Pay, productivity and high performance: time to get a MAC?

I’ve resisted blogging about Brexit for quite some time, largely because the amount of lunacy out there is simply astonishing. Brexit remains, in my view, a policy outcome intended in the first place to settle internecine war within the Tory Party but which it is clearly failing to do – and, indeed, which it is turning out to be completely ill-equipped to do.

In such circumstances, while there remains an awful lot of stuff going on that policy needs to settle, there’s little for policy-makers to do but watch on in horror as this the Brexit sh*t show meanders to a conclusion. I’ve watched on in horror as public positions have solidified around the hardest of Brexits in the attempt to appease the Tory Party’s Brexiteers and as the policy debate has shifted further rightwards to the point where Brexit has not become a far-right project – it was always this, from the days before the referendum was called – but an excuse for the public outbursts (and worse) of illiberal, angry boors.

The UK leaving the EU is still the most likely conclusion – though you never know, and that’s no reason not to try – but making sense of what things will be like afterwards is an essential task facing policy-makers. (Were our public debate to mend itself more meaningfully to actual debate rather than false slogans on buses, this is of course the sort of thing that would have happened prior to the referendum. Nevertheless.)

One of the policy organisations trying to get on with life after likely Brexit is the Migration Advisory Committee, the government’s advisory body on issues – largely but not exclusively to do with the labour market – concerning the impact of migration. The MAC has been charged recently with coming up with a report on what effects migration has had on the UK’s economy and society, which it did last month in the background of a focus on its (almost certainly false) equation of wages with skill levels, and its recommendation to impose a £30,000 minimum salary requirement on labour immigration visas.

Last week, Professor Alan Manning, Chair of the MAC, appeared before the House of Lords Home Affairs sub-committee to discuss the findings. One of the issues raised was the (very) lukewarm recommendation to engage with a seasonal workers’ scheme for agriculture – though not for care – on the grounds that the sector was absolutely dependent on EU workers and there were no prospects of what we might call ‘domestic re-supply’ taking their place (I’m deliberately avoiding repeating the nauseating terminology of ‘settled workers’). You can watch the appearance here (relevant bit at c. 11:15.50) or else read the BBC’s report which contains a full quote of the statement behind this post.

The reason for the lukewarm nature of the recommendation is the low levels of productivity (stemming from low wages) in the agriculture sector, against the background of the government’s desire (in its ‘Plan for Britain’) to turn the UK (I think this is what it means) into a high productivity, high wage economy; and the view expressed by Professor Manning in his appearance, but which isn’t at all a conclusion of the report, that low-skilled migration has been ‘fiscally negative’. (Indeed, the report specifically says that there is no evidence that low-skilled migration has any negative impact on productivity, innovation or training – though it does say that high-skilled migration is (entirely unsurprisingly) ‘better’ in all these areas.)

Now, I’m very much in favour of the principle of a high wage, high productivity economy – except in that, like a lot of things this government does, having a plan is all very well but what is also required is that someone must actually do something to achieve it (it’s not going to be happen by wishing on a unicorn). Furthermore, an essential part of any plan must be the proper taking care of the local economic, employment and social impacts none of which can be left to the market, and this is somewhat missing from recent government pronouncements. (Had we taken greater care over the last forty years of those things that cannot be left to the market, we might well not be in this mess.)

Startlingly, Professor Manning said in his appearance that the loss of seasonal produce markets ‘wouldn’t be the end of the earth for the country as a whole’ and that giving agriculture ‘privileged access to labour’ wasn’t a way to achieve a high-productivity economy. I think this is both arrant and shockingly complacent:

1. agriculture is a market that is rigged by the big retailers. The demand for lower prices by the big supermarkets, the natural effect of the cut-throat competition facing them, is what will continue to keep wages in the sector down. At the same time, falling prices won’t provide the conditions for farmers to invest in automation to raise productivity, even if the incentive might be there to do so. The same rigged market is, by the way, also present in the care sector: it’s called austerity and the resultant cash strapping of the local authorities who fund care. The government can end austerity – but, in the context of agriculture, it also needs to do something to tackle the power of big retailers to force farm prices downwards

2. it is ridiculous to suggest that the appropriate policy response to the loss of soft fruits and asparagus is to import them instead. There is the issue of quality, with large areas of Scotland, e.g. The Carse stretching along the side of Tay from Perth to Dundee, having natural advantages for the growing of premium quality soft fruits. More than that, however, one of the focuses of the environmental debate is, quite rightly, reducing the food miles involved in the transport of our food from source to plate. It makes no environmental sense to import soft fruits that can be grown, and successfully, in the UK – and there is the issue of the use of preservatives to extend lifetimes, too. Yet, green issues and concerns are apparently absent from considerations in this debate

3. agriculture constitutes less than 1% of UK GDP. It is extremely facile to think that low productivity in agriculture is somehow holding the UK back from becoming a high productivity economy. Even more so when we are specifically speaking about low productivity in one tiny (see Table 2.2 under previous link) sector within the agriculture industry

4. Brexit is already likely to lead to up to 25% of farms in England going to the wall – and probably more in Scotland, Wales and Northern Ireland if there is knock-on effect on budget subsidies to the devolved administrations. If this was an EU country, there would be consultation, a social plan and a desire to provide re-training programmes to provide a degree of support and re-orientation for those involved. But, this is the UK, and a country which is heading out of the EU

5. MAC suggests a (higher) minimum wage in agriculture will be required to provide upwards pressure on wages in the event that a seasonal workers’ scheme is introduced so as to raise productivity and in view of this ‘privileged access to labour’. I’m in favour of a higher living wage across the UK but I’m not sure that a minimum wage in the already distorted agriculture market, in isolation from a higher living wage particularly elsewhere in the food supply chain, will act in the way it thinks

6. to gain a high productivity economy, we would need, firstly, a more advanced manufacturing industry as a launchpad for a high skills, high technology revolution. However, Professor Minford, the economist that Brexiteers most like to listen to, was already prior to the referendum predicting (and indeed welcoming) the elimination of what little manufacturing industry we have left; although his post-referendum analysis is somewhat less apocalyptic predicting UK manufacturing profits ‘possibly higher than pre-Brexit levels’. (He’ll probably be right about something one day, at least on an infinite monkey basis.) Secondly, all workplaces, regardless of industry sector, need to be adopting much more of the sorts of high performance practices that create productivity and to which trade union general secretaries, for example, have pointed, and repeatedly. But, as EEF’s budget submission this week highlighted, there is precious little evidence of that. (The EEF submission also highlights that foreign-owned workplaces are more productive than ‘domestic’ ones. Funny that.)

Ultimately, if we’re to have a high productivity economy, we need our policy-makers to pay less attention to what is happening in agriculture and more to proselytising about high performance workplaces and putting clear incentives in place to encourage the adoption of high performance practices. Meanwhile, we know that a lot of people in primary industry areas such as agriculture voted for Brexit. But, funnily enough, I never saw ‘Vote Brexit: lose primary sector jobs and pay higher food prices’ on the side of a bus, either.

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