LONDON (Businesshala) – The United Kingdom’s 25-year-old model of cheap labor imports has been decimated by Brexit and COVID-19, fueling labor shortages for a 1970s-style winter, spiraling wage demands and seeds of discontent is sowing. The price increases.
Leaving the European Union, the world’s fifth-largest economy after the chaos of the biggest public health crisis in a century, has collapsed in a sudden attempt to shed its addiction to cheap imported labor.
Prime Minister Boris Johnson’s Brexit experiment – unique among major economies – has further strained already globally supply chains for everything from pork and poultry to medicines and milk.
Wages, and thus prices, would have to rise.
The long-term impact on growth, Johnson’s political fortunes and the United Kingdom’s relationship with the European Union is unclear.
Asked about the shortage, 57-year-old Johnson said, “What I would not do is go back to the old failed model of low pay, low skills, backed by uncontrolled immigration.”
He said Britons had voted for change in the 2016 Brexit referendum and again in 2019, when a resounding electoral victory made Johnson the most powerful Conservative prime minister since Margaret Thatcher.
Steady wages, he said, will have to rise – for some, the economic rationale behind the Brexit vote. Johnson has clearly told business leaders in closed meetings that they should pay workers more.
The “back control” of immigration was a key message of the Brexit campaign, which was narrowly won by the Johnson-led “Quit” campaign. He later promised to save the country from the “job-destroying machine” of the European Union.
Johnson casts his Brexit gamble as an “adjustment”, though opponents say he is framing the labor shortage as a golden opportunity for workers to raise their wages.
But restricting immigration amounts to a generational change in the United Kingdom’s economic policy, just after a 10% contraction of the pandemic in 2020, the worst in more than 300 years.
As the European Union expanded east after the fall of the Berlin Wall in 1989, Britain and other major European economies welcomed millions of migrants from countries such as Poland, which joined the bloc in 2004.
No one really knows how many people came: In mid-2021, the British government said it had received more than 6 million applications from EU citizens for settlement, more than double the number in the country in 2016.
After Brexit, the government stopped giving priority to EU citizens over those elsewhere.
Brexit prompted many Eastern European workers – including about 25,000 truck drivers – to leave the country, as the pandemic halted nearly 40,000 truck license tests.
There is now a shortage of around 100,000 truck drivers in the UK, leading to queues at gas stations and concerns about getting food at supermarkets, with butchers and warehouse workers also a cause for concern.
“Wages have to go up, so everything we deliver, whatever you buy on the shelves, the prices have to go up,” said Craig Holness, a British truck driver with 27 years of experience.
Salaries have already gone up: the job of a Heavy Goods Vehicle (HGV) Class 1 driver was being advertised for £75,000 ($102,500) a year, the most the recruiter had ever heard of.
Winter of discontent?
The Bank of England said last month that CPI inflation is set to rise to 4% later this year “due largely to growth in energy and commodity prices”, and strengthened the case for raising interest rates from historic lows. Has happened.
It cited evidence that “recruitment difficulties had become more widespread and acute”, which the bank’s agents attributed to a “combination of factors, including faster-than-expected demand and reduced availability of EU workers”. is included”.
Johnson’s ministers have repeatedly rejected the idea that Britain was headed for the “winter of discontent” that helped Thatcher to power in 1979, with rising wage demands, inflation and power shortages. — or even Brexit is a factor.
“Our country has long been running at a comparatively low rate of wage growth – basically stagnant wages and absolutely stagnant productivity – and that is because, chronically, we have failed to invest in people. “We have failed to invest in equipment and you have seen wages flat,” Johnson said on Sunday.
But he did not explain how a mix of low immigration and high wages would solve wage stagnation and poor productivity that fuels inflation that eats into real wages.
It was also unclear how higher prices would affect an economy that is increasingly consumer-driven and dependent on supply chains, whose nets wind across Europe and beyond.
To some observers, the United Kingdom has come full-circle: it joined the European Club as the ill-fated man of Europe in the 1970s and by its exit, many European politicians clearly hope, it Will withdraw into a cautious stalemate.
Johnson’s legacy will depend on proving him wrong.