Karl Marx Was Right on One Thing

Most of the bits that Karl Marx got right were cribbed from Adam Smith which is a good source to use of course. There is one part of his analysis that is useful to us today though.

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Karl Marx Was Right on One Thing

Marx insisted that it was competition among the capitalists for the labor they desired to profit from which raised wages. If there was that reserve army of the unemployed, meaning there was no need to compete for labor, then rises in productivity would feed through into profits and nothing else.

If, however, there was full employment then some would have to raise wages in order to gain access to that desired workforce. This then pulled up wages across the economy.

This is correct.

The hospitality industry is facing a staffing crisis as restaurants and pubs say that up to a quarter of those employed before the Covid-19 pandemic will not return.

The UK’s largest listed pub group, Mitchells & Butlers (M&B), has lost 9,000 of its 39,000 staff since last year; D&D, the owner of more than 40 upmarket restaurants including Le Pont de la Tour and Coq d’Argent, is looking for up to 400 recruits out of a total 1,300 UK workforce; and Pizza Express is looking for 1,000 staff, having laid off thousands less than a year ago.

Pubs and restaurateurs agree that there is a particular challenge in the south-east of England and London as a lack of supply of skilled people from the EU, post-Brexit, is causing issues with hiring staff, especially in the kitchen.

More than 30% of hospitality workers across the UK are thought to have come from Europe pre-Brexit but that rises to more than half of those employed in London.

We have had, by and large, full employment at times these past couple of decades. Domestically, inside the UK that is. But wages haven’t been rising as we might think they should.

The reason being that the reserve army has still been there, just not wholly visible. It’s been in Brno, Budapest, and Bialystock, a £50 flight away. Thus any increase in demand for labor has been met without wages needing to rise.

Of course, this is one of those economic things, as so many are, which is largely true instead of being wholly and exactly so. A tendency not a defining truth in our economy. But true as far as it goes for all that.

We’re entirely happy with that mobility of labor and moves for a better life. But it is worth noting the effects of the new legal restrictions upon it.

Low-end wages and working conditions are likely to improve in the UK as a result of Brexit. On the basis that on this one thing Karl Marx was in fact correct.

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Article Source: adamsmith.org