How we’re avoiding the Biden Trap in the East Midlands
3 min read
To get growth and living standards rising across the East Midlands, this government is investing in physical and human infrastructure.
These investments will help us avoid the Biden trap: where higher growth does not lead to rising living standards. Our investments will employ lots of workers, get wages rising, and gets bills down. That is the mission of both this Labour government and me as an East Midlands Mission Delivery Champion.
Under the Conservatives, low investment led to lower growth and lower living standards across my region. Real pay fell by 2 per cent because we have the lowest (transport) investment levels in the country. Investment will make us better off.
But not all types of investment get living standards rising in the same way or on the same timeframe. Investment in physical infrastructure – think bridges, roads, solar farms – makes us more productive, but the positive impact takes a while to be fully felt. However, investment in human infrastructure – nursing, teaching, childcare – provides a more immediate boost to living standards.
Building a bridge raises short-term living standards less than investing in childcare does because of what the money is spent on. When we build physical infrastructure, 60-80 per cent of the investment goes to buying physical stuff – concrete, rebar, or solar panels – rather than into hiring people to build it. By contrast, when investing in human infrastructure, up to 80 per cent of the investment goes directly into hiring people.
Physical infrastructure makes us all more productive in the long run, but only when it’s completed. A new road makes it easier to move goods around. A solar farm makes energy cheaper. But you need to build the stuff before that effect is fully felt.
Bidenomics provides a cautionary tale. When Biden became President in 2021, he had a two-part plan. First, physical infrastructure investment in clean energy and transport. Second, human infrastructure investment in childcare and social care. But only the first part of the plan, the physical infrastructure investments, were enacted. Congress blocked the second part.
We know how the 2024 election ended up for the Democrats. They lost because the physical infrastructure investments were not being felt. The economy was growing, but that money was going to physical stuff rather than people’s wages. Living standards fell even as GDP rose. This was why Democrats lost.
We are avoiding the Biden trap in three ways.
Firstly, we are making a lot of labour-intensive investments. The Government’s childcare plans will give working parents of children under-five 30 hours of free childcare per week. That involves hiring tens of thousands more early-years workers.
Secondly, as a UK government, we can pass budgets more quickly and so build physical infrastructure faster than in the United States. That means the full effects are felt more quickly too. We passed our first budget four months into office and that money is already start being spent. By contrast, Biden had to wait almost a year to get his investment plan approved by Congress.
Thirdly, our investments directly get bills down. Investing in the Warm Homes Plan (home insulation) and in clean energy provides a direct reduction to bills. This represents an immediate fall in costs and rise in living standards.
Making investments in physical infrastructure quickly so that wages can rise for all, in human infrastructure so more of the initial cash is paid out in wages, and investing to get bills down will get living standards rising. In my region, where living standards have fallen for over a decade, we will show that Labour is delivering for the East Midlands.
Dr Jeevan Sandher is East Midlands Mission Delivery Champion
