Brexit immigration cut drives UK wages higher

By Leith van Onselen

The decline in EU immigration into the UK in the wake of the Brexit Turmoil has proven to be a massive boon for workers, with unemployment falling to the lowest level since the 1970s and UK wages surging:

Average wages are rising at the fastest rate in a decade and employment has reached a record high in the UK, according to official figures released today…

The Office for National Statistics (ONS) said total earnings were up 3.5%, including bonuses, despite expectations the labour market would be suffering more from the UK’s looming departure from the European Union.

Figures released by the ONS also show employment has soared to its joint highest level since records began at 76.1% of the working-age population. The official unemployment rate has dipped to 3.9%, the lowest since the mid-1970s…

Matt Hughes of the ONS said: “The jobs market remains robust, with the number of people in work continuing to grow. The increase over the past year is all coming from full-timers, both employees and the self-employed”…

Meanwhile, with the UK’s unemployment rate cratering, and wages rising, employers have lashed-out at the government for stemming the flow of EU migrant workers:

“A tight labour market represents yet another headache for small business owners,” the FSB said yesterday.

“One in five small UK employers rely on staff from the EU. The sharp drop in European arrivals is a real concern for many smaller firms.”

The Recruitment & Employment Confederation also piped up – “our surveys show that firms are still experiencing shortages of key staff. This is a big risk to future growth” – while the British Chambers of Commerce bemoaned “the perennial skills shortages plaguing UK businesses”…

Weekly UK earnings growth:

 

Low unemployment (3.9%). Strong wages growth (3.5%). Improved conditions. What’s not to like?

It is basic economics that if you stem the flow of foreign workers, then workers’ bargaining power will increase. This was explained by The Australia Institute’s chief economist, Richard Denniss, when he noted that the very purpose of foreign worker visas is to “suppress wage growth by allowing employers to recruit from a global pool of labour to compete with Australian workers”.  That is, in a normal functioning labour market, “when demand for workers rises, employers would need to bid against each other for the available scarce talent”. But this mechanism has been bypassed by enabling employers to recruit labour globally. “It is only in recent years that the wage rises that accompany the normal functioning of the labour market have been rebranded as a ‘skills shortage'”.

Except in very limited circumstances, there is no such thing as a shortage of labour. There is only a “shortage” of labour at the price/ wages firms are generally willing to pay.

Given faster wage growth: a) the least productive businesses would lose people, shrink and go bust, transferring workers, land and capital to more productive businesses, raising average productivity across the economy; and b) all businesses, observing higher wages, would invest more in labour saving technologies, training and restructuring to raise productivity.

This is how the labour “market” is supposed to work. But allowing the mass importation of foreign workers circumvents the ordinary functioning of the labour market by enabling employers to pluck cheap foreign workers in lieu of raising wages. It also discourages employers from training locals in favour of hiring ready-made workers from overseas. This is deleterious for both workers and the broader economy.

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Comments

  1. And Big Australia Billy is going to somehow magic higher wages with his ‘open the gates’ policy.

    • Wages will increase for many skilled Australians as they move to the UK and other populist countries in future creating a brain drain.

  2. You’d have thought the automation would keep the wages down. Employers who whinge about rising wages to pay staff should just be told to learn to code and automate their business.

    • Lenny Hayes for PMMEMBER

      They should just get a better business, or simply be born to parents who have a better business.

      It’s not hard, business owners just need to apply themselves and not bludge off the system.

    • One of the great fallacies of the modern world right there. Automation generally increases wages because instead of digging ditches with shovels the people paid to operate the machinery are suddenly skilled and therefore paid much more. It’s called progress and productivity improvement.

      We’ve come a long way since the Luddites destroyed textile machinery, thinking their employment prospects were doomed forever.

      • Yeah, but surely the whole point of automation and productivity increases in general is that any given number of people can do more. The UK business owners are complaining about a lack of staff to get stuff done – all they should need to do is take advantage of all the AI, deep learning robotics advancements and increase productivity, and then they won’t have a problem. Just hire a couple of coders and get it done, or learn to code themselves.

        You can’t mean that a ditch digging business that automates has to employe more people, after all.

        Besides, there used to be heaps of taxi drivers in the UK- haven’t the self-driving cars freed them up yet?

      • drsmithyMEMBER

        Automation generally increases wages because instead of digging ditches with shovels the people paid to operate the machinery are suddenly skilled and therefore paid much more. It’s called progress and productivity improvement.

        And that’s why wages have been stagnating for a decade (decades if you’re American), bullsh!t jobs are proliferating like horny rabbits, and most of the returns from improved productivity have gone to capital holders.

      • Yes, smithy, but what you’re saying is only true if (as I explained to young Thomas) you believe that the number of jobs is static.

        I would agree though that the hordes of central Americans flooding over the south border does not help. It has been well documented on this blog that labor is little more than a commodity (particularly low and no-skilled) and that if over-supplied it depresses wages. I really don’t think the Yanks have any moral obligation to these immigrés to make sure they get paid a decent wage. But they certainly have an obligation to genuine citizens to protect their welfare in the wake of this horde.

      • drsmithyMEMBER

        Yes, smithy, but what you’re saying is only true if (as I explained to young Thomas) you believe that the number of jobs is static.

        “Belief” is your schtick.

        What I’m saying is what has actually happened – to varying degrees – for the last 40-odd years across the western world.

        Why do you think the consequence of cheap immigrant labour is different from the consequence of less meatier forms of automation ?

    • The problem with the AI /automation argument is that it assumes there are no more jobs for the people who are put out of work i.e. that there is a fixed number of jobs in the world, which is absurd. As long as the economy is (properly) expanding the number of jobs will expand. Computer software cannot give you a massage / do physio, for example, and nor can a robot cut your hair (decades away, if ever). What AI and robots will do is release people from doing mundane jobs (allowing them to take on more skilled jobs) and make the associated products and services cheaper. If you don’t receive a direct pay rise in such a scenario you can instead enjoy an indirect one by virtue of being able to buy more goods/services with the same salary.

      It’s funny, but if you look through history, we’ve been here several times before and yet, ‘this time is different’. This time we are ushering in the apocalypse. The more things change the more they stay the same. Humans like to think they are cleverer, more sophisticated in the 21st century but the same, age-old primeval instincts still drive them.

      And one final thing: the global population is literally a few years away from peaking — once it starts shrinking (a-la Japan, Italy etc) we’ll need AI and robots more than ever and be glad of their existence


      • And one final thing: the global population is literally a few years away from peaking — once it starts shrinking (a-la Japan, Italy etc) we’ll need AI and robots more than ever and be glad of their existence

        The population of the UK isn’t shrinking – it just isn’t expanding as quickly – and AI hasn’t prevented alleged labour shortages. Either some scepticism is warranted about the ability of AI to prevent labour shortages, or some scepticism is warranted about UK employrers claimed labour shortages. Or maybe both.

      • AI does not prevent labor shortages — it is a complement to labor and should, by definition, aid improved productivity.

        I think UE laid it out perfectly when he said there was a shortage of people available at a price that certain employers were willing to pay.


      • AI does not prevent labor shortages — it is a complement to labor and should, by definition, aid improved productivity.

        but


        And one final thing: the global population is literally a few years away from peaking — once it starts shrinking (a-la Japan, Italy etc) we’ll need AI and robots more than ever and be glad of their existence

        So it seems that when the global labour does start shrinking, and seeing as unlike Japan, who are attracting guest workers in huge numbers, as a planet there is no where else to go for extra workers, AI won’t prevent the problems associated with a shrinking labour pool.

      • @Robert
        What? Sorry, there are so many twists and turns in your statement I couldn’t follow. Not to worry, let’s not debate this issue — you either get it or you don’t. Good luck!

  3. You are not seriously holding the position that Brexit is going to be a positive move for the UK?

    • At this point all the BREXIT crowd need is for reality to be better than the horror story that the REMAINERS like to paint.

      Rising wages and low unemployment ticks more than a few boxes.

    • The EU is a failing project anyway with a ridged single currency, debt creating central bank, little concern for its borders, fracturing as eastern EU countries protect their borders and an unelected commissariat. Staying in may create more and harder issues to deal with than being outside.

    • Why ever not? Are you suggesting the more bureaucracy there is the better off everyone will be?

      Added to which, do you think Britain has been a net contributor (financially) to the EU or a net receiver? I’ll give you clue — it’s not the latter. The PIIGS have feasted at the trough, renewed much of their infrastructure, salted away tens of billions of dollars via egregious levels of corruption and totally f***ked their economies in the process (improbable as all that may sound).

      If the ship is sinking always best to be first off – no call for politeness.

      • What do you think drives the UK economy? I’ll give you more than a clue, its the city of London and without passporting rights into Europe it is locked out of its most critical market. The UK has indeed been a net contributor to the EU for many years but not to extent that Germany and France have been and of the countries you refer to as PIIGS both Italy and Spain have been net contributors, I cannot comment on the current state of the Greek and Portuguese economies but aside from the enormous legacy debt absorbed by Ireland following the bailout of EU bank bondholders unsecured debt during the GFC, the economy is booming and it is running significant current account surpluses year on year, I can assure you its economy is far from F****d. The benefits to the UK have been much greater over its 40 years of membership of the single market than the costs arsing from its contribution to EU structural funds and so the plan to exit the EU will take its economy only one way. I’ll give you a clue its not up.

    • Why not?
      No reason to think it’ll be worse than Iceland a decade ago. Sharp drop and a decent V recovery.

      They’ve got the brains. They can pull a Singapore vs Malaysia if they try.

    • Yup, Ireland’s doing brilliantly (with its 10% corporate tax threshold, making it a de facto tax haven and which all the other members resent very much and would remove in a heartbeat if they thought they could do so without leading to Irexit). Ding ding ding! Penny dropped yet?

      But you’re right, I wouldn’t want to be those other economic laggards, Switzerland and Norway, suffering as they do by being outside the EU. If they knew what was good for them … 😉

      Don’t you worry about the UK — some mildly painful adjustment may be required but they’ll be fine, no longer having to shovel tens of billions of Pounds into keeping hordes of over-paid, largely useless bureaucrats in treasure and worthless jobs.

      … oh Lordy, and I forgot the best bit: the EU’s marquee economy, Germany is virtually in recession despite interest rates at 0%. Sounds like a raging success to me!

      • kiwikarynMEMBER

        Now that the EU ruled that countries cant offer sweetheart tax deals to companies like Apple, they are ripe for the picking by the UK if they want to Brexit, drop their corporate tax rate, and offer some large global companies a good deal to relocate their head offices.

      • Jeez I have hit a nerve here. Calm down and get your facts straight first cupcake.

        Ireland’s corporation tax rate is 12.5% not 10% and has been for years. While it‘s corporation tax rate is the lowest in the EEA it has some of the highest personal tax rates in the western world so take your tax haven argument to the 5 lamps. There is a reason Michael Smurfit JP McManus and other Irish born billionaires are tax resident in Switzerland. The treaty of Rome grants a member state veto on taxation law so unless Ireland unilaterally decides to increase is CT rates (SFA chance) then the rest of the EU 27 can have a cry all they want, it won’t happen. As for “Irexit”, it is a concept supported by 237 champagne socialists who think Farage “has a point”. The remainder of the Irish Public is savvy enough to know what works for it.

        Norway and Switzerland are EEA member States which require them to adopt the 4 core principles of EU membership, and implement equivalent laws and protocols for substantive trade requirements. They are EU members in all but name. Again the Swiss and the Norwegians are savvy enough to know where their bread is buttered.

        As for the UK not having to pump in 10’s of billions into member states, well it has already spent £22bn on Brexit and all it has achieved is the knowledge that Britain cannot agree on anything so I guess the £39bn divorce bill will not seem too excessive by the time they know what side right and left are on.

        As to your point on Germany I will happily concur that it’s economy is not kicking goals at the moment but it is not in a recession and despite the sluggish economic performance, the residents of Berlin and Frankfurt are not experiencing income stress in the same way that large swathes of Sydneysiders and Melbournians are so you can mock the Germans but if they had 19% of the worlds mineral reserves sitting under their soil they would use that to make the quality of life better for their citizens not squander it on tax subsidies to generate ponzi schemes. They know how to run an economy for the betterment of its citizens.

        As for all those other monarchist poppy wearing fascist union jack waving apologists here who think that the EU is a failed concept. Europe has enjoyed it longest period of peace in centuries which was the founding principle of the EU. Economic prosperity if achieved is a bonus but avoiding conflict is what it is about and to that end the EU has been a resounding success. You can be colonial apologists all you want but supporters of an empire on which the sun has long set would do well to understand the modern realities of cooperation and collaboration.

    • The only person who has touched a nerve here is me, judging by the tone of your rant. I’ve just been chuckling to myself:
      – you declare my argument on Ireland’s low corporate tax rates null by pointing out a non-significant difference (12.5% vs 10%. Seriously?). Ireland’s personal tax rate is irrelevant given that it is the corporate tax rate that is driving a host of companies on both sides of the Pond to headquarter there. Without that carrot, Ireland’s economy would be doing what exactly?
      – Norway and Switzerland are members of the EEA for good reason: they have their people and goods moving freely across borders without all the bureaucratic and financial baggage of being an actual member. Sounds like winning the Lotto to me. That’s pretty much where the UK wants to be, minus the free flow of people.
      – You insinuate that I am supportive of Straya’s economic/political model over Germany’s. Nowhere have I suggested that all. It is your imagination running wild.
      – claiming a dividend of the formation of the EU is decades of peace. False binary if I’ve ever heard one — can you prove the Europeans would have been at war absent such an arrangement? Of course you can’t.
      – Let’s face it, the EU is nothing but a vast, bloated, inefficient bureaucracy living (as all parasites do) off their host (the taxpayer), delivering a handful of benefits, as socialist systems do, to select groups within. It is hilarious that all the doe-eyed Europhiles cannot see that the EU is actually in the process of disintegrating in front of our very eyes: Poland, Hungary, Italy, Britain all wanting to rein Brussels’ power (or get the f*ck out of Dodge entirely), while German support rests almost entirely on the ECB’s Target 2 system. The Germans, given the parlous state of their economy, will not want a bar of having to bail out or fund the rest of the slackers and bludgers for much longer.

      Not to worry, though, there is always ‘hope’ even if there is little else of substance to keep it all going.

      • Like I said get your facts straight if you are going to argue a position. I never suggested your contention on Ireland’s corporate tax position was inaccurate rather your core facts are wrong and your view of the tax position clouds your understanding of the drivers of the Irish economy. Your contention that Ireland is a tax haven is however incorrect, Bermuda and the Caymen Islands are tax havens, Ireland is not. It’s economy is dominated by SME and services led exports a sizable portion of which are driven by multi nationals but also by indigenous enterprises which are still the largest sector of employment in the country. For sure the low corporation tax rate is a carrot but a bigger one is the access it grants companies from non EU member states to the single market. Hence companies like Zurich Insurance (who save very little in CT under Ireland’s tax regime) establish their EU headquarters there. Without the low CT rate Ireland’s economy would lose some subsidiary EU operations but without membership of the EU Ireland’s economy would be much less diverse. My point being that Ireland has benefited enormously from membership of the EU accepting that it’s CT stance has been accretive in supporting its economic strategy. Contending that Ireland’s success is solely down to its CT rate is inaccurate.

        But this article is not about Ireland it is about Brexit and a suggestion that it is a smart choice for the UK so to your other points.

        The pro Brexit campaign in the UK has already rejected EEA membership as it does not wish to conform with the core principles and protocols of the EU or contribute to its budgets, all of which the UK wants out of. It only wants free access to the EU without having to make a contribution. What else was the EU going to do except tell it to f*** off. Norway and Switzerland enjoy some of the benefits of EU membership but they also contribute positively to the European project. The UK still believes it has the ability to go it alone and it is slowly finding out it does not sit at the top table without EU membership.

        As for getting into an argument about the reason for an absence of war, there is no point, the reality is that Europe has been at peace for 70 years and the EU project has been the critical driver in ensuring that. Go and argue in a phone box on that if you love your false binary position. I am enjoying EU peace too much.

        As for your contention that the EU is falling apart well you keep believing that. The EU will be around For a long time yet. Largely thanks to Brexit demonstrating to the rest of Europe what a naive position it is for a former economic superpower to think it can go it alone.

    • Sorry Thomas, I’ve read what you’ve said and I am not convinced. For starters I am ideologically opposed to the whole federalisation angle — states work far better when smaller and the citizens therein actually have a direct input into the political process. Quite frankly, the MEPS are so powerless as to be useless in the European Parliament. Instead the EU is lead by some deranged alcoholic (Jean-Claude Juncker) who cares not a f*ck for anyone but the next bottle of red (taxpayer funded).

      Let’s try and prove my point shall we: which states are the most economically successful in the modern era? Oh dear, that might be Singapore and Hong Kong. What a fvcking surprise!!! ding ding ding !!!

      Sorry mate, people who back the federalisation model are intellectual pygmies. It’s a recipe for economic disaster.

  4. I really admire Theresa May. She has the worst job in politics but is doing the right thing over all.

    • I assume you are joking. Theresa May does not care about doing the right thing. All she cares about is delivering Brexit. She herself does not believe it is the right thing to do she was anti Brexit to begin with.

      • HadronCollision

        I might be wrong here, but I think (factcheck) that England voted to Brexit via referendum.

        So she is trying to deliver upon the will of the people, is she not?

    • By right thing you mean trying to thwart the will of the people for her globalist mates. She even makes Tony ‘my god is money’ Blair look talented.

      • + 100
        You’d be dumb enough to vote for your own enslavement or worship the same god of the globalists to think otherwise.

    • The best thing to do with this bad situation is come out to the public and tell them that Brexit as portrayed by Johnston Rees Mogg and Farage was never going to be achievable and that the UK public be given an opportunity to vote for what can be achieved which is an option between a no deal Brexit or the option given to them by EU. Better still 2nd referendum on Brexit.

  5. Must be why the fake left media keeps saying “the plebs will be ruined if Brexit happens”.

    ‘Try offering higher wages’: Economist offers job vacancy solution

    “Every time there’s a story about employers can’t find workers … my economist friends on Twitter immediately slap their heads and say, ‘Try offering higher wages,'” he said.

    https://www.cbc.ca/news/canada/prince-edward-island/pei-job-vacancy-rate-1.5070516

    Canada has a slower immigration rate than corrupt Australia.

    A comment under the article:

    Steve Holiday

    The foundation of modern business is “cheap labour”. They’ll apply to bring in foreign workers that can be paid less before they’ll offer a local person a higher wage.

    And Sally McManus wants them to import cheap labour!

    If she wants perpetual construction, let it be high speed rail instead of illegal apartments. Cement pouring is cement pouring.

  6. St JacquesMEMBER

    The negative effects of Brexit haven’t kicked in yet because, well, Brexit hasn’t happened yet, but immigration from the rest of Europe, especially the much poorer eastern side, has greatly slowed down in anticipation, so this is a great little test, and wages are up. SURPRISE! Orthodox economic theories are WRONG AGAIN. But then orthodoxy is a LOAD OF RUBBISH WRITTEN BY IDEOLOGUES AND BELIEVED BY IDIOTS.

  7. As we’ve long known, open borders is just mostly for the benefit of big business, to get access to more slaves and expand their customer base at the expense of tax payers and existing residents standard of living.