Sunday , June 16 2019
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On the use, or not, of expertise by government

Summary:
I will write some thoughts, next week when I have had a chance to collect them, following an excellent PEF booklaunch two days ago, with great discussion from Ann Pettifor, Aeron Davis and Maya Goodfellow and a packed audience. In the meantime, as spring turns to summer, I wanted to write about something else. In a recent post I ask why we were governed by incompetents, and I related that to ideology, which in recent times means neoliberalism. But I think it is a little more than working in a neoliberal context, because I say that the Labour government often did try and do evidence based policy. Not always. I mentioned Iraq but there are other examples, but in comparison to Conservative governments they did evidence based policy a lot. The difference is while the Conservatives had

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I will write some thoughts, next week when I have had a chance to collect them, following an excellent PEF booklaunch two days ago, with great discussion from Ann Pettifor, Aeron Davis and Maya Goodfellow and a packed audience. In the meantime, as spring turns to summer, I wanted to write about something else.

In a recent post I ask why we were governed by incompetents, and I related that to ideology, which in recent times means neoliberalism. But I think it is a little more than working in a neoliberal context, because I say that the Labour government often did try and do evidence based policy. Not always. I mentioned Iraq but there are other examples, but in comparison to Conservative governments they did evidence based policy a lot. The difference is while the Conservatives had neoliberal zeal, Labour were prepared to intervene in the market, particularly to help the poor. A good example was the minimum wage, which was set by a specific body who aimed to keep it at a level that did not cause significant employment loss.

The Coalition government of 2010-5 contained Liberal Democrats who did often check the neoliberal zeal of Conservative ministers. But they often failed to do so, and one example was abolishing the Agricultural Wages Board (AWB) in England. (The rest of the UK kept them.). It was part of their programme to abolish red tape. The argument was that although Thatcher had spared the AWB in her bonfire of wages boards, the minimum wage made it redundant.

I have spent a lot of my life on or near farms. When we moved from London to rural Sussex some 36 years ago I still remember vividly two conversations. One was with a farm worker. I had already noticed the unsocial hours they regularly worked, and I asked him about it. He told me how when his son was born he worked so much that he hardly saw her during the first three months. It was just a bad time of year from the farm's point of view. I guess I remember that conversation so well because we had quite recently had our first child.

What the AWB did and what the minimum wage doesn’t is regulate pay for anti-social of excessive hours. But what about market pressure from labour scarcity? The other conversation I remember was with the owner of the same farm. He was complaining about how hard it was to get additional labour when he needed it. He told me how far he had advertised but it was still difficult. I suggested he try raising his hourly wage. He laughed and said he couldn’t possibly. Those in his local farmers group would stop speaking to him if he did that.

Farming is a classic monopsony, where firms can fix wages well below the market clearing level. The ability of farm workers to find work elsewhere is limited, particularly when employers operate a cartel on wages. The farm I lived on back then was typical: I have watched farm workers working late at night and weekends everywhere I have lived near farms.

Abolishing the AWB allowed farm owners not to increase in nominal terms payments for anti-social or overtime hours on existing contracts, such that they gradually wither away in real terms. It allows farmers not to offer any of these type of payments on new contracts. Some farmers may even have triedto abolish these payments on existing contracts. The governments impact assessment calculated that AWB abolition would lead to a substantial transfer of income from farm workers to farm owners.

I wroteabout the abolishing the AWB in 2014. I later had a conversation with a SPAD about their decision. He told me the level of analysis in my post was well above anything he had seen in government when the decision was made. You might think the policy was not surprising from Conservatives, who have a close relationship with the National Farmers Union (a farm owner’s club), but there was no attempt to get even the simplest of evidence, and a very short consultation period for this decision.

This illustrates a neoliberal zeal to abolish regulations, with the inevitable transfer of income from the poor to the rich, without even thinking about making a serious attempt to look at evidence on this issue. In the absence of evidence the LibDem Coalition partners chose not to fight a battle on this issue. Scotland, Wales and Northern Ireland have retained their AWBs. The Labour party opposition have pledged to reintroduce them in England.





Simon Wren-lewis
Professor of Economic Policy at the Blavatnik School of Government, Oxford University, and a fellow of Merton College. This blog is written for both economists and non-economists.

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