The poor are the fall guys yet again. With the economy struggling in the wake of the Brexit vote, and the pound plummeting in value almost hourly, here comes another grim statistic: low-paid workers will see £800 knocked off their annual wage in the next 10 years as a direct result of our decision to leave the EU.
It’s all because the minimum wage is pegged to median earnings, which we now know will be suppressed for a number of years. The Resolution Foundation think tank predicts that the next year’s Living Wage (that is just minimum wage, by the way, only being given the hard sell by the Treasury) will be 10p lower than the anticipated £7.60 due to weaker wage growth – meaning £200 a year will be lost for the lowest paid individuals in 2017. According to the research, the minimum wage may now never reach its initial target of £9 an hour by 2020, set down by former Chancellor George Osborne. That’s £800 a year missing from expected incomes for those earning the minimum wage.
In 1999, only one in 50 workers earned the minimum wage. By 2020, it will be around one in nine – at the least. We can thank automation as well as the loss of high-skilled roles to other EU nations for that.
So what? Pro-Brexit campaigners maintain that better long-term growth prospects when freed from the constraints imposed by EU membership are worth paying the price of a few short years of economic difficulties to achieve. But, as always, for those least able to bear the burden (and who once again shoulder the weight of it) those short years will feel very long indeed.
For many – particularly those in their twenties and thirties now – the impact of that lost decade could last a whole lifetime, with future earning potential affected by the freezing and falling of wages during the critical first 20 years of work.
What I’m writing sounds remarkably familiar; isn’t this just the same criticism levelled at austerity? That the poorest always pay the highest price? No, not this time. There’s a complication.
Most of the poorest voters did not have a hand in the decision to live with the effects of austerity. At the last election, all the major parties stood on a platform of cuts to public services in an attempt to get the deficit down (a project Theresa May has now abandoned in the face of the plummeting pound) – unless they chose to vote Green, there was no way out. But, in the EU referendum, every British voter played an equal part, even those who chose to abstain. And the result is what it is. Lots of the poorest voters have voted to be poorer.
Theresa May says “Brexit means Brexit”, but what Brexit really means for you depends on your assets and income, and how reliant your own household prosperity is on that of the state. For the poorest, the relationship between the two is very high. Brexiteers on the lower income scale can expect to suffer, and politicians need to be prepared for what will come next.
Not every lower income voter who cast their ballot in favour of Brexit did so over economic issues and the promise of a huge return of taxpayer funding to the UK. Many knew that there would be a significant financial impact yet still felt it was the right decision in order to protect the democratic mandate of the British electorate. Yet a significant number – I’d wager a majority – felt that leaving the EU would help to boost the competitiveness and productivity of the UK and particular the personal prosperity of low-paid workers and their families. That was an important element of the Brexit campaign. So what will happen when these voters find the opposite has occurred?
The Brexit vote was interpreted as a kick in the backside for the “establishment”, a chance to vent anger from those who felt “left behind” by modern politics. If Brexit doesn’t deliver the stability and prosperity they are looking for, what next? Politicians ought to be preparing for disaffection and its results – from the splintering of political structures such as the party system to the risk of outbreaks of rioting and physical violence – some 10 years ahead.
This is not a long-winded, patronising “I told you so”. I did cast my ballot in favour of Remain as I found myself wholly convinced by the economic arguments in favour of staying in the EU – but the referendum campaign was hard fought and, as the road remained untrodden, there were no footsteps into which we could trail. Nobody really knew (or knows now) quite where it will lead. If they tell you otherwise, don’t listen.
I can’t say I feel sure that the short-term economic hit will be worth it in the end, though I know a great many sensible individuals – most with a far more sophisticated understanding of macroeconomics than I – who believe it will. What is certain is that, right now, it doesn’t matter. What matters is the next five to seven years and how the lowest paid in our society will fare.
It is wrong that, yet again, the least able to handle the hit are due to feel the brunt of it – and that’s wrong whether or not they voted for it. It is the business of our Government to protect the poorest, and that’s a much tougher job when our most economically vulnerable are also living on the fault-lines during the biggest shift in our social, economic and political position in the world for three generations. If they fail, where is that anger channelled? Who or what is the conduit for that unease when the anti-establishment option lets down the people too?
We need to have an answer to that. Our politicians have fair warning that a new era is coming, not just in our relationship with Europe, but in our relationship with ourselves. Before prosperity, there will be significant pain.
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