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Who caused the problems for our labour market?

2 Labour business conference
Written by Catherine McBride

Catherine McBride questions the Labour Party’s attitudes to Brexit when it is clearly the free movement of labour within the EU that destroyed the unionisation of labour and its collective bargaining power. She also views the high proportion of people going to university as leading to many young people having to take jobs for which they are overqualified and which make it difficult to repay student debts.

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Although many supporters of EU membership liked to claim that it was a market of 500 million people, to whom we could sell our goods. This was far from the truth. The UK’s goods were far too expensive for most of the EU’s 27 other members and in 2016, around 80% of UK exports to the EU went to the same 8 countries who were members when the UK joined in 1973, in 2021 it was 81%. The true EU market of 500 million people was the market of workers. Suddenly, UK employers were able to pick staff from what was sometimes called ‘the best and the brightest’ but was more accurately – the cheapest and the already trained.

So I was very surprised to hear Ayesha Hazarika say on the Today program on Saturday 14th January 2023, whilst in discussion with Nick Robinson and Alastair Campbell, (hardly a balanced panel), that Brexit has “caused so many problems to our labour market”. She seemed to be talking from the point of view of an employer rather than an employee. Hazarika, you may remember was a senior Labour Party adviser to Ed Miliband (according to Robinson’s introduction) and also to Harriet Harman (according to Wikipedia) from 2007 to 2015. I doubt Hazarika is unaware that the UK Labour Party grew out of the Trade Union movement, a movement designed to improve the pay and conditions of UK workers. The Unions main tool was collective bargaining, by restricting employment to union members to create a worker’s cartel. This enabled the Unions to force their employers to increase workers’ pay, shorten their working hours, give workers sickness pay as well as paid holidays.

Nothing destroyed the unionisation of labour and its collective bargaining power more than the European Union’s Free Movement of People. Especially when free movement was expanded to include many former soviet states with living standards considerably below those fought for by the UK’s trade unions and its political arm – the Labour Party. I suspect that it is more than a coincidence that now the UK has left the EU, we are seeing much more strike action after almost twenty years of UK workers fearing that they would simply be replaced if they dared to ask for higher wages.

So, I believe that Hazarika is wrong: It was not Brexit but the free movement of people that caused ‘problems for (the workers in) our labour market’ and these are problems that many people who voted to leave the EU, hoped would have been fixed by now. And the problems were not just for the workers but for the economy as a whole, a prosperous well-paid population is really good for the economy: they spend more, require less in benefits and pay more tax. A low paid population does the opposite.

The EU became a market of workers not customers.

When the UK joined the European Economic Community (EEC) in 1973, its members were countries with similar living standards and so there was little reason for workers to move from one country to another. The exception being Ireland and the UK, but Irish workers had been powering UK industry and construction for over a hundred years without requiring EU membership to do so. However, in most other cases, limited foreign language skills amongst labourers who generally left school at 16, meant that it was generally only managerial or professional employees who would have been able to work in other EEC countries. But few did.

That all changed in the early 2000’s when Polish, Czech, Slovakian, Slovenian, Hungarian, Latvian, Estonian and Lithuanian workers happily moved to the UK and happily worked for less than a UK worker with similar training or experience, and often happily worked in jobs below their skill levels as the wages were still higher than the amount they could earn in their home countries. This was exacerbated in 2007 when Romanian and Bulgarian workers arrived in the UK. Both countries were amongst the poorest in Europe at the time. Language barriers were quickly overcome thanks to better education, global media, TV, radio and pop songs and later social media. So, while eastern EU populations may have been a bit rusty in French, Dutch, Danish or Swedish – everyone spoke English and unlike in France, British employers were all too happy to employ them.

Brexit could have caused problems for UK employers who greatly benefited from the free movement of people by having access to a copious supply of pre-trained staff, but with 6,874,700 EU citizens claiming settled status as of Sep 2022, which allows them to continue living and working in the UK post Brexit, and with net UK immigration in the year ending June 2022 of over 504,000 people according to the ONS, the government could hardly claim to have reversed the free movement of people – it merely seems to have widened the catchment area. In fairness, people using the visa system to immigrate to the UK post Brexit do mostly need a job offer, a student place, or a relative living in the UK, but a lot of people appear to have made the cut.

Unskilled and low skilled labour

But the UK’s new immigration system does somewhat limit the immigration of unskilled workers, and these are the workers that so many UK employers will be missing. The UK economy is now 80% services, but that doesn’t mean they are all lawyers or accountants, a lot of those services are in restaurants, hotels, coffee shops, retail shops, dog walkers, babysitters etc. The main requirement is a polite smiling face, prompt timekeeping and a willingness to serve.

While UK farmers prefer to employ immigrant labourers who must not only be willing to live on site, usually in a caravan for which £4.82 rent a day is deducted from their wages, but will also be willing to work very long hours. Immigrant farm workers will often be asked to work six days a week, and for up to 80 hours a week during the picking season although they should be paid overtime for the extra hours. Which will make up for the fact that the minimum wage for agricultural workers, grades 1 to 5 (of 6 grades) is below the UK’s National Minimum Wage, even Grade 6 workers’ hourly pay is below the National Living Wage hourly rate.

According to Bloomberg, about £22 million worth of fruit and vegetables went unharvested last year on UK farms due to a shortage of farm workers.  Maybe UK farmers should consider paying UK workers higher wages rather than seeking imported workers who are willing to work for less than the UK minimum wage. And if the home office limits temporary worker’s visas, then this just might happen.

Or maybe not, although the New York Times is now also pushing the rotting fruit story, the amounts don’t match official figures.  according to the UK’s Department for the Environment Food and Rural Affairs (Defra), vegetable production was worth £1,668 million in 2021, down only £2 million from its value in 2020 of £1,670 million. And although UK fruit production in 2021 was worth less than in 2020, it was worth more than in 2019, when there were no limits on EU fruit pickers. The planted area for fruit in 2021 was a thousand hectares lower than in 2020 so maybe Bloomberg’s statistic had nothing to do with a labour shortage – you can’t pick a crop that you haven’t planted.

Loss of skilled jobs

During its membership of the EU, the UK not only grew to rely of EU unskilled labourers, but it also lost many skilled jobs to eastern EU member states.  Some UK companies moved their factories out of the UK as a way to reduce manufacturing costs but others were encouraged to do so by EU-sanctioned state aid for regional development. For example, the Slovak Government provided €125 million of state aid to Jaguar-Land Rover to encourage the company to build a new plant in Slovakia. The end result of this transaction was the permanent loss of Land Rover’s Defender production from the UK. The EU claimed that these development grants were to prevent the factories from moving to Asia, and it may well have prevented this, but either way it moved skilled jobs out of the UK.

Supply of the skilled but demand for the unskilled

Another possible cause of the ‘problem for the UK labour market’ that Hazarika could have mentioned was the encouragement of British children to go to university. In the academic year ending in 2021, of people who were already resident in the UK when they started university,  359,115 graduated from an undergraduate degree course. The Government report linked, is only concerned about their ethnicity rather than how many are now gainfully employed. But according to the ONS, there were only 733,067 eighteen year olds resident in the UK in 2019[1] and thus eligible to be counted in the 359,115 graduates. That means that approximately 49% of UK school leavers went to university and graduated. I say approximately as some of the graduates will have been studying longer degrees, and some possibly shorter degrees, but we are in the right ballpark.

Although encouraging everyone to go to university sounds good in theory, industries such as distribution, hospitality, construction, manufacturing, utilities, agriculture and forestry all employ more nongraduates than graduates. The ONS thinks a quarter of UK graduates are working in low skill or no skill jobs, while Professors Peter Elias and Kate Purcell at University of Warwick believe that in 2017, 49% of recent graduates were working in non-graduate jobs. Thus, we now have graduates with massive university debts to repay, for an education that has made them overqualified for the jobs available, while the jobs they have trained for are oversupplied with immigrants who not only have a similar degree but often come with a few years work experience.

A striking change

The Labour Party’s advisers should have noticed that since Brexit UK workers are suddenly willing to strike for higher pay without fearing that they will be replaced in an instant by cheaper EU workers. But instead, labour party advisers claim that Brexit is a problem for the labour market, not a ticket to higher pay and conditions for labour market participants.

Exactly who does the Labour Party represent these days?

[1] There were about 30,000 fewer seventeen year olds in 2019 so even this number, 733,067, may include foreign students resident in the UK.

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About the author

Catherine McBride