After a check due to the miners' strike, total output has been rising since last summer. It was probably about 1 3/4–2 per cent higher in the first quarter of 1935 than in the third quarter of 1984. Allowing for the fact that perhaps 1/2 per cent of this rise was due to a recovery in coal production, as the strike became less effective and finally ended in March, the ‘underlying’ rate of growth may have been of the order of 2 1/2–3 per cent a year.

The increase in GDP in the OECD area last year is now put at 4 1/2 per cent. A relatively high rate of growth seems to have been maintained up to the end of the year.

In 1980 relatively large comparability pay increases were given to a number of public services negotiating groups following the Clegg inquiries. Longer-term trends in public service pay were shown in an article in the National Institute Economic Review (Foster, Henry and Trinder, 1984) and in evidence to the Megaw Inquiry on Civil Service Pay (Trinder, 1982). The conclusion of these earlier articles was that the long-term trend was for pay of government employees to be kept broadly in line with that of the private sector and that the above mentioned Clegg awards approximately restored their relative position. This note describes movements in the pay of the major public sector groups since 1980 and shows how they have compared with movements in prices and with pay in other parts of the economy.

Towards the end of the 1970s there was a spate of work examining the saving ratio, prompted by the unforeseen rise in the personal sector saving ratio that occurred in the early 1970s.

This article is an example of the type of exercise that is made possible by the existence of the set of UK models at Warwick. Using three quarterly models, those of the London Business School (LBS), the National Institute of Economic and Social Research (NIESR) and Her Majesty's Treasury (HMT), and two annual models, those of the City University Business School (CUBS) and the Liverpool University Research Group in Macroeconomics (LPL), it considers the use, and possible abuse, of such models of the UK economy to illustrate the real wage—employment debate.

In UK models real wages and employment are determined jointly and the article shows that the sign of the association between these two variables depends ore the nature of the shock which causes real wages to change. A common method of analysis is to perturb the endogenous real wage directly and although the results are quantitatively similar to those where the change to real wages results from a supply-side shock to the labour market, it is argued that such exercises are typically without foundation since no mechanism for achieving a direct reduction in real wages is put forward. Any implicit model which underpins the assumption of an exogenous shift in an endogenous variable needs to be stated clearly in order for the plausibility of the ‘intervention’ and resulting policy analysis to be assessed.

‘One of the most long-standing problems in this country is our failure to our school-leavers adequately for work.’

(The Chancellor of the Exchequer in his budget March 1985)

The way higher productivity depends on a workforce that is technically-skilled at all levels—from operators and foremen to senior engineers and directors of production—was examined on the basis of an interview-study of matched engineering firms in Britain and Germany in the last issue of this Review. The present article traces differences in workforce skills between these two countries to differences in preparation at school, particularly in mathematics and vocational education, and particularly for those in the lower half of the ability spectrum.