The extra demand creates more jobs, although mainly in low-paid sectors.Īgainst this backdrop, it is perhaps unsurprising that Brexit divided the nation in the way it did.
The new employees are also consumers and spend the money they earn like everybody else. Sign up to the daily Business Today email or follow Guardian Business on Twitter at is not quite the end of the story, because increasing the supply of overseas workers also boosts demand. The competition tends to be greatest in low-paid jobs, such as hospitality and social care. It is a different story at the other end of the labour market, because wages are held down when migrant workers compete with domestic workers. This tends to benefit those at the top end of the income scale. The evidence is that where workers from overseas complement home-grown workers, they boost earnings. There has been much academic work done into the impact of migration on wages in the UK. Ministers sense that this section of the workforce is quite happy with a state of affairs where, for the first time in years, there is the possibility of screwing a decent wage rise out of their employer. The third reason is political, with the government seeking to entrench its support among low-paid, traditional Labour supporters, who backed Brexit and voted for the Conservatives at the 2019 election. Both think there are UK citizens who can be trained to fill the large number of vacancies. As the ministers responsible for the economy, it may be thought that the chancellor, Rishi Sunak, and the business secretary, Kwasi Kwarteng, would be in favour of plugging gaps in the workforce in this way, but that is not the case. The second reason is that the government would rather not cope with labour shortages through migration. “Nonetheless, current labour shortages in sectors reliant on migrant labour indicate that enthusiasm to return is low.” That, of course, could change if EU nationals thought it was safe to come back and if the jobs on offer were well enough remunerated. Indeed, applications for pre-settled and settled status have exceeded the official number of EU nationals in Britain at the end of 2019,” he says. “Legally, most of these people can return if they wish. As Samuel Tombs, of the economics consultancy Pantheon Macro, points out, there are EU nationals who returned home during the pandemic last year who could come back to Britain if they chose to do so. The first is that there is no guarantee that easing controls would work. As things stand, it is the only real card companies have in their hands to play, because they are unlikely to get much joy out of the government with calls for a relaxation of migration rules. That only really leaves the option of paying higher wages, which explains why Tesco is offering a £1,000 sign-on bonus for new lorry drivers.Įmployers have expressed doubts whether higher pay will solve labour shortages either, although the basic laws of economics suggest that it will if the incentives are big enough. Both take time to organise and to have any real impact. Naturally, companies cannot solve immediate labour shortage issues by ramping up training or buying new kit. It is not immediately obvious why any of these should be either impossible or undesirable. They can invest more in labour-saving equipment they can invest more in training to raise skill levels or they can pay more in order to attract staff. There is something seriously wrong about an economy where more than half the people living below the official poverty line are from working households and where a large chunk of the welfare bill is spent supplementing the incomes of those who do not earn enough to get by.Įmployers have only a limited range of options if they find themselves short of staff and it is not possible to call up reinforcements from overseas.
If that way of doing things – in which the flipside of over-reliance on unskilled, cheap labour has been persistent underinvestment – is now coming apart then that is a welcome development and not a bad thing. It took 12 years for average earnings to exceed the level reached before the 2008 financial crisis – a dismal trend that led to entirely appropriate criticism not just of the UK’s economic model but of rising inequality. There may well have been worse decades than the 2010s to be a wage earner but you would have to go back to the 19th century to find one comparable. There are calls from industry lobby groups for the government to ease the pressure by granting more visas for EU workers.Īt which point it may be worth taking a second or two to ask a simple question: if labour shortages are driving up the wages of low-paid workers then what is wrong with that? T he number of job vacancies has topped the 1m level for the first time.
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