15  Inferred from Bradley (2016), using the mean pay of the self-employed compared to employees. Hamilton (2000). 17 Gardiner (2016). 18 Because self-employed workers are not included in statistical measures of average weekly earnings, the self-employed effect would not have shown up arithmetically in this wages measure. But there will still likely be general equilibrium effects on wage-setting in the economy for those who earn a salary. 16  8  All speeches are available online at www.bankofengland.co.uk/speeches  8  A final piece of evidence, albeit indirect, comes from historical data. The move towards greater self-employment and less unionisation is, in some respects, a shift back to the future in the nature of work. Prior to the Industrial Revolution, and indeed for some years after it, most workers were self-employed or worked in small businesses. There were no unions. Hours were flexible, depending on what work was needed to collect the crops, milk the cows or put bread on the table. Work was artisanal, task-based, divisible. st  While the read-across to work patterns in the 21 century is far from exact, there are some parallels. That being the case, one question is how wage- and price-setting behaviour operated during this earlier period of more “divisible” labour markets. Were any of today’s wage patterns evident then? The data we have on wages and output in earlier centuries are partial and imperfect, but nonetheless tell an interesting story.
Since July last year, inflation expectations have risen by around 40bp in the UK and around 25bps in the US and euro-area (Chart 15). The downside skew in inflation expectations appears to have dissipated. And not just among market participants. The shift in inflation narratives among the public has been every bit as striking. Google searches for the word “deflation” are at their lowest level in several years, having been particularly elevated in 2015. Searches for the word “reflation” have risen fourfold comparing the first quarter of this year with last (Chart 16). Hopes of reflation have displaced fears of deflation as the popular narrative about global inflationary trends. 13  All speeches are available online at www.bankofengland.co.uk/speeches  13  This shift in inflation expectations has important implications for monetary policy. One of the concerns about below-target inflation was that any negative shock to demand could dislodge inflation expectations, requiring further stimulus at a time when the zero lower bound on interest rates potentially made this less effective. This asymmetry of risks can justify holding interest rates lower for longer, on “risk management” grounds. 24  With inflation expectations now having adjusted upwards, the need for such monetary policy insurance is now lower than nine months ago. Fourth, closer to home, some of the worst of the post-referendum fears about UK growth have failed to materialise. Growth has been more resilient than expected. The Bank’s Inflation Report forecasts for UK growth in 2017 have been revised up by over a percentage point since last August.