Deputy Governor of the Bank of England Ben Broadbent thinks the growth of low-skilled and low paid-employment can be related to the increased availability of low skilled workers from different parts of Europe. (Guardian 24/09/15). Not only has this kept wage levels depressed, Broadbent argues, but it is also a reason why ‘human capital’ –the quality of the workforce and therefore its productivity has been growing more slowly compared to the 1990s.
These arguments can’t really be substantiated. A UCL study (Financial Times 05/11/15) for example, reveals that more than 60% of new migrants from western and southern Europe are now university graduates while the educational levels of east Europeans who come to Britain are also improving, 25% of recent arrivals having completed a degree compared with 24% of the UK-born workforce. Britain is uniquely successful, it argues, even more so than Germany, in attracting the most highly skilled and highly educated migrants in Europe.
In otherwords highly qualified European migrants often ‘trade down’ skills for the highly level of pay they can earn in their adopted country. But it also continues to be the case that many low-skilled jobs are also done by ‘overqualified’ British workers – According to the Office for National Statistics for example, graduates increasingly work as receptionists, sales assistants and many types of factory workers, care workers and home carers.
Broadbent thinks that an improvement in European economies will make the UK less attractive and the reduced supply of labour will help both to push up wages and encourage investment. The labour market is certainly tightening, but there’s not enough evidence so far to show that real wages are rising because of this. Equally significant is the zero rate of inflation. There’s even less sign of any significant increase in investment.
Since the downturn, the proportion of low-paid low-skilled jobs has increased extensively and labour intensive work with low productivity and low pay, continues to predominate. Though more pronounced in the UK, this has been a feature across the developed world as has the mismatch between workers qualifications and the jobs they end of doing.
Monthly figures from the ONS show the labour market tightening. Average wages have also edged up 2.4% and with inflation at almost zero this represents a real increase in income, though many low paid workers continue to miss out on an annual pay rise. The total number in employment falling by 63 000 and the unemployment rate rising by 25 000 indicates that employers are reluctant to pay more for new staff, fearing this will eat into profits –some citing having to pay an increased future minimum wage as an additional problem.
A way out would be a serious increase in investment and in particular, more use of new technology with the aim of increasing both output, but also the current miserable level of productivity. It would also make it harder to justity wages being so low.
There’s little evidence of this happening (with investment expenditure at 15% of the GNP amongst the lowest internationally) and of any serious challenge to the current ‘growth’model, where output has been increased by adding to the size of the labour force and relying on a ‘reserve army of labour’ –zero hour, temporary contracts, part-time employees who can’t get a full time job. And of course, low-paid workers from overseas.
Although some analysts have welcomed the continued fall in youth employment as a sign that, because of increased difficulties with filling vacancies, employers have more incentive to recruit cheaper younger workers, this hardly bodes well for the future. Despite this increased optimism, youth unemployment stands at 16% – after full-time students looking for work are excluded it’s still 14%. Latest estimates for NEETS are due this week.