Showing posts with label UK. Show all posts
Showing posts with label UK. Show all posts

Wednesday, 24 June 2015

A tourist guide to Royal Mail for small ecommerce shops & web developers

Introduction: Royal Mail for ecommerce

picture of a letter box
A frustration of using ecommerce software in the UK or outside the US is that so few web developers write a postage module for the simplest basic postal service. They don't even write a tablequote kit so that a shopkeeper can fill-in a managable small table of their own prices for zones and weights, like this:
  • UK - where a 2nd class 2kg parcel can be posted for £2.80 and there is a 2.5cm "large letter size" that goes cheaper up to 750g
  • "Europe" with a fiddly "UK zone B" for the Channel Islands, and 64 other countries
  • "Worldwide Zone 1", which is everything else except
  • "Worldwide Zone 2" with 34 countries.
    The zones outside the UK have detailed price / weight tables.
    There is a table further down this page for converting Royal Mail's names to ISO country codes.
I tried to change one shopping cart module so that "Afghanestan" became UK, "Andorra" became Europe, "American Samoa" bacame Worldwide Zone 1, and "Aruba" became Worldwide Zone 2. It felt like being Napoleon without the war crimes, but I didn't quite manage to make it work. Recently, I've discovered that the Drupal Ubercart module imports a country once and then keeps the name on the database. If you can find the right program on the control panel of your web host to poke into the database, sufficient trial and error brings you to the names of countries which you can change by hand to anything you like.

I wished that someone used-to modules and code could have done it for me. Maybe the shopping cart developers think "I'll make a living selling add-ons on commission, and someone is bound to write a Royal Mail add-on". Then module developers look at Royal Mail's web site with all its complicated extra services like franking, and its whimsical change, and decide not to write a module. Nobody wants to get caught between a sprawling set of services that can change at any time, and an irate customer who has only paid £10 for a module but expects some kind of support.

From what I can see of other post offices' web sites in Europe, they follow the same pattern of a few world zones priced by weight, with a fixed size and price for 0-2kg parcels that they like to post on home ground, plus letters, large letters, and sprawling web sites with loads of decoy mail services that no sane person would use, special jargon words like "docket", trademarked premium services such as Like-To-Pay-More ® - all sorts of things. Names like "delivered ®" or"here to there with a stamp on ®" are common. Big courier web sites are similar. I've just found another page where emergency closures and delays are listed There seem always to be more pages to find.
Puzzling trademark ®
Large-scale UK shopkeepers or their warehouse contractors will know the kaleidoscope of  prices & services; they will simply tell a developer what they want. They may even know what franking machines are good for. This page isn't for large-scal shopkeepers. This page is just is a tourist guide to every-day Royal Mail services for individuals, ebayers, stallholders, crafters, smaller-scale shopkeepers, and developers who write for them. The stuff that ebay sellers and shopkeepers have picked-up just by living in the UK and hope that software developers around the world will happen to know too. They might post in a forum or send you an email. This is what they take for granted.

I've just watched a video that says "we live in an Amazon world. The customers' expectation is 2 days". But the bloke says this in front of a graph saying that customers are content for the first week, even in the US where people seem to expect chinese goods sold on a huge shop margin. People know that they can't download physical goods and have them now. He also says "fight with your suppliers", which could be why his goods turned-up late.

I've got a shortlist of shopping carts on another post: Most don't help much with shipping or even hinder in order to sell you an over-priced module. Individuals are offered a kaleidoscope of options from Royal Mail, that seem to overwhelm the people who try to make the clear on Royal Mail's web site let alone the people who have to read all this detail. Most of these prices and services are decoys designed to charge more for the person who doesn't care how much something costs. Basically Royal Mail sends 2nd Class 0-2kg Small Parcels to the UK at a fixed price for delivery in 3-5 working days and airmail to three other world zones with a table of prices by wieght. Simple as that. Other shopkeepers might have other favourite services like the 2.5cm thick large letter, but probably not many more. The prices are low for everyone. The only discounts are 0.5% cashback on some visa / mastercards held in individuals' names, (no Amex) and lower prices for bulk sorted mail to Royal Mail direct or some companies that feed-in to their sorting offices.
  • You might think that Royal Mail would offer to write modules for free. No.
  • You might think that the Department for Business and its drive would make sure it's easy, given that the taxpayer still owns most of Royal Mail and the Department for Business is there to sort-out market failures, but no.There are now several departments for business or for economic development, because devolution is fashionable, and any one of these development agencies or departments could do a bit of lobbying or funding, but no.
  • You might hope that the people who write shopping cart software would make it easy, but no: they're often based in the USA and get tied-up in obscure US tax rates before they have time to think about obscure non-US post offices. Sometimes they are the sort of people who buy a T-shirt by UPS. Americans can be like that.

 Zones - Royal Mail has 4 of them plus the fiddley Channel Islands.
Royal Mail has 4 world zones: UK including Isle of Mann and Northern Ireland (with a fiddley exception for the channel islands - a tiny extra zone), Europe, Worldwide Zone 1 and Worldwide Zone 2.
It's rather hard work for the shopkeeper to attach prices by weight to every single country, and for the customer to choose a country from a long alphabetical list including countries like Aruba and American Samoa which I only discovered from these lists. A module to assemble these countries into 4 zones for a table quote by price or weight might be enough of the job done to get your software company a hug from a UK merchant, or their business anyway.
(There used to be a cheap and green rate for surface mail outside the UK that could 3 months to New Zealand. A vestige survives in "economy" mail, but it is only a few pence cheaper usually; there is more or less one price now to most places. I guess that container-size loads are still be sent privately that way.)
Highlands and Islands postcodes can attract a fuel surcharge on contract prices while courier quotes can be slower or more expensive. I haven't come-across this myself; it doesn't apply to the rate that most people pay.
Northern Ireland is in the UK postal zone.. Royal Mail and Parcelforce couriers are the same company and you'll probably get the same postal zone for Parcelforce too.

Zones - ISO country names to Royal Mail country names

I've asked Royal Mail for this list, then found that it's in the source code of a Drupal module which I don't know how to use any other way for Ubercart. I installed and used FTP to find the right file and read it in a text editor from the drupal/sites/all/modules/rmzone/ . There are probably similar modules for programs like Abantecart or Prestashop or Cubecart and the rest which can be read in a similar way.

    'AL', // Albania
    'AD', // Andorra
    'AM', // Armenia
    'AT', // Austria
    'AZ', // Azerbaijan
    // Belearic Islands: Spain
    'BY', // Belarus
    'BE', //Belgium
    'BA', // Bosnia Herzegovina
    'BG', // Bulgaria
    // Canary Islands: Spain
    // Corsica's French
    'HR', // Croatia
    'CY', // Cyprus
    'CZ', // Czech Republic
    'DK', // Denmark
    'EE', // Estonia
    'FO', // Faroe Islands
    'SF', // Finland
    'FR', // France
    'GE', // Georgia
    'DE', // Germany
    'GI', // Gibraltar
    'GR', // Greece
    'GL', // Greenland
    'HU', // Hungary
    'IS', // Iceland
    'IE', // Irish Republic
    'IT', // Italy
    'KZ', // Kazakhstan
    // Kosovo doesn't have an agreed code, and Drupal's doesn't include it.
    'KG', // Kyrgyzstan
    'LV', // Latvia
    'LI', // Liechtenstein
    'LT', // Lithuania
    'LU', // Luxembourg
    'MK', // Macedonia
    // Madeira: Portugal
    'MT', // Malta
    'MD', // Moldova
    'MC', // Monaco
    'ME', // Montenegro
    'NL', // Netherlands
    'NO', // Norway
    'PL', // Poland
    'PT', // Portugal
    'RO', // Romania
    'RU', // Russia
    'SM', // San Marino
    'RS', // Serbia
    'SK', // Slovakia
    'SI', // Slovenia
    'ES', // Spain
    'SE', // Sweden
    'CH', // Switzerland
    'TJ', // Tajikistan
    'TR', // Turkey
    'TM', // Turkmenistan
    'UA', // Ukraine
    'UZ', // Uzbekistan
    'VA', // Vatican City State

The software doesn't list zone 1: it's everything but the others.

 * Returns a list of countries in the Royal Mail zone: World zone 2. Note that
 * there seem to be two islands that are part of the Norwegian Antarctic
 * Territory that don't have ISO 3166-1 codes: Peter I Island and Queen Maud
 * Land.
 * @see
 * @see
 */ replaces the iso decoding table mantioned above
with this explanation

    'AU', // Australia
    'PW', // Belau
    'IO', // British Indian Ocean Territory
    'CX', // Christmas Island (Indian Ocean)
    // Christmas Island (Pacific Ocean)
    'CC', // Cocos Islands
    'CK', // Cook Island
    // Coral Sea Island: Australia
    'FJ', // Fiji
    'PF', // French Polynesia
    'TF', // French South Antarctic Territory
    // Keeling: Cocos Islands
    'KI', // Kiribati
    'MO', // Macao
    'NR', // Nauru Island
    'NC', // New Caledonia
    'NZ', // New Zealand
    // New Zealand Antarctic Territory: New Zealand
    'NU', // Niue Island
    'NF', // Norfolk Island
    'BV', // Norwegian Antarctic Territory (NB this excludes Peter I Island and
    // Queen Maud Land, which don't have ISO codes - see
    'PG', // Papua New Guinea
    'LA', // People's Democratic Republic of Laos
    'PN', // Pitcairn Island
    'SG', // Republic of Singapore
    'SB', // Solomon Islands
    // Tahiti: French Polynesia
    'TK', // Tokelau Island
    'TO', // Tonga
    'TV', // Tuvalu
    'AS', // US Samoa
    'WS', // Western Samoa

UK private couriers for parcels over 2kg
lists sites that sell pre-paid labels for private courier services. There is an ever-changing kaleidoscope of services including obscure shop-to-shop services, shop-to-door, and the upmarket quick and signed-for ones, and a locker-based one which may accept your returns and not loose them forever with luck. The rule of thumb is that they are cheaper for parcels over 2kg and offer tracking. Everybody knows this except the one person  at the front of every post office queue who asks very slowly "how much would 2.1kg to Aruba be? - oh, that seems a lot. Does it include tracking?".

Private couriers are unlikely to become cheaper for 2kg parcels because their staff don't do a delivery round down the street; they drive from street to street delivering a parcel here and a parcel there, ringing a doorbell for each one and most likely leaving half their parcels with neighbours when customers are not in. They also miss a VAT tax break that Royal Mail enjoys (in exchange for delivering all-over the UK for one price). Their best known services involve two van-parking and doorbell-ringing trips because people are used to them collecting as well as delivering, while Royal Mail only collects sacks; you have to go to a post office and drop-off your parcels or use a letter box.

The courier that comes closest to Royal Mail prices is a cheapskate operation in handling standards, delivery speed, and pay scales. They encourage recipients to suggest a porch or safe place where a parcel can be left late at night or while the customer is out, but customers ignore this, just as they ignore services like CollectPlus and UPS collection points which allow them to pick-up a product at a local shop. Customers prefer to sit at home and grumble that the courier didn't come when hoped-for. The service is better value and quicker if you drop-off parcels at one of their agents, which are places like newsagents and garages that can give a receipt and keep a parcel for the daily collection. Maybe in a few years more people will be used to picking-up parcels at places like this as well as dropping-off.
There is a consensus that £30kg is about the most that a single courier with a trolly and a van can carry, and the usual maximum size is 56cm x 46cm x 36cm. Pallets cost more again. Rolls and matrasses are hard to shift. Worldwide container shipping is another market again.

Addressing - no need for counties or bar codes for Royal Mail
Within the UK, the administrative list of areas isn't used by Royal Mail nor couriers; there's no need to ask the customer their county or any local government area from any drop-down list, nor worry about whether an area is part of  "greater london", or "london". Just leave-out the whole process of selecting an area. There is a Royal Mail recommendation to write the post-town, in capital letters, to help sort mail where the postcode is wrong or illegible, but it's not necessary. If you do want to add an optional area to an address, use post towns if you can find a way, or a paid-for module that gets the customer to match an address and postcode from Royal Mail's database. does the same thing by hand - if you want to double check an address - and is free for a limited number of searches per period.

Customers have a number or name for each letterbox, and a postcode. Just write anything sensible in between if you want, as any address format is accepted. When pushed, Royal Mail say they need a "thoroughfare" next to the number or name of the letterbox, again as a backup.
John Smith,  Deputy Assistant Director of Dockets, Northern Irish Grant Artist Federation,
address and thoroughfare - on one or more lines
Unit 1 Grant Artist House, Verycranky Trading Estate, Long Road, Verycranky, Antrim
last line postcode

John Smith, Rose Cottage Rose Lane, AN1 1AB would be another example

I often see bar codes on large-scale mailings of bills. I don't know if there is any way to use them to get tracking thrown-in to the price. For smaller scale mailings, any clear typeface works well. Mail very seldom gets lost if the address is clear; I can't remember the last time. Automated scanners are replacing more of the hand-sorting at sorting office for pacels now, just as they did years ago for letters. gives more detail for larger customers, with astrisks next to the typefaces they suggest for printing but are unable to print themselves. Do you miss working for big organisations like this? No? It's good that somebody still works for them. They also ignore their own advice on the software that lets you print and pay-for postage online. It uses a sans-serif font with the kerning reduced so that letters merge into each other, and prints on a grey patterned background like a watermark.
Bold fonts must not be used. Recommended fonts as follows. Arial 10-12pt, Avant Garde 11-15, Century School Book 10-11, Courier 10-15, Courier new 10-15, Frankfurt Gothic 10-12, Franklin Gothic (Book) 11-14, Geneva 10-12, Helvetica 10-14, Letter Gothic 12, Lucida Console 12, Lucidea Sans Typewriter 12, Monaco 12, News Gothic MT 10-12, OCR B 12, Univers 10-15, Verdana 10-12,

Pricing & paying:
UK 2nd class 2kg parcels have one price; 3 zones of weight tables ex-UK
Proof of postage is free but fiddly and effects the system to use:
online / drop&go
..quote dozens of sizes weights and services in a format called "handyguide.pdf" that changes at whim year to year; the Royalmailtechnical web has released a spreadsheet, but only for large scale services so far and the firm refused to publish a clear spreadsheet of prices in the past. is a route into is a new shorter form to do the same thing:
print a stamp and address from an address and postcode, and tell you a clear price if you don't buy. It can also import addresses, but only from ebay according to the help page. Ebay and Paypal also have a system of printing-out pre-paid addresses on your home printer without going to the Royal Mail web site.

Royal Mail no longer has a cash-on-delivery service, even for the annoying packages priced at over £15 that arrive from outside the EU and so have a tarrif plus VAT tax plus collection fee to pay.
Online postal payment systems demonstrate the pointlessness of weighing your post and printing a stamp with an expensively hired and serviced machine from approved suppliers. There is a small discount on franked post for no reason except to keep this pointless industry going and after a brief experiment I decided that no discount is worth the trouble.
The first /pricefinder url gives more information about sizes: Second class 1-2kg small parcels are the best value, along with letters and a thing called a large letter which is 2.5cm thick. There's probably some way of getting a robot on the customers' computer to transfer names, postcodes, and first lines of addresses onto the online postage page but no need. You can also put  pre-stamped mail in letter boxes or drop it in a sack without queing a lot of post offices. Most of them are independent franchises and capable of ignoring instructions from head office about whether to leave an open sack on your side of the counter for dropping-off mail.

Tracking is only available on expensive signed-for services, so proof of posting can be important. You have to queue-up and ask for proof of postage, which the staff do for no fee by printing-out a receipt for £0 showing the destination of the parcel. If you use ebay's Paypal postage, the old Certificate of Posting system survives, which is rubber-stamped and squiggled at the counter. Staff are polite about doing this work for no money and other systems may survive for proof of posting several parcels. They used to hide blank certificate of posting forms, though, to discourage people from using them.
is run by Post Office Counters and tried to integrate charging and reports into Royal Mail's web site, without success; it's still a manual system and the Royal Mail side of the firm have introduced a simlar one in competition. Anyway, shopkeepers can open an account, then then jump the queue at a post ofice branch and leave addressed parcels to have stamps stuck-on by the staff who's branch makes a small profit on them. Happy post office. May remain open. They can print form headed "manifest" on which to list postcodes and addresses for them to stamp as proof of postage. It's possible to download the form as a pdf and to made it editable so that you can cut-and paste the three columns of 2nd class / street number / address that are most used.
Free collections at the ground floor exist for sacks, or more precisely "free weekly collections for customers who spend over £15,000 a year with us". If you only send the cheapest £2.80 parcels, five days a week, 50 weeks a year, that's nearly 22 parcels a working day. Comments on message boards say that the £15,000 limit isn't strictly enforced, and of course the customers who opt of for first class or export parcels will reduce the minimum number, as will use of a specialist pick-and-pack mailing warehouse in some cheap part of the UK, or collaboration with one or two neigbouring firms to collect shared mail from the ground floor: I don't know if there's a way to make that work.

Bulk customers can get small discounts for doing some of the sorting but I don't know how much that takes-away from the benefit of having a sack of mixed mail collected. They also have a long pre-computerised tradition which may still have its odd jargon or options for manual book-keeping. I don't know what a "docket book" is for example, but they do.

Royal Mail's Europe zone is very large, including non-EU countries like Ukraine for which a customs sticker is needed and possibly a tariff paid by the recipient.

Neighbouring post offices that speak English -
Netherlands,  Ireland, Channel Islands, Isle of Mann

Anyone who writes about how Royal Mail works has to mention the Isle of Mann and Channel Islands. So why not write about a couple of bigger neighbours first? These two speak english. or serves the Netherlands, a country of 16.8 million mercantile & well-educated people next to the UK's 61 million people. I think people in the main dutch towns often do business in English by default; a client's IT department is likely to accept sales contacts English, with Dutch and Flemish more common at home, in the country, or when buying rather than selling. Signs at Schipol Airport are all in English. I don't live in the Netherlands and might have got this wrong, but the main postal service seems to be for 3.5cm "letterbox size" 0-2kg parcels delivered cheaply in Holland or the Benelux countries, with another zone for Europe and I think another for "world".

Cash on delivery is available. That's different to the UK.
Online stamping and addressing isn't obviously available. I might have missed it. own the TNT Post courier service in other countries, and briefly tried doing a door-to-door delivery round in parts of London, as well as touting for the sack collection trade under the name Door-to-door delivery staff were made redundant with zero warning, but UK sack collection continues with a minimum of 250 items per collection. for the Republic of Ireland's 4.6m people is like in using €uro & speaking english. Fewer Irish people speak other languages than in most countries of the world I guess, but politicians have diverted resources from social insurance, including education and health, into making sure that, should people suddenly start speaking Gaelic all at once in the future, pubic services will be ready for them. That's the sort of thing that politicians do with your social insurance payments if you don't watch the bastards. Signs at Dublin Airport are in Gaelic and English, as at Knock airport, where you can go to see the miracle of priests evading prosecution for false statements or worse. It's a great place to visit in other ways though: living there is the problem and unfortunately, UK politicians are picking-up these tricks just as Irish ones try to get rid of them.

ANPost collects sacks from senders of 30 parcels a more a week outside Dublin - and an unstated amount inside - and from post offices and letter boxes in the southern Irish counties. says that collection services outside the republic have been sold-off.
ANPost delivery price zones are Ireland - north is the same price, GB, Europe, World.
ANPost addressing guide is at
There is no online address and stamp printing service, but large customers can use a machine for printing normal-looking stamps and a database of addresses can be hired.
The pointless franking industry survives in Ireland as in the UK, with small discounts and perhaps some purpose for the bulk mailers.

Just recently I had a parcel returned as insuffiently addressed to putting two lines together and ommitting the new postcode; I don't know which triggured the return, but they now use postcodes slightly longer than the UK ones, so best to check from their site what's happening. It will suggest a printed format in roman letters that's hard to cut and paste into your own software, but there is bound to be a way.

I don't think they've got up to the UK / Canada pattern of six letters and numbers. Counties are named after the county town, so you can leave out "County Limerick" if the town is "Limerick".

The Channel Islands' 164,000 people use UK currency in three independent EU states, sharing some services like embassies with the UK. They do not have a Channel Islands postal service. They have two:
E-commerce is a regular business in the Channel Islands.
For a while this meant that you could sell your ebay items from a Channel Islands warehouse and not pay VAT. More recenlty the state-owned Royal Mail has added a separate "sub zone" price to all mail from the UK to the Channel Islands, and all goods from the channel islands now have to pay UK VAT on entry - not just goods valued under the usual £15 threshold.

The Isle of Mann's is a separate post office for the 80,000 people who live there. The island has its own EU government and tax rates but shares the UK pound while its post office seems to share the same postal zones of UK, Europe, and world. Like AMPost, it offers signage in Gaelic. Letters cost less to send than from the Royal Mail; parcels more.

Gibralter's serves 30,000 people in the EU who speak English first and have regular air deliveries of mail to the UK & US as well as land deliveries via Spain.
Other neighbouring countries have english-language post office web pages and english-speaking clients, but I don't live in any of them or have any off-the-cuff knowledge to add to what you find. In Europe, the northern countries and those with coastlines are the more mercantile but have worse weather. I guess that most have a handful of world zones priced by weight and a favourite size of 2kg parcel that they like posting so much that they do it very cheaply.

Oh here's a thing. The Italian post office is not yet as reliable as the others - see Time Out Guides, Rough Guide, Lonely Planet, or google phrases like "ex pat guide to life in..." for details about the Italian post office and whether it has got any better. Items I send to Italy are more often delayed than to other countries, although they turn-up in the end. An ebay seller might choose "everywhere in the EU but Italy" as a choice for where to post.

I began by writing about Royal Mail and neighbouring services as though you were selling your software at a trade show in the UK. The Indian post office is further away and different in pricing for more different weights and countries. It serves a population of 1252 million.

Saturday, 1 October 2011

uk unemployment 1980s

This post might become a transcript of a 1980s UK economics textbook chapter, done in order to see whether the book deliberately lied or deliberately mis-led about the government's effect on the recession at that time or whether it just failed to win my confidence. I think it just failed to win confidence. The chapter is headed "26 Unemployment", which is an odd place in a textbook to put the chapter on unemployment when the total was three or four milllion in 1984 when the book was published. There was no chapter called "why all the factories are closing", but there was a rather technical reference, even later in the book, which described the closure process caused by government's policy on interest rates that tweaked the exchange rate.

Related: Bad Economics Teaching for the twenty-teens from data on Unistats, 2015 Better Economics Teaching: some off-the-cuff suggestions based on being a 1980s student The British Economic Crisis - a similar book to Robert Peston written in the 80s - Star Courses: the least satisfied, most bored and lowest paid UK graduates, written 2015 Boring Economics Teaching is interesting: how someone managed to teach economics from memories of an old textbook at the peak of the worst recession since the 1930s, and tried to cover-up for government causing the recession. Journal Articles by Professor Les Fishman - unbelievable beliefs - 1980s recession explanations I wrote - UK unemployment 1980s from the Begg 1984 textbook

In the early 1930s, more than one quarter of the UK labour force was unemployed. In particular regions and occupations the unemployment rate was very much higher. [employment of economics teachers was hardly effected at all]. High unemployment means that the economy is throwing away output by failing to put its people to work. It also means misery, social unrest, and hopelessness for the unemployed. Over the following 40 years, macroeconomic policy was geared to avoiding a rerun of the 1930s. Figure 26-1 shows that it succeeded.

In the 1970s views about unemployment bagan to change. People began to reject the Keynsian pessimism about the capacity of the economy to respond to shocks by quickly restoring full employment. The classical model began to be more widely accepted as a description of the way the economy works even in the relatively short run. Since in the classical model unemployment is voluntary there is less presumption that unemployment means extreme human suffering. Moreover, research by labour economists has shown that in the 1950s and 1960s most of the unemployed quickly found jobs. Unemployment might therefore be considered a stepping stone to a better job.

By the 1970s, not only was it felt that the cost of unemployment might have been overstated; in addition, governments in many countries began to percieve an even greater danger to economic and social stability, the danger of high and rising inflation. Thus by the end of the 1970s many governments had embarked on tight monetary and fiscal policies into try to keep inflation under control. The combination of restrictive demand policies and the adverse supply shock of hte second major OPEC oil price increase in 1979-80 has led to a dramatic increase in unemployment in most of the industrial countries in the early 1980s. Figure 26-1 shows data for the UK. Data for other countries are shown later in the chapter.

High unemployment is one of the major problems of the 1980s. Will it contine? Is it a drain on society or a signal that iat lst people are getting out of dead end jobs into something better? What can and should the government be doing? These are the questions we set out to answer in this chapter. We begin by looking at the facts.


Not everyone wants a job. Those who do are called the labour force.
The participation rate is the percentage of the population of working age who declare themselves to be in the labour force. In Chapter 10 we pointed out that postwar growth of the UK labour force had been caused by an increase in the population of working age who declare themselves to be in the labour force. In Chapter10 we pointed out that postwar growth iof the UK labour force has been caused less by an increase in the population of working age than by an increase on paricipation rates, most noticably by married women.
The unemployment rate is the percentage of the labour foce who are withoug a job but are registered as being willing and vailable for work.
Of course some people without a job are really looking for work but have not bothered to register as unemployed. These people will not be included in the official statistics for the registered labour forcem nor will they appear as registered unemployed. Yet from an economic viewpoint, such people are unemployed. This is an important phenominon to which we return shortly. For the momentm when we present evidence on the size of the labour force or the number of people unemployedm it should be undestood that data refer to the registered labour force and the registered unemployed.

Figure 26-1 makes two main points about the unemployment rate in the UK.
First, unemployment was high during the interwar years, especially during the great recession of the 1930s. It was the persistance of unemployment that led Keynes to develop his General Theory.
Second, by comparison, post war unemployment was tiny until the late 1970s. By the early 1980s it was starting to get back to prewar levels. This basic pattern applies in many other industrialised countries. [I doubt this is true - JR]

Stocks and Flows

Unemployment is a stock concept measured at a point in time. Like a pool of water, its level rises when inflows (the newly unemployed) exceed outflows (people getting new jobs or quitting t he labour force altogether). Figure 26-2 illustrates this important idea. Beginning with people working, there arc three ways to become unemployed. Some people are sacked or made redundant (job-losers); some are temporarily laid off but expect eventually to be rehired by the same company; and sonic people voluntarily quit their existing jobs. But the inflow to unemployment can also come from people not previously in the labour force: school-leavers (new entrants), and people who once had a job, then ceased even to register as unemployed, and are now coming back into the labour force in search of a job (re-entrants). People leave the unemployment pool in the opposite directions. Some get jobs. Others give up looking for jobs and leave the labour force completely. Although some of this latter group may simply have reached the retirement age at which they can draw a pension, many of them are discouraged workers, people who have become depressed about the prospects of ever finding a job and decide to stop even trying. Between January 1980 and January 1983, the number of people registered as unemployed in Britain rose from 1.3 million to 3.1 million. Data collected through Department of Employment

jobccntres account for most of this increase and .11 shown in Table 26-1. The table makes the 1)( wit that the pool of unemployment is not skignant. Even with 3 million unemployed, this tit her is less than the number of people entering and leaving the pool every year.

I I )nr.itioll thiciiiplovnicnt When un-employment is high, people have to spend longer in the pool before they find a way out.
Table 26-2 gives data on the duration of unemployment. As the level of unemployment has risen, the problem of the long-term unemployed has returned. Whereas in 1974 only 20 per cent of the people unemployed had been out of work for longer than one year, by April 1983 this pro-portion had risen to 36 per cent. And over the same period, the fraction of the unemployed who had been unemployed for less than eight weeks fell from 44 to 17 per cent. Unemployment can no longer be regarded as a temporary stopover on the way to better things.
The Composition of Unemployment Table 26-3 gives a recent breakdown of unemployment by sex and by age. A recession hits young workers badly. Unlike established workers with accumulated skills and job experience, young workers have to be trained from scratch, and firms frequently cut back on training when times are tough. The over-50s are also vulner-able during a recession. If they lose their existing job, they will find it tough to persuade a firm to spend on them what little training money is available; firms would rather spend the money on younger workers, who may represent a better long-term investment and may be able to learn more quickly. Table 26-3 also shows that the unemployment rate is lower for women than for men. In part this may reflect the fact that employment in the declining heavy engineering industries has tradi-tionally been predominantly male, so men are worst hit by redundancies in steelworks and shipyards. However, although established women have managed to hang on to their jobs, young women are finding it nearly as tough as young men to get started. Labour economists believe that the discrepancy between male and female workers is smaller than the table suggests, because unemployed women are less likely than unemployed men to register as unemployed. Hence the true un-employment rates for women are probably higher than the table suggests.


Having introduced some of the most important facts about unemployment in the UK, we now develop a theoretical framework in which to discuss the subject. We begin with the old-style classification of types of unemployment, which emphasizes the source of the problem. Then we discuss the modern approach to unemployment which emphasizes the way people in the labour market are behaving.
Types of Unemployment Economists used to classify unemployment a frictional, structural, demand-deficient, or clamp ical. We discuss each in turn.

Frictional Unemployment
This is the irredrit ible minimum level of unemployment in .1 dynamic society. It includes people wIr.)4e physical or mental handicaps make them aim, 'NI unemployable, but it also includes the pc(11►1, spending short spells in unemployment Ir. ■ hop between jobs in an economy where b( )111 r h. labour force and the jobs on offer are cont in tr.111‘ changing.

Structural Unemployment
In the longer run, the pattern of demand and production is alwir‘ 4 changing. In Chapter 31 we discuss the re.r,...114 why particular countries in the world CC(111411M come to specialize in the production of 1).11 ticular commodities at particular times. In re, (Au decades industries such as textiles and heavy engineering have been declining in the UK, Structural unemployment refers to unemployment arising because there is a mismatch oi and job opportunities when the pAtIci II of

Itint.t i id and production changes. For example, a 44111C(I welder may have worked for 25 years in %Ittplwilding but is made redundant at 50 when the industry contracts in the face of foreign competition. That worker may have to retrain in it new which is more in demand in today's et 'II( )111y. But firms may be reluctant to take on mid it din older workers. Such workers become victims of structural unemployment.

Demand-deficient Unemployment
This refers Keynesian unemployment, when aggregate dentaild falls and wages and prices have not yet 'Owed to restore full employment. Aggregate Jett l id is deficient because it is lower than full-iv merit aggregate demand. In chapter 25 we saw that, until wages and have adjusted to their new long-run equilibrium level, a fall in aggregate demand will lead lower output unemployment. Some workers will want to work at the going real wage rate but will he unable to find jobs. Only in the longer run ill wAr,e,, And prices fall enough to boost the

real money supply and lower interest rates to the extent required to restore aggregate demand to its full-employment level, and only then will demand-deficient unemployment be eliminated.
Classical Unemployment Since the classical model assumes that flexible wages and prices maintain the economy at full employment, classi-cal economists had some difficulty explaining the high unemployment levels of the 1930s. Their diagnosis of the problem was partly that union power was maintaining the wage rate above its equilibrium level and preventing the required adjustment from occurring. Classical unemployment describes the unemployment created when the wage is deliberately maintained above the level at which the labour supply and labour demand schedules intersect. It can be caused either by the exercise of trade union power or by minimum wage legislation which enforces a wage in excess of the equilibrium wage rate. The modern analysis of unemployment takes

the same types of unemployment but classifies them rather differently in order to highlight their behavioural implications and consequences for government policy. Modern analysis stresses the difference between voluntary and involuntary unemployment.

The Natural Rate of Unemployment Figure 26-3 shows the market for labour. The labour demand schedule LD slopes downwards, showing that firms will take on more workers at a lower real wage. The schedule LF shows how

many people want to be in the labour force at each real wage. We assume that an increase in the real wage increases the number of people wishing to work. The schedule AJ shows how many people accept job offers at each real wage. The schedule lies to the left of the LF schedule, both because some people are inevitably between jobs at any instant, and because a particular real wage may tempt some people into the labour force even though they will accept a job offer only if they find an offer with a rather higher real wage than average. Labour market equilibrium occurs at the point E. The employment level N* is the equilibrium or full-employment level. The distance EF is called the natural rate of un-employment. The natural rate of unemployment is the rate of unemployment when the labour market is in equilibrium. This unemployment is entirely voluntary. At the equilibrium real wage w"-, N, people want to be in the labour force but only N"- want to accept job offers; the remainder don't want to work at the equilibrium real wage. Which of our earlier types of unemployment must we include in the natural rate,of unemploy-ment? Certainly all frictional unemployment. But we should also include structural unemploy. ment. Suppose a skilled welder earned £150 a week before being made redundant. The issue is not why the worker became redundant (the decline of the steel industry), but why the worker refuses to take a lower wage as a dishwasher in order to get a job, or why steelworkers as a whole did not take a sufficient wage cut to allow the steel industry to remain profitable and com+ petitive at its former levels of output and em-ployment. If the answer is that steelworkers refuse to accept that the equilibrium wage for their skill has fallen, and refuse to work at wages lower than those to which they have been accus-tomed, then we must count this unemploymen as voluntary and include it in the natural rate. They are not prepared to work at the going wag rate but still want to be considered part of tlic. labour force.
What about classical unemployment, for ex-., mple where unions maintain wages above their equilibrium level? This is shown in Figure 26-3 a wage rate w2 above w"-. Total unemploy-ment is now given by the distance AC. As indi-v iduals, a number of workers AB would like to ta ke jobs at the wage rate w2 but will be unable o find them since firms will wish to be at the point A. As individuals, these workers are in-voluntarily unemployed. A worker is involuntarily unemployed if he or she would accept a job offer at the going wage rate. lowever, through their unions, workers collec-t i v el y decide to opt for the wage rate w2 in excess 1 the equilibrium wage, thereby reducing the level of employment. Hence for workers as a w hole we must regard the extra unemployment .1., voluntary. Thus we also include classical imemployment in the natural rate of unemploy-ment. If in the long run unions maintain the w .1 gc lv,, the economy will remain at A and AC is the natural rate of unemployment. 'Ilk leaves only Keynesian or demand-deficient mei i t ployment. Such unemployment is involun-ta r v, being caused by sluggish labour market ustment beyond the control of individual workers or unions. Thus we can divide total unemployment into the equilibrium or natural ate the equilibrium level determined by normal labour market turnover, structural mi%itiatch, union power, and incentives in the 1,111( 1111. market — and Keynesian unemployment, ►ict lilies called demand-deficient or cyclical unemployment — the disequilibrium level of lily( )1tintary unemployment caused by the com-hin.ition of low aggregate demand and wage oilinstment which is sluggish for the reasons we t.N.iiiiined in the previous chapter. l'his division helps us think clearly about the guvernment policies required to tackle the un-employment problem. Since we have argued that fit the long run the economy will gradually niaiLage to get back to full employment through slow process of wage and price adjustment, Keynesian unemployment will eventually get rid

of itself. But in the short run, Keynesian un-employment is the part of total unemployment that the government could help mop up by using fiscal and monetary policy to boost aggregate demand, rather than waiting for wage and price reductions to increase the real money supply and lower interest rates. In contrast, the natural rate of unemployment tells us the part of unemployment that will not be eliminated merely by restoring aggregate demand to its full-employment level. The natural rate is the 'full-employment' level of unemployment. To reduce the natural rate, supply-side policies operating on labour market incentives will be needed. This is the framework we employ for the rest of the chapter. We begin by investigating the large increase in unemployment over the last decade, in order to understand its causes more fully. Then we discuss the prospects for unem-ployment during the rest of the 1980s and the policy options open to the government.


By 1983 the UK unemployment rate was more than eight times as high as it was in 1965. The task for empirical economists is to try to say how much of this increase was caused by an increase in the natural rate of unemployment and how much was caused by deficient demand and slugg-ish wage adjustment. In Table 26-4 we give some recent estimates of the forces at work, based on the work by Professor Steve Nickell of the London School of Economics. Nickell's esti-mates were derived from data on male unemployment, which is more comprehensively and reliably documented than the unemployment of women.'
' For other attempts to estimate the natural rate of un-employment in the UK, see R. A. Batchelor and T. D. Sheriff, `Unemployment and Unanticipated Inflation in the UK', Economica, 1980; and Patrick Minford, Unemployment: Cause and Cure, Martin Robertson, 1983.

In considering the prospects for unemploy-ment in the rest of the 1980s, we begin by looking at how the government could get the natural rate of unemployment down to a lower level. Then we consider how quickly Keynesian unemployment could be reduced.


Keynesians believe that the economy can deviate from full employment for quite a long time, cer-tainly for a period of several years. Monetarists believe that the classical full-employment model is relevant much more quickly. But everyone agrees that in the long run the performance of the economy can be changed only by affecting the level of full employment and the correspond-ing level of potential output. Supply-side economics is the use of micro-economic incentives to alter the level of full employment, the level of potential output, and the natural rate of unemployment. Although in this section we are interested chiefly in how to change the natural rate of unemploy-ment, it is convenient to discuss some of the wider implications of supply-side economics at the same time. We return to the determination of potential output in Chapter 29.
Income Tax Cuts One of the key themes of supply-side economists is the benefits. that stem from reducing the marginal rate of income tax. The marginal rate of income tax is the fraction of each extra pound of income that the government takes in income tax. We discussed tax rates and work incentives in detail in Chapter 10. We pointed out that a cut in marginal tax rates, and a consequent increase in the take-home pay derived from the last hour's work, tend to make people substitute work for leisure. But against this substitution effect must be set an income effect. To the extent that people now pay less in taxes, they will have to do less work to obtain any given target living standard.
Thus, theoretical economics cannot prove that income tax cuts increase the desired labour supply, and in fact most empirical studies con-firm that, at best, tax cuts lead to only a small increase in the supply of labour. We gave some details in Chapter 10 and give some more in Box 26-2. Figure 26-5 may be used to analyse the effect of a cut in marginal tax rates. The labour demand schedule LD shows that firms demand more workers at a lower real wage. We draw a steep schedule LF showing that higher after-tax real wage rates, at best, lead to only a small increase in the number of people wishing to be in the labour force. The schedule AJ shows how many

An income tax makes the net-of-tax wage received by households lower than the gross wage paid by firms. When the vertical distance AB measures the amount each worker pays in income tax, equilibrium employment is N,, the quantity that households wish to supply at the after-tax wage w, and that firms demand at the gross wage w. At the after-tax wage w, the natural rate of unemployment is the horizontal distance BC. If income tax were abolished, equilibrium would be at E. Employment would rise from N, to N, and the natural rate of unemployment would fall from BC to EF. Relative to the fixed level of unemployment benefit, the rise in take-home pay from w, to w, reduces the level of voluntary unemployment.

Ni N2 Number of workers
people wish to accept job offers at each real wage. It is drawn for a given (real) level of unemployment benefit. Hence the horizontal distance between the AJ and LF schedules — the it umber of people in the workforce refusing to work at each real wage, or the amount of voluntary unemployment — decreases as the real wage rises relative to the given level of un-employment benefit. Thus the figure incorporates lie fact that a reduction in the replacement ratio, t he ratio of unemployment benefit to wage rates, reduces voluntary unemployment. Suppose initially that there is a marginal 11 come tax rate equal to the vertical distance AB. lhe equilibrium level of employment will then he N, . Why? Because income tax drives a wedge between the gross-of-tax wages paid by firms the net-of-tax wages received by workers. At t lie employment level N, firms are happy to hire this quantity of labour at the gross wage w,. Subtracting the income tax rate AB, N, workers kN'allt to take job offers at the after-tax wage w3. I 'II us N, is the equilibrium level of employment. l'he horizontal distance BC shows the natural ,it e of unemployment, the number of workers in I In' labour force not wishing to work at the going r.i I e of take-home pay. To show the effect of a cut in marginal tax ales, suppose that income taxes were abolished. gross wage and the take-home pay now oiiicide, and the new labour market equilibrium IL, at L. Note that two things have happened. First the equilibrium level of employment has ri wit. Second, although more people wish to be III the labour force because take-home pay has increased from w, to w2, the natural rate of unemployment has fallen from the distance BC t > the smaller distance EF. A rise in take-home pay relative to unemployment benefit reduces I he level of voluntary unemployment. Si nil lar effects would be obtained if, instead of cti t t i lig income tax, the level of unemployment benefit were cut. For a given labour force schedule :1;, fewer people would now wish to he un-employed at any real wage. I fence the schedule (I I, showing acceptances of job of furs, would
shift to the right. Again, the effect would be both to increase the equilibrium level of employment (and hence of potential output) and to reduce the natural rate of unemployment by reducing the replacement ratio. What about the effect of changes in the national insurance contributions paid both by firms and by workers? These are mandatory contributions to state schemes which provide unemployment and health insurance. They act like an income tax in driving a wedge AB between the total cost to a firm of hiring another worker and the net take-home pay of a worker. Figure 26-5 shows that a reduction in these contributions will increase the equilibrium level of employment, increase the equilibrium level of take-home pay, reduce the replacement ratio, and reduce the natural rate of unemployment.
Other Policies Aimed at Labour Supply In Figure 26-3 we showed that, by restricting labour supply, unions could force firms up their labour demand schedule. In consequence, the equilibrium real wage would be higher but the equilibrium level of employment lower. Since a higher real wage reduces employment but (slightly) increases the number of people wishing to be in the labour force, we said that in raising real wages unions had increased the natural rate of unemployment. Collectively, labour had opted for higher wages and more unemployment. Conversely, the natural rate of unemployment will be reduced if the power of organized labour is weakened. Unions will then be less successful in restricting labour supply and forcing up wages. Hence any government intervention in the labour market to weaken the monopoly power of trade unions should be classified as a supply-side policy aimed at reducing the natural rate of unemployment and increasing equilibrium employment and potential output. Such policies would include changes in the law governing trade union activities, or incomes policies — direct regulation of wages — if the aim of the latter is to reduce real wages.'Phis need not he the sole aim

BOX 26-2
Do tax cuts make people work harder? It is important to distinguish two aspects of the labour supply decision.
HOW MANY HOURS TO WORK A lower marginal tax rate makes an extra hour of leisure more expensive in terms of the income and goods sacrificed by not working. It makes people substitute work for leisure. But tax cuts also increase workers' disposable incomes, making them want to consume more leisure. This income effect makes them want to work less. The table below is taken from a highly readable survey of incentive effects on labour supply, 'The Tax Carrot', by Professor Steve Nickell, published in Management Today, September 1980. Based on work by Professor Tony Atkinson of the London School of Economics and Professor Nick Stern of Warwick University, the table shows that the 1979 income tax cut in the UK should not have been expected to lead to a spon-taneous eruption of work effort. Nickell's survey shows that this is the over-whelming conclusion of many studies of work effort in the UK.
WORKERS WITH 1979 ANNUAL GROSS INCOME OF: £4800 £5460 £8990 £10 920 £13 759
— 2.1% — 1.8% — 0.4% + 0.2% + 1.8%
WHETHER OR NOT TO WORK The second aspect of labour supply, and the one in which we are primarily interested in this chapter, is whether or not individuals want to work at all. Again we must consider the income and substitution effects of higher take-home pay on the decision about whether or not to work. The UK evidence, surveyed in C. V. Brown, Taxation and the Incentive to Work, Oxford University Press, 1980, shows that for men the income and substitution effects cancel out. However, for women higher take-home pay does lead to more women wishing to join the labour force. One possible reason, which we discussed in Chapter 10, is that at low wage rates it may not be possible to offset the costs (commuting, babysitters, etc.) that must be incurred when working. Hence in this chapter we assume that the labour force schedule LF is not vertical. Higher real wages increase the total number of people wishing to work, though not by very much. By increasing real take-home pay, income tax cuts will lead to a small increase in the labour force.

of incomes policies, as we explain in the next chapter. Earlier, we pointed out that frictional and structural unemployment are important com-ponents of the natural rate of unemployment. Policies aimed at reducing frictional and struc-t it ral unemployment should also be included in stipply-side economics. Their objective is to shift he AJ schedule to the right relative to any given position of the labour force schedule LF. Among such policies we include grants that llow redundant workers to retrain in relevant skills, and the various government measures introduced to help school-leavers develop skills and job experience for the first time. By making the labour force more suited to employers' needs, such policies aim to allow firms to make wage offers that unemployed workers will find ceptable. Hence such measures reduce voluntary unemployment.
Policies Aimed at the Demand for Labour Thus far, we have emphasized policies aimed at t he supply of workers for employment. We now turn to the demand for workers by firms. In the previous chapter we saw that an adverse supply s I wk could reduce the demand for labour, shift-ing the LD schedule downwards. It seems plausible that the two dramatic rises in real oil prices in the 1970s had this effect. Overnight, many energy-intensive factories were inade economically obsolete by the rise in oil 1,rices. 'l'hey could no longer compete with more modern energy-saving plant. It was as if many 1st i ng firms had suffered a reduction in their usei HI capital stock. Since labour now had to )1-1K with a smaller quantity of relevant capital equipment, the marginal product of labour was !educed at each employment level. This can be I (presented in Figure 26-5 by a downward shift t be labour demand schedule LD. Try constructing your own diagram to show the effect of this. (Forget about income taxes and %1 .11A Iroiui the point F, in Figure 26-5.) If you draw the diagram correctly you will discover

[more to follow if this chapter is not transcribed yet. It relates to a later post about bad economics teaching in the 1980s which ignored the manufacturing crisis that had caused 3-4 million people to be unemployed, many of them close to the campus, and preferred to teach the usual graphs and a lot of statistics that couldn't be used instead.]