The home-working revolution, which caused a flurry of excitement a while back, turned out to be just another aspect of the rise in self-employment. Among employees, the percentage working from home has risen only slightly over the last fifteen years.

Home working 2014

Source: ONS

Transport for London (TFL) is planning for a 30 percent increase in population but a 60 percent increase in Tube travel by 2050, which suggests that they are not anticipating the death of commuting during the next three decades.

It’s expensive and time-consuming to travel into city centre workplaces but still we do it. It’s not just because employers don’t trust people to work from home. Most of us still like to go into a workplace at least for part of the week. There is something about working with people face-to-face that can’t be replicated by technology.

I keep hearing that work is a thing you do, not a place you go but most people in Britain will be heading off to work by train, bus or car today. This will probably be so for years to come. Decades from now, a lot of people will still be going to work. And people will still be getting up at 5am to beat the rush hour.

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Why a richer Africa means more migrants

Britain’s Home Secretary Theresa May and France’s Minister of the Interior Bernard Cazeneuve say that the only long-term solution to Europe’s migration problem is to stop so many Africans wanting to come here in the first place:

Ultimately, the long-term answer to this problem lies in reducing the number of migrants who are crossing into Europe from Africa. Many see Europe, and particularly Britain, as somewhere that offers the prospect of financial gain. This is not the case – our streets are not paved with gold.

We must help African countries to develop economic and social opportunities so that people want to stay. We must work with those countries to fight illegal migration and allow people to be returned to their home countries more easily. This means a better targeting of development aid and increased investment.

All good intentions, of course, but the trouble is, ‘paved with gold’, at least in this sense, is a relative term. The gap between income levels in Africa and Europe is massive and is likely to be so for some time. And here’s the rub; as Africans get that bit richer, more of them are likely to try their luck.

That might sound counterintuitive but it makes sense when you think about it. The increase in per capita incomes in African countries, while not doing much much to close the gap with Europe, give people the extra resources they need to emigrate. As Paul Collier said, the relationship between income and propensity to migrate is like an inverted U. The poorest would like to migrate but can’t afford it, the richest can afford it but wouldn’t gain much. It is those in the middle that have both the incentive and the means.

A fascinating report from Senegal in the Wall Street Journal found that the country’s increasing prosperity is not encouraging people to stay at home, it is enabling more of them leave.

Senegal is a stable West African democracy, and Kothiary has profited from the currents of globalization transforming rural Africa’s more prosperous areas. Flat screen TVs and, increasingly, cars—mostly purchased with money wired home by villagers working in Europe—have reshaped what was once a settlement of mud huts. The wealth has plugged this isolated landscape of peanut farms and baobab trees into the global economy and won respect for the men who sent it.

But it has also put European living standards on real-time display, and handed young farm hands the cash to buy a ticket out.

They leave behind a proud democracy whose steady economic growth has brought American-style fast food chains, cineplexes and shopping malls to this nation of 15 million, but hasn’t kept pace with the skyrocketing aspirations of the youthful population.

The flat-screen TVs raise expectations and the computers and mobile phones give access to information about how to get to Europe.

West Africa houses several of the world’s faster-growing economies but is also sending some of the most migrants out.

Deaths along the route are also high. And yet aspiring Senegal migrants are undeterred. In Facebook chats, college students swap tips on how to avoid or appease police and bandits: “Just be polite,” was the advice a friend typed to Ibrahima Sidibé, a 28-year-old at the country’s top Cheikh Anta Diop University.

Students there, Mr. Sidibé included, have cashed out their scholarships to pay traffickers for a ride to Tripoli. Even their professors have traded in paychecks to journey north, joining policemen, civil servants and teachers, said Souleymane Jules Diop, the country’s minister for emigrants.

“People don’t go because they have nothing, they go because they want better and more,” said Mr. Diop. “It’s aspiration.”

As Christine Mungai, for South Africa’s Mail & Guardian notes:

One of the more intriguing nuggets about the Africa emigration story is that far from fleeing poverty, migrants out of the continent are likely to be relatively well off, and are rarely from the most destitute families.

Data from the UN’s World Migration Report shows that African emigration rates to the OECD countries are strongly related to GDP per capita, and to household wealth, as these migrants are more likely to have the resources to pay for transport to and resettlement expenses in the OECD countries, and are more likely to have the education and other skills required to find jobs there.

The journey across the Sahara desert and over the perilous Mediterranean costs anything between $1,000 and $3,000, and often, payment is strictly in advance.

Research suggests that most people want to emigrate not because they are poor, but because their reality does not match up with their aspirations and what they expect to get out of life – it’s a relative, rather than absolute, dissatisfaction.

Research by UCL’s Centre for Research and Analysis of Migration found that the probability of migration increases in line with household wealth in Asia and Sub-Saharan Africa but decreases in Latin America, reflecting that region’s greater per capita incomes.

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For most of the world, the richer people are, the less likely they are to migrate. In Africa and Asia, though, a certain level of wealth makes people more likely to migrate because they have the means and access to information.

The UCL study comments:

Our findings conform remarkably to the predictions of our simple model: whereas migration probabilities decrease in Latin America (the richest region), they increase with the individual wealth index in Africa and Asia. The association between migration intentions and various dimensions of local amenities (e.g., contentment with public services, security), however, is negative for all regions.

That last point is important. Security and good government makes people less likely to migrate and the lack of it makes them more likely to do so. But cheaper travel and instantly available information about the world outside means that people are able to flee oppressive regimes in greater numbers.

In Syria and Iraq, for example, outbreaks of violence against Christian minorities are nothing new. Despite their troubles, the Christian populations hung on. They had nowhere else to go and few had the means to escape. In contrast, the sectarian violence of the last decade or so is likely to spell the end of Middle-Eastern Christianity. Where once people might have stayed and fought back, or died trying, they now emigrate. Communities that have existed for two thousand years look set to disappear within decades. Last year, Syria accounted for the most migrants attempting to cross the Mediterranean.

So far this year, according to the Economist, most Mediterranean migrants have come from Gambia, Senegal and Somalia, which illustrates the multi-faceted nature of the migration. Some of it is political, some of it is economic but all helped along by cheaper travel and more widely available technology.

Writing in IRIN last month, Christopher Horwood, of Kenya’s Regional Mixed Migration Secretariat, commented

Modern mobility is also empowered and inspired by unprecedented levels of connectivity – particularly through email and social media – and the virtual proximity of a seemingly obtainable better life. Immeasurable though it may be, we cannot underestimate the force of aspirations, dreams and adventurism of many young people stuck in what they regard as politically restrictive, socioeconomic backwaters.

There is evidence suggesting that migration actually increases as countries become more prosperous and educated. As the lions of the African economy flourish in what is dubbed by some as the African Renaissance, expect more migration not less, as increasing numbers of people have the resources to migrate.

Eventually, there may come a time when the wealth gap between Europe and Africa is reduced to the point where people no longer feel the need to migrate. That is unlikely to happen for many years though. In the meantime, as Africa gets richer, more people will have the knowledge and the means to migrate. The streets of Europe will still be paved with gold and more people will have the wherewithal to go looking for it. As Christine Mungai said, expect more overcrowded boats.

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