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Having analysed what consequences Brexit may have on trade and described what agreements the UK could try to form if the country voted to leave the EU, we will now move the focus to employment. This week, we will look at the current situation and examine arguments put forward by both camps when talking about employment.
A British exit, or ‘Brexit’ would lead to a diminished selection of employee candidates. Currently, UK businesses are free to employ workers from any EU member state without obtaining a work permit or sponsoring visas. If the UK leaves the EU, Remainers argue that there will be a skills shortage and this will have a negative effect on the success and productivity of industries.
Remain campaigners further argue that millions of jobs would be lost, as global manufacturers moved to lower-cost EU countries. Britain’s large, foreign-owned car industry would be particularly at risk. “The attractiveness of the UK as a place to invest and do automotive business is clearly underpinned by the UK’s influential membership of the EU,” said a KPMG report on the car industry.
The financial services sector, which employs about 2.1 million people in the UK, also has concerns about a British exit. “The success of the UK financial services industry is to a large extent built on EU Internal Market legislation. To abandon this for some untried, unknown and unpredictable alternative would carry very significant risks,” said global law firm Clifford Chance in a report by think tank TheCityUK.
Norwegian Prime Minister, Erna Solberg was asked in a BBC interview in March if she thought Britain could retain access to the single market without being subject to free movement of people, she said: “[t]o believe you’ll get everything you want without giving something back does not happen in any political body.”
On 7 April 2016, the Trade Union Congress (TUC) published an independent report warning of years of uncertainty for workers and employers if the UK votes to leave the EU.
The legal opinion, commissioned by the TUC from Michael Ford QC of Old Square Chambers, identifies the dangers of Britain leaving the EU for working people and their rights at work. It lists the rights that would be most at risk of being diluted or scrapped after Brexit, and it considers the mechanisms for disapplying EU workplace laws in the UK.
Michael Ford QC’s legal opinion says that the process would not be quick or easy, noting that “there is no precedent for the kind of radical overhaul of laws which would potentially flow from Brexit”. He says that simply repealing the European Communities Act 1972, as some Brexit supporters appear to advocate, is an “almost unimaginable” course of action, which would lead to “legal and commercial chaos”.
Brexit would mean working people are haunted by years of uncertainty, as rights like paid holiday, parental leave and equal treatment for part-timers and contract workers could be stripped away over time.
“The EU guarantees these rights, but generations of trade unionists fought for them. If we lose them because of Brexit, it could take generations to get them back again.
“The biggest cheerleaders for Brexit think that your protections at work are just red tape to be binned. Bad bosses will be rubbing their hands with glee if Brexit gives them the chance to cut workers’ hard-won protections.”
The BMW Group has also been vocal with its employees about the benefits of the UK remaining within the EU. In regards to employment, the group highlighted to employees the benefits that come from free movement of people and skills, gained from EU membership. The EU “allows the rapid transfer of expert knowledge throughout the Rolls-Royce Motor Cars and BMW Group networks, building the skill level of our UK workforce”.
The SMMT endorsed the statement put forward by BMW, stating that ‘its members had “clearly stated” in a survey that pulling out of the EU could jeopardise jobs, investment and growth”.
Leave campaigners say there would be a jobs boom in the event of Brexit, as firms are freed from EU regulations and red tape, namely small-and medium-sized (SMEs) companies who don’t trade with the EU benefiting most.
In a recent paper, the EU Jobs Myth, the free market Institute for Economic Affairs seeks to ‘debunk’ the claim that 3-4 million jobs would be lost if Britain left. “Jobs are associated with trade, not membership of a political union, and there is little evidence to suggest that trade would substantially fall between British businesses and European consumers in the event the UK was outside the EU,” it argues.
“The UK labour market is incredibly dynamic, and would adapt quickly to changed relationships with the EU.”
More than 200 bosses of small firms have also signed an open letter ‘urging Britain to leave the EU’, which would give them the “flexibility and adaptability [which] are key” to the UK’s “long term success.”
The letter urges Britons not to listen to “a minority of managers from Britain’s largest companies” who want Britons to stay in the EU.
“Our businesses thrive because we instinctively understand that flexibility and adaptability are key to our long term success. We employ the majority of the UK’s workforce.”
A member of the Economists for Brexit, Roger Bootle, founder of Capital Economics, said that leaving the EU could cut unemployment by 75,000.
Within the Economy after Brexit report written by the Economists for Brexit members, Ryan Bourne states that ‘being a EU member is neither necessary nor sufficient for a healthy labour market. Three economies with some of the lowest rates of unemployment in Europe – Iceland (3.2%), Norway (4.5%) and Switzerland (3.7%) – are all outside the EU. Conversely, Greece (24.6%), Portugal (12.2%) and Spain (20.5%) are all EY members”.
Bourne further attributes the UK’s low rate in unemployment (5.1%) to domestic UK skill levels.
He argues that the UK’s success could be maintained if the UK government provided assistance to ‘disadvantaged industries’ in Brexit, such as volume cars and agriculture, to manage transitional phases.
Brexiters have also argued that leaving the EU would allow the country to reshape employment law which could then be tailored to ‘suit our domestic circumstances’.
When assessing the impact of EU membership on British employment opportunities, the topic is often discussed alongside migration. Whilst some argue that the free movement of people brings new skills and workers to the UK, relieving many industries of skills shortages, others argue that EU nationals working in the UK become more employable than British workers as they offer cheaper labour to employers, effectively stagnating or even reducing wage growth in many sectors.
Those that argue for Brexit are adamant that once the UK leaves the EU, the UK Government will be able to change immigration policy and restrict free access to UK jobs. However, the reality of this will be dependent on the trade agreement reached by the UK and the EU post Brexit. If the UK was to follow the type of agreement enjoyed by Norway, the free movement of people would not change.
Woodford Investment Management state that ‘[t]here could be a “rush for the border” if the UK was able to place restrictions on the movement of people’, causing ‘a surge in migration in the short term’ before new restrictions came into effect. ‘EU migrants already in Britain would almost certainly be given leave to stay, just as British citizens living in Europe could remain. Furthermore, if European Union migrants already in the United Kingdom knew that it would be hard to get back in if they left, they might stay longer than they otherwise would have.’
There is also firm debate as to whether employment/jobs would grow or decline in the face of Brexit.
Studies also suggest that, at any point, around 3-4 million jobs are associated (directly and indirectly) with exports from UK businesses to consumers and other businesses around the EU (Ardy et al, 2000; CEBR, 2014). However, Brexiters point to the argument that ‘this is not the same as saying this number of jobs is dependent on EU membership and would be lost as a result of Brexit’ (Bourne). Remainers argue that the increased costs of exports and trade would reduce employment as companies struggled to balance the new additional costs.
In 2012, the UK Government launched the Balance of Competences Review. This aim was “to give us an informed and objective analysis of where the EU helps and where it hampers.”
In regards to Social and Employment Policy, the review did not necessarily lean towards either the Remainers or the Brexiters. It found that “this area of EU policy is highly controversial and respondents’ views range from the uncompromisingly negative to the resoundingly positive and offer no clear median.”
As explained by the IIEA, ‘the general view of employers was that the EU often goes beyond what would be a proper minimum in the realm of health and safety at work issues, and imposes higher standards than are necessary.’
On the other hand, the Review observed that EU social and employment rules had also brought significant benefits to individuals. While businesses perceive aspects of EU policy as burdensome, there was also evidence that the same policies contributed to a better work environment in terms of equal pay, anti-discrimination, the status of part-time workers, worker protection and health and safety at work.
Ultimately, do UK employees need EU employee regulations to ensure a fair work environment or should this be the responsibility of companies to ensure best practice for employees are put in place?
It is arguable here that employees need the EU, more so than companies. Companies could see a lift on employee regulation as freeing and flexible, however this could be used to the detriment of employees. The likelihood of any immediate repeal of employment law, in reality, is limited. This would be more dependent on who was in Government and the negotiations with the EU.