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September 25, 2008



"What they did do, though, is raise the fear of unemployment and so keep wage growth down."

Remind me again why this is a good thing.


Perhaps, Phil, that could be phrased "remind me for whom this is a good thing".


How does this help areas struggling to absorb large waves of migrants?


Phil - the conventional answer runs like this:
if wages are lower at any given level of unemployment/aggregate demand, firms will be inclined, at the margin, to take on more workers. Also, if a given level of unemployment produces fewer wage pressures, the Bank, less fearful of inflation, will hold interest rates down, again raising demand.
For both reasons, the result should eventually be a lower "equilibrium" level of unemployment - more jobs.


1. If 100,000 got child benefit, then that means there must be no less than 100,000 extra children in the UK requiring state education, visits to the doctor etc. Has he factored in this cost into his assessment? What about the effects on housing?

2. What are the figures for non-A10 country migrants (eg Pakistani Mirpuris, Bangaldeshi Sylhetis)?


Depends on the skill level of the migrants. Borjas (2003) uses the approach of examining variations in supply shifts across different skill groups, but assumes workers who have the same schooling but different levels of experience are imperfect substitutes in production. He reaches the conclusion that, in the US, as well as harming the employment opportunities of native workers, overall, a 10% increase in supply of labour reduces wages by 3-4%, with the effects being comparatively worse for those of lower skill-levels.

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