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