April 3, 2025 • 13 mins
In this week's roundup, Merryn Somerset Webb, speaks with Money Distilled newsletter author John Stepek about how US tariffs have highlighted a benefit of Brexit and why they believe the minimum wage is too high.
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Episode Transcript
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Speaker 1 (00:02):
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
(00:23):
web editor at large for Bloomberg UK Wealth.
Speaker 2 (00:25):
Now I'm Joined Stappeck, Senior report at Bloomberg and author
of the Money Distilled newsletter.
Speaker 1 (00:31):
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?
Speaker 2 (00:40):
Listen?
Speaker 1 (00:41):
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.
Speaker 2 (00:53):
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
(01:15):
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.
Speaker 1 (01:33):
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
(01:54):
a hard man.
Speaker 2 (01:56):
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
(02:18):
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.
Speaker 1 (02:29):
And services one included in this brand of tariffs, and
we are mainly a service economy for good or bad.
Speaker 2 (02:34):
Well, yeah, and I don't think they will be no.
Speaker 1 (02:36):
I mean, this is about rebuilding America's manufacturing person it's
not about the services sector.
Speaker 2 (02:40):
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
(03:02):
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.
Speaker 1 (03:17):
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
(03:40):
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.
Speaker 2 (03:47):
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
(04:08):
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.
Speaker 1 (04:29):
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
(04:52):
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
(05:15):
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.
Speaker 2 (05:29):
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,
(05:51):
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
(06:15):
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
(06:36):
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.
Speaker 1 (06:46):
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
(07:07):
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.
Speaker 2 (07:18):
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
(07:38):
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
(08:01):
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
(08:24):
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
(08:44):
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
(09:06):
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.
Speaker 1 (09:17):
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.
Speaker 2 (09:27):
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
(09:52):
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,
(10:12):
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
(10:33):
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
(10:56):
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
(11:17):
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.
Speaker 1 (11:27):
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.
Speaker 2 (11:49):
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
(12:11):
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.
Speaker 1 (12:26):
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.
Speaker 2 (12:35):
Yeah, that's pretty counterproductive, regardless of what you think is
the value of a university degree.
Speaker 1 (12:41):
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
(13:02):
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
(13:24):
marrin Money at Bloomberg dot net.
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
(00:23):
web editor at large for Bloomberg UK Wealth.
Speaker 2 (00:25):
Now I'm Joined Stappeck, Senior report at Bloomberg and author
of the Money Distilled newsletter.
Speaker 1 (00:31):
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?
Speaker 2 (00:40):
Listen?
Speaker 1 (00:41):
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.
Speaker 2 (00:53):
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
(01:15):
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.
Speaker 1 (01:33):
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
(01:54):
a hard man.
Speaker 2 (01:56):
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
(02:18):
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.
Speaker 1 (02:29):
And services one included in this brand of tariffs, and
we are mainly a service economy for good or bad.
Speaker 2 (02:34):
Well, yeah, and I don't think they will be no.
Speaker 1 (02:36):
I mean, this is about rebuilding America's manufacturing person it's
not about the services sector.
Speaker 2 (02:40):
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
(03:02):
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.
Speaker 1 (03:17):
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
(03:40):
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.
Speaker 2 (03:47):
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
(04:08):
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.
Speaker 1 (04:29):
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
(04:52):
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
(05:15):
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.
Speaker 2 (05:29):
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,
(05:51):
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
(06:15):
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
(06:36):
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.
Speaker 1 (06:46):
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
(07:07):
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.
Speaker 2 (07:18):
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
(07:38):
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
(08:01):
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
(08:24):
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
(08:44):
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
(09:06):
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.
Speaker 1 (09:17):
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.
Speaker 2 (09:27):
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
(09:52):
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,
(10:12):
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
(10:33):
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
(10:56):
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
(11:17):
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.
Speaker 1 (11:27):
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.
Speaker 2 (11:49):
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
(12:11):
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.
Speaker 1 (12:26):
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.
Speaker 2 (12:35):
Yeah, that's pretty counterproductive, regardless of what you think is
the value of a university degree.
Speaker 1 (12:41):
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
(13:02):
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
(13:24):
marrin Money at Bloomberg dot net.
Host
Merryn Somerset Webb
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