Productivity is growing again – real pay rises could be next
THERE is one reason, above all others, why we should welcome the latest figures on the state of the jobs market. Yes, jobs are being created in vast numbers, and good ones for that matter. But the real positive news is that productivity seems to be going up again, a development of central importance to Britain’s prosperity and to the coalition’s political future.
The economy’s output grew by 0.7 per cent in the last three months of the year, yet the total number of hours worked rose by just 0.4 per cent. That means that GDP per hour worked crept up. This is a crucial development: the only way wages will start to go up again in real terms is if workers start to produce more; the primary reason for the collapse in the inflation-adjusted average wage in recent years has been the cratering of productivity.
On the face of it, real wages are still rising more slowly than inflation. But if one strips out public sector workers, whose pay is being kept low deliberately by the government, a much more positive picture seems to be emerging for those workers whose earnings are determined by market forces. Average earnings excluding bonuses for private sector workers rose by 1.5 per cent year on year in the three months to December, significantly faster than the 1.2 per cent seen in November. The ONS also reports that median gross weekly earnings of the 18.8m full-time employees rose 2.8 per cent year on year in the fourth quarter. It’s all rather encouraging.
The other figures are almost all good, with the exception of the weird 0.1 per cent uptick to 7.2 per cent in the unemployment stats. Over the past year (to Oct-Dec 2013), employment is up by 396,000, unemployment is down by 161,000, economic inactivity is down by 23,000 for people aged 16-64, the employment rate is back up to 72.1 per cent (up by 0.6 points from a year earlier), female employment is at a record high of 67.2 per cent and male employment has recovered to 77.1 per cent (up from 75.4 per cent two years ago, but down massively from the 92.1 per cent seen in 1971). Over the year to January 2014, the number in receipt of jobseekers’ allowance fell by 327,600, the largest annual fall since March 1998. The number of state-supported training roles and unpaid family workers are down, public sector employment is falling, and full time work is increasing. For once, it’s genuinely good stuff.
ZUCK’S GAMBLE
IT’s got just 55 employees, boasts 320m daily active users and was sold last night for $19bn. You can say this of Mark Zuckerberg: he has balls of steel. In buying Whatsapp, a business that is adding 1m users per day all around the world, he’s either just triggered one of the greatest private sector misallocations of capital in recent history (and wasted the 7.9 per cent stake in Facebook being handed over to Whatsapp) – or he’s a genius who is about to capture a dominant share of the global SMS text messaging market. It’s a sector worth $120bn a year to the telcos, though of course the digital entrants will destroy most of this value by making communicating almost free; in terms of volume, Whatsapp is already thought to be processing roughly the same volume as all of the word’s telcos put together, or some 7 trillion messages per year.
The question is this: Whatsapp generates around $1 a year per user, so how on earth can Zuck afford to pay $50 each? Can he pull it off, massively increase monetisation, continue the vertiginous take-up and ensure that Whatsapp endures – and doesn’t become another MySpace? Or is this another deranged bubble, a manifestation of the fact that money is once again too cheap and too plentiful, and that the digital revolution, while great for the consumer, remains powered by economically irrational egos. We will find out in about five years’ time.
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