Free movement has harmed low-skilled British workers. Brexit is a chance to fix the system.
As our negotiations to leave the European Union reach a crucial stage, the EU is reported to be prepared to offer the UK some significant trade benefits in exchange for maintaining free movement of labour after we have left.
In effect, our goods and services would be sold freely into the European market and in exchange EU citizens would be allowed to come and work here and, of course, the British in return would be allowed to settle and work anywhere they wanted to on the continent. Is that the reasonable trade that it sounds?
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Drifting apart
Lots of us like the idea of being able to live and work somewhere else, and we'd prefer to live in a world where everyone else could do the same thing. If an Italian or French person is the best qualified for a job in London or Manchester, we'd like it to be open to them. Likewise, if someone from Swansea is the best-qualified person for a job in Stuttgart, they should get it. But this has never really been the case.
Eurostat has this month published new data on who is working where. It turns out that only 1.1% of our working-age population is employed in other EU countries, the second lowest of any of the 28 countries (Germany is just below us on 1%). Over the last ten years, it has actually gone down from 1.2%.
A bit like the share of our exports going to the rest of Europe, which has dropped from close on 60% to 40% over the last two decades, we have been drifting away from the EU for years. Instead of becoming more integrated with our neighbours on the other side of the channel as the years go by, we are becoming less and less so. There are more British citizens living and working in Australia 1.2 million than there are in the whole of the EU.
A continent-wide cheap-labour scheme
For some of the poorer countries, however, the numbers are massive. Of Romanians, close on 20% are now working in other EU countries. Of Lithuanians, it is 15%, and of the Portuguese it is 13%. The numbers are rising dramatically. So, for example, the percentage of Romanians working aboard has almost trebled in the last ten years and so has the percentage of Lithuanians. The percentage of Poles has almost doubled.
Significantly, it also turns out that in the richer countries it is mainly middle-class workers who work abroad. Of the French who work in the rest of the EU which is still only 1.3% of the population even if it might not seem like that in Kensington more than two-thirds have degrees. Of the Romanians, hardly any do.
Among the wealthy countries, a tiny percentage of well-educated professionals job-hop from country to county, while in the poorer states it is the low-skilled who move abroad in search of better-paid work. It turns out that free movement of labour was not really a way of integrating the European economy and workforce after all. It was, in truth, a massive scheme for moving cheap labour across the continent.
A better way
It is easy to see why that benefited companies. They got lots of low-cost if relatively unskilled workers. Care homes and coffee shops would find it almost impossible to operate without them. But there is no point in pretending it benefited British workers. Among the degree educated and skilled, hardly any of us went to work in Europe. And among the low skilled, it meant intense competition for jobs and pressure on their wages.
We can almost certainly design a better system once we have left the EU. The tiny minority of us who want to work in Germany or Italy will almost certainly be allowed to, while the well-educated French, Spanish or Czech professionals who want to work in Britain should be allowed in. Very few governments want to stop the movement of skilled workers, or prevent companies hiring the people they need. At the same time, the numbers of low-skilled workers can gradually be bought under control. That would be far better than automatic free movement.
