Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Marrin
Speaker 1: Drugs Money Weekly round Up, our debrief on the biggest
Speaker 1: stories in the markets and economics. I'm Marrin Sum's that
Speaker 1: web editor at large for Bloomberg UK Wealth.
Speaker 2: Now I'm Joined Stappeck, Senior report at Bloomberg and author
Speaker 2: of the Money Distilled newsletter.
Speaker 1: So, John, you know people say to us all the time,
Speaker 1: can you list Brexit benefits for us? What did you
Speaker 1: get out of that? What's the big win?
Speaker 2: Listen?
Speaker 1: And now finally here we are a couple of years
Speaker 1: on admittedly, but we've got a very obvious stand up
Speaker 1: Brexit benefit. We've got a very obvious stand up Brexit
Speaker 1: benefit thanks to Donald Trump.
Speaker 2: Yes, thank you Donald. We're going to get charged Lord Tardiff's.
Speaker 2: And if we remained in the EU, which is actually
Speaker 2: pretty good because it also means that we can negotiate
Speaker 2: our way out of even the ten percent that we're
Speaker 2: meant to be paying quite quickly, whereas if we were
Speaker 2: stuck as part of the EU, then we to Macro
Speaker 2: and talking a big game because he's coming up for
Speaker 2: elections soon and needs to act a hard mind and
Speaker 2: also whatever all the other countries decide that they want
Speaker 2: to do, so it's gonna be pretty difficult to chat
Speaker 2: about that one. So yeah, it is a bonus. And
Speaker 2: this part of the reason, it is explicitly part of
Speaker 2: the reason were left to be more flexible.
Speaker 1: Yeah, to be inflexible, also not to get bogged down
Speaker 1: and the endless negotiations. But it's first before before the
Speaker 1: EU can negotiate with the US, they have to negotiate
Speaker 1: with each other, and that handless and relentless and as
Speaker 1: you say, tied up in an awful lot of big
Speaker 1: egos and who's getting elected when and who needs to
Speaker 1: look like to their own voter base, etc. And here
Speaker 1: are you saying that Kirstama doesn't need to look like
Speaker 1: a hard man.
Speaker 2: No, I don't think he does. I think Britain when
Speaker 2: it comes to the USA, there's just you know, there's
Speaker 2: just the current electorate anyway, he's kind of four years
Speaker 2: away from an election. You can't get much less popular anyway.
Speaker 2: But also I don't I don't think that the average
Speaker 2: British person is that bothered about sort of making some
Speaker 2: big stand on America because at the end of the day,
Speaker 2: the reason that we've got ten percent tariffs is because
Speaker 2: we don't you know, we don't run a good deficit
Speaker 2: with them, so it's just not that big a deal.
Speaker 1: And services one included in this brand of tariffs, and
Speaker 1: we are mainly a service economy for good or bad.
Speaker 2: Well, yeah, and I don't think they will be no.
Speaker 1: I mean, this is about rebuilding America's manufacturing person it's
Speaker 1: not about the services sector.
Speaker 2: Yeah, And I said, I mean the services thing is
Speaker 2: interesting too because it does tie into the Brexit stuff
Speaker 2: again because one problem that we always had with the
Speaker 2: EU is that the goods area was basically broadly sping
Speaker 2: open borders, but we can never get any kind of
Speaker 2: agreement on the services site, partly because you know, that
Speaker 2: would have been more helpful for us because that's where
Speaker 2: all of economy was. So it's just flagging that up again.
Speaker 2: You know, it kind of stuck with a situation which
Speaker 2: we were when in anything and the you know, we're
Speaker 2: in a bit of possession for being liberated from that.
Speaker 1: There we go see exciting times. Now this actually isn't
Speaker 1: really about us, and it's not really about the UK
Speaker 1: relationship with the US. This is in the main about China.
Speaker 1: Pretty much. You know, the biggest tarraf is not absolutely
Speaker 1: the biggest, but some of the biggest are on China
Speaker 1: and Chinese goods, and added to the previous tariffs on China,
Speaker 1: it doesn't make it really very high. And the same
Speaker 1: for a lot of the countries that the US thinks
Speaker 1: that China might run goods through to get them into
Speaker 1: the US. So what we have here actually tell us
Speaker 1: about the islands, John tell Us about the Islands.
Speaker 2: Yeah, I know, it's interesting because we saw quite a
Speaker 2: few tweets to be talking about who Trumps slapped to
Speaker 2: ten percent TATA for aliens that have done nothing more
Speaker 2: than penguins level knowing them. And the mutual friend Marcus
Speaker 2: as was pointed out to me that well, I said, look,
Speaker 2: this isn't as daft as it looks. If you want
Speaker 2: to stop ships running contraband goods, then you take a
Speaker 2: look at all of the flags they might be running
Speaker 2: until not just the flag is a ship. And so
Speaker 2: it's the same with us. It's that you can't root
Speaker 2: goods through venue I to see because suddenly it's the
Speaker 2: only country in the world without any tartaffs on it.
Speaker 2: So it's it's basically just covering all the bases and
Speaker 2: making sure there's no look poles.
Speaker 1: Yeah, but imagine if everyone now reached their goods through us,
Speaker 1: that would be terrible finally get some use anyway, So
Speaker 1: it all comes back to the fact that, I mean
Speaker 1: a lot of this is going to unwind over the
Speaker 1: next few days, a few weeks, a few months, or
Speaker 1: the negotiations will be will begin, these tariffs stay. There
Speaker 1: are lots is going to change, but nonetheless all their
Speaker 1: stems right back to China entering the wto the big
Speaker 1: competition globally over the last couple of decades to be
Speaker 1: the I guess exporter, all this mercantilism, et cetera. It
Speaker 1: comes back to the same thing we always talk about,
Speaker 1: this rise of globalization that has driven inequality inside X
Speaker 1: manufacturing economies X manufacturing economies of course, because all the
Speaker 1: manufacturing and the high paid jobs in those areas have
Speaker 1: ended up off sure driven inequality in some of the
Speaker 1: Western countries. Looks like it's driven a lot of the
Speaker 1: inequality in the US. And so someone was always going
Speaker 1: to step in and say this doesn't work.
Speaker 2: Yeah, I mean, it is interesting because before all this
Speaker 2: and before it was kind of Trump that was in charge,
Speaker 2: there weren't a lot of complaints even from slightly more
Speaker 2: left lean and economists. For example, Germany needed to spend
Speaker 2: more and of the biggest consumer economy. People have been
Speaker 2: seeing the same thing about China for years in fact,
Speaker 2: I mean arguably China has sort of attempted but kind
Speaker 2: of futilely a biggest consumer economy. And so again, Trump's
Speaker 2: kind of just pushing for something that people have been
Speaker 2: complaining about as being clearing flaws in the global economy
Speaker 2: for something for my entire career. So I think you
Speaker 2: might not be very happy about the way he's going
Speaker 2: about it. But at the end of the day, the
Speaker 2: previous softly softly approaches clearly we're not working, whereas this
Speaker 2: is doing something I don't know. I think it creates
Speaker 2: an awful lot of uncertainty and volatility in all the
Speaker 2: rest of it. But it's definitely pushing it towards the
Speaker 2: resolving the things that people have been complaining about for
Speaker 2: a long time but haven't liked the potential trade offs
Speaker 2: that that would imply, where the things they don't like
Speaker 2: to be fixed.
Speaker 1: Yeah, So as ever, with him, it's an amplification of
Speaker 1: an existing trend. Yeah, yeah, right, speaking of which, bizarrely,
Speaker 1: today on the Bloomberg UK website, the most popular article
Speaker 1: is absolutely nothing to do with harr, has nothing to
Speaker 1: do with global and equality, and nothing to do with Trump.
Speaker 1: It's all about the UK. It's minimum wage. And you
Speaker 1: wrote this, I mean, fascinating piece of this on wage
Speaker 1: wage suppression in the UK. Tell me about that. I
Speaker 1: agree with you. By the way, I agree with every
Speaker 1: word in this article.
Speaker 2: That genre really interesting. It's more you know, I've got him.
Speaker 2: I was a little bit surprised they kind of mentioned
Speaker 2: that this is as well, but yeah, it's basically about
Speaker 2: the minimum wage going up to the point where it
Speaker 2: is counter productive. And I just took a we look
Speaker 2: at the statistics. So the minimum wage was introduced in
Speaker 2: nineteen ninety nine and it was with three pounds sixty
Speaker 2: and I heard at that point and now it's going
Speaker 2: up to over twelve pounds an hour. But if you
Speaker 2: look at the gap between the average elenins for a
Speaker 2: forty forty nine year old in the UK, and what
Speaker 2: I've done is I've just basically assumed that if you're
Speaker 2: a full time worker, you can basically say that age
Speaker 2: is kind of like approxate for seniority case, so a
Speaker 2: full time marker in the UK in two thousand and
Speaker 2: three times what a minimum wage worker got, and then
Speaker 2: over the last kind of twenty five years that's falling
Speaker 2: to just over twice as much. So that's called wage compression.
Speaker 2: And the basic argument is that there's two problems. One
Speaker 2: problem is that you're getting paid less for taking on
Speaker 2: more responsibility, so it's less attractive to go for those jobs.
Speaker 2: And the other big issue is that between industries it
Speaker 2: gets harder a differentiat between basically jobs that most people
Speaker 2: would say are easier or more appealing to do than others. So,
Speaker 2: for example, you've get a choice between working a care
Speaker 2: home with everything that that entails and the level of
Speaker 2: actual responsibility that entails for looking after sick people and
Speaker 2: actually working a relatively clean job at Tesco, say, and
Speaker 2: they both pay the same amount, or you know, there's
Speaker 2: only fifty per an hour in it, then it's going
Speaker 2: to be much harder for the less pleasant jobs to
Speaker 2: get recruited for. This has a big impact on the
Speaker 2: jobs market, on the morale of people within your organizations.
Speaker 2: And I suspect that this get something to do with
Speaker 2: poor productivity. It's clearly not the.
Speaker 1: Only issue productivity, because people don't try harder to get
Speaker 1: promoted or to move up a level at work because
Speaker 1: it's it's much less worth the bother than it used
Speaker 1: to be.
Speaker 2: Yeah, and then you throw in everything else that's happening well,
Speaker 2: for example, obviously the marginal tax rates and the fact
Speaker 2: that if you had over one hundred thousand pounds and
Speaker 2: you've got kids, you can actually end up losing money
Speaker 2: because you won't get your free childcare. The other thing
Speaker 2: that's been happening recently that didn't put in but this
Speaker 2: idea of equal pay for basically just different roles. So
Speaker 2: recently there was this rule in the Asda the men
Speaker 2: that because more men worked in the warehouse than women,
Speaker 2: the the people on the shop floor, so we can
Speaker 2: pay the same as the people in the warehouse. And
Speaker 2: that is not what most people assume is meant by equality.
Speaker 2: You know, equality is meant to be that if a
Speaker 2: guy's sweeping the floor and a woman sweeping the floor,
Speaker 2: they both get paid the same. It's not meant to
Speaker 2: be that if somebody is like stacking shelves and somebody's
Speaker 2: kind of running to tell that's the same job, because
Speaker 2: it's not the same job. It's a different job, and
Speaker 2: there should be a market rate for these jobs rather
Speaker 2: than something that's imposed. The point is that there are
Speaker 2: so many jobs now that basically pay the exact same
Speaker 2: amount or it's very close to it, and that makes
Speaker 2: it much much harder to differentiate. And then again because
Speaker 2: so much money, because the minimum wage has gone up
Speaker 2: so far and so fast, there's less money left over
Speaker 2: for anyone not getting paid minimum wage, which means that
Speaker 2: again you can't maintain the differentials, which used to be
Speaker 2: a really important thing in union negotiations. I've listened to
Speaker 2: a lot of the Dominic Sandbrook books about the seventies.
Speaker 2: Thing that comes up a lot of the time and
Speaker 2: the talks about the unions is like the wage differentials
Speaker 2: really mattered. You know, those meant to be a gap
Speaker 2: between the guys doing one job and the guys do
Speaker 2: another job, and the ones who were you know, they
Speaker 2: kind of the more senior people were very aware of
Speaker 2: how much more they were meant to be getting paid
Speaker 2: than the people below them. So again, if you if
Speaker 2: you can compress that, then you're causing real problems in
Speaker 2: terms of people's desire basically work hard.
Speaker 1: That well and in terms of the status and the
Speaker 1: improved lifestyle that they feel comes with working harder. Yeah,
Speaker 1: And I suppose student loans feed into that as well,
Speaker 1: don't they, Because you reach a certain a certain income,
Speaker 1: relatively low income, and suddenly you've got another nine percentage
Speaker 1: points of marginal tax rate. So that takes away from
Speaker 1: your interest in earning more money as well. If you're
Speaker 1: a graduate, which increasing numbers of people are.
Speaker 2: Well, yeah, I mean Duncan Robinson and the economist too,
Speaker 2: I think makes the button we'd call them, wrote something
Speaker 2: but this's a couple of weeks ago and basically made
Speaker 2: the point that if you work a forty hour week
Speaker 2: minimum wage and the UK now you'll be getting paid
Speaker 2: more than twenty five pounds a year, and twenty five
Speaker 2: thousand pounds is the point at which the graduate attack
Speaker 2: kicks in. So if you're a graduate, are you what
Speaker 2: in a minimum wage job? Then you are getting less
Speaker 2: than someone who they didn't graduate and is working the
Speaker 2: same minimum wage job. So I mean, on the one hand,
Speaker 2: the good news is that maybe people will think twice
Speaker 2: about going in the unit.
Speaker 1: None of these policies were intenders to bring us to
Speaker 1: a world where people thought carefully about going to university
Speaker 1: because they'd end up with a lower net income and
Speaker 1: some working on the minimum wage.
Speaker 2: Yeah, that's pretty counterproductive, regardless of what you think is
Speaker 2: the value of a university degree.
Speaker 1: Counterproductive policy. We're about to find out quite a lot
Speaker 1: more about that, aren't we over the coming weeks and months.
Speaker 1: The extent to which American policy is counterproductive. This is
Speaker 1: bigger than whether a couple of people in the UK
Speaker 1: go to university or not. We will be talking more
Speaker 1: about the tariffs and the global economy over the coming week,
Speaker 1: so listen in and hopefully things will begin to settle
Speaker 1: down a little. Thanks for listening to this week's Maren
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