Author; Caitlin Keenan
Productivity across the UK is stalling and until recently inflation was outpacing real wage growth. People have been facing worsening living standards, as people have less real income. Currently the UK falls significantly behind the levels of productivity in similar countries. Between 1997-2007, average productivity grew by 2.1% each year: only 0.01% behind America. But from 2007-2017, the UK has only experienced an average of 0.2% productivity growth per year, falling behind America, Germany, France and more. The financial crash of 2007 is partly to blame for a decrease in productivity, as experienced by all countries worldwide, however the UK has not recovered as well as other countries and this can be put down to poor policies which do little to boost our productivity.
An example of how much the UK is trailing behind Germany in terms of productivity is that in Germany, people clock off on a Thursday afternoon but still produce the same amount as people in England doing a full week’s work. This shows how vital it is for the UK to boost productivity, and unless we do this the only way to raise incomes would be to increase people’s hours of work: something no one wants.
Immigration is a key policy area which will need to be addressed to increase productivity. Many overlook the advantages of skilled migrant workers in an economy as it is argued that they “steal jobs” from UK citizens. It is also claimed that migrants are a burden on our economy and welfare system. In reality, migrants do not crowd out employment (the so-called ‘lump of labour’ fallacy) and many take up lower-skilled jobs that UK citizens do not want to carry out.
Furthermore, migrants pass on knowledge to native workers and are often extremely hard-working – they want to earn a good living just like anyone else. On the whole, the economic impact of EU migrants on the UK has been positive. Freedom of movement has increased income for the vast majority of workers and in 2011, EU migrants paid £1.5 billion more into the public purse than they took out, unlike the average British citizen who was a net drain.
Therefore it is clear that migrant workers are a vital part of our economy. We must ensure that during Brexit negotiations we keep this in mind. Foreign workers cannot be deterred due to mounds of bureaucracy nor can foreign students be penalised. Policies need to be put in place by our government to allow free movement to continue if our economy is to become more productive. Also we need to allow workers to come into our economy to fill occupational shortages. If we have occupational shortages and no migrants fill the places due to government policies creating a barrier to their entry, we will have failed in boosting productivity and becoming a more diverse, rich society.
The bottom line is that a boost in productivity will increase our living standards and immigration is a key factor to helping us along the way. Skilled migrants do contribute to the economy and to a much larger extent than many are willing to accept.