WS MoreOrLess: The UK vs Mississippi
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Hello and welcome to More or Less on the BBC World Service. We're the programme which dances daringly with the data that surround us in the news and in life, and I'm Tim Harford. The journalist Fraser Nelson caused quite a stir recently when he wrote an article for the UK newspaper The Daily Telegraph in which he said that if Britain were to leave the European Union and become the 51st state of America, the country would actually be, if you took economic output adjusted for living costs... the second poorest state in the Union. Only Mississippi would be poorer. This comment was met with both scepticism and annoyance by many proud Brits online. But was Fraser Nelson right? Chris Dillow writes for the Investors Chronicle and has a blog called Stumbling and Mumbling.
He's been checking the numbers. I started by asking him why so many people questioned Fraser Nelson's assertion.
You mentioned the southern states to the typical Englishman. He pictures deliverance and men playing banjos, and he's got all these images of quite a poor country. But in fact, that's a very outdated image, and the southern states have grown very strongly over the last 40, 50 years.
Talk us through how you subjected Fraser's number to an independent assessment.
UK GDP last year was £1.6 trillion. If you divide that between 64 million of us, you've got GDP per head of just over £25,000. The exchange rate last year was 1.57, so that gives us GDP per head in dollars of just over £39,000. In the US, you've got GDP per head of just over $53,000. So it looks as if the United States are $14,000 per person richer than us. What I decided to do then was to forget that calculation and look at wages. We know from the UK that the median full-time male worker gets £556 per week.
Was Fraser Nelson right that the UK would be poorer than every US state except Mississippi?
Now, the typical American worker, this is a man, gets $860 per week. If you convert that at an exchange rate of about $157, they're very close. There's something else, which is that a lot of prices in America are a lot, lot lower than in the UK. And this means that in terms of what your money buys, you're much better off in America. So what I thought I'd do was I'd have a look at the prices of actual goods in the shops. Take a dozen eggs. These cost just over £3 in the UK, but they cost only $1.95 in the US.
Which is about £1.20, something like that?
Yes.
So that's much cheaper, less than half the price. Yeah. I mean, I guess we all know about petrol. Petrol's a lot cheaper.
Yeah, petrol's a lot cheaper, but so are most other staple foodstuffs. I mean, milk, mints, coffee... I looked at several things and the picture is pretty similar.
None of this is super statistically rigorous. It's just a sort of a basic reality check that you're able to do armed only with Google that says really it shouldn't be surprising to find out that the UK does not stack up terribly well in GDP terms relative to most American states.
We can come at this in two different ways. GDP per head tells us that the Americans are doing better than us, but so too do wages and individual prices.
What's the counter-argument that actually the UK is not doing as badly as those economic statistics seem to suggest, and in many ways life in the UK is better than those statistics would suggest?
There's quite a few things that these figures miss. One is that Americans work more hours than we do. We've got some OECD figures which show that Americans put in 7% more hours per year. So they're richer than us in part simply because they work harder. There's also the question of health care. Americans spend 7.6% more of their GDP on healthcare than we do in the UK. So once you take account of those two facts, the gap between the British and the Americans narrows quite dramatically.
So you're not saying we should all immediately emigrate, but you are saying, on the face of it, Fraser Nelson's claim, which seemed surprising, surprised you, it's perfectly plausible.
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