Great Aunt Margaret, The Bishop of Litchfield, Downton Abbey Strip-0-grams.

Before I start I would like to make it clear that my Great Aunt Margaret had nothing to do with the Bishop of Litchfield or any kind of strip-o-grams, although all of these people will appear in this blog.

I wanted to write this after reading a series of  newspaper articles about the increase in inequality in the UK.  I have kids, and worry like most parents about the world they are growing up into.

Newspaper stories about inequality tend to fall into one of 2 categories.  The first type claim that inequality in the UK is the worst it has been since some point in the past; the 1980s, the 1950s, the 1940s. Each newspaper article seems to be outbidding the last for how far back they can push the historical comparison.

The second type claims that inequality has been rising inexorably since some time further in the past. This links to a narrative from writers like Thomas Piketty – an inexorable growth in inequality is baked into capitalism, and that a more equal society only happens after some kind of economic shock like a World War.  There are some examples of these articles in the references at the end.

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This is a photograph of my Gran and her sisters, taken in the 1950s.  She is top row 2nd from the right, her Mum is in the middle. This is a photograph of an era which was deeply unequal, socially immobile and class based.  The kind of society, which according to a number of newspapers we are heading back to rapidly.

Of the woman in the photo most of them ran a home and raised large families of children, while the men worked in occupations which varied from skilled manual work through to running small shops. I knew some of them as old people when I was a child, and while there must have been some inequality of income between them it wasn’t immediately obvious.The lived in similar houses, ate similar food (pies).  They were also fiendishly good card players.

My Gran, and her sister Margaret both worked.  My Gran attended Sunderland Teacher Training college, now part of Sunderland University, and qualified as a Primary School Teacher.  The College was based in Langham Tower on Ryhope Road and was women only.  The college’s other course, Naval Architecture, was men only. She worked as a teacher in County Durham until she was married and gave up work.  The “marriage bar” in teaching had been officially removed by Sex Disqualification Removal Act 1919, however the practice continued for decades afterwards in areas like Durham where male unemployment was high. The Civil Service itself only lifted its Marriage Bar in 1946. 

My Great Aunt Margaret is bottom right. She was the live in cook/housekeeper in a large house at Sandbanks, Dorset, kept by a Sunderland Solicitor named Wright as a holiday home.  She was the last of my family to enter service, although there had been plenty before her, particularly on the Modral side. Uncle Willie and Aunt Kate, worked for the Shuttleworth family at  Old Warden, in Bedfordshire – they were the last of a long line of gardeners and servants going back longer than I can remember.

There was never any particular reticence about her job, no-one ever seemed to be surprised or embarrassed.  It was a respectable job for a woman of our social class.  Margaret always spoke fondly of the family she worked for and they seemed to treat her well.  At the start of the C20th domestic service was the largest employer of woman in the UK (c. 1.4m) and I am surprised how little we talk about it.   When my Grandad bought his house in Longacres for £300 in 1933 his friend Bill Howe moved into a Council Houses at Moorlands nearby.  Bill had a live in maid, and the Council allowed him an extra bedroom to accommodate her.

From a modern perspective I find the idea of employing full time servants baffling.  The costs and resources needed for even a small sized domestic workforce are well beyond all but the richest middle class families today.  Yet back in the 1930s Solicitors, Doctors, even Vicars had servants.

Vicars are an easily tracked sub-group of British middle class society, partly because they have been round or a long time, and also because they have been complaining about being underpaid since the middle ages.  This makes them a great source of data.

Thanks to Lambeth Palace, Church House, Durham County records office and a few other sources I was able to put together some ideas of the incomes of Vicars and some similar professions, from  the first half of the 1930s.

The Bishop of Lichfield earned £4200pa, took home £2600 after tax and rates, paid £800 for servants, train fares and his motor car.  We know a lot about his income, and his Diocese, because he wrote a chapter on the Poverty of the Clergy for a report of 1933.  I was impressed that in accounting for his income he lumped together his servants and his motor car.  This was roughly double the salary paid to a Cabinet Minister at the time.   

My Grandfather, who was a School Master probably earned £300-400pa. Secondary School teachers and Headmasters earned more – between £500-600.

An Army Officer (2nd Lieutenant with 7 year service, married) earned £500pa

The average living for a Vicar in the diocese of Lichfield was £275pa*.  Wages for the clergy varied widely, and a small number earned considerably more.

A Durham Miner earned just over £100pa, in an era when unemployment was high in the coalfields.  Wages had fallen considerably from their peak in the 1920s.

Live in staff earned a lot less, largely because their employer provided accommodation; my Great Aunt probably earned between £50 and £60pa; a maid less again, between £20-30

By comparison at the time the Labour Party were campaigning for the National Living Wage of £250pa.

This tells us income for a range of professions, however to form a full picture we need to see what it costs to maintain a home with servants.  These are the personal accounts for a prosperous Vicar, married, with one child at School, and another living away at University from 1933.

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It is commonly said that the decline of domestic servants in the UK started with WW1.  As men went away to the front woman replaced them in industrial jobs, which fundamentally changed the Labour Market.  As it got harder and harder to find servants, middle class woman got used to managing the house by themselves, with fewer and fewer staff.   

“You can’t get the staff these days” was a familiar complaint.

As technology improved it was easier for a woman who didn’t work to manage the home herself, with a part time cleaner, than to hire, accommodate and manage servants.   

Despite all of the changes in housing people might be surprised that there is still a good sized employment market for servants in the UK.   According to the Office for National Statistics from the 2012 Labour Force Survey, about 65,000 people are employed as domestic workers by British households. If you are interested in the kind of jobs available the on line version of The Lady always has adverts for Butlers, under Butlers, Cooks and Housekeepers.

Wealthy households don’t have as many staff as they used to, and the vacancies in The Lady reflect an ageing population – more carers, fewer nannies   Partly the fall in opportunities reflects technological change – it takes fewer servants to run a big house full of appliances, and partly discretion – rich people are more discrete about their servants that a century ago. 

In fact overall it takes a lot fewer poor people to meet the needs of rich people than it did a few decades ago.

[Anyone googling hiring Butlers at random needs to be careful that a good proportion of the sites are for nude Butlers, and Downton Abbey Strip-o-grams, which is a completely different part of the Labour Market].

Before we go any further with this I want to make it clear that I am not suggesting that the return of big houses and servants is a good thing, nor am I equating having a cleaner to having a man in a Stressman suit who opens your front door.  But as  the gap between the rich and the rest gets bigger and bigger in the UK we apparently approach the levels of inequality that we last experienced in an era when having servants was common place and respectable.   

Which begs the question?  Why don’t people have someone in stripey trousers to open the door?  My household probably occupies a similar position in the economic hierarchy as a prosperous vicar did 70 odd years ago, if not slightly higher.

One of the most obvious economic changes is the cost of housing.   The Vicarage House, on the Old Warden Estate where Willie and Kate worked was sold in 1937 to Richard Ormonde Shuttleworth, the local landowner, for a “consideration of £1250”. He then granted it to Revd Edward Wells, the Vicar of Old Warden.  I assume £1250 was the price agreed by Mr Shuttleworth and the vendors, who were the Church of England’s ‘Governors of Queen Anne’s Bounty’ a scheme set up in 1704 (during Queen Anne’s reign) to augment the incomes of the poorer clergy in England.  The Rev. Wells probably resembles the chap with the £1000 expenditure above

It is only when we inflate the salaries in the examples in line with inflation that the real changes become obvious.

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The salaries for a housekeeper are starting salaries, an experienced cook/housekeeper with staff working for them can earn up to £50,000pa.   Live in Au-pairs start at around £8,000pa in London, although you would need to meet the costs of food and housing on top of that.  I am not sure how this works with the National Minimum Wage.

Vicars have seen their salaries increase by more than inflation, although they still lag well behind their equivalents in other middle class jobs  The pay of Bishops has collapsed.  The pay scales for Cabinet Ministers, Teachers and Army Officers are remarkable similar, which is a testament to the efficiency of Public Sector Pay Review Boards.

Our prosperous clergyman with expenses of £1000 a year would equate to the modern equivalent of a newly appointed NHS Consultant, Senior Civil Service Grade 1, or Headteacher Group 6.   A Downton Abbey strip-o-gram earns about £100 per strip, plus a £25 non-refundable booking fee, in case your are wondering.   

All of this would indicate that in 2 crucial dimensions our society is much more equal than in my Grans day.

Firstly the role of women in the workforce has been transformed.  If we took the same photo today of my wife, my sisters and sisters-in-law every single one of them works in high status, high income professions.   All of them come from 2 income families. Gender inequality, has been transformed, if not wholly solved.

Secondly – while the incomes of middle class earners has risen pretty much in line with inflation wages at the bottom end have increased much faster.   The real reason why domestic servants are so much rarer is because they are much more expensive.  The gap between the poorest paid and middle class people is much closer than it was.

So – why the do we believe that we are becoming a more unequal society?   Is it actually true?

The analysis above only shows a more equal society because it misses out 2 groups.  I haven’t dealt with anyone from the lowest income groups in the UK, nor have I included anyone in the very highest income brackets – the top fraction of the top 1%.   That’s because this is based on the real lives of my family, and over the last 100 years or so no-one in my family has been very rich or very poor. 

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If we add in these groups the UK becomes the 7th least equal society out of the 30 Countries in the OECD LIS data, and the 4th least equal in Europe.  I leave it up to you to decide where on the graph we would like to be one day.

For most of us in our day to day lives we live in a much more equal, much more egalitarian, much less snobby or hierarchical society than our Grandparents.  While there are big differences in salary between a CofE Vicar and an NHS Consultant with a merit award they are not so big that it is impossible for them to be friends.  In fact despite the disparity in Salary most people would recognise both as belonging to the same extended social class.  Our definitions of class seem to have extended to cover wider and wider groups of people with similar experiences and tastes, despite wide ranges of income.

The people at the far ends of the pay spectrum live apart from the rest of us, and we don’t really interact with them.

There is also one final aspect of inequality which struck me writing this. Clearly my family have changed a lot since my Gran’s generation.  Like lots of families we have become upwardly socially mobile.   

If you come from the well off family, go to a good school, and are well connected the chances are that you will grow up to be well off.

If you come from a poor family, don’t have access to good education, live in a poor party of the country, and have a social circle of other poor people the likelihood is that you will grow up poor.

It is this respect – social immobility  – that our times most resemble the 1930s rather than income inequality.   

The 20th century expectation that each generation would be better off than the preceding one is no longer being met. People born in the 1960s, 1970s and early 1980s have lower incomes than their predecessors had at the same age. Those born in the 1980s are the first postwar cohort not to start their working years with higher incomes than their immediate predecessors. Home ownership, the aspiration of successive generations of ordinary people, is in sharp decline, among the young especially. Most shocking of all, today only one in eight children from low-income backgrounds is likely to become a high income earner as an adult.” State of the Nation 2016

For those are wondering what happened to Great Aunt Margaret, her younger brother John played outside right for Burnley.  He retired from football after a full back snapped his ankle, and went to work in Luton at the car industry.  Aunt Margaret moved to live nearby, and took a job in the factory too.  She moved back to Pittington, and lived up the road from us.   

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Big thanks to the archivists at Church House, Lambeth Palace, Durham County Records Office for their help.  

The main sources I used for this were:

Clerical Incomes: An Inquiry int the Cost of Living Among the Parochial Clergy, Masterman 1933

The Deployment and Payment of the Clergy, Paul, CIO 1964

Office Holders in Modern Britain 1815-1879, University of London 1984

History of Durham Blue Coat Schools, R Chadwick, 1958

Royal Commission on the Coal Industry 1925, National Archives

Church of England Clergy Stipends Report 2016, Clergy Stipends Authority

State of the Nation Report, Social Mobility Commission, 2016

http://www.lady.co.uk/

If you are interested in the kind of inequality thinking going on this blog, while well researched and accurate ,is typical of this trope:

http://blogs.lse.ac.uk/businessreview/2017/04/27/the-long-run-tendency-for-wealth-to-concentrate-in-a-few-hands/

The Guardian has a really good ongoing series of articles on inequality. This, from Yuval Noah Harari posits a singularity of inequality in the near future:

https://www.theguardian.com/inequality/2017/may/24/are-we-about-to-witness-the-most-unequal-societies-in-history-yuval-noah-harari

These are the accounts for a couple of other Vicars a bit less well off than our chap with a £1000+ a year.  The represent the rough equivalent to a family on an average income today:

 

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Yuri Gagarin, Juicero, Texas Tom, and the Office of National Statistics.

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We had our first ever meeting last week with a venture capitalist.  He was an impressive chap, knowledgable in the way that a professional investor should be.  I learnt a lot about investing just from one meeting, although not enough to decide whether Venture Capitalist should be capitalised or not.

Most people don’t ever meet VCs, Hedge Fund managers, or Private Equity investors, despite the enormous influence they wield over which businesses get funding, and which don’t.  My mate Pete slightly misheard and demanded to know why I was meeting with a French capitalist rather than a salt of the earth British one.  Brexit means Brexit after all.   

Mostly we associate these kind of investors with High Tech, cutting edge, industry disruptors, driving fast paced change in the economy.  We are used to thinking that we live in a world of dizzying technological change that is transforming our lives when in fact the rate of change in lots of fields of technology is getting slower, not faster.  The big transformative technological changes, flight, TV, space travel, through to washing machines happened a couple of generations ago.

When my Grandad was a small child the first motor cars were raced at over 100mph at Brooklands.   After centuries when the top speed that man could travel at was set by the velocity of a fast horse, this was a massive leap forward.  He lived near the goods depot at Gilesgate (when Durham had a goods station), and saw the first 100mph Steam Train – The Flying Scotsman.

When my Dad was a small child Chuck Yeager because the first human being to go faster than the speed of sound in the Bell X-1.   From 100mph to 770mph in one generation. 

When I was a toddler Charlie Brown, the Apollo 10 re-entry vehicle achieved 24,791 mph, the fastest speed ever by a human being.  A long way from the Flying Scotsman.

My children are 17 and 12.  They have never seen a major speed landmark achieved; the current water speed record was set in the 1970s; the fastest manned aeroplane was the 1960s, the land speed record was the early 1990s.  Apart from a few obscure records the pursuit of speed is over.   The world last supersonic passenger jet was scrapped a few years ago

Attempts to break speed records are about as cool as the World Strongest Man Competition, which is to say, a bit naff.

There are regular claims that the US will try and restart the Space Programme, but right now the only launches taking place are satellites to improve Internet or Mobile Phone coverage, and some experiments for high priced tourism. I took my kids to the Museum in St Petersburg to see the Russian space programme.  It was ancient history to them, and the analog nature of so much of the technology made it look even older.  Yuri Gagarin was as far away in time to them as the Tsar. 

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At the risk of being too dismissive lots of the dizzying advances in technology in recent years have been aimed at improving our leisure time, rather than pushing the boundaries of the possible. 

The same pattern can be seen in Pharmaceuticals.  The number of patents being submitted in the UK remains high, and the number of breathless newspaper stories heralding the rise of medical miracles is equally prolific.   

The majority of these patents however are new uses for old molecules rather than new molecules themselves.  These patents are designed to extend the patent protection period on existing drugs by re-licensing them for new uses and new populations.  The number of genuinely new molecules emerging from the product development pipeline of major Pharmaceutical companies is falling.  A BMJ paper a few years back rated new patents on how innovative they were in offering treatments – the proportion of new patents they rated as highly innovative is falling, as companies try and extend the patent life of existing treatments.

At the heart of this problem are the economics of the pharmaceutical industry.  In order to keep shareholders and investors happy big Pharmaceutical companies have prioritised maintaining patents on existing drugs, and creating treatments for Western ailments such as obesity and erectile dysfunction.   Really useful stuff like a cure for Malaria has dropped down the priority list. 

If you want an image to represent the gap between the treatments that patients need and the economic priorities of Pharmaceutical companies watch the Great North Run. Loads of the athletes taking part will be wearing vests supporting medical research charities – Cancer Research UK is popular, MND also.  I ran for Arthritis research, which seemed like a positive investment in my own future. 

Each one of those brightly coloured vests represents a point of market failure.  People are raising money through charities to do the job that the big Pharmaceutical companies find uneconomic.

It can be hard intellectually to resolve the conflict between the newspaper headlines trumpeting the latest breakthroughs in pharmacology, with the decline in actual innovation, but the same gap between reality and headline occurs in lots of places.   We read loads of headlines about the rise of robots to take our jobs, but the biggest robot take over of the workspace is relatively mundane and low tech – the movement to self service check outs in supermarkets and DIY stores.  I say DIY stores but in reality I mean Homebase as they are close to the only company left in the business.  I miss Texas Tom.

It is possible to see the differential pace of changes in terms of cycles of technology, but fromm the perspective of a small business trying to raise funds to grow it is hard to separate technological innovation and business growth from patterns of investment.   

Some of the technological advances I listed above were driven high levels of state spending, on both sides of the ideological divide, during the Cold War.  Lots of them weren’t – they simply date from an era when investments, both private and state went into different things.   It is no co-incidence that the list of everything getting faster all of the time comes to an end around the time the Berlin Wall comes down.   It is even less of a co-incidence that the areas where technological change is still growing strongly are the ones where the state is still active in aiding development (this is a massive subject in it’s own right, and I will come back to it I promise).

From the 80s onwards deregulation of financial markets became a popular policy choice, first in the in US and UK, then, as the Cold War ended, in countries making the transition from Communism.  Financial markets like Wall Street and the City of London, which had always been important in allocating capital, became more and more powerful. 

The theory was that rational utility maximising actors such as Banks, VCs, Hedge Funds, Private Equity firms working in deregulated markets should have become more efficient at allocating resources as they were freed from regulation and government interference.  The greater the deregulation, the greater the efficiency.

Over the last 30 years it is clear that things haven’t quite worked out like that.    

It is easy to find examples where investors and capital markets have made odd decisions, without having to look deep into the heart of darkness that is the Credit Crunch.  Juicero recently raised $120m to develop a juicer that was linked to the internet of things.   Linking things to the internet of things is currently a good way of getting people to invest in what would ordinarily be a very humdrum business opportunity.   

Investments like Juicero look like innovation when they are pitched to investors, but in reality there is nothing innovative about it – it is 2 sensible ideas (fruit juice and the internet of things) mashed together to create one weird idea.   

A similar phenomenon can be observed in the on demand market.  Investors have backed the Uber of Hot Food, the Uber of Groceries, the Uber of Flowers, the Uber of Booze, the Uber of Gardening, the Uber of Dry Cleaning.    All of these have been lucratively capitalised despite the real Uber failing to actually make a profit.

Who would like to join me in pitching an on demand musical instrument delivery service – the Uber of Tubas?  On demand greasing and oiling services?  Lets set up the Uber of lubers.   

To find evidence of the disconnect between business investment and economic growth we can look at the ONS data set.  This shows wild swings in business investment, apparently unrelated to any kind of business cycle.   

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I was so shocked by this chart that I swapped a couple of emails with the Business Investment Team at ONS, to check that it was right.  Apart from the obvious collapse in investment during the credit crunch I can’t explain these wild swings other than irrationality in the market. 

A few weeks ago I wrote about low levels of productivity in the UK economy.  The inconsistent levels of business investment look like they are a big part of this problem.

Productivity is rubbish. Inefficiency rules. Why Craft Gin is better than United Airlines.

Despite all of this it is clear that there is plenty of money out there to invest in stuff.  Tech unicorns in the US are having billions piled into them without any clear idea of where the profit is going to come from.  It seems incredible with all of the opportunities from technology and globalisation that we are apparently running short of really good stuff to invest in

One of the obvious problems behind this is a lack of consumer demand. Companies who have surplus capacity already won’t invest in expanding, and instead will take advantage of low interest rates to do things like buy back shares and increase dividends rather than build new factories.  Share buy backs, particularly leveraged ones allow businesses to improve profits, particularly profit per share, without having to do anything messy like make things.   Lobbying for cuts to Corporation Tax has pretty much the same effect. 

It is pretty clear that globalisation has increased trade, and raised living standards in a number of countries.  However even in highly consumer oriented societies like the UK we are starting to get to “peak stuff”.   

Measuring peak stuff is hard, however to look into this we can look at the tonnage of raw materials we consume in the UK.  This is one of my favourite ONS datasets (we all have favourite ONS datasets don’t we?).

In 2001 the UK used 888.9 million tonnes of raw materials (15.1 tonnes per person), the highest on record.  By raw materials I mean biomass (crops, wood and fish), metal ores (iron and non-ferrous metals), non-metallic minerals (such as construction materials) and fossil energy materials (coal, oil and gas).

By 2011 this had fallen to 642.0 million tonnes (10.1 tonnes per person).

In the same period resource productivity had risen sharply – the amount of GDP we generated from a KG of stuff had increased from £1.87 per kilogram in 2000 to £2.98. 

This partly reflects people becoming more environmentally friendly.  it also reflects that technology is making things smaller and less resource intensive

But a big driver of this is the shift from buying lots of stuff, to buying less and better.  More personalised and bespoke.  For our last wedding anniversary some of the nicest presents we got were vouchers for experiences, rather than actual physical gifts.  Over the last year I have paid to go on 2 guided walks. We want experiences, not more stuff to go in cupboards.  This seems like a very middle class explanation, given that lots of other people don’t have enough anyway, but the shifts in tonnage are too great for it just to be a middle class fad.

Changing the metric from output per person, to output per KG of raw material changes fundamentally how we look at consumption.  All of a sudden the decline in efficiency caused by an economy which moved from high volume manufacturing to services and bespoke products doesn’t look as scary.  In fact the whole concept of economic performance, efficiency and growth looks different. 

If there was one really cool product I would love to own it would be a 3D printer.  I love the idea of making my own stuff.  If there was a way to recycle and 3D print I would love it even more – breaking down waste packaging and plastic into pellets to fuel my 3D printer. I could make stuff, use it, recycle it myself into something else.   

Central banks are still trying to boost demand for stuff by Quantitative Easing.  There is some evidence that this is working, for example in new car sales.  But across the economy it looks like they are better at boosting asset prices for things like houses than they are at stimulating demand.   In our experience there is actually money out there chasing investments, rather than investments chasing investment, which isn’t great for encouraging hard nosed decision making

But no amount of QE can solve the essential problem – from the 80s onwards investment has moved towards consumer products and global supply chains.  This has increased the amount of resources we consume globally, and accelerated environmental degradation.  But as markets mature the scope to sell more products in advanced economies is declining. 

We still want all the cool stuff that modern Capitalism produces.  But increasingly we want less of it, from smaller, more local producers, rather than from giant impersonal conglomerates with rubbish customer service.   We want more differentiation and more individuality.    Right now big financial markets want us to have a wifi juicer.

If you are interested in some of the data I have referred to in this blog you can find more at:

https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/businessinvestment/jantomar2017provisionalresults

https://www.ons.gov.uk/economy/grossdomesticproductgdp/datasets/businessinvestment

https://www.ons.gov.uk/economy/nationalaccounts/uksectoraccounts/datasets/thenationalbalancesheetestimates

https://www.ons.gov.uk/economy/environmentalaccounts/articles/ukenvironmentalaccountshowmuchmaterialistheukconsuming

http://bmjopen.bmj.com/content/4/10/e006235

http://eprints.lse.ac.uk/65415/1/Schankerman_Patents%20and%20the%20Global%20Diffusion.pdf

http://journals.plos.org/plosone/article?id=10.1371/journal.pone.0147215