Guess Wages Will Just Have To Rise After Brexit

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Employers are complaining that without badly paid immigrant labour they’ll just not be able to get the staff. The answer to which is that they’d better start paying higher wages then, eh?

Business groups warned that major industries would face a shortage of vital workers after the government outlined its new points-based immigration system to limit the number of low-skilled workers coming to the UK.

Unions said the care system would be “on its knees” should the policy be introduced without further reductions in the minimum salary, which ministers set at £25,600 unless migrants can show they have a job offer in a “shortage occupation” or have a relevant PhD.

The analysis here stems from something Marx got right. It’s competition among capitalists for scarce labour which pushes wages up. If there’s a vast reserve army of the unemployed then anyone needing more straining backs just tosses a crust to those in that army and gets as many limbs and torsos to exploit as desired. But if all are already employed then any desire for extra labour requires tempting it away from current employer and occupation to the new. That means a better job offer. Some mixture of conditions, enjoyment of the job, cash and so on that makes up a more attractive package.

The combination of cheap flights and free movement of labour has meant that the reserve army lives in Wroclaw and Debrecen. It’s also been near unlimited – compared to the size of the UK economy – these past couple of decades.

The absence of free movement – what is being complained about here – will mean that to gain the desired labour those employers are going to have to offer higher wages, higher compensation rather, to those not ordinarily resident or stemming from central Europe.

The effect of this will be to raise low end UK wages. This is a problem for us, right? Or, actually, are we entirely happy about the idea of low end wages rising? I’m certainly on that second side, what’s wrong with the workers getting pay rises?

Brexit means cutting ourselves off from that reserve army of the unemployed. Wages will therefore rise. And?

Well, the and is that some outputs will become more expensive top produce. And? And some will even become uneconomic to produce. And? Say, for example, that England will no longer grow its own strawberries. And? We don’t grow our own bananas either.

We can even take the Dean Baker view of this. One major complaint – for what it’s worth and that might well be not a lot but still – is that income inequality is “too” high in the UK. If we remove competition for those low end jobs while still leaving the high end ones open to any of the 7 billion who want them this will collapse the income inequality, won’t it? If not collapse, at least reduce. That is, restrictions on low end labour arriving should appeal to anyone whingeing about that income inequality.

But back to the basic complaint here. These employers are complaining that Brexit will mean they’ve got to raise the wages they pay. To which the correct response is “Ah, Diddums”.

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Spike
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Spike

Yes, an echo of George W. Bush’s jaw-dropping comment that the U.S. “needs” foreigners to do “the jobs Americans are unwilling to do.” We have done any work and built anything, if we anticipate an attractive return! And yes, competition for anything including employees tends to push up the price paid. And yes, reform of anything makes prices fluctuate, thank goodness they are able to.

bilbaoboy
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bilbaoboy

Heh, last sprog graduates from Loughborough with a good degree in Mech. Eng. this summer. Did an internship last summer that worked out well and has the contract for a full-time job starting this September on his desk now.

The offer has gone up by £2,000 since they first mooted the possibility.

Despite Brexit 🙂

Bernie G.
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Bernie G.

I recall my younger years – in the 80s – when, thanks in no small part to the absence of a migrant labour stream, I was called into the board room on an almost monthly basis and informed of another pay rise. That said, back then it was an exclusively male environment. You could argue the advent of women in the workforce has had a more detrimental effect on wages than immigration.

Phoenix44
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Phoenix44

But not on household wages. Which is actually what matters.

Bernie G.
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Bernie G.

Not necessarily. But that’s a different story.

Phoenix44
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Phoenix44

Pretty sure stopping doing low skilled, low productivity stuff in favour of more skilled, higher productivity stuff is going to raise our average productivity, if my understanding of averages is correct?

john77
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john77

What is more significant is transferring people from the unemployment register to fill jobs that were previously filled by horrendously over-qualified Latvians etc will improve average UK incomes and reduce inequality.
Most of the guys who drop off parcels for my my neighbour have noticeable accents but otherwise excellent English – why aren’t they in better jobs and replaced by less qualified ocals?

Quentin Vole
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Quentin Vole

The cowman at my neighbouring dairy farm is a qualified vet from somewhere out east – possibly Latvia. The farmer tells me he’s a great cowman, but I can’t help thinking that humanity is not globally optimising its resources.

Pcar
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Pcar

The answer to which is that they’d better start paying higher wages then, eh?

Too simplistic. The answer is remove wage controls – minimum wage

Then the “not bright” can be employed and do the care work, albeit more slowly. However, that’s a benefit as more time spent with old & lonely.

Nigel Farage does not hold back praising Brexit negotiator for “getting the upper hand”
https://www.youtube.com/watch?v=FlJo4WM7RtA

@Bernie G

“I recall my younger years – in the 80s60s before women in the workforce”

FTFY

Jim
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Jim

Its interesting that the ‘party of the working classes’ is more worried about the continued ability of the evil capitalists to get cheap foreign labour to continue making profits, than about the ability of said working classes to get higher wages because of a labour shortage, especially at the lower echelons.

Identity politics makes strange bed fellows……….