Why Scotland will be the next target for Tories to ‘take back control’

The man is a moral vacuum, sloughing off responsibility for his actions, blaming others for his inability to imagine the consequences of his actions and for his repeated failures to act with the degree of prudence that his office demands.

The idea that we can just move painlessly to a high-wage, high-productivity economy is just his latest fantasy. No doubt, safely returned from his holiday, he’ll have developed another one, so that no-one can hold him to account.

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For many migrants, low wages in the UK seemed like a good deal – offering much more than they would have been paid in their home countries. Migrants take the entry-level jobs, which other people do not want to do. Many will move on quickly. Some will go back to their own countries. Others, assimilating well, will move on to other work. This is before we get on to the simple fact that migrants are typically net contributors to society because they are young, healthy, and have no dependents.

It was a delight to hear Professor David Card, one of the winners of this year’s Nobel Prize for Economics, being interviewed on the BBC about his research. Along with Alan Krueger (who died last year), Card found new ways of discovering what local labour market data can tell us about important economic relationships.

His work finally rebutted the old truism that high minimum wages will lead to higher unemployment. His explanation is that legislation is essential to enable employers to co-ordinate increasing wages to levels which they would not feel able to do were they and their competitors trying to keep their costs down.

In effect, he imagined employers who think it is the right thing to increase wages – who might even be willing to offer the higher wage to new starts, but not to their whole workforce. Competition stops them from doing this. They fear taking on additional costs when competitors will not.

Card’s work on migration suggests that its effect on wage rates is in fact quite trivial because migrants are so rarely in direct competition with other workers. What they are paid has very little effect on other workers’ wages. The Prime Minister (above) should look at migrants’ wages and claim that UK employers are addicted to low wages.

For Card, wage setting is not just about the narrow economics of efficiency. He imagines there being many possible outcomes to wage bargaining, some of which we might agree to be better than others. Minimum wage legislation then enables us to achieve better outcomes than otherwise. Migration adds value in the economy, without substantially affecting the opportunities open to individuals.

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The tradition of economics values efficiency in production, and efficiency means stripping out costs. If migrants provide the most efficient way of completing routines, competitive pressures – the same ones which make it difficult for individual firms to increase wages – will lead to the use of migrants.

Organisations develop complex systems and routines in which there is no redundancy, so that as soon as one part is removed, the system quickly loses its capacity.

A minimal Brexit, remaining in the single market, and avoiding restrictions on freedom of movement might well have worked. The government’s chosen option was designed to curtail migration. In doing that, it followed typical, crude conservative thinking about the economy.

Time and again, we have heard government ministers effectively telling us that markets work, indeed that they must work, because government can’t make them work.

I don’t think that this is intended to be a fatalistic, but honest admission of incompetence.

These ministers seem to think that if there are problems in supply chains, it is a result of businesses failing to have enough foresight to see how useless they would be in government.

The possibility that migrant workers complement – without competing with – British workers never seems to have crossed their minds. The fact that the economy was already close to full employment, with most people in better-paid jobs, has passed them by. That there would not be a rush of applicants to fill the roles which migrants left has therefore surprised the government, no matter how many warnings they received.

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These ministers are now discovering just how important low-paid migrant workers’ contributions were to many supply chains.

And we will all pay the price of this wilful ignorance.

Overcoming these problems won’t be a question of investing in skills and raising wages – businesses will need to change the whole way they manage their activities. They will have to deal with a smaller workforce, and in many cases will need substantial investment and innovation to replace people with machinery.

Many businesses will either merge or close because of these challenges, and that means more disruption in the economy.

No matter – the UK Government has taken back control. The Crown in Parliament, effectively the Prime Minister, is again fully sovereign. Be very afraid, Scotland, because the next step will be to take back control from the Scottish Government.