Freedom of Movement

Brexit
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**Freedom of Movement - FOM - nows here’s the thing about Freedom of Movement … **

I studied Economics in the early '70s and Free Market economics was the hot topic ahead of the discussions on joining the Common Market.

Free Market Economics - much beloved of J.R-M and many others on the Conservative right, of whom I was an acolyte right up to Camerons botched “trip to Brussels” which led to the Brexit Referendum. Then they started to say strange things - like FOM in the interal market was “bad” for the UK economy (which is rubbish coming from a free marketeer).

Well, here’s the thing - you can’t have a Free Market economy and unnaturally restrict access to labour. That’s really obvious which makes it a really stupid thing for a “Free Marketeer” to say - unless they have some other agenda that’s more important than sticking to their free market principles.

When you introduce controls to artificially restrict the access capital has to labour you cease to have a free market in labour and thus you cease to have a free market PERIOD.

Free access to labour is fundamental to the operation of a free market economy.

The “great minds” behind the Single Market knew this. So,when Barnier says “Chequers challenges the integrity of the Single Market” this is what he is actually saying - the Single Market is a free market for those who are “in the Club” and abide by it’s principles. He’s not “being mean” to May, he’s standing up for the 27 Members of the Club who all understand that you only get the full benefits if you are in the Club and follow the free market philosophy.

So, lay off the weak-minded “the EU hates us and wants to make us suffer” and “it’s up to the EU to make counter proposals”. This line of argument makes no sense to anyone who understands the principles that the Single Market operates under. These principles that have already been so carefull explained over many decades.

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Perhaps you could explain the working and purpose of the Single Market and the Customs Union in the very simplest of terms to people like Nadine Dorries.

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All true, however………

It is only strictly  true in a uniform labour market - if the going rate for a job is much better in one (geographic) part of the labour market than in another FoM will allow large movements of workers from lower paid areas to higher paid ones. This starves the source area of workers and leads to over-supply in the destination area. In the long term an equilibrium will be reached; in the short term you get into the situation where you can’t find a plumber in Poland for love or money.

Now, this was also foreseen and when some nations joined the EU temporary restrictions were allowed on FoM - unsurprisingly when the rest of the EU decided to implement these restrictions and we did not we became a popular destination.

It is not the EU’s fault that this happened but I don’t think it completely unreasonable for the UK to ask for some assistance with controlling flows given that we had already absorbed a high number of migrant workers - Cameron tried and was rebuffed which ultimately led to the mess in which we now find ourselves.

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As has been said many times before… far better to have the camel inside the tent pissing out than outside the tent pissing in.
Cameron was (is still) a pratt for thinking he could bully the EU into making concessions against the 4 freedoms and history is about to repeat itself if May thinks likewise as suggested by the likes of Raab…

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Agree, I just have a modicum of sympathy for the idea that FoM is not universally of benefit to all concerned.

The irony, of course, is that Brexit will probably increase non-EU immigration.

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Absolutely… particularly since the French will probably abandon the Le Touquet accord (which provided the facility of UK Border force controls in Calais/Dunkirk et al) leaving the Brits to fight it out on the Dover beaches (cue historical recordings of Winston Churchill).

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What’s a “uniform labour market” Paul? It’s not a term I’m familiar with so could you, please, cite some examples from e.g. Friedman, et al

My problem with this is that markets only “tend” towards equilibrium but it’s never achieved because they are never “uniform”, there are always pressures towards “flow” whether of goods, services, capital, or labour.

In any economy things move. Under-supply/over-supply are both temporary and ephemeral in a free market.

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In this case I mean one where the same job attracts the same rate at all locations within the market which might be geographically large. I’m not sure whether economic texts would necessarily define this - they probably just assume it.

In reality you don’t seem to disagree that real markets are not like this.

Happy to be educated on economics by the way - it isn’t something I’ve ever studied to any depth.

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No problem Paul, it’s an education for everyone - especilly me.

The assumption is usually the opposite of “uniformity”.

An example :- Due to free market forces the UK has a surge in demand for toilets whist Poland has a slump. There are now more plumbers than jobs in Poland while UK has more plumbing jobs than plumbers. That’s Polish plumbers on the dole whilst UK plumber are paid like premiership footballers :slight_smile:

Provided the Polish plumbers are capable of doing the job and UK employers are prepared to accept the downsides as well as the upsides and employ them then it is in everyone’s interest to let it happen. Yes, UK wages will be held down and yes, Polish wages will rise. But workers across the Single Market will seek to meet the Polish demand just like Polish plumbers moving to the UK. If the demand is great enough and stable enough workers in other industries will retrain as plumbers.

Eventually, UK will have too many plumbers at which point it will make sense for some to seek work elsewhere. In practice the first people to leave will be “the prospectors” i.e. those that came to get rich but not to settle. It’s just the nature of free markets - ebb and flow.

Workers will settle where the work suits them best but only if they are allowed the freedom of choice.

What happens if you mess with these natural market forces?

Firstly, if you restrict competition in the labour market then your economy becomes less efficient - workers naturally expect to be paid more for less work if there is a shortage of labour. After all, they can always get a better paid job next door.

Secondly, rising wage costs will create pressure in other industries and these will be passed on to consumers who in turn will demand wage increases to off-set a falling standard of living. Coupled with falling efficiency this is not good at all.

Thirdly, if employers have to increase wage costs beyond the point at which it becomes uneconomic ro continue production they will take their capital elsewhere letting the business fail which creates unnecessary unemployment. This is where we got to in the 80’s and it was painfull. Best avoided if possible.

Most importantly, capital will seek to establish the means of production where it makes most sense economically. Without free movement the choices for capital just aren’t free at all.

Sorry this is so long and a bit “basic” but there are a lot of myths about FOM and most of them sound plasible but just don’t stand up to analysis.

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Very interesting post Jane. Thank you.

I studied economics, albeit very briefly, as part of my accountancy training and found it interesting back then - many many moons ago and I’ve forgotten most of it. Pleased to have my memory jogged.

Do you work in the field?

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Your explanation is absolutely fine - yes I agree that there will be some ebb and flow in a steady state market.

But when Poland (for example) joined it was not the case that natural movements led to a surfeit of plumbers over plumbing jobs there, it was the case that there were suddenly a large number of plumbers in Poland who could earn twice their normal wage by moving to Germany1 or the UK which distorted the labour market at the time and for some while after.

1] I am aware from personal experience that it wasn’t uncommon for Poles to travel to Germany to work (not necessarily officially) prior to Poland joining the EU.

I understand that this is slowly sorting itself out so that influx into the UK from the A8 nations has, in fact, naturally slowed down anyway.

In short I do not disagree with your analysis but, as I said, I do have some sympathy with the notion that the market got somewhat distorted when a number of poorer nations joined and that distortion still hasn’t evened itself out, meaning that FoM is not as straightforward as the Single Market “Great Minds” thought.

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Beyond your economics there is the division of families.
Our daughter lives in Munich and we live near Cluny.
Should we need to live nearer to our daughter as we grow older, I am 71 now, we would have to take french citizenship if we lose freedom of movement
This is cruel and should be avoided at all costs.
I hold out no hope other than taking french citizenship.
We have had nothing but discrimination from the UK government since we moved to France.
Losing our WFP and then this illegal Referendum makes us nothing less than second class citizens.

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You would be in a bit of a catch-22 if the reason that you wanted to apply for French citizenship was to live somewhere else in the EU because that would almost certainly cause you to fail the test for commitment to the French nation.

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You will still becable to move to Germany after Brexit as a UK citizen, it just won’t be as straightforward as it is now.

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Re: Free Movement (of labour) not being as straight-forward as the Single Market Great Minds thought.

I seem to recall seeing in TV many moons back a complicated hydraulic model comprising many cisterns, pipes, valves and overflows through which water circulated. And that this was used to demonstrate how the market operates to students of economics, including, one imagines, the movement of capital, goods, labour etc.,and the processes by which ‘levelling out’ etc occur in market conditions. Cash flows like water etc.

Surely the Founding Fathers had some such model in mind when they created the Leviathen we call the EU, and would have anticipated a few gurgles, splashes, air-locks and wet patches on the carpet, like Polish plumbers or Estonian leek-puller-uppers?

And hoped it would all work out fine, if a bit damply, in the end? Cue “Ode to Joy”… :eu::indonesia::uk:

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My main concern is that it might be necessary for me to live with my daughter for reasons of poor health.
Our ideal is to live out our days in France, but if there is a hard Brexit it would affect our ability to move easily.

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It’s not a distortion, it’s the way it’s supposed to work!!!

I understand your reasoning but you haven’t explained in any detail why FOM is bad for all of us.

Taking the democrat veiw of “for the many not the few” I accept some workers lose out but they also share in the benefits that accrue to EU citizens in general from FOM.

Current Gov are about to discover how disasterous “cakeism” can be - they are still talking about capping immigration from the EU whilst also pursuing a policy that promises 300,000 new homes next year.

Just where are all those building trade skills going to come from???

It will be a bureaucratic nightmare papertrail of delays and disruption that will create skills shortages across the UK and will push up the cost of building new homes for years. But maybe that’s what Farage and J.R-M and their disaster capitalist cronies and banking on :wink:

Ordinary Joe in the street screwed again because he failed to see hpw FOM mitigates against all this?

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I was one of those students Peter, back in the early 70s, and I remember the lectures well - particularly the various “ballons” that would inflate and deflate at various times. it all really caught my imagination :slight_smile:

I’m sure you’re right about the EU model and it goes a long way to explain why the Council of Ministers et al are not prepared to compomise on those principles.

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I work as a UN Volunteer helping with Economic Development projects, although it’s all a bit quiet at the moment, Mandy.

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I fail to see how the injection of a large pool of labour used to significantly lower rates of pay can do anything but distort the market.

In fact I rather assume the EU agree with me - otherwise why allow for restriction of FoM from the A8 nations for up to 7 years after they joined?

Well, I don’t have to do that because I actually think that FoM is of benefit - as I said I agree with your analysis and I have never said I think that FoM is bad.

I merely said that I have a little sympathy with the idea that we have absorbed slightly more than our fair share of migration.

Yes, but it is about perceptions, and also how likely a local worker displaced by a migrant1 is to make use of FoM to compensate.

As far as perceptions go - well, the Leave campaign very successfully tapped into a feeling that there were “too many” foreign workers though they didn’t differentiate nearly well enough between EU and non-EU workers for my linking.

As to the 2nd question my gut reaction is that Brits are probably slightly less likely to take advantage of FoM but I can’t find numbers to definitely back that point of view.

In fact what I can find might suggest the opposite. There were 2.3M EU workers in the UK according to government figures in March 2018 but the only figure I can come up with is about 1.3M (estimates vary) UK nationals living in the EU - and we know from previous posts that the profile of UK nationals living in the EU is very different to that of EU nationals living in the UK. However even if only 1/3 of UK ex-pats (probably a conservative estimate) are working in the EU that would imply we are more likely to be mobile.

Training them in the UK?

It takes time though and it takes someone to actually encourage and enable it - which is where the UK government has a poor track record.

1] I don’t think there is strong evidence this has actually happened.

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