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Membership of the EU and Pay and Conditions in the UK

By Dr John Sydenham.

During the 2016 EU Referendum campaign there was a lot of coverage of the importance of migrant workers to the UK economy.  Since leaving the EU there has been a headline reduction by about 8% in EU workers in the UK.  The total EU workforce in the UK has declined from about 2.4 million to 2.2 million in December 2020.  It subsequently bounced back to 2.34 million by June 2021.

This small reduction in workforce has created huge media coverage and headlines, often incorrectly blaming Brexit, such as in the case of lorry driver shortages.  Brexit is blamed but it is most likely that the one in twelve EU workers who went home did so to be near their families during COVID.  Having gone home the workers have discovered that there are labour shortages in the EU and so half of them are staying at home, at least until COVID is over.

The Food and Drink Industry is especially keen on employing foreign workers, the July 2021 Labour Force Survey found 2.4 million EU citizens working in the UK on a permanent basis and it is thought that around a fifth of these work in the food and drink supply chain.  The proportions of EU employees in each of the food and drink industries are: 28% in food and drink manufacturing, 20% in food wholesaling, 13% in food and drink services, 6% in permanent agriculture and 6% in food and drink retail.  As might be expected, 99% of seasonal workers in agriculture are migrant.  (See Establishing the labour availability issues of the UK Food and Drink Sector August 2021).

The proportion of EU workers lost to the Food and Drink industry is only 5% of EU workers which is only 1-2% of the workforce in food wholesaling and 0.3% of the workforce in food and drink retail.  Why are such small changes causing such concern for employers?  The big problem is that for these industries to recruit staff during a time of staff shortages they must also pay more money and offer better conditions for all of their staff to avoid claims of discrimination. The only way they can keep wages down and continue poor working conditions is to import as many people from overseas as possible to prevent the need to recruit UK staff.  The employers and their media are demanding that the government help them to do this.

As can be seen from the graph below, EU workers are a small proportion of the workforce in most sectors of the food and drink industry.  The main function of importing foreign labour is to create a surplus of labour that undermines pay for new recruits. This ensures low pay for UK nationals who are the majority of the workforce.  If UK workers balk at the pay and conditions there are always people from overseas who will take their job:

It only needs a small surplus of labour or a small shortage to dramatically change the terms of employment, as we are now seeing across the haulage and food and drink industries where the small shortage is creating pay rises.  The employers are keen to restore their previous dominance; just a few percent of foreign workforce can be used to keep wages and conditions poor for everyone.

It was the free movement provisions of the Maastricht Treaty in 1992 that allowed the switch from investing in expensive plant and machinery to using cheap EU labour:

It is understandable that employers were happy with the changes but it is also deeply puzzling that so many young adults are passionate for the low wages and other consequences of high migration, such as high rents, to continue.

Although the Food and Drink industry was used as an example above the same pattern has been repeated across UK industry.  Real wage growth has been declining since 1992.

What Brexit and COVID has exposed is that those who believed that open borders were making workers poorer were correct. 

Some have argued that Germany has had rising wages and increased investment since Maastricht despite migration.  This is true of Germany but the underlying reason is that loans to industry are easy to obtain because of Germany's local, States sponsored banking system whereas in the UK the banks have invested largely in property and left businesses with a choice between expensive loans or cheap labour.  Germany has also benefited from using the Euro as its currency which has made its exports more competitive:

The solution to the problems in the UK is to provide incentives for banks to invest in industry and to cure extreme, temporary labour shortages with work permits. Large scale provision of work permits should not be used because it will discourage businesses from investing to increase productivity.

Given global warming and the lack of sustainability of even the current population, under no circumstances can large scale migration to the UK be justified.  See: Population Growth in the UK.

22/10/2021


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