Our dysfunctional labour market was reliant on a pool of exploitable workers
A fruit picker at a farm in Hereford.
Photograph: Bloomberg/Getty Images
John Harris is a Guardian columnist
Mon 30 Aug 2021
Empty shelves, missing product lines and the rising sense of a country that may not be able to feed itself: despite still being underplayed by most of the media, the results of Britain’s labour shortages are now ubiquitous.
Fruit growers warn that their crops are simply being left to rot. For want of regular workers, meat-processing plants are set to employ prisoners. The shortage of lorry drivers means that McDonald’s has run out of milkshakes. After 18 months of misery and disruption, most of us seem to be responding with fatalistic shrugs, although the situation also brings to mind a cliched but pointed question: can you imagine the reaction if this was happening under a Labour government?
If you want to understand the starkest realities, a good place to look is the chunk of eastern England that encompasses Lincolnshire and Cambridgeshire, where vast vegetable farms sit alongside food-processing businesses, and where such towns as Wisbech, Spalding and Boston have become bywords for migration from central and eastern Europe. I have been there many times, trying to understand an area of the country at the core of how Britain’s economy has been reshaped over the past three decades.
A few days ago I put in a call to Lionel Sheffield, the boss of a labour agency called Rapid Recruitment, based in Wisbech. The last time we met, in the immediate aftermath of the 2016 referendum, he told me the local labour market was heading towards some kind of crisis, but his firm’s books were still full of hundreds of people from EU countries, whom he directed towards work not just in the food industry, but also transport and manufacturing. Now, as Brexit has convinced people to return to their home countries, and new visa rules have ensured they will not be replaced by new migrants, things have passed a tipping point. Employers are “fighting over a dwindling pool of labour”, he says.
The standard line from the Home Office, parroted with a familiar populist zeal, is that “employers should invest in our domestic workforce instead of relying on labour from abroad”. But Sheffield insists that even if wages increase – and in food processing, he says, local hourly rates have recently gone up from the minimum wage of £8.91 to £9.50 – he operates in a part of the country with full employment, where British-born people tend to choose different kinds of work. Pay may well continue to rise, as much as the tight margins imposed by supermarkets will allow. Yet whether that will conjure up new armies of workers seems doubtful.
The result, for the moment, sounds like chaos. One company Sheffield deals with employs people to chop up carrots and onions for supermarket ready meals. But, as it runs low on workers, it faces another problem: insufficient numbers of lorries have been turning up to transport the processed veg to the next stage of production. As a result, even more food has been thrown away.
Which brings us to the kind of work that sits at the core of the crisis. The haulage industry is reckoned to be short of around 100,000 drivers. Some of this is to do with Brexit, but it also reveals deeper, more structural problems evident in many countries. For lorry drivers, median hourly pay stands at £11.80, work is often arduous and massively time-consuming, and the majority of the workforce is over 45. Via such services as Amazon Prime, we have been encouraged to believe that the costs of post and packaging can be waved away, and transport can somehow be organised for free – an insidious idea that has accelerated the downward slide of pay and conditions.
Adrian Jones, the Unite union’s national officer for road transport, says “a lot of chickens have come home to roost”. He is now seeing pay increases for drivers that are three or four times the rate of inflation, and he wants more. A fragmented industry, he says, ought to be compelled to agree a floor on pay and basic standards, as happens in the Netherlands. In the short to medium term, the haulage industry’s problems will be seen in confusion and economic disarray – but the sudden sense of urgency surrounding such proposals shows that fundamental things might already be changing for the better.
For decades, large swathes of the labour market have been run on the assumption that there will always be sufficient people prepared to work for precious little. But here and across the world, as parts of the economy have been shut down and furlough schemes have given people pause for thought, the idea that they need not stay in jobs that are exploitative and morale-sapping has evidently caught on.
In the UK, meanwhile, Brexit remains a disastrous and chaotic project – but, among its endless and unpredictable consequences, leaving the EU has cut off employers’ access to a pool of people who were too often exploitable. Time has thereby been called on one of the ways that our dysfunctional labour market was prevented from imploding.
A sudden flurry of short-term fixes – witness big companies’ offering signing-on bonuses for new recruits – ought to be greeted with derision, but elsewhere there are very interesting signs of change. Unite’s new general secretary is Sharon Graham, who says she is less interested in the union’s relationship with the Labour party than with the urgency of organising in workplaces. Last week her union’s press office suggested I talk to a 30-year-old union activist named David Imre, who came to the UK from Romania six years ago.
Two years ago Imre joined Unite, and he is now an official union convenor at a factory in Wales that processes chicken. The work, he told me, is “cold, hard – not easy”. A big part of the workforce is from Poland, Romania and Bulgaria. A few years ago, there were only 90 or so unionised workers at the factory; now, the figure is closer to 800.
Thanks to Brexit, Imre says, the factory is now “really, really short of people”. Six months ago, after pressure from the union, its basic hourly rate went from £8.93 to £9.50. He says he now wants entry-level pay to rise to at least £10.50. “I’m using this labour shortage to get more money for people,” he said.
Herein lies something that should not be overlooked in these strange, unprecedented times. Amid chaos and uncertainty, things that were not supposed to happen suddenly seem eminently possible.
Empty shelves, missing product lines and the rising sense of a country that may not be able to feed itself: despite still being underplayed by most of the media, the results of Britain’s labour shortages are now ubiquitous.
Fruit growers warn that their crops are simply being left to rot. For want of regular workers, meat-processing plants are set to employ prisoners. The shortage of lorry drivers means that McDonald’s has run out of milkshakes. After 18 months of misery and disruption, most of us seem to be responding with fatalistic shrugs, although the situation also brings to mind a cliched but pointed question: can you imagine the reaction if this was happening under a Labour government?
If you want to understand the starkest realities, a good place to look is the chunk of eastern England that encompasses Lincolnshire and Cambridgeshire, where vast vegetable farms sit alongside food-processing businesses, and where such towns as Wisbech, Spalding and Boston have become bywords for migration from central and eastern Europe. I have been there many times, trying to understand an area of the country at the core of how Britain’s economy has been reshaped over the past three decades.
A few days ago I put in a call to Lionel Sheffield, the boss of a labour agency called Rapid Recruitment, based in Wisbech. The last time we met, in the immediate aftermath of the 2016 referendum, he told me the local labour market was heading towards some kind of crisis, but his firm’s books were still full of hundreds of people from EU countries, whom he directed towards work not just in the food industry, but also transport and manufacturing. Now, as Brexit has convinced people to return to their home countries, and new visa rules have ensured they will not be replaced by new migrants, things have passed a tipping point. Employers are “fighting over a dwindling pool of labour”, he says.
The standard line from the Home Office, parroted with a familiar populist zeal, is that “employers should invest in our domestic workforce instead of relying on labour from abroad”. But Sheffield insists that even if wages increase – and in food processing, he says, local hourly rates have recently gone up from the minimum wage of £8.91 to £9.50 – he operates in a part of the country with full employment, where British-born people tend to choose different kinds of work. Pay may well continue to rise, as much as the tight margins imposed by supermarkets will allow. Yet whether that will conjure up new armies of workers seems doubtful.
The result, for the moment, sounds like chaos. One company Sheffield deals with employs people to chop up carrots and onions for supermarket ready meals. But, as it runs low on workers, it faces another problem: insufficient numbers of lorries have been turning up to transport the processed veg to the next stage of production. As a result, even more food has been thrown away.
Which brings us to the kind of work that sits at the core of the crisis. The haulage industry is reckoned to be short of around 100,000 drivers. Some of this is to do with Brexit, but it also reveals deeper, more structural problems evident in many countries. For lorry drivers, median hourly pay stands at £11.80, work is often arduous and massively time-consuming, and the majority of the workforce is over 45. Via such services as Amazon Prime, we have been encouraged to believe that the costs of post and packaging can be waved away, and transport can somehow be organised for free – an insidious idea that has accelerated the downward slide of pay and conditions.
Adrian Jones, the Unite union’s national officer for road transport, says “a lot of chickens have come home to roost”. He is now seeing pay increases for drivers that are three or four times the rate of inflation, and he wants more. A fragmented industry, he says, ought to be compelled to agree a floor on pay and basic standards, as happens in the Netherlands. In the short to medium term, the haulage industry’s problems will be seen in confusion and economic disarray – but the sudden sense of urgency surrounding such proposals shows that fundamental things might already be changing for the better.
For decades, large swathes of the labour market have been run on the assumption that there will always be sufficient people prepared to work for precious little. But here and across the world, as parts of the economy have been shut down and furlough schemes have given people pause for thought, the idea that they need not stay in jobs that are exploitative and morale-sapping has evidently caught on.
In the UK, meanwhile, Brexit remains a disastrous and chaotic project – but, among its endless and unpredictable consequences, leaving the EU has cut off employers’ access to a pool of people who were too often exploitable. Time has thereby been called on one of the ways that our dysfunctional labour market was prevented from imploding.
A sudden flurry of short-term fixes – witness big companies’ offering signing-on bonuses for new recruits – ought to be greeted with derision, but elsewhere there are very interesting signs of change. Unite’s new general secretary is Sharon Graham, who says she is less interested in the union’s relationship with the Labour party than with the urgency of organising in workplaces. Last week her union’s press office suggested I talk to a 30-year-old union activist named David Imre, who came to the UK from Romania six years ago.
Two years ago Imre joined Unite, and he is now an official union convenor at a factory in Wales that processes chicken. The work, he told me, is “cold, hard – not easy”. A big part of the workforce is from Poland, Romania and Bulgaria. A few years ago, there were only 90 or so unionised workers at the factory; now, the figure is closer to 800.
Thanks to Brexit, Imre says, the factory is now “really, really short of people”. Six months ago, after pressure from the union, its basic hourly rate went from £8.93 to £9.50. He says he now wants entry-level pay to rise to at least £10.50. “I’m using this labour shortage to get more money for people,” he said.
Herein lies something that should not be overlooked in these strange, unprecedented times. Amid chaos and uncertainty, things that were not supposed to happen suddenly seem eminently possible.
So what’s so wrong with labour shortages driving up low wages?
For those who are part of Britain’s casualised workforce Brexit isn’t flawed – quite the opposite
For those who are part of Britain’s casualised workforce Brexit isn’t flawed – quite the opposite
Tesco is offering a £1,000 sign-on bonus for new lorry drivers, but calls for a relaxation of migration are unlikely to be successful.
Photograph: Maureen McLean/REX/Shutterstock
Larry Elliott
Sun 29 Aug 2021 11.00 BST
The number of job vacancies has topped the 1m level for the first time. Firms are screaming out for staff. Labour shortages abound. Wage growth is accelerating. There are calls from industry lobby groups for the government to ease the pressure by granting more visas for EU workers.
At which point it may be worth taking a second or two to ask a simple question: if labour shortages are driving up the wages of low-paid workers then what is wrong with that?
There may well have been worse decades than the 2010s to be a wage earner but you would have to go back to the 19th century to find one comparable. It took 12 years for average earnings to exceed the level reached before the 2008 financial crisis – a dismal trend that led to entirely appropriate criticism not just of the UK’s economic model but of rising inequality.
If that way of doing things – in which the flipside of over-reliance on unskilled, cheap labour has been persistent underinvestment – is now coming apart then that is a welcome development and not a bad thing. There is something seriously wrong about an economy where more than half the people living below the official poverty line are from working households and where a large chunk of the welfare bill is spent supplementing the incomes of those who do not earn enough to get by.
Employers have only a limited range of options if they find themselves short of staff and it is not possible to call up reinforcements from overseas. They can invest more in labour-saving equipment; they can invest more in training to raise skill levels; or they can pay more in order to attract staff. It is not immediately obvious why any of these should be either impossible or undesirable.
Naturally, companies cannot solve immediate labour shortage issues by ramping up training or buying new kit. Both take time to organise and to have any real impact. That only really leaves the option of paying higher wages, which explains why Tesco is offering a £1,000 sign-on bonus for new lorry drivers.
Employers have expressed doubts whether higher pay will solve labour shortages either, although the basic laws of economics suggest that it will if the incentives are big enough. As things stand, it is the only real card companies have in their hands to play, because they are unlikely to get much joy out of the government with calls for a relaxation of migration rules.
There are a few reasons for this. The first is that there is no guarantee that easing controls would work. As Samuel Tombs, of the economics consultancy Pantheon Macro, points out, there are EU nationals who returned home during the pandemic last year who could come back to Britain if they chose to do so. “Legally, most of these people can return if they wish. Indeed, applications for pre-settled and settled status have exceeded the official number of EU nationals in Britain at the end of 2019,” he says. “Nonetheless, current labour shortages in sectors reliant on migrant labour indicate that enthusiasm to return is low.” That, of course, could change if EU nationals thought it was safe to come back and if the jobs on offer were well enough remunerated.
The second reason is that the government would rather not cope with labour shortages through migration. As the ministers responsible for the economy, it may be thought that the chancellor, Rishi Sunak, and the business secretary, Kwasi Kwarteng, would be in favour of plugging gaps in the workforce in this way, but that is not the case. Both think there are UK citizens who can be trained to fill the large number of vacancies.
The third reason is political, with the government seeking to entrench its support among low-paid, traditional Labour supporters, who backed Brexit and voted for the Conservatives at the 2019 election. Ministers sense that this section of the workforce is quite happy with a state of affairs where, for the first time in years, there is the possibility of screwing a decent wage rise out of their employer.
There has been much academic work done into the impact of migration on wages in the UK. The evidence is that where workers from overseas complement home-grown workers, they boost earnings. This tends to benefit those at the top end of the income scale.
It is a different story at the other end of the labour market, because wages are held down when migrant workers compete with domestic workers. The competition tends to be greatest in low-paid jobs, such as hospitality and social care.
Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk
That is not quite the end of the story, because increasing the supply of overseas workers also boosts demand. The new employees are also consumers and spend the money they earn like everybody else. The extra demand creates more jobs, although mainly in low-paid sectors.
Against this backdrop, it is perhaps unsurprising that Brexit divided the nation in the way it did. If you were in a relatively well-paid job and not at risk of being replaced or undercut by a worker from overseas, you were likely to vote remain. The Polish plumber was cheaper, the Lithuanian nanny was better educated, so what was not to like?
If, on the other hand, you were part of Britain’s casualised workforce, needing two or more part-time jobs to get by, you were much more likely to vote leave, on the grounds that tougher controls on migration would lead to a tighter labour market, which in turn would push up wages.
For those who have nothing to fear from open borders, labour shortages are evidence Brexit is flawed. For those not so fortunate, it is doing what it was supposed to do.
Sun 29 Aug 2021 11.00 BST
The number of job vacancies has topped the 1m level for the first time. Firms are screaming out for staff. Labour shortages abound. Wage growth is accelerating. There are calls from industry lobby groups for the government to ease the pressure by granting more visas for EU workers.
At which point it may be worth taking a second or two to ask a simple question: if labour shortages are driving up the wages of low-paid workers then what is wrong with that?
There may well have been worse decades than the 2010s to be a wage earner but you would have to go back to the 19th century to find one comparable. It took 12 years for average earnings to exceed the level reached before the 2008 financial crisis – a dismal trend that led to entirely appropriate criticism not just of the UK’s economic model but of rising inequality.
If that way of doing things – in which the flipside of over-reliance on unskilled, cheap labour has been persistent underinvestment – is now coming apart then that is a welcome development and not a bad thing. There is something seriously wrong about an economy where more than half the people living below the official poverty line are from working households and where a large chunk of the welfare bill is spent supplementing the incomes of those who do not earn enough to get by.
Employers have only a limited range of options if they find themselves short of staff and it is not possible to call up reinforcements from overseas. They can invest more in labour-saving equipment; they can invest more in training to raise skill levels; or they can pay more in order to attract staff. It is not immediately obvious why any of these should be either impossible or undesirable.
Naturally, companies cannot solve immediate labour shortage issues by ramping up training or buying new kit. Both take time to organise and to have any real impact. That only really leaves the option of paying higher wages, which explains why Tesco is offering a £1,000 sign-on bonus for new lorry drivers.
Employers have expressed doubts whether higher pay will solve labour shortages either, although the basic laws of economics suggest that it will if the incentives are big enough. As things stand, it is the only real card companies have in their hands to play, because they are unlikely to get much joy out of the government with calls for a relaxation of migration rules.
There are a few reasons for this. The first is that there is no guarantee that easing controls would work. As Samuel Tombs, of the economics consultancy Pantheon Macro, points out, there are EU nationals who returned home during the pandemic last year who could come back to Britain if they chose to do so. “Legally, most of these people can return if they wish. Indeed, applications for pre-settled and settled status have exceeded the official number of EU nationals in Britain at the end of 2019,” he says. “Nonetheless, current labour shortages in sectors reliant on migrant labour indicate that enthusiasm to return is low.” That, of course, could change if EU nationals thought it was safe to come back and if the jobs on offer were well enough remunerated.
The second reason is that the government would rather not cope with labour shortages through migration. As the ministers responsible for the economy, it may be thought that the chancellor, Rishi Sunak, and the business secretary, Kwasi Kwarteng, would be in favour of plugging gaps in the workforce in this way, but that is not the case. Both think there are UK citizens who can be trained to fill the large number of vacancies.
The third reason is political, with the government seeking to entrench its support among low-paid, traditional Labour supporters, who backed Brexit and voted for the Conservatives at the 2019 election. Ministers sense that this section of the workforce is quite happy with a state of affairs where, for the first time in years, there is the possibility of screwing a decent wage rise out of their employer.
There has been much academic work done into the impact of migration on wages in the UK. The evidence is that where workers from overseas complement home-grown workers, they boost earnings. This tends to benefit those at the top end of the income scale.
It is a different story at the other end of the labour market, because wages are held down when migrant workers compete with domestic workers. The competition tends to be greatest in low-paid jobs, such as hospitality and social care.
Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk
That is not quite the end of the story, because increasing the supply of overseas workers also boosts demand. The new employees are also consumers and spend the money they earn like everybody else. The extra demand creates more jobs, although mainly in low-paid sectors.
Against this backdrop, it is perhaps unsurprising that Brexit divided the nation in the way it did. If you were in a relatively well-paid job and not at risk of being replaced or undercut by a worker from overseas, you were likely to vote remain. The Polish plumber was cheaper, the Lithuanian nanny was better educated, so what was not to like?
If, on the other hand, you were part of Britain’s casualised workforce, needing two or more part-time jobs to get by, you were much more likely to vote leave, on the grounds that tougher controls on migration would lead to a tighter labour market, which in turn would push up wages.
For those who have nothing to fear from open borders, labour shortages are evidence Brexit is flawed. For those not so fortunate, it is doing what it was supposed to do.
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