England, Employment, Wages and Brexit
The Guardian newspaper has a story about wages in England:
A shortage of factory workers is starting to push up pay rates but wage rises in the services sector remain rooted at around 2%, according to the latest feedback from the Bank of England’s regional agents.
The central bank said its agents, which are based in offices across the country, found that shortages this month across the manufacturing sector were leading to a “slight increase in pay growth” that would take average rate of pay rises up by half a percent, from 2-3% this year to 2.5%-3.5% in 2018.
The report appeared to justify Threadneedle Street’s move last week to increase interest rates, which officials at the bank said was needed to dampen the inflationary effects of wage rises.
A survey of employers in October by the Recruitment and Employment Confederation chimed with the BoE report after it found firms were having to raise their pay offers to hire new staff.
The REC said the increase, the second quickest rise in wages since November 2015, followed a fall in unemployment to the lowest level in 40 years that had restricted the number of workers available to take up new positions. It warned that higher pay offers were also needed to counter a growing shortage of EU workers ahead of Brexit.
“We already know that EU workers are leaving because of the uncertainties they are facing right now,” said Kevin Green, REC’s chief executive. “We therefore need clarity around what future immigration systems will look like. Otherwise, the situation will get worse and employers will face even more staff shortages.”
Official data shows that in August net migration fell to its lowest level in three years, with more than half the drop caused by EU citizens leaving and fewer arriving since the Brexit vote.
I find it truly shocking that employment and wages are determined by the market forces, or that the supply of labor is affected by whether foreigners can freely enter and exit a market. Who could have imagined such absurd chains of events? Fortunately, we can rest assured that this is an aberration and can’t possibly apply in the US.
The UK U-6 is 10.3%. There is no shortage of workers. There is no large pay raises. They are taking one month, which is generated by inflation monthly’s and trying to make a talking point about it.
fwiw, the number of people leaving the UK region is not impressive either. The level been generally the same since 2011 when before that, it took a big drop. The article is lazy in that regard as well. There was a much bigger drop between 2008-11.
That doesn’t generate wage growth with those numbers. The Guardian didn’t really try. 2% wage growth with 3+% inflation will lead to higher payouts. Their utilization is awful. Sorta like how US wages are going to get a nice boost by hedonics in November.
From Nicola White, Head of International Migration Statistics, Office for National Statistics:
From the same doc:
Also, take a gander at Figure 2.
None of these numbers are as trivial as you imply.
Can’t try snarky with strawmen.
EMichael,
I am going to pretend that for once, your comment was in good faith and give you an answer based on that assumption.
What may be the defining paper paper in the field (and probably the most damaging, in terms of impact it has had outside of economics, in particular, on thinking in the Democratic party) concludes that dumping a large number of unemployed foreigners, including many prisoners and insane people, in Miami in the early 80s had no negative impact on wages in Miami.
Meanwhile, Miami Vice spent a few seasons entertaining people at the top of the Nielsen ratings, and not incidentally, explaining what was wrong with that paper. One might as well look at data on home prices in San Francisco from 1850 – right in the middle of the Gold Rush – and conclude that a large inflow of prostitutes into an area has no negative impact on housing costs.
Yeah, I know the entire Dem Party relied on a study, know to be flawed, of an increase of the workforce of somewhere around 9 % in a small area on a one time basis.
Just like I know that Miami Vice is the place to go for real info.
Well, now theer is Angry Bear.
EMichael,
Card’s paper was used as evidence – at the time it mattered to the Dem party – that immigration didn’t hurt the working class. Of course, after a generation, we have now reached the point where immigration matters more than the working class to the Democrats.
As to Miami Vice – the fact that it existed is evidence that pretty much everyone except Card and those who read his paper, understood that what differentiated Miami in the 1980s from, say, Topeka or Lincoln or Peoria or Santa Fe, was cocaine. That was the economic driver. Card could have done the same study using the same period of time for Medellin or, a few years later, Cali (assuming he could obtain reasonable data for those cities v. other cities in Columbia) and reached exactly the same conclusion.
oh, well
” find it truly shocking that employment and wages are determined by the market forces…
true, but the market is shaped by political forces. supply and demand work exactly the same if the demand comes from “government” or “private enterprise.”
[yes, the results might be different (that is, after all, the point) but the “market forces” are the same.]
Mr. Kimel, in your response to Emichael’s comment you stated:
“… what differentiated Miami in the 1980s from, say, Topeka or Lincoln or Peoria or Santa Fe, was cocaine. That was the economic driver.”
So does this mean your deciding which economic drivers are the “good” ones and which are “bad” and thus “bad” economic drivers make them mute and non-real, or what?
Seems like you have a habit of using straw dogs in your arguments.
Mr. Kimel,
In your extraction from The Guardian article the point you apparently were making is that Brexit (aka reducing immigration or making it unhospitable for the present immigrants) increases reduces the supply of labor and thus increases relative demand thereby increasing labor wages.
You then (by tongue in cheek) applied the apparent (on the face of the Guardian’s article) Brexit experience on labor wages to the US’s immigration policies, which by inference you propose that reducing immigration (or throwing out “illegals”) will raise U.S. labor wages.
If I didn’t miss the point of your posts I’ll make the following observations:
1. Reducing the size of the present population will reduce the labor supply and thus increase relative demand for labor and thus increase labor wages.
2 Reducing the size of the population reduces goods and services demand and consumption.
3. Reductions in consumption reduce producers output
4. Reductions in producer’s output increases competition among producers
5. Increased competition among “domestic” producers reduces the prices of the goods and services they provide
6. Reductions in prices reduces producers profits
7. Reductions in producers’ profits increases incentives to reduce labor content.
8 Incentives to reduce labor content reduces employment and/or replaces it by increased productivity and/or by offshoring “domestic” production or by reducing taxes on producers.
9. All effects of 8) reduce labor’s wages back down again, or remove benefits labor receives from gov’t spending which only means no net economic benefit to labor occurs..
It has been observed that economic prosperity increases with increasing population sizes in every and all cases of note and the reductions in population sizes reduce economic prosperity.
So it seems the point of your post is in direct odds with reality.
coberly,
Political actions do have an effect. They set ground rules and boundaries. Market forces then get superimposed on top. If the government requires a permit for new construction, say, the price that the government charges creates a baseline for the price of supply of construction, as builders have to add their cost on top of that.
Longtooth,
Boy, the old joke about having to type slowly for to avoid overwhelming a person’s reading comprehension kicks in here. It’s been a while since I read Card’s study, the short version is this:
1. Noted that wages did not fall faster in Miami than in other American cities during and in a time period after the Mariel boat lift
2. Concluded that therefore the Mariel boat lift had no impact on wages
3. Concluded that an inflow of immigrants does not depress wages
The problem is that it ignored the elephant in the room, the thing that differentiated Miami at the time the most from other cities in America, is that it was the hub for the inflow of cocaine. As I noted before, you could do the same study for Medellin and reach the same conclusion – an inflow of people into Medellin at the time certainly didn’t depress wages v. other cities in Columbia. Conclusion: a big increase in the supply of labor doesn’t exert any downward pressure on wages. But that’s an insane conclusion.
Observed by who? When?
All else being equal, an increase in labor generally increases real GDP. But it doesn’t necessarily increase real GDP per capita.
Since you’re on “it’s been observed” – its been observed that wages rose after the Black Death. All of a sudden – the amount of capital and the amount of land available, per person, increased dramatically. In general, the Black Death led to improvements in the material well being of survivors some time after the “initial shock” to use bloodless economic parlance.
This isn’t an endorsement of a plague, but it is an observation.
As I said, you can’t do snarky with straw men.
http://ftp.iza.org/dp10806.pdf
E,
You find a paper stating again that there is minimal impact of a large number of foreign workers. In other words, they are concluding what you called a straw man. Are you trying to make yourself look bad?
What a maroon. No, you have it exactly backward. Your strawman was Dems attention to Card’s paper, and Dems thoughts and actions regarding immigration based on Card.
That paper is just a much, much better compilation of the effects of immigrants. Thought you might learn something.
Oh, and as for your thoughts on Dems and immigration?
The mention of the Dem party came after you first made your comment about not being able to do snarky with a straw man. Unless you can tell the future you were obviously not responding to what you now claim to have been responding.
For the life of me I do not understand why Dan lets you post.
”
« Back
England, Employment, Wages and Brexit
Mike Kimel | November 11, 2017 9:17 am
The Guardian newspaper has a story about wages in England:
A shortage of factory workers is starting to push up pay rates but wage rises in the services sector remain rooted at around 2%, according to the latest feedback from the Bank of England’s regional agents.
The central bank said its agents, which are based in offices across the country, found that shortages this month across the manufacturing sector were leading to a “slight increase in pay growth” that would take average rate of pay rises up by half a percent, from 2-3% this year to 2.5%-3.5% in 2018.
The report appeared to justify Threadneedle Street’s move last week to increase interest rates, which officials at the bank said was needed to dampen the inflationary effects of wage rises.
A survey of employers in October by the Recruitment and Employment Confederation chimed with the BoE report after it found firms were having to raise their pay offers to hire new staff.
The REC said the increase, the second quickest rise in wages since November 2015, followed a fall in unemployment to the lowest level in 40 years that had restricted the number of workers available to take up new positions. It warned that higher pay offers were also needed to counter a growing shortage of EU workers ahead of Brexit.
“We already know that EU workers are leaving because of the uncertainties they are facing right now,” said Kevin Green, REC’s chief executive. “We therefore need clarity around what future immigration systems will look like. Otherwise, the situation will get worse and employers will face even more staff shortages.”
Official data shows that in August net migration fell to its lowest level in three years, with more than half the drop caused by EU citizens leaving and fewer arriving since the Brexit vote.
I find it truly shocking that employment and wages are determined by the market forces, or that the supply of labor is affected by whether foreigners can freely enter and exit a market. Who could have imagined such absurd chains of events? Fortunately, we can rest assured that this is an aberration and can’t possibly apply in the US.”
Mike
I assume you were agreeing with me that politics (power) sets the stage in which “market forces” act. I only mentioned it because it has seemed to me that commenters, especially on the right seem to believe that market forces are like the force of god and we only do right when we eliminate “government” entirely… except the part of government that assures that “market forces” only work in their favor. But they call that the “hidden hand.” which is what you would expect from a hand that is picking your pocket.
Mr. Kimel,
In my most recent comment I commented on the content and your statement in your post itself… not subsequent commentary you made.
You cannot defend your implied point based on what you posted so you use the standard practice of misdirection by employing straw dogs in an amateur attempt to do so when others point out how what you posted doesn’t wash with your implied but unstated point..
I’ll address what you posted and ignore your straw dogs. If you want to make a stated point and defend it do it I what you post. I’ll address your posted content when you append a revision to it.
Coberly,
Yes,
Longtooth,
What misdirection? I noted that the literature seems to reach a conclusion that violates both supply and demand theory and also what is actually happening in Britain. I also noted why one of the seminal papers got it wrong – it ignored the key driver of wage effects in the market it was focused on (ie, coke in Miami, which changed Miami completely, had a bigger effect than the arrival of the “Marielutos.”). Where is the is the straw dog, as you put it? Perhaps EMichael’s straw man can walk your straw dog.
What a maroon.