Economic Theory

The Skidelsky Report: another blast from the past


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John McDonnell recently said that the Labour Party’s next manifesto had to be “really exciting, full of new ideas”. But some of the ideas we have seen floated recently are very far from new. Renationalising the utilities and repealing Thatcher-Major industrial relations legislation are just turning the clock back, as are demands for sectoral collective bargaining and planned tax hikes. Even the apparently novel idea of a universal basic income, flirted with by Mr McDonnell and Ed Miliband before him, turns out on closer inspection to have been knocking around for centuries, with the 18th-century revolutionary Thomas Paine being an early advocate.

Last week we had another example. The Shadow Chancellor welcomed a report which he had commissioned on a proposal to move to a 4-day week, something that the TUC has been pushing for.

The report was by the distinguished historian and economist, Lord Skidelsky, who wrote it with the assistance of Rachel Kay. It’s a curious document.

It starts from the assertion that full-time employees in the UK work longer hours than full time employees in all other EU countries except Greece and Austria, and the belief that this is A Bad Thing. I have pointed out elsewhere that even on the basis of the figures Professor Skidelsky uses, UK workers have shorter working weeks than their counterparts in Australia, Japan and the USA so we are hardly outliers. Moreover these figures rely heavily on self-reported data, for example on ‘unpaid overtime’, a fluid concept to say the least. Those reporting the longest apparent hours worked include managers and directors, lawyers and academics whose careers may involve working in their own time, but are not under the constraints faced by factory or administrative workers and are usually well-rewarded. Alternative ways of measuring working time in any case suggest that the UK is somewhere in the middle of the EU league.

Not that this necessarily matters. The point that Professor Skidelsky misses is that the UK labour market offers a far wider range of employment contracts than most continental European countries, and thus has large numbers of people working short hours as well as many working longer hours.

The evidence is that most UK workers choose jobs which meet their working hours requirements. Some want to work long hours to maximise pay (over a million people have more than one job for example) given their income targets and family commitments (or lack of them). Others want a limited amount of work as they near retirement or have caring responsibilities. This is the great strength of a flexible labour market, but it is downplayed by Professor Skidelsky, who thinks people on short hours ‘really’ want to work more, while those on long hours ‘really’ want to work less. But there is no one-size-fits-all ideal  working week, as the French found to their cost when they imposed a 35-hour week by law.

The Skidelsky report finds that, contrary to the views of some activists, an imposed 4-day week would cost quite a lot. Although he trots out old stories such as the apparently increased productivity during the three-day week (a ‘natural experiment’ caused by strike-induced power cuts) of the 1970s, Professor Skidelsky is forced to admit that increased productivity in some areas doesn’t mean that a shorter working week would be costless. People working as heart surgeons, firefighters, restaurant and bar staff or home carers cannot carry out all their existing work in a shorter time frame. If they work less, extra staff will have to be employed. Unless people take a pay cut to match their shorter hours, which they show no signs of being willing to contemplate, this will necessarily mean higher prices for goods and services and extra costs to the taxpayer.

Professor Skidelsky sees the 4-day week as only one of a number of ‘back to the future’ measures which include revival of trade union power. The report suggests that fears of trade union power are exaggerated. At one point it is claimed that trade unions only made moderate pay claims ‘until the late 1960s’, a glossing-over of the early postwar period where governments felt obliged to impose almost continuous incomes policies of one kind or another and where the Donovan Commission report of 1968 illustrated how serious an issue this had become.

One of the odder elements of this report is the belief that, despite the lowest unemployment rate for forty years, the UK still has a hidden unemployment problem to which the solution is a government commitment to ‘guarantee a job to any job-seeker who cannot find work in the private sector’.

This suggestion is totally uncosted and considers none of the difficulties which are known to plague job creation schemes – deadweight, displacement, substitution. It is the sort of well-meaning twaddle politicians love to spout but it is surprising to see it coming from a widely-respected academic.

On the other hand, perhaps it isn’t. Lord Skidelsky is best known for his massive three-volume biography of Keynes. But before this, he wrote an excellent study of the life of Sir Oswald Mosley – the leader of the British Union of Fascists. Mosley was a bizarre character, who was a Conservative MP and then a Labour MP and Chancellor of the Duchy of Lancaster under Ramsay McDonald. Keynes and Mosley shared a common rejection of much of market capitalism.

Keynes is never very far from Lord Skidelsky’s thoughts: he even bought his hero’s house. He heads this new pamphlet with a 1943 quotation, and the early part of it is taken up with the puzzle of why Keynes’s prediction that by now we would only be working 15 hours a week and enjoying a Bloomsbury lifestyle has not been validated.

Keynes’s sympathy for public works funded by a fiscal deficit is well-known – both analytically in his General Theory and in his 1929 support of Lloyd George’s make-work proposals in Can Lloyd George do it? 

The proposal for a job guarantee, however, is straight out of the Mosley playbook. It was a central feature of the ‘Mosley Memorandum’ which was put to the Labour cabinet. Mosley demanded that a ‘Planning Council’ should take on the responsibility for employing the unemployed (Skidelsky wants something similar). But the Chancellor of the Exchequer, Philip Snowden, an oddly misplaced classical liberal (a huge fan of Cobden), baulked at the cost and interference with market forces. He and his colleagues rejected the Memorandum and Mosley went off in a huff, resigning from the party in 1930.

So Lord Skidelsky’s pamphlet, far from representing genuinely new thinking on the economy, is really just another nostalgic Blast from the Past.

 

Editorial and Research Fellow

Len Shackleton is an Editorial and Research Fellow at the IEA and Professor of Economics at the University of Buckingham. He was previously Dean of the Royal Docks Business School at the University of East London and prior to that was Dean of the Westminster Business School. He has also taught at Queen Mary, University of London and worked as an economist in the Civil Service. His research interests are primarily in the economics of labour markets. He has worked with many think tanks, most closely with the Institute of Economic Affairs, where he is an Economics Fellow. He edits the journal Economic Affairs, which is co-published by the IEA and the University of Buckingham.


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