The 25-year-old British model of importing cheap labor has been turned upside down by Brexit and COVID-19, and the seeds were sown before a 1970s-style winter of discontent over labor shortages, high demand for wages and rising prices. Writes Guy Faulconbridge.
Brexit, followed by the chaos of the biggest public health crisis in a century, has swamped the world’s fifth-largest economy in a surprising attempt to overcome dependence on cheap imported labor.
Prime Minister Boris Johnson’s Brexit experiment – unique among major economies – has further tightened supply chains already underway around the world, from pork and poultry to medicine and milk.
Wages, and therefore prices, must rise. Continue reading.
The long-term implications for growth, Johnson’s political fate and the relationship between the UK and the EU are unclear.
“This is a really big turning point for the UK and an opportunity for us to take a different path,” said Johnson, 57, when asked about the labor shortage.
“What I won’t do is go back to the old, failed model of low wages, low skills and uncontrolled immigration.”
He said Britons voted to change the Brexit referendum in 2016 and again in 2019, when Johnson became the most powerful Conservative prime minister since Margaret Thatcher after a landslide election victory.
Wage stagnation must grow — for some, the economic rationale behind the Brexit vote. Johnson frankly told business leaders in closed sessions to pay employees more.
Immigration “take back” has been the main message of the Brexit campaign, which Johnson’s “Leave” campaign has hardly won. He later promised to protect the country from the European Union’s “job-destroying machine”.
Johnson calls the Brexit project a “correction”, although opponents say it is masking a labor shortage as a golden opportunity for workers to raise wages.
However, the restriction on immigration represents a generational shift in Britain’s economic policy after the 2020 pandemic, which caused a 10% decline, the worst in more than 300 years.
As the European Union expanded eastward after the fall of the Berlin Wall in 1989, the United Kingdom and other major European economies welcomed millions of immigrants from countries like Poland who joined the bloc in 2004.
Nobody knows exactly how many people have arrived: in mid-2021, the UK government reported that it had received more than 6 million settlement requests from EU citizens, more than double the number in 2016.
After Brexit, the government stopped giving EU citizens priority over people from other countries.
Brexit left many Eastern European workers – including about 25,000 truck drivers – to leave the country when about 40,000 truck registration tests were suspended due to the pandemic.
The UK is currently experiencing a shortage of around 100,000 truck drivers, which leads to queues at gas stations and concerns about supermarket shopping, as well as a shortage of butchers and warehouse workers.
“Wages have to go up, so everything we offer, everything you buy off the shelves has to go up,” said Craig Holness, a 27-year-old British truck driver.
Wages are already up: a job to drive a Class A heavy vehicle (truck) is advertised for £75,000 ($102,500) a year, the highest recruiters have ever heard.
The Bank of England said last month that CPI inflation will rise to 4% by the end of this year, “largely due to changes in energy and commodity prices”, and that arguments for raising interest rates from historically low levels have been bolstered.
It cited evidence that “employment difficulties are becoming more widespread and severe”, which bank agents attributed “to a combination of factors including a faster-than-expected recovery in demand and lower labor availability in the EU”.
Johnson’s ministers have repeatedly dismissed the notion that Britain is heading for a “winter of discontent” like the one that brought Thatcher to power in 1979, with rising wage demands, inflation and energy shortages – and even Brexit being a factor.
“Wage growth in our country has been relatively low for a long time — mainly wage stagnation and overall productivity stagnation — and that is because we are not chronically investing in people, we have not invested in equipment, and wages are flat,” Johnson said. Sunday.
However, he did not explain how wage stagnation and low productivity could be resolved through a combination of lower immigration and higher wages that fuels inflation that absorbs real wages.
Nor was it clear how higher prices would affect a consumer-oriented economy that is increasingly dependent on the supply chain, with tentacles creeping across Europe and beyond.
For some observers, the circle has completed a full circle: he joined the European club in the 1970s as a sick man in Europe, and his departure, many European politicians hope, will send him back to a dead end warning.
Johnson’s legacy will depend on them being proven wrong.
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