It was one of the more memorable moments of the referendum campaign. In the midst of a fevered debate between Remainers and Leavers – and with the Treasury and its allies rolling out ever more lurid predictions by the day – Stuart Rose, the former Marks & Spencer chairman who was in charge of the Remain campaign, made the point that leaving the EU might lead to higher wages. And that would, of course, be a very bad thing, at least from the perspective of a multi-millionaire businessman who had made his career as an employer of mainly relatively low-paid retail workers.
The Remain campaign wasn’t the best run organisation in the world but even it could sense that observation was, to put it mildly, slightly out-of-touch with the ordinary working man. It was quick to clarify that Lord Rose had been misquoted, and didn’t mean anything like that at all. It soon returned to the party line that leaving the European Union would take us all back to an economic dark age, where we’d mostly be eating root vegetables and scavenging for fuel in the forests. But as it turns out, it was actually one of the few things Project Fear got right. Figures from the Office for National Statistics released today, show that not only does the UK now have record levels of employment but also that wages are now rising at 3.4 per cent annually, well ahead of inflation.
Of course, there is no great mystery about that. Anyone who has ever seen a supply and demand chart or simply had some experience of buying and selling stuff (which Rose had had plenty of) could figure out that if leaving the EU meant a slightly lower supply of workers then the price you had to pay for each one would go up. And so – surprise, surprise – it has turned out. In the last year, the number of immigrants coming to Britain from the rest of Europe has started to fall significantly, partly because they are understandably unsure of their status, partly because a cheaper pound makes this country less attractive, and partly because very strong growth in places like Poland and Hungary means there is less incentive to do so. The result? Companies have to pay a bit more to fill their vacancies.
In fact, Rose’s full point back in 2016 was a perfectly reasonable one. If rising wages were accompanied by a recession that would certainly be very bad. We would be right back with the ‘stagflation’ of the 1970s, a miserable combination of rapidly escalating wages and prices and zero growth or outright recession. Perhaps we will still end up there after we tumble out of the EU at the end of March. We will see. But what we are witnessing right now is rising wages, along with stable prices and modest but respectable growth. That is roughly what you would expect to happen with a slightly reduced supply of foreign labour. Rose should be congratulated on his prediction. He was completely right – it was the rest of his campaign that was wrong.