Brexit drives up wages by ending free movement

Brexit
Brexit

Staff are enjoying significantly higher salaries as Brexit, the pandemic and the furlough scheme cut competition for jobs - in an early sign that leaving the EU is benefitting lower-skilled workers in the UK.

Data from recruitment firm Reed, first reported by The Sunday Times, has found that average salaries this year have risen by 18pc across hospitality and catering, 10pc in retail and 4pc overall.

It follows widespread reports that bosses in retail and hospitality, in particular, have been struggling to fill jobs as they reopen following coronavirus lockdowns, with some forced to cut opening hours because they cannot find the staff.

According to Reed, the average salary in hospitality is now £26,888 compared to £22,701 last year and £23,425 in 2019. The average salary in retail is now £29,310, it said, compared to £26,758 last year and £23,425 in 2019.

Economists said the staff shortages were due to factors connected to the pandemic, such as the furlough scheme, students studying from home and people having moved out of big cities, as well as Brexit.

The pay rise data contradicts claims by many mainstream economists before Brexit that migrant labour was not holding down pay. In the run-up to the vote, the Resolution Foundation think-tank argued that a minimal increase would be dwarfed by other forces driving wages down.

Paul Dales, of Capital Economics, said Brexit and migration back to the European Union were helping drive staff shortages and increasing pay.

He added: “I think there is going to be some labour shortages and upward pressure [on wages] in those sectors that tend to employ a higher share of migrants from the EU - such as agriculture and hospitality.”

Julian Jessop, an economist, said that the labour shortages strengthen the case for winding down the taxpayer-funded furlough scheme, despite a delay to the June 21 unlocking likely to be announced today.

He said: “People should now be encouraged to look for new jobs, instead of being locked into their old ones.”

Philip Shaw, chief economist at Investec, said: “The exact cause [of the staff shortages] isn’t entirely clear - it may reflect for example a lack of student labour.

“There is some evidence that EU workers going back to the EU - for workers in specific sectors, that may well lead to higher pay, but it also might mean for customers that they are less able to get the services or the goods they want to purchase.”

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