Status: 08/15/2022 10:16 a.m
The British government wants employers to fill jobs with local workers and pay higher wages. However, as a study shows, there have not yet been any signs of wage increases since Brexit.
British labor market researchers attribute part of the acute shortage of staff in Great Britain to Brexit. This is the result of a study published today. “There is some evidence that the end of free movement of workers has contributed to shortages in various areas of the UK labor market,” said Leeds University labor market researcher Chris Forde, who has been studying the Brexit impact with researchers from Oxford University. However, that is not the only factor.
According to the study, other reasons for the shortage are the pandemic and the fact that many workers would have chosen to retire earlier than usual. There are also industry-specific bottlenecks. Last year, for example, a lack of truck drivers meant that some supermarket shelves remained empty and petrol stations could not be supplied with fuel.
However, it is difficult to separate the effects of the end of free movement from other specifics of the post-pandemic labor market, according to the researchers. When employers have difficulties recruiting enough staff, there are often several factors that come together. For example, longer-term trends such as lower wage growth have made some occupations less attractive.
Gastronomy with difficulties
According to the study, British employers used to rely heavily on workers from the EU, particularly in areas such as gastronomy or logistics. They now have great difficulty in filling vacancies.
The number of restaurant bankruptcies in Great Britain rose by almost two-thirds (64 percent) last year, according to a recent analysis by the accounting firm UHY Hacker Young. While 856 restaurants filed for bankruptcy in 2020/21 (until March 31), it was 1406 in the following year.
Smaller restaurants in particular suffered from not being able to easily hire workers from the EU, said UHY partner Peter Kubik. “Many just can’t find enough employees to work in a way that keeps them profitable.”
Elaborate procedure for visas
With Brexit, freedom of movement – i.e. the right for EU citizens to live and work in all countries of the European Union – has expired in Great Britain. Expensive visas are now necessary, which are sponsored by the employer and have to be applied for in a complex process.
The post-Brexit immigration system liberalized access to the UK labor market for non-EU citizens, but at the same time introduced visa requirements for EU citizens, who previously could work in any profession, the researchers write in the study. “As a result, low-wage occupations that previously relied heavily on EU labor are now denied work visas, with some limited exceptions for social workers and seasonal workers.”
Lower production – not higher wages
The British government has set itself the goal of “a high-skilled economy with high wages”. British employers are said to be hiring local workers and raising wages.
So far, however, there are no signs that wages have increased significantly since Brexit, the researchers conclude. In fact, employers that were heavily dependent on EU workers were more likely to adapt by producing less or automating processes. Some jobs – for example in agriculture – went to non-EU foreigners instead, but this is by no means a suitable alternative for all companies.
“While it is clear that the end of free movement has made it harder for employers in the low-wage sector to find suitable applicants, changes to immigration laws bring their own challenges,” said Madeleine Sumption, who heads the Department of Immigration Research at Oxford University. Visa programs often lead to exploitation in these industries and are difficult to regulate.
Central bank expects inflation of over 13 percent
The consequences of persistently high energy prices and the global economic downturn are increasingly affecting the British economy. In the spring it has shrunk slightly. From April to June, gross domestic product (GDP) fell by 0.1 percent compared to the previous quarter. The Bank of England expects the country to slide into a recession by the end of the year, which is likely to last all of next year. This would be the longest economic downturn on the island since the global financial crisis.
Driven by skyrocketing energy costs and supply chain problems, consumer prices in the UK had recently risen by 9.4 percent. The British central bank is anticipating an inflation rate of over 13 percent by the end of the year. In the fight against high inflation, the currency watchdogs had recently raised the key interest rate by half a percentage point to 1.75 percent.