Ouch! Polly tries economics again

Labour’s pitch on immigration is counter-intuitive: enforce decent pay and conditions and fewer migrants will come. Once British people with families could afford to take those jobs, employers would lose any incentive to recruit cheap workers abroad. Stop bad employers undercutting decent pay with imported near-slave labour. As a message it may not quite work politically as it doesn’t satisfy the gut fears of the Ukip-inclined, but it has the advantage of taking real action against a real problem. Labour’s new determination to enforce minimum pay inspections and spread gangmaster legislation to construction and hospitality is more than welcome: Tony Blair and Gordon Brown adamantly refused both, appeasing employers with lax regulation.

Employers are to blame for importing so many of the unskilled, instead of hiring at home. The best favour tougher rules on pay and conditions to drive out cowboys who undercut good companies. A living wage imposed, for example, on all big supermarkets would work if they all had to pay the same. Almost all low-paid work is essential: a living wage would stop cheapskate employers scrounging off tax credits and importing what too often looks like serf-labour.

Sigh.

No, seriously, what is she on about? The way to stop immigrants taking all our jobs is to raise wages?

So, why do they come here? Because the pay is better. So, if we make the pay even better will more come or fewer?

And as to “all low-paid work is essential”. Has she never heard of replacing labour with capital? You know, like those self service checkouts? ATMs?

Our real problem is that some of the people who attempt to run the country believe this sort of tosh.

41 comments on “Ouch! Polly tries economics again

  1. “Once British people with families could afford to take those jobs…”

    If they can ‘afford’ not to take those jobs, then perhaps our benefits are too generous, eh, Polly?

  2. A living wage imposed, for example, on all big supermarkets would work if they all had to pay the same.

    So never mind the universal application of the law, we’ll just single out certain businesses for special treatment. What could possibly go wrong?

  3. Put to one side for a moment the oddly chauvinistic assumptions that jobs in Britain should only be for British people, and that even if foreigners applied for those jobs they would be no match for those plucky Brits (I presume this is why foreigners are not anticipated to be competing with Brits for those better-paid jobs, unless instead it is assumed people in Foreign are a bit crazy regarding incentives, scoff in the face of better conditions and higher wages, and seek out someplace they can get more abuse for less coin). Let us assume the government has the means to improve pay and conditions across the board. This seems to leave us with:

    Once all the jobs are taken* then there won’t be any other jobs**.

    *(by fantastic Brits)
    ** (for beastly foreigners)

    Which looks like textbook Lump of Labour Fallacy to me ( http://en.wikipedia.org/wiki/Lump_of_labour_fallacy )

  4. Polly joined the NF?
    Employers should only employ Brits!
    Oh no…
    NF incorporated with Labour a while ago, didn’t it?
    “British jobs for British workers.”

  5. Some immigrants come for benefits and/or the fact that they can get council housing so wages are irrelevant.
    I have met some like this, sadly some are related to me.
    Now of course this is anecdotal – sadly accurate figures are hard to find. One immigrant I know like this is now a British citizen and in some studies will probably show up as a lazy native!
    The easiest way to reduce immigration would be to say that people can’t get benefits for x years. It would improve the quality and reduce the quantity.

  6. Put to one side for a moment the oddly chauvinistic assumptions that jobs in Britain should only be for British people,

    Why is this “oddly” chauvinistic?

    One entertaining way to look at it; Keith Vaz’s new Romanian best friend explained to the newspapers that he has come to Britain to earn lots of money to take back to his wife in Romania. This is, on a personal level, entirely understandable and admirable. However, if we look at it from the perspective of currently popular Keynesianesque economics, his strategy is to effectively run out of the country at some point with his pockets stuffed with gold; which is disastrous, since he’s running away with job-generating consumption money.

    Meanwhile, Romania gets a free economic stimulus, with which to purchase many locally produced donkeys, carts, funny hats, etc. Under such circumstances, is not “chauvinism” rather essential for our own, chauvinistic, common good?

  7. I’m confused: I thought even mentioning the fact that immigrant labour undercuts the locals was outright fascism and racism. Is Polly a racist now?

  8. Keith Vaz’s mate is going to run home with a load of pound notes in his pocket – what’s he going to do, eat them? No, he’ll either spend them in Romania or convert them to Rumanian Pesos or whatever.

    Said pounds will probably ultimately end up back here, because it’s easier to spend them on British goods.

    Anyway, he’s already produced a net benefit to the country (assuming he didn’t get an ingrown toenail or something while he was here), so let him take his winnings home.

  9. “Said pounds will probably ultimately end up back here,”
    ?
    “because it’s easier to spend them on British goods.”
    Very true. Ypu need a lot more of them.
    Have you seen prices in Romania?

  10. MyBurningEars

    Do you mean the oddly chauvinistic assumption that countries exist for the specific benefit of their current citizens and their descendants, rather than for any random mass of humans who just happen to be in the arrival lounge at the time?

    Do you mean the oddly chauvinistic assumption that the British Economy is there to serve the British people, rather than vice versa?

    How smart of you to notice the “Lump of Labour fallacy”. But not all inputs are as elastic as labour. We really do have a “lump of land”. I’d prefer to live in a country with relatively high wages and relatively low property prices.

  11. Given the high marginal rates of tax/benefit withdrawal applicable to poorer British residents, such a proposal might well encourage more of them to compete for the jobs available, and thus leave fewer vacancies for foreigners.
    It would also of course provide extra incentive for foreigners to compete for jobs here.
    Polly is assuming that the first effect will outweigh the second.
    Given the cost to employers, it would also reduce the number of jobs available. and increase costs to all consumers- which means everyone living here. The cost of living increase would of course reduce the benefit of the higher wages, and unless benefits were raised to compensate leave the unemployed worse off.
    As JM said wouldn’t it be simpler to restrict access to benefits for everyone here. And whilst we’re about it abolish all tax on the low paid (earning say less than half the median wage) including NI, and to abolish employers NI at least for the same group of people.
    Of course this would provide much less work for civil servants, provide less opportunity for politicians to pretend they care and the Charity industry would be desperate for new causes- so it won’t happen.
    Indeed one of the things that Maggie is accused of is reducing the social security budget, which she achieved by reducing unemployment.

  12. “A living wage imposed, for example, on all big supermarkets would work if they all had to pay the same.”
    A while back Polly was stating that we should use self service till at Supermarkets as it allowed them to employ less staff. Her idea would mean many more self service tills.

    I have seen on Twiiter that she think that if you don’t support her idea you support illegal pay and rents. Bonkers!

  13. Bonkers? Standard. If you don’t agree with them you are mad/evil. Saves them having to think, even if they are capable. After a while they stop thinking at all. Polly is some way past that stage.

  14. TimothyA,
    She’s not completely wrong. Whenever we substitute machines for manual labour we’re replacing several low-paid workers (checkout girls) with one higher-paid worker (self-service manager). Or a more obvious example: well-paid jobs building and servicing an automated car wash versus low-paid jobs hand-washing cars.

    Sadly she has her chicken and egg the wrong way round. It’s the absence of cheap labour that forces society to mechanise; mechanisation doesn’t destroy cheap labour. Look at Japan: zero immigration, and machines to do everything.

  15. Toynbee’s argument is coherent enough. She thinks that employers would prefer to employ native labour if it were available at the market price. And that demand for low-paid labour is insensitive to the actual pay levels – employers are competing with each other to minimize costs, but increasing those costs for all employers would not affect consumer demand. So that if the minimum wage were raised to sufficiently attractive levels, with adequate enforcement, demand for labour would be sustained, but demand for immigrant labour would collapse. (I’m not saying I agree with her, but that’s the argument to be addressed.)

    Indeed one of the things that Maggie is accused of is reducing the social security budget, which she achieved by reducing unemployment.

    When Thatcher took office in May 1979, the unemployment rate was 5.3%. It rose to a peak of 12% in 1984, then fell to 7% by mid-1990. When she left office in November 1990 it was 7.4%.

  16. Why do we only ever see this in one direction – the smelly Romanians coming here? It does happen the other way as well – Tim and myself being examples. Though I guess we aren’t in smelly Romania (though I do know one Brit who has moved to Poland).

    Which I guess is the problem. Perhaps we should export one of our feckless to Romania for each Romanian who comes in?

  17. Pat

    Polly’s argument is rather similar to that of Ron Unz in the USA:

    http://www.nytimes.com/roomfordebate/2013/12/04/making-low-wages-liveable/raise-the-minimum-wage-to-12-an-hour

    The left-right split on this issue is far from straightforward. Unz is a conservative. His principal opponent is the libertarian free market absolutist, Bryan Caplan, who believes in completely open borders.

    Milton Friedman said that you can’t have both a welfare state and open borders. I’d always taken that as a piece of sober, moderate wisdom for cautious politicians to ponder. But Caplan actually runs with the idea, seeing unrestricted immigration as an economic battering ram; to hasten the collapse of the US welfare state by deliberately burdening it to breaking point.

    The Unz-Caplan debate is here:

    http://intelligencesquaredus.org/debates/past-debates/item/909-let-anyone-take-a-job-anywhere

  18. Andrew M

    The point is, it’s high capital-to-worker societies which generate technological progress. The British Industrial Revolution was driven by a virtuous cycle of more and more plant and machinery per worker employed. First one worker per loom, then one worker tending five looms, then ten etc.

    One reason many third world countries failed to escape poverty until very recently is that most of their economic growth went into population growth rather than capital accumulation. So they stayed close to the Malthusian limit.

    I suppose China’s “one child policy” was the most extreme version of MyBurningEars’ “lump of labour” fallacy. But, for all its iniquities, it seems to have enabled China to escape the Malthusian trap.

  19. georgesdelatour:

    You’ve got the causality wrong: economic growth doesn’t choose whether to go into population growth or not… Economic growth leads to lower birth rates once it reaches a certain hurdle. Before then flat birth rates lead to growing population as less of them die from starvation and other deceases. Economic growth and slowing population growth comes from economic freedom, markets and capitalism. Mandating higher wages to low productivity people does not lead to economic growth but to higher unemployment, it is growth that leads to higher wages as productivity rises (through more skills and more capital)

  20. JamesV-

    Immigrant labour overwhelmingly enters the economy at the bottom. This works fine in immature economies expanding into new resources (think: 19th century USA) but not in mature economies which are already having trouble deploying unskilled labour. It just worsens the Gini Index.

    Georgesdelatour-

    Regarding Caplan’s view; anyone seeking a catastrophist phase change that will enable their preferred ideology to rise from the ashes is a fool. The idea tends to occur somewhere in every ideological group from communists to libertarians, to racial supremacists, to religious groups, to anyone else you can think of. They always have this dream that when The System collapses, somehow everyone remaining in the wreckage realises that their particular ideology was Right All Along, and utopia something or other. Sadly, history has never worked that way. You just get wreckage.

  21. “They always have this dream that when The System collapses, somehow everyone remaining in the wreckage realises that their particular ideology was Right All Along, and utopia something or other.”
    Experience would tend to show the people running The System tend to stay on top right throughout the collapse & very often thereafter. I can fully imagine Europe as a starving pestilence ridden wasteland, But there’ll still be 6 course lunches in Brussels

  22. bis,maybe the trick is to stop giving a damn about principle and get on the Brussels gravy train. Part of me wishes I could be that person.

  23. JamesV – “Which I guess is the problem. Perhaps we should export one of our feckless to Romania for each Romanian who comes in?”

    Well Britain tends not to export its feckless. Rather it exports its old and its talented. We send retired gangster to the south of Spain, the retired middle class to the south of France, and oil engineers to Nigeria.

    But there could be something to this. Paul Johnson once proposed that we should take the people from Hong Kong – on a one-to-one basis where someone in Hong Kong pays a British person of Caribbean origin to go home. Of course it was a wildly stupid argument in the details but perhaps he was on to something.

    The problem with immigrant labour isn’t that they don’t help the economy – and they probably don’t, or at least the over all impact is minor – and it isn’t that it is nice the Upper Middle class have docile nannies and cleaners. It is that they are greeted virtually at the Airport by the Grievance Industry that tells them White British people are evil and so their children grow up to blow themselves up on the Tube. Or vote for Ken Livingstone.

  24. I wonder if Great Britain has the same false view prevalent in the U.S. Immigrant labor is preferred by U.S. employers because they are hard working, reliable, and bring no drama/baggage to work.

    A friend of mine who employs 40 Latin American workers says his business model wouldn’t work with American workers. He pays his employees the same as he would American workers.

    To wit, immigrant labor (sic-American spelling) isn’t “cheap workers,” rather it is productive workers.

    “Stop bad employers undercutting decent pay with imported near-slave labour.” Maybe this is true in GB, but I doubt it. Any drive to replace immigrant workers with locals requires the locals to be as productive.

  25. Emil

    I think the causal mechanisms of fertility rates are more complex than that.

    1. Most demographers say female literacy is the single biggest predictor of the birth rate; and that’s heavily dependent on government policy, whether or not there’s a capitalist free market.

    2. Another factor is how intensely religious people are. In Israel, for instance, ultra-orthodox haredi Jews have 6.5 children where secular Jews have 2.3. In the UK, strict Salafi Muslims have the most children. Interestingly, Haredi Jews have the lowest participation in the Israeli labour market; and in the UK, Somalis, Pakistanis and Bangladeshis have higher than average unemployment.

    3. Very crowded places tend to have very low fertility. Singapore, Macau and Hong Kong are the three lowest fertility locations in the world. (Singapore is at 0.79 children per woman). They’re also the first, third and fourth most densely populated locations in the world. Of course they’re also rather wealthy. But wealthy locations with plenty of free space (e.g. Iceland, Norway) have relatively high fertility – below replacement, but not scarily super-low.

    It’s pretty easy to see how that might work. In densely populated areas property prices are likely to be higher, with houses large enough to raise children in comfort unthinkable for many. Good schools may be oversubscribed too.

    So I wonder. If we’d skipped the Blair era experiment with unprecedented high third world immigration, would the market have eventually raised the native birth rate all by itself? I’m imagining a mechanism where the fertility rate falls, reducing the population pressure on towns like London. Family formation in London then becomes cheaper, and the fertility rate goes up again…

  26. Gamecock-

    And yet, paradoxically, this same pool of awesomely productive workers appear to be capable of producing pretty much fuck all when they stay at home.

    He pays his employees the same as he would American workers.

    …could equally be written, “he would pay American workers the same as he pays immigrants”.

    Remember the Golden Rule- “The bourgeoisie require higher pay to attract the best talent. The proletariat require lower pay to maximise productivity”.

  27. @ gamecock
    What you’ve got there is the selective view of immigration shared by people who oppose immigration.
    immigrants are hardworkers =immigrants are feckless dole scroungers.
    Closer to the truth is that immigrants usually have one thing in common. The inclination to leave their homeland to better themselves. That will favour the hard workers. But it also favours those who prefer to use crime & other methods. And it favours the latter more, because unlike the hard workers, they’re already unwelcome in their country of origin.
    So the same process gives your friend his 40 diligent Latino workers puts gangbangers on the streets of LA.

  28. bis, you mean Groucho? As in, “those are my principles. If you don’t like them, I have others”?

  29. The whole thing feels like a Ponzi scheme to me. The entire system is predicated on their being enough cheap productive imported workers to keep the economy going to generate the tax revenue to fund a hefty proportion of the natives to sit around thinking they don’t have to work for living. The welfare claimant with a ‘bad back’ is effectively living on the back of minimum wage Eastern Europeans working in the engine room of the economy – factories, warehouses, meat plants, driving lorries, picking veg, building sites etc etc ad infinitum. Vast swathes of the UK economy would disappear without the Eastern Europeans and other immigrant workers – either there just wouldn’t be anyone prepared to do the work, or the wages required to entice natives to do it would make it unviable. And tax revenue would fall down the toilet, and there wouldn’t be the wealth to pay people to live without working, other than the truly disabled.

    How long can we continue to shovel cheap labour into the bottom of the pyramid before it all collapses? Presumably Eastern Europeans won’t be prepared to work for minimum wage and live 6 to a house forever.

  30. or the wages required to entice natives to do it would make it unviable.

    No no no. There is no such thing as a “correct price” for anything, just whatever the current market price is. Without the constant shovelling in of immigrant labour, the price system would simply adjust which, in practise, would mean an improvement in the Gini Index. It would be even better if we stopped shovelling billions of welfare in at the top of the economy by money printing but, one thing at a time and all that.

    The current scam works because there are woefully underdeveloped parts of the world whose inhabitants will see anything as an improvement in income, so are prepared to migrate to get that improvement. If we imagine an ideal-ish world in which every nation has roughly equal incomes (i.e. GDP/capita) our immigrant “reserve army of capitalism”[1] would disappear and the price system would have to adjust to the same sort of distribution as we might get with closed borders, globally.

    Broadly speaking and over-simplistically, immigrant labour doesn’t increase production. But by spannering the price system, it shifts consumption between classes. Hence the steady increase in income inequality.

    [1] Yes I know, I get more Marxist every day.

  31. Gamecock’s law of wages:

    “Employers pay what they have to pay to attract and retain people who can do what they want done.”

    My friend would pay his immigrant workers less if he could.

    I used my friend as an example, but I have talked with many about the added value of immigrant workers.

    As far as crime in LA, that is LA, not here. Laying it at the feet of immigrants is bogus. We have no problem here.

  32. @Ian B: I never said there was a ‘correct price’ for labour in the UK, merely that in the event of stopping the influx of cheap labour, business owners would have to pay more to entice the natives to do the jobs they won’t do now. And unless foreign competition in goods is removed as well, many activities that currently take place here would stop, because the domestic producers could not compete with the cheaper foreign imports.

    That is the system adjusting, as you mention. Adjusting in a way that removes economic activity from the UK, unless you also prevent the importation of production by cheap labour abroad as well. Which incidentally if you did would raise the price of virtually everything, and reduce everyone’s standard of living.

    One way or another the standard of living of the UK’s citizens is intimately linked to a constant supply of cheap hard working foreign workers. Take that away and we all become considerably poorer.

  33. I disagree Jim. I think the economics tells us that it makes no difference whether a Ruritanian produces here or in Ruritania. What happens when you shift them into another currency zone is to change the distribution of income, and thus consumption, in that currency zone, rather than aggregate production.. Which is why the econometrics don’t show any benefit in terms of GDP/capita despite years of a torrent of immigration.

    Another way of looking at it; as Tim frequently tells us, wages are set relative to the comparable wages in the economy. Ergo, the more low wage earners you import, the more everyone else’s wages get depressed. With incomes at the top end of the economy powered by State largesse and careful cartelisation and ring fencing, you end up with a two peak distribution, one at the top, one at the bottom or, in more visible terms, an economy of white professionals with brown nannies.

  34. @gamecock
    “As far as crime in LA, that is LA, not here. Laying it at the feet of immigrants is bogus. We have no problem here.”

    Can you actually refute the proposition other than saying it’s bogus?

    SMfS from further up the thread
    “Well Britain tends not to export its feckless. Rather it exports its old and its talented. We send retired gangster(s) to the south of Spain, ”
    No-one disagreed. Least of all me & I live here. The numbers of crooks amongst the Brit ex- pat population here are well above the UK norm. The arrests are a regular feature in the paper. it’s enormously entertaining.

  35. BiS, crime in LA far exceeds crime here, regardless of race. It is the nature of California’s libtard government.

  36. @ JuliaM and lots of others
    The reason why some Brits cannot afford to take low-paid jobs is the tax-and-benefits system distorted by New Labour so that the marginal rate of tax can be in excess of 100% (especially for commuters, whose fares are not tax-deductible unless they are self-employed, and low-paid workers with a kid at school and one or two kids at “university”).
    But those earning peanuts in Eastern Europe and willing to put up with long hours and cheap accommodation can send home walnuts and chestnuts out of their net pay.

  37. Gamecock

    “Crime in LA far exceeds crime here, regardless of race”.

    Is that really true? I was reading this:

    http://en.wikipedia.org/wiki/Race_and_crime_in_the_United_States

    It says:

    “Homicide:
    According to the United States Department of Justice: Blacks accounted for 52.5% of homicides, whites 45.3% and Native Americans and Asians 2.2%, from 1980 to 2008. The offending rate for blacks was almost 8 times higher than whites, and the victim rate 6 times higher. Most murders were intraracial, with 84% of white homicide victims murdered by whites, and 93% of black victims murdered by blacks.

    Youth crime:
    The “National Youth Gang Survey Analysis” (2009) state that of gang members, 49% are Hispanic/Latino, 35% are African-American/black, 9% are white, and 7% are other race/ethnicity.
    According to the FBI Uniform Crime Reports, in the year 2008 black youths, who make up 16% of the youth population, accounted for 52% of juvenile violent crime arrests, including 58.5% of youth arrests for homicide and 67% for robbery. Black youths were overrepresented in all offense categories except DUI, liquor laws and drunkenness.”

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