Net migration to the UK has run at hundreds of thousands a year for decades, of which about a quarter since 2004 has been “A8 countries”, Poland, the Baltic states, Czech Republic, Slovakia, Slovenia and Hungary, another quarter from ‘Core EU’ and the rest from non-EU countries, mainly India, Pakistan and West Africa. 13% of the population of the UK was born overseas, of whom over 2/3rds are non-EU migrants. This is an unprecedented migration to the rich world from the poor, and It’s not clear from this EU migration is the underlying problem. The Poles will integrate fast, and leave imprints on the culture like a higher incidence of catholicism, bigos (a stew of meat and Sauerkraut) and some hard-to-spell surnames. They’re often better educated than the natives, and work harder.
In general the view I’ve taken over the years is that minimum wages are a bad thing, arguing that they are mainly paid for by the people who otherwise wouldn’t get a job at all. Only a job can lead to a better job, and if people are unemployed for a long time, they often become unemployable. So by this logic, keeping unemployment down should in the long-run be better for the poorest.
But, there is a trade off. When I grew up, late ’80s and ’90s, I cannot recall seeing cars washed by hand. When my father wasn’t exploiting child labour by getting me and my brother to do a rubbish, half-arsed job for which we expected to be paid handsomely, we went to see the “blue Dougals” at the petrol station. The UK as a wealthy country, had substituted Capital for Labour, and cars were washed by big machines at every petrol station. But a team of a dozen hard-working and cheerful eastern Europeans can set up a car-wash, do inside and out for very little capital outlay – a jet washer, and some sponges, so when the EU accession countries citizens moved to seek work, this is what many did. The car wash machines were gradually removed and replaced by people. This is the opposite of progress.
Labour substituted for capital
Let’s take a step back and look at the big picture.
Europe’s wealth, it’s vitality, its progress didn’t spring from European individual or cultural superiority. It started when half the population was wiped out by Yersinia pestis in the 14th Century. There was a certain amount of luck – the same event increased the power of the landowner in Rice states and in pre-feudal societies farther East, but in Northwestern Europe, this created a shortage of Labour, and the peasants rose up a generation afterwards to demand higher wages from their lords. When this happened in Italy, the energy was put into sculpture of the nude male form, and was called “the Renaissance”. When wages rise, it makes sense to build machines rather than employ labour, which has a virtuous feedback loop: skilled people running the machines drive up production, and become richer, which creates an incentive for further innovation. More widespread desire for, and access to education is grease in the wheels of this, the motor of progress that led to the industrial revolution.
The opening up of America, a nation with a perpetual and long-lasting shortage of labour not only added another motor to that European culture of innovation which grew up after the Black Death, but also absorbed the excess labour of Europe. While there is a labour shortage, immigration can be managed, though immigrants in large numbers have nowhere, ever been welcomed by the people they move to. Even when the people are kith and kin, the ‘Scots Irish’ (in reality, families originally from Northern England and the Scottish Borders) were moved on by the Germans and English who’d already settled the East coast. They ended up in Appalachia.
It’s clear, then in the short run and in aggregate, wages aren’t “driven down” by migration in a market economy. Part of that, in modern times may be due to the minimum wage, which protects some of the people most vulnerable to substitution, but also the ‘lump of Labour fallacy’. Immigrants, especially young workers with families bring demand as well as supply and these things more-or-less balance. They aren’t “taking our jobs” but they are changing the nature of jobs available. And the vast supply of excess labour from the subcontinent, Africa and the poorer bits of Europe is not exactly an incentive to invest in productivity-enhancing machines, as the car-wash example shows. The mass immigration from the poor world has the potential to stall the western motor of innovation and may contribute to wages not rising as far as they might, especially for the lowest skilled workers.
The UK has a problem with productivity. UK employers have got good at employing the excess Labour of a serious chunk of the world, UK wages have been flat for a decade, and these things are linked. So the Chancellor is hiking the minimum wage in the hope of good headlines, and to incentivise investment to drive productivity. So. What effect will this have on immigration? Will it draw more migrants to the UK hoping for higher wages, like European immigration to the USA, or will it price low-skilled immigration out of the Labour market, and allow the motor of progress to continue?
Splits that used to be geographic – some countries were rich, and others poor and the movement between the two was rare, is moving to one where there are still two countries, it’s just the divide is social, educational, and cultural. You have a global, liberal, free market culture, which values education and novelty. And you have national, small ‘c’ conservatives who just want their own culture, don’t care about education all that much, won’t move to find a job, expect to be looked after who stay put and resent incomers. And the latter are disproportionately annoyed about foreigners moving into “their” neighbourhoods while it’s the former who have more to fear in the short term from highly skilled competition, minimum wages see to that. And if minimum wages rise far enough, low skilled workers will not be able to get jobs and they will stop coming to the UK. The problem is, the lowest skilled people are often native. The cost of a raised minimum wage will be borne by those least able to cope.
It’s not all about economic self-interest, nor is it wholly naked in-group preference (what educated, open minded people call “bigotry”). It is the interplay between the two. Ultimately the stagnation of UK wages over the last 10 years isn’t due to migration, but the recovery from a balance-sheet recession of 2007-9. It’s the feeling of ennui caused by a decade of stagnation which has caused the anti-immigration nonsense, the rather blameless Poles have just become a Piñata and for a population that was persuaded to lash out at the EU when they really wanted to lash out at “the Muslims”. The tragedy is all this happened just as we were getting back to normal.