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There is no automatic relationship between leaving the EU and having lower immigration.  It is possible to imagine Britain voting for Brexit and the Government then deciding to have higher immigration – whether from EU countries, others or both.  But what can be imagined and what would actually happen are very different.  If the British people vote to leave, one of the main reasons will be to protest against recent levels of migration.  Any post-Brexit settlement would be likely to see lower immigration from the EU than at present.

Remain argues that this would be impossible without curtailed access to the single market.  This is highly debatable, given the size of Britain’s economy, the trading relationship between us and our neighbours, and the mutual need for each others’ markets.  But even if it is correct, we would be able to debate and decide for ourselves what the trade-off between immigration levels and that market access should be – one which our EU membership currently prevents us from holding.

It follows in the view of some supporters of Leave that less immigration would mean higher wages all round.  This view holds that migration from the EU since its expansion into eastern Europe, combined with New Labour flinging the doors open to more immigration from the rest of the world too, has led to a deal between British business (especially bigger business) and foreign labour.  Business wants labour.  Foreigners supply it – undercutting British workers and depressing wage rates.

This is simplistic.  The sum of the evidence is that migration as a whole raises some wages and lowers others.  As Ryan Bourne wrote in a magisterial article on this site, “on aggregate most studies suggest little overall effect – some showing a slight average uplift as a result of immigration, some a slight fall”.  However, it doesn’t follow that this result is uniform.  As Ryan also pointed out, “highly skilled migrants often compete with lower skilled Brits, keeping wages lower than they otherwise would be for that group”.

They may well not keep them very much lower.  But the effect has been big enough to bring both Labour and Conservative politicians together to worry about the effect.  Before the last election, Ed Miliband warned of the consequences of “high levels of low skilled migration mostly from within the EU”.  James Brokenshire used his first speech as a Home Office Minister to assail “employers who [want] an easy supply of cheap labour”.  Over at UKIP, the effects of higher immigration levels on the wages of lower skilled workers has been a leitmotif of Nigel Farage.

The Government’s view has been summed up by Theresa May.  “There is evidence…that immigration puts a downward pressure on wages…the people who lose out are working-class families, as well as ethnic minority communities and recent immigrants themselves”.  The Home Secretary was quoting the research of the Migration Advisory Committee.  Its report probed non-EU immigration only, but other studies have waged wider.  A Bank of England report has suggested that the impact of both EU and other migration has been pronounced in recent years.

“The EU immigrant-native ratio appears to have been rather stable until 2006, rising rapidly thereafter notably in low skilled jobs,” it wrote.  It also noted that “the concentration of EU immigrants has been substantially higher in low-skilled jobs in recent years, compared to non-EU immigrants where the spread is more variable across occupations”.  It therefore follows that restrictions on EU migration, were Britain to leave the EU, would bring upward pressure on wage rates - to borrow May’s form of words – for many lower earners were it properly managed.

It will be said that wages for this group are going to rise anyway, because they will be receiving George’s Osborne’s new Living Wage.  However, this is to assume that it will actually be paid at the rates the Chancellor presently plans, surviving any downturn in the economy between now and 2020, with the pressures on employers which such an event would bring.  In any event, not all workers feel its benefits.  Some firms don’t pay it, others miscalculate it, younger workers are paid a lower rate, and the self-employed don’t get it in any event.

There is a more searching objection to seeking to exclude foreign workers from lower-paid work here to help ensure that wages rise for British ones.  In a nutshell, it is that employers should not be compelled to fork out higher pay for lower quality labour: this is what one what might call the Theodore Dalrymple critique of parts of Britain’s native workforce.  Moreover, it can be argued that it would be additionally mistaken to do so given the low levels of productivity in our economy.  Why should employers have to pay more money for poor quality work?

But think for a moment about where the logic of this position leads.  It points to giving up on Britain’s own unemployed and poorer qualified and relying on cheap labour from abroad instead.  This would lead to more of the pressure on public services and social cohesion that the Home Secretary has warned against.  But such an outcome would also be wrong in itself.  We should be straining to raise the skills of our own workforce and not giving up on our own citizens.  Which is precisely what Matthew Hancock and Nick Boles and a raft of other Ministers are striving to do.

The Tory tradition, from Disraeli through Baldwin and Macmillan to Cameron, doesn’t always privilege capital above labour.  Nor does the bigger Conservative one of which it is a part: after all, one of Margaret Thatcher’s greatest achievements was precisely to give labour access to capital through the mass sale of council houses and shares.  One of George Osborne’s leitmotifs is that he wants a high wage economy.  Brexit and higher wages for British workers would give the Government a chance to help prove that “we’re all in this together”.

And what an opportunity it is.  As Dominic Raab wrote on this site on Monday, leaving the EU would provide a framework for more growth and jobs, especially for smaller businesses, partly through the medium of more free trade deals, partly through cutting back on unnecessary regulation.  So higher wages is more than simply a matter of move some jobs from some foreign workers to British ones.  It’s also one of growing prosperity as a whole.  We are more likely to be able to do so if we leave rather than remain.

49 comments for: The Rewards of Leave 3) Higher Wages

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