The UK-EU Deal

Today we have found out what all the renegotiation was about: the possibility that the UK might be able to put a stop temporarily to in-work benefits being paid to EU nationals working in the UK (assuming other EU countries are happy with this happening in any particular situation).

If that sounds a little underwhelming, it is probably because it is, which must be both good and bad.

Good, since there is no dramatic altering of the right of free movement of labour within the EU, as was hoped by some in the Conservative Party. As we’ve just covered in unemployment in our lectures, labour mobility is a good thing. Yes, it does lead to more uncertainty for us since there’s a larger pool of labour potentially for any job we do, but equally it gives both us, and firms, great opportunities to move into new jobs that are better suited to us, and better suited to firms. Workers aren’t restricted simply on the basis of a passport within the EU from taking their ideal job, and equally, firms aren’t stopped from recruiting the ideal worker for the post they’ve advertised because the ideal worker doesn’t have the right (European) passport.

Bad, since those hoping for big reforms in order to vote to remain may well be unhappy with this rather weak deal. Those seeking the UK’s exit claim that the UK gets little back from the EU, and simply gets told what to do. Rules and regulations we just have to accept are made in Brussels, not Westminster. This outcome, which reflects on Cameron’s inability to get what members in his party would ideally have hoped for (ability to stop inward migration unilaterally, plus other grabs back of national sovereignty). As I’ve written before on this blog, and mentioned in lecture, such issues regarding sovereignty clash with the reality of a common market – we can’t be involved in a common market without a common regulatory structure determined by some central regulatory body.

On balance, will it leave the UK any closer to the exit door? This is obviously impossible to say; even opinion polls can only give so much insight.

Will it even matter? Clara Sanderlind makes the point here that since most EU migrants working in the UK don’t claim in-work (or out of work) benefits, the deal will make no difference whatsoever to actual flows of migrants.

This week in lectures we’re covering trade and globalisation, topics which have so many obvious applications into the current UK relationship with the EU. See you later in the week!

Challenge yourself, first edition

University is entirely about personal development in all areas of your life. Developing almost always involves having preconceived ideas challenged. This can be a disconcerting experience – things you previously thought to be true you may find are anything but.

As students of economics, your lecturers and class tutors are most likely to do this in the sphere of economic ideas. It’s very easy, too, as there’s a huge range of economic ideas once you start looking, and the internet makes these much easier to come across than ever before. Every economist, or everyone who would like to think of themselves as an economist, can write a blog.

While this presents risks (who are the ones to believe and treat with respect, which ones are we safe to ignore?), it presents huge opportunities. One particular school of thought, much more common in the US than here, is libertarianism. Libertarian economists place a huge amount of attention on individual liberty, questioning the ability of others, and in particular institutions, to make decisions on behalf of individuals.

If you think that needn’t challenge you, it’s worth thinking a bit deeper. That the government sets a minimum wage is an example where an institution (the government) thinks it knows better than firms and individuals about how markets work, and what the right price would be. It impinges on the liberty of a firm to set a wage, and for an employee to accept a particular wage – if it’s below what is legally mandated.

Here’s an article from today on immigration, which is written by a libertarian economist: “Schengen, Adieu” by Alberto Mingardi. It’s written at the blog of the Library of Economics and Liberty, which gives a strong hint that it is libertarian. It asks the question: how do we “control” borders? Can we really think about controlling borders? We probably can if we erect big walls, and employ huge amounts of people to police the border. But we probably also then need to police things inside our country too, in order to make sure that those that have arrived aren’t doing certain things we don’t like (say, claiming benefits, or access to healthcare).

The problem with all of this is that it will impinge on the liberty of those of us native here. We’ll have much more faff and hassle when leaving the country to go elsewhere – for example,longer queues at the border, as anyone who has taken the ferry or Eurotunnel to France will testify. Additionally, we will find much more stringent checks when we do things we used to take for granted. We’ll be asked when applying for jobs to prove our immigration status even though we come from this country and always have.

Employers will have to devote much greater attention to compliance; the University of Reading has to check what its students from overseas are up to, which then eats into the time of lecturers to lecture, and class tutors to teach (and research). Governments have to employ more and more people to police borders and monitor those that enter, causing greater costs and a larger state.

None of this is to say that “controlling” our borders is not a bad thing; clearly nobody wants to have terrorists from overseas entering our country and prowling our streets without any checks taking place. But it’s to say that the controlling will have implications.

And more broadly, it’s to challenge any preconceptions you might have when thinking about immigration, a very real issue facing us at the moment. Should you do this? You certainly should challenge those views if it means you are less likely to support policy proposals that may be ineffective and have a lot of unforeseen consequences.

Immigration up (a little bit)

As well as the aftermath of the Autumn Statement, there’s another bit of news today: net migration (immigration minus emigration, those coming minus those leaving) is at a record level of 336,000.

This number, actually identical to the number from the previous quarter, is higher than it was at the same point in 2014 – we usually try and compare the same point in the year since there are often seasonal effects (for example, higher sales near Christmas hence more demand for jobs).

A lot of people care a lot about this number. The government talked about getting this number down to “sustainable levels”, without ever defining what “sustainable” would actually be. It suggests that the current number is unsustainable – which undoubtedly it is since it cannot continue at that rate indefinitely. But by that logic, any positive number is unsustainable since there is only a finite amount of land in the UK. Of course, a more sensible approach to finding a sustainable level would consider the rate at which aggregate demand outstrips aggregate supply, since immigrants form part of the supply side of the economy (as well as the demand side).

Other parties, most notably, UKIP, have tried to make political capital out of this.

What is curious however is that this number isn’t being celebrated – it shows what a great place to be Britain is! People are desperate to come here to contribute towards the growing economy, and fewer folk are deciding to leave at the same time. It’s important to note, of course, that few if any of the immigrants considered here are refugees such as those coming from Syria.

The final thing worth noting is that less than half of this number is EU migration, which hardly makes a convincing case that renegotiating our EU membership on terms related to free movement of labour will make any meaningful difference.

Immigration and Sport

At a time when public sentiment regarding immigration has perhaps never been more negative (in recorded times at least), the Rugby Football Union has just started a global search for its new head coach. Apparently South African Jake White is favourite. The appeal is obvious, as White won the World Cup as South Africa coach in 2007. The explanation also, of course, is straight forward in terms of the apparent contradiction: we don’t mind skilled foreigners coming here, it’s the non-skilled ones we apparently have an issue with, and the illegal ones.

This is, of course, labour economics, and feeds into macroeconomics as one of the key macroeconomic variables we’ll spend some time looking at is unemployment. We’ll also spend time thinking about globalisation, too. Unemployment, most simply, is an excess supply of labour: more people looking for work than there are firms looking for workers – at the current market price.

This simple description covers over a multitude of complexities; different types of work have different supplies of labour – hence governments worry about skills shortages, which are insufficient levels of the supply of labour in particular industries. Most people support the idea that we should allow immigration in areas where skills shortages are most acute, and one could quite easily make the case that in elite sport management, that is the case. In football, no Englishman has won the Premier League since its conception in 1992, and in rugby we all know the abject failure of the England team at their World Cup in the last few months.

However, even this is debatable. Some would (and do) argue that English candidates could still do a perfectly good job; after the last non-English football manager, Capello, the Football Association felt compelled to search only for an English candidate. It may well be true: the labour market is one characterised by huge uncertainties: will somebody do well in this job? Can those looking to fill positions necessarily identify the best workers for those roles?

Faced with all these difficulties even at the firm level, it seems very optimistic to think that at an industry level it’s possible to know whether there’s a skill shortage or not?

All sorts of questions you can start to think about asking as you study economics…