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Corbyn is right: Migrants don’t drive down wages

CorbynIn his recent speech to Labour Party conference Jeremy Corbyn said, “It isn’t migrants that drive down wages, it’s exploitative employers and the politicians who deregulate the labour market and rip up trade union rights.” This is excellent and entirely correct. It is probably the best statement ever made by a Labour leader on this issue. It used to be regularly argued, and not just by far right or fascist groups, that immigrant workers take British workers’ jobs. This has more recently been supplanted with the notion that migrant labour has driven down wages. Both are equally wrong.

The claims that immigrants take jobs became harder to sustain as the level of the overseas migrant population reached record highs in Britain at the same time as a record high level of employment overall and a record high for employment of UK-born workers. Even so, the most recent Tory party conference tried to revive the racist claims, with lists of foreign workers, removing overseas doctors from the NHS and prioritising immigration controls over economic prosperity. Some of these have already fallen apart while they would all be deeply damaging to the UK economy, as well as fanning the flames of racism.

In fact, as shown in Chart 1 the record number of migrant workers now coincides with a record employment rate for workers in the UK. Since the beginning of 1997 the number of migrant (non-UK born) workers in the UK has risen from just under 2 million to nearly 5.5 million in mid-2016. At the same time the employment rate of workers in the UK has risen from 70.8% to 74.5%, a new all-time high (the unemployment rate is also close to its all-time low at 4.9%). No-one is having their job taken by a migrant worker.

Chart.1 Record Employment Rate in UK, % & Record Level of Migrant Workers, 000s

Instead, the anti-immigrant rhetoric has more recently focused on the claimed negative impact on wages arising from immigration. As this false idea has some sway even in the labour movement it is worth dealing with the false economic logic which forms its basis.

Employment and wages

The false claim that immigration drives down wages has long been exposed as relying on the ‘lump of labour fallacy’ . The long history of capitalism in general is that more and more workers across the globe are brought into production. That is still happening to this day. At the same time, for the overwhelming majority of those workers their material conditions have risen enormously over the same period. The growth of the workforce has been matched by the growth in the work available. This is because of the growth of the productive capacity of the global economy, in which workers fight for a share.

Instead the attack has switched to the alleged impact of immigration on wages. As the discussion of this issue is so loaded with emotion and confusion in a country like Britain, it is important to set out some clear points of reference.

Objectively, there is no difference between a worker who travels ten miles, hundreds of miles or thousands of miles for work. There is of course no difference in terms of their skin colour, religion, gender, sexuality or nationality. Wages in any city or town are not more or less affected by the immigration of a worker from the next county than from a different continent.

Yet the idea that wages are driven down by immigration, that the price of labour (wages) is determined by the increased supply of labour from migration is closely related to the lump of labour fallacy. They both depend on the notion there is a fixed amount of work or fixed amount of wages, and that in both cases these are adversely affected by increasing the supply of labour through immigration. For the lump of labour, now read the ‘pool of wages’. These are false notions.

Wages have an absolute floor and an absolute cap. The absolute floor is set somewhere below the minimum levels of subsistence for the continued existence of the workers. In some cases, where slavery existed within capitalist production such as in the Southern United States or the European colonial powers’ operations in Africa and elsewhere, the workforce had to be constantly replaced as lives were destroyed in the production process.

The absolute cap on wages is set by the absolute level of value created by all firms (which each individual firm shares in). Firms cannot sustainably increase the level of wages beyond the total value created, otherwise all firms would go bust. In addition, the value created will tend to rise as capital is accumulated over time (even though, as now there may be distinct periods of crisis when there is little or no accumulation). As capital accumulates and the productive capacity of the economy rises, the absolute cap on wages will also rise.

Yet most wages are set well within those bounds and by different factors. It is widely understood that there are two principal destinations for the value created in an economy. In Marxist terms, these are the value created by labour a portion of which is claimed by the capitalists, ‘surplus value’. In mainstream economics there is instead a focus on the labour share of national income and capital’s share of national income. Income is not the same as value so these are an only approximate guide to total value created and the portion claimed as surplus value.

These proportions or ratios of value/income are not stable over time. In the Western economies the labour share of national income has been falling for a prolonged period. Chart 2 below shows the OECD estimate of the labour share of national income in selected groups of OECD economies from 1969 to 2014.

Chart 2 Labour Share of National Income, 1969 to 2014

As the chart shows there has been a dramatic decline in the labour share of national income. This is sometimes and mistakenly attributed to the forces of globalisation, that somehow workers in poorer countries have ‘taken the jobs’ or driven down wages in the advanced industrialised countries. This is simply a geographic variant on the ‘lump of labour’ or ‘pool of wages’ notions.

Chart 3 below the level of labour productivity in the G20 economies and the real wage index from 1995 to 2013, which includes the period which is regarded as one of accelerating globalisation. If labour in the advanced countries was being undercut by labour in poorer countries it would be extremely difficult for there to have been a rise in labour productivity in those countries. Production, especially high-value production would have been shifted overseas.

Instead, the chart shows that the rate of exploitation in the G20 increased over the period. A greater proportion of the value created by labour was claimed by capital as surplus value; the capital share of national income rose.

Chart 3 Labour Productivity and Real Wage Index 1995 in G20, 1995 to 2013

Struggle

As the chart shows, the output per worker in these advanced economies rose more than three times as fast as the rise in real wages, which were close to stagnation. The workers in the advanced industrialised countries were not being undercut by workers in the ‘Third World’. They were being robbed even more by their employers in the advanced countries.

Within the absolute caps and floors set for wages by the value created by labour within all firms and the subsistence of the workers, the general and continuous contest between labour and capital over the share of that surplus is set by the class struggle. Over a prolonged period this is a struggle the capitalist class has been winning in the advanced industrialised countries.

In the OECD economies the proportion of workers in part-time employment has risen from 5.4% in 1960 to over 20% in 2015. Union densities were 35.6% in 1975 and had fallen to less than half that, just 16.7% by 2014. It is not workers outside the advanced industrialised countries who have lowered wages in the G20 countries. It is the capitalist class in the G20 which has robbed workers of a greater proportion of the value they create.

Of course, it is in the interests of those same capitalists to foster the idea that someone else is to blame. This partly accounts for the tenacity of these very false ideas. It also explains why far right and fascist groupings are tolerated or even promoted by big business, sometimes even funded by them.

But it is impermissible for the labour movement to adopt these ideas or even to adapt to them. This is not primarily a question of political morality, although that should enter calculations. The reason the labour movement as a whole should thoroughly reject any notion that jobs or wages are lost to migrant workers is primarily self-interest. There is no example anywhere in history of a ruling class that offered to make one section of workers better off at the expense of others and that made good its promise to the former. Yes, it is possible to systematise discrimination against one of more sections of workers and make their lives an absolute misery, or even worse. But the distractions of racism, xenophobia, frenzied attacks on religious or national groups and so on are precisely that; designed to distract from the absence of any strategy to lead society out of its morass. The workers not directly under attack are only ever relatively better off. Their absolute conditions never improve as a result, and often worsen. The poor whites of Southern United States were immeasurably better off than the black slaves. But their living conditions did not improve, and ultimately the whole parasitic, bloodthirsty society had to be crushed by the industrial North.

If the labour movement pays the slightest lip service to these lies it does itself great injury. It disarms itself in the class struggle by agreeing that it is foreign workers, not rapacious bosses who have driven down wages, increased rents and increased prices.

In fact the true position is that migrants add to net prosperity for the whole of society. Even if that view is not widely accepted in Britain, we may soon be provided with incontrovertible proof that it is correct. Unfortunately, this may well be a negative proof, as the Tory Government clearly aims to reduce immigration even at the expense of falling living standards. A position that used to be confined to UKIP’s cranks is now government policy. All our living standards will fall further as a result, if this policy is implemented. The labour movement has every reason to oppose its implementation.

This article first appeared on Socialist Economic Bulletin.

11 Comments

  1. John Penney says:

    This article is utter economic and historical nonsense – simply providing a faux “leftish” gloss to the neoliberal argument for completely unlimited labour supply .

    It is of course quite true, but worthless , that it is capitalism that produces low wages, poverty, war, etc, etc, etc. But it is very basic supply and demand economics of labour supply as a basic “factor of production, plus the overall and sectoral profitability, and the related strength and weakness and pro worker OR pro employer legal framework of each economy, plus the related strength or weakness of organised labour, which determines wage rates (and working conditions) for those employed in the various sectors .

    In the post war, to late 1970’s “golden era” of Western capitalism, the strength of organised labour in the core metropolitan “advanced economies” , and its ripple “pull” effect on less organised sectors, combined with the long post war economic boom , and the ideological threat to the capitalist status quo represented by the powerful propaganda image of the “socialist” (aka Stalinist) states, enabled the privileged workers of these core “advanced” economies to secure historically extraordinary wage levels and welfare benefits.

    This extremely privileged status of Western workers , evident in the wage levels of the “labour aristocracy” in all the core , imperialist, capitalist states throughout their existence to some extent, never extended to the colonial or ex colonial workers, whose super-exploitation enabled the various Western ruling classes to “buy off” their indigenous working classes with the post war “Welfare Statism” of the Western core states-only postwar “butskellite” consensus.

    A key element for supporting the relatively privileged Western working classes’ bargaining power was the boom conditions of most of the early post WWII economies, and the labour shortages this boom produced. A key feature of the post 1980’s Reagan/Thatcher “neoliberal Offensive” to restore profitability to a capitalist system running out of steam, alongside ever more oppressive anti trades union legislation, breaking up the highly organised “big labour battalions, by shifting heavy industry to the “third world” , outsourcing big company functions to a myriad of tiny “white van man” micro businesses, removing the legal shackles on the financial sector, and providing legal loopholes to allow big business and the superrich to avoid their tax liabilities, was, and is, best evidenced by the EU and its “four freedoms” (for capital, services , and goods), the creation of an unlimited labour supply. This has been an absolutely core element in not only avoiding any labour supply “bottlenecks” for any sector or individual economy, but, particularly in the semi or unskilled labour markets, make collective bargaining nigh on impossible, and inevitably , keep the ability of workers in these sectors on an ever reducing real share of the value their labour produces.

    Any analysis of the stagnation of the share of national income accruing to the majority of the populations from wages , compared to the ever rising dividend/super salary and bonus, distribution to the top 10% , within the Western capitalist states over the last 30 years of the “neoliberal Offensive” – combined with the now ever-accelerating withdrawal of the Welfare state benefits that provided the “social age” element of working class postwar prosperity, shows just what has been happening. The Western economies have certainly remained highly profitable – for the supperich, but since the late 1970’s , in Europe, and the USA. Most of the extra wealth arising from productivity improvement has accrued to the OWNERS OF CAPITAL, not the working classes. The ordinary citizen has in fact substituted real wage growth over the last 30 years via ever greater personal indebtedness.

    The authors of this neoliberalism-supporting article are , as with too many on the Left, hiding behind liberal , “freedom of movement” platitudes, to utterly misrepresent the very real, and for neoliberalism, systemically vital role , of unlimited labour supply to raise the rate of exploitation of a working class increasingly left with no effective wage or conditions bargaining power at all, (the “Uberised” precariat economy – all too familiar today in so many unskilled sectors, and spreading to even previously “middle class” sectors like education now) .

    There is a better way to run an economy and a society – via a radically Left oriented system of democratic planning – of which labour supply planning, and ensuring that no major region or subset of that society’s resident workers is left behind, is a core element. All the authors of this dreadful apologia for neoliberalism’s unlimited labour supply strategy have to offer, is the continuation of the status quo – and ever greater impoverishment of the UK working class. NOT a very attractive “political offer” for the Left !

  2. C MacMackin says:

    An interesting article, but I’m not entirely convinced that all of its arguments hold up. First of all, the argument that it is bosses that drive down wages and not immigrants, while strictly speaking true, ignores the fact that people coming from other countries may be willing to work for less. Thus, immigration (not the individual immigrants) would allow bosses to drive down wages. That is the difference between someone coming to work from the next county as opposed to the next continent–someone from the next continent may (depending on their country of origin) have much lower expectations in terms of wages.

    I am also unconvinced by Chart 3. It is purported to show that productivity continued growing in the developed world even during the heyday of globalisation. It can thus be inferred that outsourcing to poorer countries did not result in job losses or wage losses in the developed world. Even assuming that logic is valid, the charge is for the entire G20, which includes countries such as China, South Africa, and Brazil. That is, it includes a number of low wage countries, so I highly doubt that any conclusions about trends in the developed world alone an be drawn from it.

    Most of the argument here is made based on simple economic formulations (what in physics we would call “toy models”). These probably do represent real forces at play in the economy, but we can’t guarantee that they are representing the dominant forces. To establish that, empirical data is needed. I found most of the data provided here to be either insufficient or irrelevant in terms of proving the thesis.

  3. David Pavett says:

    I agree with John Penny and C MacMackin that this article fails to deliver on its promise.

    1. The Jeremy Corbyn quote in the first paragraph is ambiguous. This may be studied ambiguity or it may be naivety. Whichever it is the gushing praise of Tim O’L is surely well over the top. Corbyn’s claim is that it is not migrants who drive down wages but employers. This leaves open the possibility that employers use migrants to drive down wages and therefore leaves everything to be answered.

    2. The logic of TO’L’s argument is an implicit rejection of the idea that a pool of unemployed functions to keep wages down both on a national and an international scale. Can this be serious?

    3. The claims made in the second paragraph and bolstered by Chart 1 are near meaningless. Employment for the ONS is anyone working one hour a week or more. Therefore the figures can hide very real unemployment. TO’L makes no effort to analyse this.

    4. The argument of paragraph three is similarly unconvincing. First, the measure of employment rate is near meaningless. Second, it is entirely possible that employment rates can rise (on the ONS definition) while more immigrants are unemployed and that, at the same time effective unemployment increases.

    5. TO’L tries to show that not only is it empirically false to claim that immigrant labour produces a downward pressure on wages but that it could not be so in principle. He says that this has never been the case in the “long history of capitalism”. In fact his case could well be something coming from any of the free-market think tanks. He even seems to suggest that everything is getter better all the time!

    6. TO’L claims that “there is no difference between a worker who travels ten miles, hundreds of miles or thousands of miles for work”. This is ridiculous. There is a big difference between moving within national borders to find a job and going across borders to do the same. I could enumerate but I guess that I don’t have to.

    7. The idea that there is no issue of supply and demand in the labour market (the backbone of the article) beggars belief. This idea is not reliant on the idea of a fixed “lump of labour” as TO’L claims.

    8. The argument about an “absolute cap on wages”, insofar as it makes sense, is tautological: workers cannot be paid over and above the value they generate. It is not at all clear what this has to do with immigration.

    9. It is claimed that “It is widely understood that there are two principle destinations for the value created in an economy. In Marxist terms, these are the value created by labour a portion of which is claimed by the capitalists, ‘surplus value'”. This doesn’t even make sense. How can the value created by Labour be a principle destination for the value created?

    10. Chart 2 makes little sense as presented. What has it got to do with the argument about immigration?

    11. TO’L claims that “If Labour in the advanced countries was being undercut by labour in the poorer countries it would be extremely difficult for there to have been a rise in labour productivity in those countries”. Why is that? Labour productivity is normally thought of as “the value of goods and services produced by one hour of labour”. There are all sorts of problems with this definition but TO’L offers no other. If someone agrees to do a job for less money that doesn’t prevent a rise in Labour productivity.

    12. TO’L tells us that union densities have gone down. Indeed they have. One would therefore have thought it worth inquiring into the level of unionisation among immigrant works. TO’L doesn’t do that.

    I don’t know who Tim O’Leary is but I thought that this article, and the previous one by him, was dreadful. Both seem to have been published on the grounds that they support Corbyn. However, we do no favours to Corbyn, or the rest of us, by supporting him with bad arguments. And when he is wrong we do him, and the rest of us, no good by not saying so. Finally, one should add that there is an important social dimension to immigration and the idea that it should not be managed in anyway seems to me to be absurd.

    1. Shan Morgain says:

      Thank you David for another well reasoned analysis.
      To be honest I stopped reading the article halfway, which I rarely do, being of a thorough attitude normally.
      But ditzy little graphs that don’t add useful info, and skeins of jargon, suggest either a bad writer not grasping their audience; a lazy one can’t be bothered to make the effort to be clear; or smoke and mirrors.
      Since I am of Celtic stock I began to smell smoke, or as sometimes named, blarney.

      I have thr education and intellect to fight through that kind of stuff. But when I’d done so a couple of times and found it said either nothing very much, or else it was wrong, I gave up.

      Immigration deserves a much more serious and practical examination. Theory is fine in ts place, in university seminars where I enjoy it. But out here in the market, employers DO import cheap labour. Desperate outsiders do accept disgusting conditions, and very pow, insecure pay. So natives here who want a decent work package can’t compete.
      Until someone says they will address that by making low pay and bad conditions into serious crimes for employers, and actually enforce it with big penalties including prison, this will continue with all the attendant hatred of minorities.

  4. Peter Rowlands says:

    I have a somewhat different take on this article to that of its critics, although I do not defend free movement, which has probably, on the basis of what I have read, contributed to some degree to lowering Labour’s share of GDP. The author is therefore wrong, if this is so, in defending free movement,but equally it would be wrong to attribute labour’s falling share solely to free movement.The more important reasons are anti trade union legislation, higher levels of unemployment, the decline in manufacturing and other areas where trade unions were strong, and the reduction in size of units of production. The author is therefore wrong in denying that free movement is not a cause of labour’s falling share to some degree, but right in asserting that it is not the main reason.Unlike his previous article, which I could not see had any place in a left blog, this is argued from a class perspective, although it is flawed in argument and badly written as David Pavett has outlined.

  5. Tom O'Leary says:

    Self-styled Lexiteers, in reality Brexiteers, really don’t like facts, do they?

  6. David Pavett says:

    This article first appeared in Ken Livingstone’s Socialist Economic Bulletin. No comments have yet appeared on it website. It is impossible to say if any have been received since on that website the authors are the moderators for their own articles!

    I posted a comment pointing out that a number of criticisms of the article have been made here. I suggested that it would be helpful if Tim O’Leary answered them either here or on the SEB website. My comment has not yet appeared.

    1. David Pavett says:

      Three days later and the SEB website still says that no comments on TO’L’s piece have been received.

    2. David Pavett says:

      It’s now six days since I sent a comment to the SEB website requesting TO’L to respond to the points made here. My comment has still not appeared on that website.

      We on the left rightly make a big issue of the need for debate and for wider democracy in the Labour Party. So it is particularly galling to have no response to comments, all of which are critical, on this important issue.

      And it’s not just a question of Tim O’Leary but of the Labour leadership and those who side with it on this issue. Not one person has come forward to respond to the criticisms and questions raised here. Surely if there are answers to the questions raised a member of Corbyn’s team could take 5/10 minutes to give us a clue as to what they are.

      This situation seems to me to be a clear indication of the extreme vulnerability of the Labour left. Democracy is seen as something to hammer the right with when we clearly have a better case. When we don’t have much of a case then, rather than grappling with the issues, silence descends. A left that functions in that way is not ready to exercise power democratically.

      1. David Pavett says:

        My comment has still not appeared on the SEB website and neither TO’L nor any other supporter of free movement has offered any response to the points made in the comments here. I think that the reason for this is not hard to fathom.

  7. Eleanor Firman says:

    Tom O’Leary was a character in Shameless. I’ll just leave that here.

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