We have compiled some news, comment pieces and announcements that we hope our readers find interesting. In this instalment, there are stories relating to employment and inflation, artificial intelligence, taxation and carbon trading schemes:

Why British workers keep getting pay rises despite weak hiring (Financial Times)

Young hotel workers in Glasgow have negotiated a 10 per cent pay rise following a strike, an outcome that is perhaps indicative of a wider problem in the UK: pay awards remaining relatively high while employment slows down. With a weakening job market, such pay growth appears incompatible with the Bank of England’s target inflation rate of two per cent and there are concerns that inflation will become entrenched if households are now so accustomed to rising prices that they hold out for higher pay awards each year. Meanwhile, while they are reluctant to hire new starters or are keen to cut costs with less generous benefit packages, companies appear unwilling to reduce headline rates of pay when prices remain high and there is a widespread skills shortage

 

Faith in God-like large language models is waning (The Economist)

Enthusiasm for large language AI models appears to be in decline, with greater interest being shown in small language models. While no clear definition of the difference between the two exists, models that are trained using other AIs rather than having to crawl the web themselves, operate more quickly and with greater energy efficiency as a result of their more limited focus, and will run on in-house IT systems, appear to be more popular with companies, in part because of their lower cost but also because they can be adopted as bespoke models that focus on particular fields or functions.

This means that they can perform certain tasks well on industry specific data in a way that would not be cost effective for large language models. Better functionality and reliability, combined with a desire to see a return on any investment, have led to an expectation of growing demand for small language models at twice the rate of demand for all-purpose large language models. Should the trend continue, a more diverse landscape for artificial intelligence development is likely to emerge

 

We need to move on from the dreadful stamp duty system (The Times)

Stamp duty can be described as a tax that is complex, disincentivises purchases and house moves, reduces housing supply and increases rents. How would the lost revenue raised by stamp duty be replaced if the tax was abolished? Perhaps the answer is a reformed council tax charge based on the actual current value of property, without the current cap that ensures the most valuable properties are never charged at a rate that is more than three times that charged on the cheapest properties.

 

The problem with taxing the rich (FT)

The wealth of the super-rich has increased considerably since Forbes published its first list of billionaires in 1987 and there is a feeling that they ought to pay more tax. However, when in most developed countries, the largest shares of tax revenue are raised by sales and income taxes, and much of the wealth of the richest is invested in assets, taxing wealth is not straightforward.

Attempts to do so tend to lead to changes in behaviour. The history of wealth taxes suggests that they are of limited success and of the nations that have introduced them, few have retained them. Where they still exist, they raise little revenue.

While the UK has dismantled its ‘non-dom’ tax regime, other countries are seeking to attract the very wealthy – and for a government looking to extract more from the rich, there are numerous problems. How do we identify the very rich? Are they millionaires or billionaires? Are those whose homes have gone up in value and have more generous pensions than more recent generations the ‘very wealthy’? Such people are less mobile than the very richest and cannot move their wealth, so are easier to tax – but are they ‘super-rich’?

Some recommend a global asset tax on those with a total wealth of more than $1 billion, but asset taxes are very difficult to administer and enforce – and arguably discourage wealth accumulation and therefore economic activity. Others favour an ‘exit tax’ for those taking their wealth abroad. With ageing populations and increasing welfare costs, governments will continue to struggle with the question of whom to tax and how much, but while reform is needed, some argue that the narrative around tax and wealth needs to change.

 

Airlines fear carbon tax as flagship climate scheme develops holes (FT)

Corsia, the UN-backed Carbon Offsetting and Reduction Scheme for International Aviation is running low on the carbon credits that airlines in participating countries (of which there are 130) must purchase (unless they procure sustainable aviation fuel instead, which is in very short supply). Such credits cannot be used by governments to meet climate goals once they have been used by airlines, so there is little incentive to sell them. Airlines are now concerned at the possibility that on reviewing the performance of the market-based scheme, the European Union will extend a carbon tax on flights within the bloc to external flights. Some organisations predict a continuing shortfall of available credits, and rising compliance costs. Iata, which represents airlines, is calling for greater availability of credits, while some countries have yet to commit to fully participating in Corsia, which is supposed to be mandatory for all members of the UN’s International Civil Aviation Organization:

 

My job interview with an AI recruiter: at least there was no small talk (The Telegraph)

What is it like to be interviewed by an AI bot and why are some companies conducting first round interviews using artificial intelligence? For companies, there is a saving of time now that they receive so many applications for each vacancy (some of which are produced by AI), but the results are ‘mixed’: for instance, artificial intelligence cannot distinguish between genuine responses and those being read from a script. Some interviewees found the questions to be more worthwhile and relevant to a role than those often asked by junior HR staff in a first round interview. Some – particularly technology enthusiasts – quickly found talking to a machine to be less awkward than expected. The technology is in its infancy but some version of it is likely to play an increasingly significant role in recruitment.