A Terrible Tragedy – Brexit Means Wages Will Rise

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We have predictions of the most appalling skills shortages as a result of Brexit. This means, inevitably, that Brexit will cause wage rises. And isn’t that good? We rather liking the idea of higher wages in the main.

The correct method of analysing this is to use Karl Marx for, yes, he did get the one thing right, how wages are determined.

Nine in 10 businesses say Brexit has affected their ability to recruit and train staff this year, the Confederation of British Industry has said. The Recruitment and Employment Confederation, the professional body for the recruitment industry, says the public sector, including the NHS and schools, face up to seven more years of skills shortages, based on current demand. On Thursday the Office for National Statistics said the number of EU citizens coming to the UK for work had fallen to a six-year low.

Fewer workers, higher wages, that’s how it works.

Marx cast in into that story of the reserve army of the unemployed.

But then the underlying point is one that even Marx did get right. When there’s that reserve army of the unemployed then employers don’t have to share the profits, or any rise in them through things like productivity improvements, with the workers. For there are those unemployed who can be brought in to do the work. Either because more labour is required or because the current lot get a bit bolshie. When there are no unemployed then the various capitalists are in competition with each other to find the labour they wish to exploit. That competition raising the price paid for the labour, that is, wages go up. Full employment really does mean wages rise.  

But, but, we’ve had full employment for some time now, haven’t we? So why aren’t wages rising? The point being that we’ve had that full employment locally, yes. But the reserve army of the unemployed is off in Wrosclaw, Timisoara and such places, at the end of an £80 flight. That competition between the capitalists hasn’t thus been happening as it is indeed possible to just hire some more workers. We leave, they can’t come, the others can’t hire, wages will rise.

Brexit will raise the workers’ wages. Why isn’t that a good idea?

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Dodgy Geezer
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Dodgy Geezer

…Brexit will raise the workers’ wages. Why isn’t that a good idea?…

An economist would point out that this will raise prices, and make our exports less competitive. As well as making the country one which will attract less investment. Resulting in a slump.

However, the key questions, as they are with so many economic issues, are By how much? and How rapidly? I see no appreciation of either of those ….

Shadeburst
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Shadeburst

Countries with high wages tend (as opposed to being necessarily so) to have higher productivity. Labour costs per unit output are lower. Frog zample Germany. Which is why the euro is such a wonderful thing for the Germans. Back in the good old deutschemark days the currency just kept on getting stronger and stronger and German goods were getting priced out of the market. With the euro there are tons of underperformers to keep the currency at a stable affordable level.

Dodgy Geezer
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Dodgy Geezer

I must admit that I haven’t followed the argument that Brexit will mean higher prices closely – My experience is that all predictions about Brexit are barely concealed lies – aka Project Fear.

But are they really arguing that Brexit will raise productivity? I suppose you could claim that if people leave the UK those of us that remain will be richer in terms of fixed assets….