Retrospective on Katherine Wu, “Economic Consequences of UK Immigration Reform Following Brexit” from The United Kingdom on the Brink of Brexit Perspectives on Business and Economics, Volume 36, 2018 Katherine Wu ‘18 is a research engineer at The Johns Hopkins University Applied Physics Laboratory. Wu evaluated the economic role of EU citizens in the UK and predicted post-Brexit effects on the UK economy of reduced immigration from the EU. What is the status of productivity in the UK? While financial studies on productivity in the UK post-Brexit are ongoing, there are some key takeaways from existing analyses. Most notably, business investments remain weak, and the proposed policy lever designed to promote investment, also known as the “super-deduction,” has not proven to be as successful as initially thought (Portes & Springford, 2023). Additionally, this policy lever expired in April 2023 and plans for future policy alternatives to increase business investment remain unclear. This policy lever was deemed unsuccessful mainly because of waning productivity stemming from a lack of low-wage workers. In the past, immigrants primarily assumed roles in lower-wage occupations, but Brexit made it so immigrants could no longer fill these jobs. Studies on the labor market generally conclude that immigration had positive effects on UK productivity, so a post-Brexit UK is mainly suffering from a reduced number of EU workers (Campo et al., 2018). The reduced availability of lower-wage employees has negatively affected production for many firms. Moving forward, much debate exists about whether businesses can compensate for this deficit in production over time with increased productivity, rather than simply reducing output (Portes & Springford, 2023). For the time being, however, the post-Brexit UK labor market shows waning levels of both immigration and productivity within businesses. How is labor accessibility in the UK post Brexit? Is there a shortage and are employers facing issues? In 2021, headlines were brimming with accounts of labor shortages across various sectors and industries. Statistics show that “one third of businesses with at least ten employees said that they were facing staff shortages in early April 2022” (Sumption, 2022). Some accounts include semi-truck drivers “driving fuel tankers and stocking up retail stores; pig farmers claiming that they must slaughter thousands of animals because of a lack of abattoir workers and skilled butchers; and demands from numerous other industries – from hospitality to the care sector – for greater access to visas to supply their labour” (Sumption, 2022). The two areas of the workforce hit hardest, with the highest vacancy rates, were hospitality and health. Not only did the UK grapple with the aftereffects of Brexit, but also it had to navigate the economy through the impacts of the pandemic. These two factors had a compounding effect on the shape of the workforce in the UK. Considerable job losses caused many UK citizens to leave the country in parallel with the economy and labor market adjusting to the new immigration restrictions. Like after previous downturns, economists could have expected EU migration to recover after the pandemic thanks to EU free movement. But the new immigration system provided, “few options for migration to take up low-wage work” (Sumption, 2022). UK labor market constraints continue, causing difficulty for employers in finding able candidates. References Campo, F., Forte, G., & Portes, J. (2018). The impact of migration on productivity and native-born workers' training (IZA DP No. 11833). Institute of Labor Economics. Portes, J. & Springford, J. (2023). The impact of the post-Brexit migration system on the UK labour market (IZA DP No. 15883). Institute of Labor Economics. Sumption, M. (2022). How is the end of free movement affecting the low-wage labour force in the UK?. In J. Portes (Ed.), The economics of Brexit: What have we learned? CEPR Press. Retrospective by Alexander Damle ‘24 Accounting and finance 2 Martindale Retrospectives December 2023
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