Brexit will not boost wage levels even if leaving the EU allows the Government to reduce immigration, according to “A Brave New World,” a new study. Any wage gains for British workers resulting from lower migration from EU countries will be dwarfed by the economic downside of Brexit, the Resolution Foundation says.
Even if the Government achieved its target to reduce net migration from 330,000 to under 100,000 a year, it would increase the wages of low-paid workers in the sectors most affected by only between 0.2 and 0.6 per cent. That would be more than wiped out by the 2 per cent downgrade to average wage growth expected after the Brexit vote.
Leave campaigners raised the prospect of higher pay if Britain left the EU, claiming the current open door policy had cut wages by 10 per cent. A continuing pay squeeze would be seized on by those who campaigned for Remain as another “broken promise” by the Leave camp.
According to the study, while the large increase in migration over the last decade had no impact on the wages of British-born workers overall, it has dragged down earnings slightly in occupations such as skilled trades and basic cleaning, sales and security jobs. But Stephen Clarke, policy analyst at the foundation, said: “Those expecting a wage boost off the back of a post-Brexit fall in migration are likely to be disappointed. Any such gains will be dwarfed by the losses caused by the post-referendum slowdown in the economy.”
Lower migration will hit sectors such as food manufacturing, clothing and domestic personnel services, where more than 30 per cent of the workforce are migrants. “The rights of these existing workers will need to be safeguarded to avoid short term and severe damage to these sectors,” said the study. A short, sharp drop in the number of workers available could even threaten the viability of some businesses, it added. The foundation argued that simply replacing migrant workers in such firms with British-born employees is not realistic given the large pay gap between the two groups. Eastern European workers typically earn almost £3 an hour less than British-born ones.
The foundation predicted a greater role for temporary workers after the ending of free movement from the EU. It warned that this would require Britain’s “light-touch” labour market enforcement regime to be beefed up, because there is currently just one officer for every 20,000 working age migrants. The combined frontline staffing of the three existing agencies – HMRC’s National Minimum Wage Enforcement Unit, the Gangmasters Licensing and Labour Abuse Authority and Employment Standards Agency Inspectorate* [see here] – is less than 350. “At present the number of staff enforcing labour market policies like the minimum wage is scarcely enough, and a new immigration regime will throw up major new enforcement challenges,” said the report.