The UK economy is suffering from the loss of EU workers

It would be impossible to tell the story of the UK labor market without recognizing the oversized role migrant workers have played over the past few decades.

In 1996, only 5 percent of British workers were born outside the UK, but by 2019 that number had more than tripled to 17 percent. Overseas workers accounted for 60 percent of net employment growth in the UK during that period, a number that rose to 67 percent in the South East, 74 percent in the West Midlands and 107 percent in the suburbs of London.

A robust economy, comparatively good wages and the expansion of free movement attracted workers to Great Britain, while the high unemployment on the continent in the second decade of the new millennium led many to look for better opportunities here.

However, Brexit and the pandemic end this chapter. The value of the pound slipped after the UK voted to leave the EU in 2016, lowering the value of home remittances by foreign workers and making poorly paid UK jobs – disproportionately occupied by foreign workers – less attractive. Since the referendum, the number of EU workers coming to the UK has declined, a trend that accelerated dramatically as job opportunities dried up during the pandemic.

Migration data are difficult to collect and notoriously unreliable, but official estimates suggest that the number of EU citizens in the UK has fallen by 100,000 over the past year. The consequences are now being felt as the economy has reopened and demand has returned. Sectors that disproportionately employ foreign workers, such as hospitality and food manufacturing, are now feeling the pain. Many jobs in these sectors, such as chefs or meat packers, have an above-average turnover rate and do not fall on the list of government-approved occupations for the skilled worker visa, which makes recruiting even more difficult.

Tensions are emerging across the labor market, forcing politicians to relax rules so that companies can fill key positions. However, this alone is not enough. The government recently provided 300 visas for truck drivers in the fuel industry, but only 27 tanker truck drivers from the EU applied for the program.

Rod McKenzie, Director of Policy at the Road Haulage Association, said, “People don’t want to come unless it’s a really attractive alternative. You don’t give up a well-paying job for a better-paying job if it only lasts a few months. “

Economists accept that companies must adapt to the decline in the foreign workforce, either by investing in productivity-enhancing technologies or by improving pay and working conditions to attract workers. “Improvements in conditions would be most welcome given the poor record of many high-density industries when it comes to labor rights,” the Resolution Foundation wrote in a recent report. It found that between 2015 and 2019, 15 percent of workers in the hospitality industry reported not receiving paid vacation.

In a politically sensible step, the government has also emphasized this point. Speaking at the Conservative Party conference in Manchester, Boris Johnson said, “What I think should happen is that business and industry should organically pay people a little more to help them.”

Higher wages could help encourage UK citizens to take jobs previously occupied by migrants. The UK labor market is smaller than it was before the pandemic, not only because of the drop in migrant numbers but also because of the high level of economic inactivity.

Many older workers who left the labor market in the past year have chosen to retire and students have chosen to stay in education rather than entering the world of work. Millions of people were still on vacation before the program ended last week. Higher wages could put some of these people back into work.

Sanjay Raja, UK Senior Economist at Deutsche Bank, said: “The eventual return of students should help the workforce and a resumption of cross-border work will also help. However, our baseline scenario is that given ongoing health concerns, the slow surge in immigration and a potentially slightly more permanent spike in inactivity due to the rise of retirement. “

As companies keep emphasizing, higher wages alone will not solve the problem. It is impossible to train butchers and truck drivers overnight, and many argue that the government is not doing enough to attract workers to the UK. Wage rates in these sectors have already risen and European workers are looking for jobs in the UK again, but the continent’s interest is still far less than it was before the pandemic.

According to job search platform Adzuna, the number of EU citizens looking for work in the UK was 48 percent lower in August than in the same month of 2019. However, the trend has increased since reaching a floor in April 2020. When the UK was in the middle of the lockdown, searches were 66.7 percent below pre-pandemic levels, according to Adzuna.

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