Sunday, June 06, 2010
Free movement of goods and services works to our mutual advantage. But the free movement of labour is another matter entirely.There have been real economic gains from the arrival of young, hard-working migrants from eastern Europe over the past six years. But there has also been a direct impact on the wages, terms and conditions of too many people – in communities ill-prepared to deal with the reality of globalisation, including the one I represent. The result was, as many of us found in the election, our arguments on immigration were not good enough.
While it is true that one million British people do migrate to work in the rest of Europe, they are more likely to be working for higher wages in Brussels, Frankfurt and Milan than undercutting unskilled wages in the poorer parts of Europe. As Labour seeks to rebuild trust with the British people, it is important we are honest about what we got wrong. In retrospect, Britain should not have rejected transitional controls on migration from the first wave of new EU member states in 2004, which we were legally entitled to impose.
Balls twice asserts that Eastern European workers undercut the wages, terms and conditions of British workers. There has been a great deal of research into this issue, and no one can find a trace of it. Two recent studies have looked specifically into the issue of Eastern European immigration and its impact. One was carried out by UCL for the Low Pay Commission (here) and the other by the IPPR (here). If anything, there tends to be a slightly positive impact on wages, but this is so negligible as to not be worth bothering about. Nigel Harris has pointed out (Thinking the Unthinkable, IB Tauris, 2002) that econometric studies have consistently looked for this effect where there is large amounts of immigration, for example across the Mexican-US border. They can't find a trace of any downward pressure on wages or conditions. The idea that it would negatively affect the wages and conditions of 'native' workers is based on simplistic economic reasoning, wherein more and less expensive workers means a weaker bargaining position for labour, but that's not the way the migrant labour economy works.
Notably, Balls says nothing about the free movement of capital, which brings us to a more pressing problem with his argument. New Labour really did energetically embrace policies that manifestly reduced workers' incomes, and these are policies that Balls shares responsibility for, having been in the Treasury when they were implemented. These policies are based on Gordon Brown's acceptance of the doctrine of NAIRU (the 'non-accelerating inflation rate of unemployment', or the 'natural rate of unemployment' as it used to be called). This doctrine says that the government cannot reduce unemployment through economic stimulus, by demand management, or by redistributing wealth, because otherwise it will lead to unmanageable levels of inflation. The only way to reduce unemployment is to reduce the 'non-accelerating inflation rate of unemployment', by cutting the costs of hiring. This means keeping a 'flexible labour market', and some of the toughest anti-union laws in Europe.
The result has been a severe downward pressure on wages in the UK, relative to the rest of the EU. Average pay of manufacturing workers at the zenith of New Labour's rule in 2001 was, according to David Coates, lower than most advanced European competitor states, and even lower than in the US, while the pay gap was the highest in Europe. Low pay is at higher rates in the UK than in Poland, Estonia, Malta, the Czech Republic, and Italy. Even deferred wages compare badly, with pensions being the worst in Europe because of the government's commitment to a more privatised system, ideally modelled on Chilean lines.
The British government opted out of workers' protections in EU legislation in 2007, specifically denying that Title IV in the EU Charter of Fundamental Rights implied any legally enforceable rights for British workers, and in 2002 allied with Berlusconi to oppose workers' rights in Europe. Where is Balls on these questions? Where he has always been: at the heart of the New Labour project, suppressing wages to benefit employers, in the name of neoliberal orthodoxy. The only context in which Balls wants to discuss "labour protections" is, ironically, that of bashing workers from a different part of Europe. He wants to "protect" one group of workers from another, as if they are mortal enemies and his job is to support the British "side". No doubt the idiotic phrase "the white working class" will pass from his lips soon, if it hasn't already. Balls' article is both a cheek and a barely sublimated appeal to crude, scapegoating racism.