What If Everyone Had A Job?

In recent times of economic trouble, unemployment in Britain has risen considerably in the past decade. From a relatively healthy 4.5% rate in May 2005, in April 2014 it was recorded at 6.8%- not an insignificant rise in any sense. This has led to the more and more citizens becoming reliant on state benefits- easily proven by the debate over benefits of the last few years, and shows like 'Benefits Street', which makes quite a crude reality-style show out of the lives of a group of unemployed people on benefits.

The ideal situation to most people, after having constantly been hearing news of unemployment in the last few years, is that everyone has a job- that no one is unemployed, that we have full employment.

Full employment has no agreed definition, though of course it cannot mean purely 100% employment- as there is always likely to be Frictional unemployment- that is the unemployment of people who may be searching to change, or is in the process of changing their employment. Christopher Pissarides, professor of economics at LSE states "full employment never meant zero unemployment".

The apparent benefits of full employment are clear- more people would have a wage, would be able to afford a living, homelessness would decrease, no one would have to depend on benefits- but the potential effects of full employment go deeper. Let's look at just a few.

Firstly, an advantage (though I'm sure some would disagree with me) is that full employment would empower regular workers. Employment is a scarce resource, just like oil or gold- and, just like these scarce resources the value of employment increases as unemployment decreases. As more people gain jobs, the pool of unemployed workers will grow smaller and smaller. It will be harder to find employees.
Thus the employees will be empowered more in a world of zero unemployment than in one of unemployment. We've seen recently, perhaps moreso in the USA, that mass unemployment has decreased the value of workers- that they have become almost disposable. As a business could easily find someone else desperate for their job, workers have been suppressed via long working hours, terrible pay and the like. A world of full employment would be the opposite of this.

On the other hand, the potential wage rise that could result from this could simply lend itself to a larger cycle.
As wage demands increase, so would inflation- this was notable for example in the 1970s, when acceptance of union demands for higher wages was closely linked to rising general inflation.
What this does is in effect create a nominal wage increase- people may begin to see a higher number on their paychecks, but the benefits of this would most likely be cancelled out by rises in prices of everyday items, the general cost of living. Take an example- if your wages rose by 4%, but the price of bread rose by 4%, you wouldn't directly benefit on your weekly shop- because the extra money you earned would be spent on the same things you purchased before. If you could normally only afford 1 loaf of bread, after your nominal wage increase you'd still only be able to afford 1 loaf.
This is not what we really want, a real wage increase. A real wage increase would mean increase in purchasing power- so that you could afford an extra loaf after your wage increase rather than one.

The 'cycle' mentioned earlier relates to the business' viewpoint of this. An increase in expenditure on wages that full employment may enforce would be an extra cost that potentially could lead to spending cuts, if the business is not willing to absorb the costs of extra wages (certainly not a rare occurrence). This would lead to people losing their jobs- reversing the effect of full employment. Of course this would be a long term shift, but arguably it implies full employment is no sustainable solution itself, but part of a larger repeating shift in the economy.

So, full employment has potentially far deeper effects than at first glance. Only two have been mentioned here (for the sake of relative brevity)- what do you think about full employment? An ideal target or a false friend? 

Why Do We Buy Designer Clothes?

VIDEO: http://bit.ly/XHuw51

I was in a Ralph Lauren store just yesterday- being the unenthusiastic spender that I am I had been attracted by the large sign in the window that boasted of 'Generous Savings'.

A thousand pounds for a jumper, anyone?

I went in, walked straight to the sale rack and I saw these 'Generous Savings'- a white V-neck sweater was the first to catch my eye. Knowing Ralph Lauren is something of a 'prestigious' brand, I expected it to be overpriced- perhaps £100, on sale at half price to £50?

But no. I was wrong. Very wrong indeed.

The fuzzy Christmas-style sweater was £995.
And the 'Generous Saving'?
£300 off- the sweater, on sale, with roughly 30% off, was £695.
SIX HUNDRED AND NINETY FIVE POUNDS.

Or how about this £46 equivalent?

Other than making me leave the shop immediately in fearful haste, this small event made me think about what we know today as 'designer clothes'.
No doubt, this jumper I saw at Ralph Lauren was not the only one of its kind- I returned home to find a very similar jumper for £46 at Debenhams; still an exorbitant price for a jumper in my opinion, but far less than the RL equivalent.
So what is it that we are paying for if we are to buy this £995 jumper?
Ralph Lauren refused to give exact figures of the cost to make it, but we do know it's handmade, by 'Pure Cashmere Yarn'- which, according to my father (who made these when he was young) would cost a maximum of £30 (considering today's £15 per 50g price of the material) plus labour costs.
Now, unless labour and other costs (eg. transport) for each jumper were over a couple of hundred pounds, it's fair to say the profit margins on every jumper sold would be huge for RL. It wouldn't take an economist to determine that.
Yet people still buy designer clothes. Someone must have bought the jumper; the product department at RL aren't misinformed enough to invest in a product no one would buy.

So why? Why would people buy the Ralph Lauren jumper rather than the Debenhams one?
In the interest of not writing a book of reasons, I tried narrowed this down to three; it was difficult, and I haven't included many, but I think I've done it well enough.

REASON 1- SHEEP MENTALITY
You'll know this if you lived during the craze of Superdry Windcheater jackets (I admit to being guilty myself in this case). This mentality was what enabled David Beckham, in a single magazine photoshoot, to help the Cheltenham fashion brand to grow from a single shop to what is now a global icon in pop fashion, making sales of almost £400m last year.
Essentially, once more people begin to wear designer clothes of a sort, people feel pressured (often unwittingly) to wear the same- to 'fit in', to 'look cool'. Social pressure, exacerbated by the celebrity lifestyle forced into our faces via the media, creates this sheep mentality, of obsessively following trends. Remember crocs? They were once considered cool.

REASON 2- QUALITY
It's a thought perhaps the biggest of cynics (cough cough, my uncle) cannot really deal with, but it is often the case. You'll expect a £165 Barbour fleece Jacket to be made of better materials than a £15 Primark equivalent- and thus the Alcantara-lined Barbour Jacket does cost more. Many people care about the quality- and more often than not designer, expensive brands offer better quality, usually through better, more expensive materials and/or better production procedures, that would make them more comfortable/last longer.
However I think it's safe to say there are exceptions- the aforementioned RL jumper an example of this.

REASON 3- SOCIAL STATUS
This is probably the main objective for the fortunate buyer of the RL jumper- it links well to reason 1 as well. The little logo of a horse, or a seagull, or whatever logo for some people is the main reason for their purchase- because it sends a message to people who see it: that the wearer is wealthy enough to buy expensive designer clothing. That they are fashionable, 'trendy'. It would be overly cynical to state this is the objective of all wearers of designer clothes, as it isn't, but it does explain some of the more ridiculous designer purchases- such as the RL jumper, or these nine-grand Louis Vuitton binoculars (pictured right) that perform the same function no better than a regular £20 pair.

One could argue that designer clothes are unnecessarily expensive- and in many cases they'd be right. For £4 north of £995 I could buy a MacBook Air- which would certainly be of better quality and perform everyday tasks quicker than a £30 laptop (if one exists), saving me time- while the £995 RL jumper would not hold such an advantage (in terms of practical value) over a £30 jumper.

While the quality must be taken into account also, it's worrying in my opinion that a growing focus on outward appearance is increasingly taking its toll on the largely cash-strapped wallets of the Western world. The impact of social pressure, this 'sheep mentality' cannot be underestimated.

So think, next time you're at the Armani, Superdry or dare I say even the Ralph Lauren store. Question your motives; and you potentially could save yourself (or your parents) a few bob.

Thanks for reading. This is probably the longest I've ever taken to discuss largely a single jumper.

Should Footballers Be Paid So Much?

VIDEO: http://bit.ly/XHuBp8

It's debate that's been steaming up in recent years; mostly by the activity of clubs such as Real Madrid, who spent a record-breaking £85 million to purchase Welshman Gareth Bale, along with a rumoured £300,000 a week pay package. Should footballers be paid such huge amounts?

Huge investment in the last decade or so into the beautiful game has launched this debate- kickstarted here in England by Russian oligarch Roman Abramovich, whose 140 million pound takeover of Chelsea FC in 2003 sent shockwaves throughout world football- it was the first major introduction of big, big money into the sport.

According to the Professional Footballers' Association, in the 1950s an England player at the height of his game would have earned today's equivalent of £75,000 a year- a good wage by today's standards (in nominal terms, disregarding inflation and other changes)- that of a doctor or medium-scale manager perhaps.

Today, however, the story is very different. Money is being thrown about by the oligarchs, sheikhs and other billionaire owners of today's big clubs. Abramovich was rumoured to have lured Eden Hazard to Chelsea through a phone call, saying "I don't know what your wage is, but I'll triple it.".

This is simply an example of market activity- supply and demand. Numerous world class clubs other than Chelsea were after the young Belgian attacker- driving up his market price, to the point that he is being paid roughly £180,000. His sale was similar to that of an auction- Manchester United and Manchester City had been put in pole position to sign him, but the tables turned when Chelsea trumped their bids for him- paying £32million.

This attitude that skill and therefore success can be bought, and the strengthening of the impact of supply and demand this has caused in football have led to huge changes in the wages of footballers.

The average wage of Manchester City this year, the highest in the world, was £102,653. Not a year. Not a month. But per week. That's roughly £5.4 million.

Much has been made of such astronomical figures.

In a time of economic trouble and wage stagnation that has recently hit hard most of the population, footballers have been criticised for their huge multi-million salaries, 'all for kicking a ball around'. Middle and lower class wages have stagnated, whereas that of footballers has rocketed in the past decade.
While this certainly is an issue of justice, particularly in nations such as Spain where the employment rate has recently hit 26%, is a curbing of football wages the best way to correct this?

£2.3 million of income tax per Manchester City player (almost £60m altogether from the regular 25-man squad) will have entered the tax pot in the past year- and while this is not an earthshaking contribution (£105 billion was spent on the NHS in 2012/13), it is by no means useless- the tax from Manchester City players' wages alone is a fifth of the Somerset County Council's budget.

So footballers' salaries do actually have an effect on government public spending- though Manchester City alone may not have caused any particular bumps in the government spreadsheets, consider that there are 20 teams in England who pay wages of a similar (slightly lower) amount.
This is undoubtedly a positive contribution- these contributions of tax are certainly high enough in aggregate to maintain public spending in certain areas, in particular areas such as local government noted above.

We must remember one aspect of this debate- the money used to pay footballers is by no means coming without choice from the regular taxpayer. If you want to contribute to footballers' wages you buy a shirt, you buy a ticket to a game- but still, the majority of money for the wages comes from  the wealthy benefactor that is the owner- be is Roman Abramovich, or Sheikh Mansour, the owner of Manchester City.

Footballers' wages are therefore in fact a very effective way in which to funnel money from the wealthy billionaires of the world- it is unlikely that Abramovich, Mansour and the numerous foreign owners of clubs in the Premier League would invest so many millions in Britain if something the scale of the Premier League was not in place. Roman Abramovich has invested over £1 billion on his beloved Chelsea- much of which has been spent on footballers' wages- and certainly much of which has gone into the tax pot to contribute to public spending.


SOURCES:

PFA on past wages http://www.telegraph.co.uk/sport/football/competitions/premier-league/8265851/How-footballers-wages-have-changed-over-the-years-in-numbers.html

Manchester City wages http://www.dailymail.co.uk/sport/article-2604978/Manchester-City-global-sports-salary-list-ahead-New-York-Yankees-Los-Angeles-Dodgers-Chelsea-Arsenal-Liverpool-Manchester-United.html

Spanish unemployment rate http://www.tradingeconomics.com/spain/unemployment-rate

NHS Spending http://www.nhsconfed.org/resources/key-statistics-on-the-nhs

Somerset County Council Budget (£327.9m) can be found on their 2012/13 Statement of Accounts.

Roman Abramovich spending on Chelsea http://www.standard.co.uk/news/1-billion-cost-of-roman-abramovichs-chelsea-empire-6390456.html