LABOUR ECONOMICS

Posted: December 22nd, 2022

LABOUR ECONOMICS

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Labour Economics

Economic nationalism is re-emerging across the highly-industrialised countries across Europe and North America, and is threatening to rearrange the labour markets in these countries and globally (Behr 2019). Already, countries such as the United States have not only increased tariffs on Chinese goods but have restricted immigration, while the United Kingdom is expected to exit the European Union (Brexit) by January of 2020. In both countries, the governments are intent on intervening over the free flow of labour and goods in a bid to invigorate their slowed economies. This trend threatens to undo the progress in globalization and neoliberalism witnessed in the 20^th century in which the global economy has become hugely integrated across nations (De Bolle 2019). In addition, the trend is bound to impact labour economics by not only influencing labour supply in these countries but also the wages and salaries in the domestic workforce. Brexit will restrict the interaction of the United Kingdom with the European Union countries by requiring people and goods be taken though border and customs controls. Economic and political commentators are divided on whether Brexit will have a positive or negative effect on the workforce and economy of the United Kingdom. On one hand, the United Kingdom worker may be protected from immigration inflows, thus raising their salaries. However, on the other side, the labour market in the country may experience wage and job cuts as the demand for local goods and services become uncompetitive in the global market. Understanding the dynamics in labour economics due to Brexit may help the workforce prepare for Brexit.            

Theoretical background and research focus

Review of the literature

Globalisation created winner and losers, with net welfare gains being counterbalanced by significant job displacement and reduced earning sue to import competition (Colantone & Stanig 2018). Rodrik (2018) observed that the economic and political order was on a predictable course until recently when the globalising effects of information technology advancements and trade agreements yielded unequal economic benefits within and across countries (Rodrik 2018). Economic nationalism, which is the state intervention over market mechanisms, is an emerging phenomenon across the developed world. De Bolle (2019) noted that there as an upsurge in obsessive nationalistic economic policies across countries in the world, which was likely to harm the global economy. She pointed out that the largest political parties in the 55 G-20 countries were increasingly emphasizing policies that rejected multilateralism, stressing national sovereignty, and prioritizing national rather than foreign interests. Behr (2019) observed that nationalistic sentiments were sweeping across France, Italy, Germany, Austria, Poland and Hungary, although they had not reached the level anti-EU levels. Inequalities in society and particularly, the labour market are exposed when citizens vote or demand government action, as was exhibited by the support for leaving the EU exhibited by the lowly-skilled, qualified and earning workers in the UK, with similar trends being reflected in the 2016 presidential election in the United States (Liberini, et al. 2017).  Colantone and Stanig (2018) argued that countries used economic nationalism to try and compensate the losers of globalisation as well as reverse the globalisation process. This involved the introduction of protectionism in the domestic free-market policies. Bonikowski 2017) attributes the current popularity of the radical-right policies to the confluence of authoritarianism, populism and nationalism. Indeed, Diesen (2017, 25) views economic nationalism as a strategy employed by the United States and Germany to ascend to economic prosperity using international trade without surrendering to British dominance. However, the economic rise of China and other developing nations as threatening the supremacy of the United States and European countries, and waning their commitment to free trade (Diesen (2017, 26).    

The nexus between economic nationalism and economy has been studied extensively, revealing its bidirectional nature. Furman (2018) argued that depressed economic growth has inspired populist nationalism historically. Specifically, reduced economic growth made societies less inclusive, tolerant and generous, increasing opposition towards immigration and free trade. However, the only difference between the current and the previous situations of the 20^th century was that the toxicity of the current form of nationalism was likely to worsen the economic retardation (Furman, 2018). Indeed, Hopkin (2017) argues that modern capitalism has influenced the labour market by epitomizing the importance of cash in the material survival of people, which was unanticipated in the past. Moreover, the production networks established in the European Union were benefitting the brand owners of large multinationals rather than spreading the economic benefits equitably throughout the member nations (Coe & Yeung 2015). German’s auto industry was a beneficiary of the production networks at the expense of the automotive manufacturing industry in other EU members (Coe & Yeung 2015). Unfortunately, neoliberal policies had enhanced commodification and brought about material deprivation, sociocultural distress and economic insecurity (Hopkin 2017).   

The 2007 global financial crisis (FGC) and particularly the slow economic recovery after the crisis is associated with the rising economic nationalism observed today. Johnson and Mitchell (2017, S13) contend that the Brexit vote was an expression of the discontent with the unfortunate economic situation before and after the financial crisis. Notably, national incomes returned to pre-crisis levels in 2013, while income per capital recovered in 2015. Moreover, living standards stagnated as the incomes of working-age households remain below 2007 levels (Johnson & Mitchell, 2017, S13). However, Liberini et al. (2017) contradict this view when they argue that it was the narrow personal feeling about one’s financial situation that informed the Brexit vote rather than general economic discontent.

Immigration spurs workforce expansion and in turn, economic growth across the developed nations. Furman (2018) reported that with the developed countries experiencing ageing populations and in some cases, shrinking workforces, immigration was filling in the labour gaps. For instance, immigrants were responsible for the 70-percent growth of the European Union workforce between 2000 and 2010, while 44 % of new enterprises were started by foreign-passport holders in Germany. Moreover, immigrants were more entrepreneurial than indigenous workers, with the OECD indicating a 29-percent difference, while in the United States, the patenting rate of immigrants was 2 to 3 times higher than that of native-born citizens (Furman, 2018).

The effects of Brexit on the UK labour force remain controversial and unpredictable. Vandenbussche, Garcia and Simons (2019) observed that the fragmented production processes across the world made countries react differently to trade shocks, such as Brexit. In the short-term, such shocks caused job losses and an increase in unemployment, albeit temporarily. Similarly, Portes and Forte (2017, S31) demonstrated that although Brexit-induced migration reduction would injure the GDP of the United Kingdom, it would raise the wages of low-skilled service workers marginally. For instance, the office of national statistics reported that the labour costs index dropped briefly from 101.5 to 101.1 points between 2016 and 2017 before resuming their rising trend, as illustrated in figure 1.

Figure 1. UK labour cost index between 2016 and 2019

Source: Trading Economics.

However, Petrongolo (2016) finds the trade-off between labour mobility control and free trade as the biggest challenge facing the Brexit negotiations. Already, the uncertainties were affecting the labour market, inducing a hiring freeze as indicated by the halving of online job ads after the referendum. However, other studies have demonstrated that the increase in immigration in the UK between 2008 and 2015 have not significantly increased unemployment among UK citizens or lowered their wages.                      

Aim, objectives and research question

This study aims to determine the effects that Brexit would have on the labour market in the United Kingdom in the wake of rising economic nationalism. The objectives of this study are:

• To determine the possible impact of Brexit on the movement of labour within the United Kingdom.
• To determine the possible effects of Brexit on the movement of labour in and out of the United Kingdom.
• To predict the changes in wages and salaries in the United Kingdom due to Brexit.

Therefore, the research question is, how will Brexit affect workers in the United Kingdom?

Null Hypotheses

H_O: There is no statistical significance between Brexit and labour mobility within the United Kingdom

H_O: There is no statistical significance between Brexit and labour mobility in and out of the United Kingdom

H_O: Brexit will not significantly affect wages and salaries in the United Kingdom

Justification and contextualization

The significance of this study is premised on the anxiety and uncertainty that nationalistic policies and actions like Brexit portend to the contemporary worker. Nationalistic policies tend to be populist-inspired because they prey on these anxieties and uncertainties in the population of a country. Political regimes seek legitimacy and longevity by leveraging issues that affect a majority of the citizenry. In this case, many people in the developed countries support such political moves without understanding their immediate and long-lasting effects as workers. Many times, workers unable to control their economic predicaments look up to their governments to offer solutions. In other times, people force their governments to take actions that appear to remedy the employment problem without understanding the full implications of such decisions. The 2016 US presidential election campaigns were run on the economic agenda, with countries like China and Mexico being blamed for the economic woes confronting the US workers and families. China was blamed for stealing jobs from the US economy through unfair trade practices, while Mexico was blamed for flooding the US citizens out of employment. In the European Union, countries are complaining about the labour market distortions by the influx of refugees from Syria and the Middle East and economic immigrants from Central and Eastern Europe (CEE) (Simionescu et al. 2017, 29). A nationalism wave is sweeping across the European Union, with some countries restricting the inflows of refugees and economic immigrants to safeguard their economies and culture. Yet, these economies have grown due to immigrant labour, considering that foreigners are willing to do the so-called low jobs that are often despised by the local people in Europe, and are eager taxpayers. It is not lost to the researcher that the Brexit vote coincided with the presidential election in the United States, similar economic patriotism prevailing. The European Union has been a model of neoliberal policies and a champion of free markets. The inward-looking policies that focus on the national interests of an individual country are increasing in the European Union, raising concerns of its survivability in the midst of growing economic patriotism (Clift & Woll 2012, 308).      

Therefore, this study would unearth the far-reaching effects policies and actions pursing of economic nationalism on the workers in the affected countries. The United Kingdom population decided to leave the European Union because of the economic predicaments faced by workers and families. These feeling were particularly stronger in England than in Northern Ireland and Scotland, considering that 55.8 % and 62.0 % of the Northern Irish and Scots preferred to remain in the EU (Goodwin & Heath 2016). With the continued extension of the UK’s exit from the EU, it is unclear whether the sentiments that informed the referendum vote still prevail. Moreover, it is not clear how the labour conditions have changed since the vote, pending the actual exit.

Government policy significantly influences the labour market in a country. In many cases, governments promise to create jobs and ease the economic predicaments of their citizenry. However, global forces are difficult to direct or stifle, and as such, may influence the effectiveness of government policies or even present unintended outcomes. The current global economic environment and political atmosphere are reminiscent of the Great Depression of the 1930s, when nations flouted international agreements, adopted protectionist and isolationist policies, and welcomed government intervention in economic matters. The poor economic performance after such interventions precipitated into the Second World War, a likelihood that is not lost to current economic and political commentators (Beams 2018).      

This study is timely because Brexit may become a reality in January of 2020 after repeated postponements and disagreements on the exit deal. Moreover, there is likely to be an election in the United Kingdom prior to this date, whose outcome may be informed by the feelings of the UK workers regarding the government’s ability to insulate them from the diverse effects of exiting the EU.       

Methodology

Research Paradigm

Interpretivism paradigm is preferred for this study because it helps unearth the influence of environmental factors on human behaviour (Taylor, Bogdan and DeVault 2015). Interpretivists view human behaviour as a being multilayered and therefore is best studied in daily life activities instead of in a controlled environment. In this study, human behaviour is influenced by economic conditions in the global stage, country, labour market and work environment.

The epistemological justification of interpretivism paradigm is that studies in labour economics immerse the researcher into the study, influencing the interpretation of data. This generates perceived knowledge that focuses in the concrete and specific issues in a given context (Taylor, Bogdan and DeVault 2015).        

Qualitative research is used in this study because it attends to the epistemological demands by creating an in-depth meaning of an ongoing phenomenon in society in a particular context. In this regard, the labour market in the United Kingdom and the world is likely to be affected by the rising economic nationalism in developed countries. Experiences from and perceptions of Brexit provide a context in which issues such as labour migration, nationalistic labour policies and anxiety in the labour market can be studied comprehensively. Indeed, qualitative research offers numerous tools for investigating social and economic phenomena and making sense of the meanings, while advancing knowledge (Taylor, Bogdan and DeVault 2015).

Methodological approach

The case study approach will be used in this study because it enables an in-depth interrogating of a phenomenon within its context of occurrence. Labour economics is expansive, and its issues are influenced by different factors occurring in various locations in the global labour market. By focusing on the United Kingdom, these issues can be studied more comprehensively when concentrating on the unique country characteristics.  

Methods

Surveys will be used to unearth the effects that Brexit is likely to have in the UK and global labour markets.  A survey of the workers, entrepreneurs and employers in the United Kingdom will be undertaken. In addition, a survey of the literature published within the last 10 years will be undertaken to unearth information that can facilitate the answering of the research question.

Techniques

Questionnaires will be used as the data collection tool. The questionnaires will be administered online to participants who provide their consent. The questionnaire will have two sections, with the first capturing demographic data, while the second focuses on the perceptions and experiences of workers in the United Kingdom. The online approach is preferred because of its broad reach, speedy administration and cost-effectiveness. As such, the online approach promises to gather information from widely dispersed participants, who would be representative of the labour market in the United Kingdom.

Sample Size

Two hundred (200) questionnaires will be administered to the working population in the United Kingdom. This sample is considered large enough to present diverse responses and capture the population representatively.  

Target Populations

People of working age in the United Kingdom will be targeted by the study. Specifically, people between the age of 16 and 65 years, which are the minimum working and retirement ages, respectively, are the target population. The sample will comprise of working and unemployed individuals, entrepreneurs running their businesses and employers of different types and sizes of organisations.  

Data Analysis

The data from the questionnaires will be cleaned and coded before being entered into a statistical computer program (SPSS) for analysis. Descriptive analysis and tests of hypotheses will be performed. The significance level of the statistical tests will be maintained at 0.05. The open-ended responses and secondary sources will be analysed for prominent themes using thematic and content analysis. The findings will be used to reinforce and qualify the responses of the closed-ended items in the questionnaire.   

Access and Ethics

The study will respect the research ethics principles, including objectivity, honesty, openness, confidentiality, informed consent, beneficence, and integrity, and many others. The study will use the internet to administer the survey because it is ubiquitous in the country and does not allow the direct contact with the researcher. Anyone of working age in the United Kingdom is free to participate in the study and allowed to withhold personal information that can be used for identification. The informed consent of participants will be sought after informing them of the purpose of the study and assuring them of their anonymity and the confidentiality of the information they provide. 

Limitations

The case study approach does not provide a full picture of the economic nationalism permeating the labour markets across developed countries. Therefore, the findings should not be generalised to other countries. However, these shortcomings are countered by its ability to study Brexit as a unique, unfolding phenomenon, providing insights that can be used to prepare the labour market for the imminent changes upon exiting an economic union. Besides, the small number of participants may not be representative of the entire workforce population of the United Kingdom. However, this is countered by the comprehensiveness of the information gathered relating to the UK labour market.

Reference List

Bonikowski, B 2017, ‘Ethno‐nationalist populism and the mobilization of collective resentment’, The British Journal of Sociology, 68, pp. S181-S213.

Clift, B & Woll, C 2013, ‘Economic patriotism: reinventing control over open markets’, In Economic Patriotism in Open Economies (pp. 11-27), Routledge, Abingdon

Coe, NM & Yeung, HWC 2015, Global production networks: Theorizing economic development in an interconnected world, Oxford University Press, New York.

Colantone, I & Stanig, P 2018, ‘The trade origins of economic nationalism: Import competition and voting behaviour in Western Europe’, American Journal of Political Science, vol. 62, no. 4, pp.936-953.

Diesen, G 2017, ‘The global resurgence of economic nationalism’, Valdai Discussion Club Paper, no. 80, pp. 21-31.

Goodwin, MJ & Heath, O 2016, ‘The 2016 referendum, Brexit and the left behind: An aggregate‐level analysis of the result’, The Political Quarterly, vol. 87, no. 3, pp. 323-332.

Hopkin, J 2017, ‘When Polanyi met Farage: Market fundamentalism, economic nationalism, and Britain’s exit from the European Union’, The British Journal of Politics and International Relations, vol. 19, no. 3, pp.465-478.

Johnson, P & Mitchell, I 2017, ‘The Brexit vote, economics, and economic policy. Oxford Review of Economic Policy, vol. 33, no. 1, pp.S12-S21.

Liberini, F, Oswald, AJ, Proto, E & Redoano, M 2017, Was Brexit caused by the unhappy and the old? IZA Discussion Papers, No. 11059. Available from: https://www.econstor.eu/bitstream/10419/171043/1/dp11059.pdf. [19 November 2019].

Portes, J & Forte, G 2017, ‘The economic impact of Brexit-induced reductions in migration’, Oxford Review of Economic Policy, vol. 33, no. 1, pp. S31-S44.

Rodrik, D 2018, ‘Populism and the economics of globalization, Journal of International Business Policy, vol. 1, no. 1-2, pp.12-33.

Simionescu, M, Bilan, Y, Smrčka, L & Vincúrová, Z 2017, ‘The effects of European economic integration and the impact of Brexit on the UK immigrants from the CEE countries’, E+ M Ekonomie a Management, vol. 20, pp. 29-46.

Taylor, S.J., Bogdan, R. and DeVault, M., 2015. Introduction to qualitative research methods: A guidebook and resource, John Wiley & Sons, Hoboken

Trading Economics (2019), ‘United Kingdom labour costs’, Available from: https://tradingeconomics.com/united-kingdom/labour-costs https://www.econstor.eu/bitstream/10419/171043/1/dp11059.pdf. [19 November 2019].

Vandenbussche, H, Garcia, WC & Simons, W 2019, Global value chains, trade shocks and jobs: an application to Brexit. CESifo Working Paper No. 7473. Available from: https://www.econstor.eu/bitstream/10419/198833/1/cesifo1_wp7473.pdf https://www.econstor.eu/bitstream/10419/171043/1/dp11059.pdf. [19 November 2019].

Vargas-Silva, C. 2012. Handbook of research methods in migration, Edward Elgar Publishing, Cheltenham.