Brexit and the Temp Economy

Avatar

Holly Whitman

Holly Whitman is a writer and journalist based in Washington DC. She loves to share her thoughts on the intersection of politics and culture, and writes on everything from feminism and human rights to climate change and technology.

Related Post Roulette

47 Responses

  1. Avatar Damon says:

    And interesting question would be, of those 744K contract employees in the UK, how many of them voted for/against Brexit, and of those voting to exit, how many were aware of this scenario.Report

  2. Avatar Swami says:

    You’ve done a lot of research on this topic. I would suggest an equal amount of work studying the nature of how markets set wages based upon supply and demand, how markets work via both signals and incentives, how minimum wages effectively work by prohibiting employers and employees from making deals to mutual advantage, and how vacation and work conditions are part of the total package and forcing both parties to get more of one part means they get less of others (such as pay).

    In brief, you seem to operate under a top down view of the world where working conditions are set primarily from above rather than through the decentralized actions of millions of competing and cooperating people. Until you understand how markets work, I suggest you refrain from commenting on how they should/could be improved.Report

  3. Avatar Kolohe says:

    I don’t want to be as jerky as Swami about it, but I find it unconvincing that a full blown nation-state (multi-nation state actually) of over 60 million people needs the EU to keep the UK in line.

    What you’re really protesting is that there’s not a living breathing Labour party right now in UK politics.Report

  4. Avatar J_A says:

    Probably no one hates Brexit more than me, but I think this post fails to mention at least two important issues that go against your argument:

    1- You are using today’s F/X rate of 1.22 dollars per pound. Before Brexit the rata was 1.44. That’s an 18% difference, so your minimum salary numbers compared to similar numbers in the USA are skewed. A more correct comparison would be $ 10.36 per hour for the above 25 yo minimum salary, not 8.82, and your 18 year old worker would be making $ 9,630 per year AND would have full free medical coverage, compared to your $12,000 uninsured CA teenager (and probably would be much better than most non CA my nimum salary workers in the USA). Plus, the first 11,000 pounds of income in the UK are tax free, so this teenager is getting his income without any tax liability.

    This devaluation has not yet run through the British economy, so most everything costs 18% less in dollars than it did in June, but it costs the same in pounds. We don’t know what the steady state of the exchange rate will be after the market fully embeds the referendum impact AND the Article 50 notification, but there’s no reason to believe there would not be a minimum salary correction if the inflationary impact of Brexit is big (as it is expcted to be).

    2- Sort of the only thing we know about how the Brexit will be implemented is that an Omnibus Act of Parliament will incorporate every single EU law into British law, so that at Real Brexit time there will be no changes to the status quo, including labor protections. Then, each EU regulation that the government of the day wants to do without would be repealed by a specific act of Parliament. Thus, workers won’t lose in one day whatever security the EU is providing them today.Report

  5. Could you clarify your terminology for that 0.88% of the US workforce? You used both “temporary jobs” and “part-time workers”. Part-time workers is a formal classification used by the US Dept of Labor. As of last month, 16.3% of the US workforce were part-time workers, a good portion of whom were not looking for full-time work. I think the US classification you’re looking for is “independent contractor”. The DOL ruling you reference didn’t eliminate independent contractors, but did narrow the definition. I know a couple of skilled people (one blue collar, one white collar) who have been successful independent contractors for years who are hoping that the ruling doesn’t force them out of that classification.Report

  6. Avatar Chip Daniels says:

    My only takeaway is to note how the UK economy, like the US economy, seems unable to create enough jobs to sustain its population.

    Tax rates and labor laws are very different, culture is different, relational position to the world economy is different, and yet the same conditions appear, that there just isn’t enough employment to keep everyone occupied.

    Is there any place in the world where labor is in such short supply that workers can negotiate from a position of strength?Report

    • Avatar LeeEsq in reply to Chip Daniels says:

      Japan, South Korea, and Taiwan probably. Any country that is developed, rapidly aging, and has a low population growth rate because of next to none immigration and low birthrate.Report

    • Avatar j r in reply to Chip Daniels says:

      Workers don’t negotiate from a position of strength because labor is in short supply. That is classic lump of labor fallacy. Italy meets allbthe criteria that Lee puts out above and doesn’t exactly have a booming labor market.

      Workers negotiate from a position of strength when they have a high marginal product of labor. That is, when they have skills that contribute to the firm’s output in excess of the amount of the wage being paid.Report

      • Avatar Dand in reply to j r says:

        Then why are fast food workers in North Dakota getting payed $15 an hour?Report

      • Avatar Chip Daniels in reply to j r says:

        I have it on good authority that Econ 101 says that when something is in short supply and demand rises, the price rises.

        That when there is a excess supply and low demand, the market sends pricing signals to workers that their labor is worth very little.
        See, its right hereReport

      • Avatar j r in reply to j r says:

        @dand and @chip-daniels:

        Here is the Wikipedia entry on the Lump of Labor fallacy: https://en.wikipedia.org/wiki/Lump_of_labour_fallacy. It contains the answers to your queries.

        The short answer is that a country is not just one big labor market.Report

        • Avatar Chip Daniels in reply to j r says:

          Yeah, I keep hearing about that Lump of Labor Fallacy, right alongside patient lectures on Econ 101.

          Funny thing is, I still never hear about increasing productivity resulting in higher wages.

          I mean, overall worker productivity has been climbing since forever, but wages somehow have remained stagnant.Report

          • Avatar Kolohe in reply to Chip Daniels says:

            That’s not what the most recent released Census Bureau data shows.Report

            • Avatar Chip Daniels in reply to Kolohe says:

              Did you read the link?

              But, as NPR’s Pam Fessler notes, “the median household income was still lower than it was in 2007.”

              And have real wages increased commensurate with productivity?

              I mean, in Econ 101 the market for labor should show periodic variations, where sometimes the price of labor rises or falls, depending on market signals .
              And sometimes the seller or consumer has the upper hand, as the market adjusts.

              Is that actually what we are witnessing? Where?

              And in the Lump of Labor disputation, the amount of labor needed is not static, but rises sufficient to create more demand for labor.

              Is that actually what we are witnessing, a global rise in consumption fueling a rise in the demand for labor, driving wages up?

              Why not?Report

          • Avatar j r in reply to Chip Daniels says:

            Yeah, I keep hearing about that Lump of Labor Fallacy… Funny thing is, I still never hear about increasing productivity resulting in higher wages.

            I mean, overall worker productivity has been climbing since forever, but wages somehow have remained stagnant.

            It’s because you still refuse to digest the key implication: the country is not one big labor market.

            Wages have been rising in highly profitable industries like finance and tech that employ highly skilled (ie high marginal product) labor. If Goldman Sachs or Google can bring in a million dollars a year in revenues for your services, then they will hire you and pay you half a million.

            Wages and employment levels have been falling in industries that are using less labor and more automation. A factory that used to hire 100 people and pay them $50k a year to run stamping machines now buys a bunch of robot stamping machines and pays 10 people $100k a year to keep the robots running.

            Wages remain low in low margin industries like food service and grocery and home health care. In those industries, employers need people who can show up on time and do the job, but beyond that it doesn’t make sense to hire the world’s best fry cook or shelf stocker at McDonald’s or Walmart (ie they are low marginal product workers).

            Different labor markets have different dynamics. What exactly is the big mystery?Report

            • Avatar Chip Daniels in reply to j r says:

              The mystery is, what do we need to do in public policy to improve the wages for the median worker?

              You are asserting the same thing I am- that there is less and less need for the labor that we have. The industries that pay well are a tiny part of the labor force.

              So for the vast majority of the nation’s workers, what policy suggestion would improve their lot?Report

              • Avatar Jaybird in reply to Chip Daniels says:

                So for the vast majority of the nation’s workers, what policy suggestion would improve their lot?

                What field is the vast majority of the nation’s workers in? If the answer is some variant of “vaguely unskilled labor”, maybe slow down on importing vaguely unskilled labor.

                Which is not to say “cease immigration!”

                Start importing skilled labor in rates that will cause the services that skilled labor charges for to have to go down because of a glut in the market.Report

              • Avatar j r in reply to Jaybird says:

                There is a problem with the phrase “importing vaguely unskilled labor.” It is out of line with what immigration channels look like. Immigrants move to where the jobs are, to areas of low unemployment.

                A lot of folks hold some form of the belief that, if there were less immigrants willing to work low wage jobs, employers would be forced to raise wages and that would bring more native-born workers into the job market. It’s a nice story, but it isn’t true.Report

              • Avatar Jaybird in reply to j r says:

                If I can find evidence of a state passing a law forbidding the hiring of illegal immigrants and unemployment goes down following this law’s passage, would that count?Report

              • Avatar j r in reply to Jaybird says:

                Count for what? What do you think that example demonstrates? Is it proof that restricting immigration can lower unemployment? Maybe, but we should point out that over the same time period to total U.S. unemployment rate dropped from 9.1 to 8.2, so maybe something else is going on.

                Does it show us something about what happens to low wage workers when you chase illegal immigrants out of town. Again, maybe, but I’m not sure that what it shows us is supportive of what you’re saying:

                A massive factory that processes 130,000 chickens a day… For years, most poultry workers here were Mexican immigrants, including some who were in the country illegally. But last fall, after a tough state law against illegal immigrants took effect, many vanished overnight… leaving the poultry business scrambling to find workers willing to stand for hours in a wet, chilly room, cutting up dead chickens… The firm held a job fair that attracted about 250 local residents, but few were hired, and some soon quit, daunted by the demanding work. Since the law took effect, he said, “our turnover rate has gone through the roof.”

                or

                Nevertheless, a variety of employers in Alabama said they have not been able to find enough legal residents to replace the seasoned Hispanic field pickers, drywall hangers, landscapers and poultry workers who fled the state. There was an initial rush of job applications, they said, but many new employees quit or were let go.

                And that doesn’t even get us to a discussion about how that law affected economic growth.Report

              • Avatar Jaybird in reply to j r says:

                From the story: from 9.8 percent to 7.2 percent

                From your comment: over the same time period to total U.S. unemployment rate dropped from 9.1 to 8.2

                There’s a game in IT called “bring me a rock”.

                The security guy says “bring me a rock” and you bring him a rock.

                “I don’t want that rock. I want a red rock.”

                So you find a red rock for the security guy.

                “That rock is too small. I want a bigger red rock.”

                So on and so forth.

                I found evidence that demonstrated a case where “there were less immigrants willing to work low wage jobs” and, in response “employers would be forced to raise wages and that would bring more native-born workers into the job market.”

                Yeah.
                You don’t want this rock.
                You want a red rock.Report

              • Avatar j r in reply to Jaybird says:

                No. You didn’t bring evidence of any of that. You brought one data point: a rise in the unemployment rate that happened the same year that Alabama passed that law. For data to be evidence, we need to investigate the relationship between the two occurrences and see what the correlation is and then see what role one plays in driving the other.

                Also, this is from the Wikipedia page on the law:

                On December 18, 2011, it was reported that Alabama’s unemployment rate had fallen from 9.2 percent to 8.7 percent. Supporters credited the immigration law for the decrease.[21] However, Ahmad Ijaz, Director of Economic Forecasting at the University of Alabama, found that the majority of job growth in 2011 was in the automotive sector – an area of the economy where undocumented workers were uncommon. Ijaz attributed a rise in employment to the retail growth during holiday sales. Contrary to expectation, there was no job growth in sectors where Latinos typically work – construction, agriculture, and poultry processing.

                I’m not ready to say one way or the other what role the law played in the change in the employment rate, but let’s not pretend that I’m moving goal posts.Report

              • Avatar Jaybird in reply to j r says:

                Well, if you want a government report, there’s this one.

                Now it’s your turn to provide a report that shows that immigration is beneficial to unskilled labor.

                Oooh! And then I can say that it doesn’t demonstrate what you say it does!Report

              • Avatar Chip Daniels in reply to Jaybird says:

                And then what happens?

                I’m still waiting for something that ends with “and then the median worker sees real wage gains.”

                Because since around 1970, that hasn’t been happening.Report

              • Avatar Jaybird in reply to Chip Daniels says:

                Well, when was the Immigration and Naturalization Act of 1965 passed?

                Maybe we’re looking at this incorrectly: Let’s say we started weighing the benefit that the people working here instead of, say, Guatemala are seeing.

                How much are median workers helped then?Report

              • Avatar J_A in reply to Jaybird says:

                Without looking at statistical analysis, because I’m a lazy sod, as my British better half says frequently:

                Median workers are helped by increasing aggregate demand (the immigrants’ demand is added) and by access to cheaper services, increasing their disposable income to allow for further demand (and, believe it or not, illegal immigrants pay taxes, not only sales taxes, but payroll and income taxes withheld to fake social security numbers)

                Now, low end workers, that might be a different story, and we had a sub thread not a week ago comparing different studies about the impact of unskilled immigration on high-school-graduates-and-below native workers. Let’s say that the studies are inconclusive, so as not to rehash the debate, but definitely they do not invariably point in the direction you seem to be hinting at.Report

              • Avatar Jaybird in reply to J_A says:

                Let’s say that the studies are inconclusive, so as not to rehash the debate, but definitely they do not invariably point in the direction you seem to be hinting at.

                Yeah, whenever this thread comes up, I always point to the same reports, then other people point to articles that don’t mention the reports that they’re citing, and then we say that studies are inconclusive.Report

              • Avatar J_A in reply to Jaybird says:

                In the last debate, I brought (and linked) the Peri paper from the Federal Reserve Bank of San Francisco, and was rebutted with an article from David Frum quoting the Borjas paper that had itself being rebutted by the time Frum wrote his article.

                So I am in team published paper, not in team opinion article.

                I am unwilling to rehash a debate that is not one week old (look for it but n the Merkel thread), so I was willing to be generous by saying we ended the debate without settling the matter. We don’t need to repeat the ad-hominems.Report

              • Avatar Jaybird in reply to J_A says:

                Yeah, I linked to that paper I cited here in that thread too.Report

              • Avatar Chip Daniels in reply to Jaybird says:

                When did intermodal freight make global shipping cheaper?
                When did the rules in international tariffs and finance change to make global finance easier?
                When did the New Deal coalition break apart?
                All around 1970.

                The current landscape never has a magic silver bullet of causality.Report

              • Avatar Jaybird in reply to Chip Daniels says:

                Well, I suppose there’s nothing to be done.Report

      • Avatar notme in reply to j r says:

        Then why do these no skill and no education mouth breathers think they should get 15 per hour? I guess because some liberal told them they deserve it.Report

      • Avatar Mike Schilling in reply to j r says:

        When labor is scarce, wages go up because there’s more producer surplus. When labor is plentiful, wages go down because there’s more consumer surplus. Of course, these aren’t completely static situations: when times are good, more businesses get created, which makes labor more sought after, which raises wages. (If you don’t believe that, look into what programmers, even bad ones, were making in 1999.) When times are bad, businesses fold, which means people will take whatever they can get. (If you don’t believe that, look into what programmers, even good ones, were making in 2001.)

        It’s not like any of this is controversial.Report

    • Avatar Joe Sal in reply to Chip Daniels says:

      “Is there any place in the world where labor is in such short supply that workers can negotiate from a position of strength?”

      Position of strength would need to be unpacked a bit there. As far as location versus strength, if it holds that labor is in the realm of individual agency, then the locations where labor holds the most strength is in those areas that have the least amount of distortion from social constructs. Straight up slavery is an extreme example of where individual agency of labor has been completely defeated by a social construct.

      (gees howd this comment end up down here)Report