A high wage economy needs more than wage increases

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To the surprise of many – and especially himself in all probability – Boris Johnson was pushed into coming close to telling the truth in an interview yesterday, when he more-or-less accepted that the disruption caused by the multiple crises affecting fuel, food, and energy was the inevitable result of his approach to Brexit. It wasn’t something that they put on the side of any buses at the time, and when those arguing against Brexit warned against such an outcome, he and his gang simply denied that it would be so, but it now seems that he claims to have known all along that the adjustments following Brexit would be difficult and disruptive. Who’d have thought it?

Later in the day, he told us that part of the problem with a shortage of lorry drivers is that the career is unattractive to women because women don’t want to urinate in the bushes or sleep in their cabins. As opposed, one can only assume, to men, who are happy to do so, and foreigners, who are so excited about the prospect that they will be queuing up for short term visas to enable them to partake of such delights. It’s all the fault, apparently, of the haulage companies who haven’t invested in proper facilities, although whether he’s referring to built-in toilets in the cab or better facilities at motorway service stations is left unsaid.

There was one thing he said, though, which will strike a chord with many, and that is his desire to move away from a low-wage economy dependant on foreign labour and build a high wage economy using native talent. The problem is that it’s just a slogan; there is no plan for achieving it. As interpreted by Johnson, it assumes that the myth of EU labour depressing wages is true – or, more likely, it assumes that the population at large believe the myth. But there is little or no evidence to back it up, and experience is daily exposing the extent to which it is, and always was, fallacy.

He understands enough economics to conclude that if there is a shortage of one type of skill, then the law of supply and demand will increase the price that employers must pay to get that skill, but nowhere near enough economics to understand the knock-on effect of that. Increasing wages without increasing productivity merely increases business costs, and that in turn feeds through into the prices we pay for things. Whether wages are ‘high’ or not depends not on their absolute level (nor even on their rate of growth, an indicator which he crassly suggested a few days ago to be more important than increasing life expectancy or improving cancer treatment) but on their relationship to prices; increasing both wages and prices does not lead to a high wage economy. Skills shortages in one area may lead to wage increases in that area, but the mathematical nature of percentiles is that 1% will always be in the lowest. Changing who is in that lowest percentile isn’t the same thing as levelling up, it’s just moving people between categories. Any serious attempt at ‘levelling up’ necessarily involves reducing the gap between the top percentile and the bottom percentile, but it’s clear that doing that figures nowhere in his thoughts.

Moving to a high wage economy is a worthy aspiration, but he is clearly clueless about how to achieve that. One of the things that the pandemic has taught most of us, albeit not Johnson, is that the economy works as an integrated whole; it depends on the efforts of many people, many of whom work in jobs which are grossly undervalued. Valuing that work, and the people who perform it, properly would be a start. Placing rather less value on the activities of speculators and rent-seekers is a necessary concomitant of that. But as long as it is those latter categories which largely fund the Tories, ‘levelling up’ and ‘high wage economy’ are destined to remain exactly what they are today – meaningless slogans.