Brexit won’t raise wages: why Sir Stuart Rose is wrong
We got an object lesson yesterday in why workers and their representatives need to play a more prominent role in the EU referendum campaign. Sir Stuart Rose – former boss at non-union Marks & Spencer, and now chair of Britain Stronger in Europe – appeared to suggest that leaving the EU would raise wages, and then (incredibly) appeared to suggest that lower wages were a reason to support remaining in the EU.
This is a very quick response. He’s wrong on so many levels – but here are just four key reasons why leaving the EU would actually lead to many people seeing their wages or living standards fall.
1. Trade and investment
UK membership of the EU increases foreign investment in the UK economy, and investment creates better paid, higher value jobs. Being in the European Union is one major reason why we export so much to the rest of Europe, and the bigger our export market is, the more jobs there are in those industries. Jobs in exporting industries pay more than the average, and are more skilled. At the same time, membership of the EU has produced cheaper imports, which raise real wages by reducing the cost of living for everyone.
2. Workers’ rights and decent jobs
By ensuring British workers have decent rights at work, EU membership requires employers to invest more in their workforces, raising their productivity. That encourages a virtuous circle – treating workers well means they produce higher value goods and services and the wages they earn increase. On a very basic level, measures like equal pay for work of equal value have directly increased wages paid to women, and likewise for part-time and temporary workers’ rights. And the provision of paid holidays under the Working Time Directive at a stroke increased the average wages per day worked for millions of low paid workers.
The likely impact on the value of the pound if the UK left the EU would not affect what Harold Wilson used to call “the pound in your pocket”, but as everyone now knows, devaluing your currency actually makes us all poorer because the foreign goods we import become more expensive. Britain already has a long-established trade deficit, and it is higher in goods than in services, so everyday purchases on the high street (as well as holidays abroad, for people who can afford them) would immediately cost more, thus reducing the value of the wages we earn.
There isn’t a fixed number of jobs to go round – for every European worker who moves to the UK to work, they have to buy food and other goods, which increases the number of jobs there are, promotes growth generally and therefore increases wages overall. So, across the economy as a whole, immigration has generated jobs and growth by stimulating demand – as well as supporting vital services like health and social care. There is certainly a problem among lower skill, insecure and low paid jobs where low-skill migration has held wages down (before the crash that just meant wage levels didn’t go up as much as they could have – it was the financial crisis and government cuts that led to wages actually declining in some areas, not migration.) But these problems are better addressed through tackling exploitation rather than restricting migration. More enforcement of the minimum wage, controls on zero hours contracts and plugging the loopholes in the Agency Workers Directive are vital, and, across the economy as a whole, the restoration of collective bargaining, as the TUC’s migration messaging project argues.
There are certainly some employers – and maybe Sir Stuart Rose was one of them – who tried to use the European single market to cut their wage costs and boost profits. But overall, having access to a bigger market and having employment rights guaranteed has boosted British workers’ wages, and where that hasn’t happened, it is decisions made by the Government and in British board rooms which are to blame. That’s why the TUC has been running our Britain needs a pay rise campaign.
We look forward to Sir Stuart’s rowing back his comments. And, hopefully, we’ll see a bit more recognition that the campaign he leads needs to win workers’ votes.