In the news cycle of late: lorry driver shortage threatens empty supermarket shelves.
One product so affected is apparently bottled water. I can say I have been having trouble buying the particular brand of bottled soft water I put in my coffee machine to avoid having to descale it so often.
The Road Haulage Association wrote to the Prime Minister with five causes of the shortage: covid, Brexit, retiring drivers, a driving test shortage and IR35. The first two are causing foreign drivers to return to their home countries, not to return, they say. The last two I imagine are exacerbating the first three. If you make lorry driving pay less and cost more (whether obvious monetary costs or by increasing bureaucratic hurdles) it stands to reason that supply will diminish. To get supply back to the same level, you will have to pay more. In macroeconomic terms: taxes and regulations reduce economic growth. This is how that looks in real world terms.
IR35 is particularly egregious. A driver recruitment agency writes:
The effect of the IR35 reform is to force agency workers who previously operated as Ltd Companies to pay more tax and their agencies or end clients to pay Employer NI Contributions. If we were to keep the drivers’ net income the same, it would result in an increase in employment costs of 25% to the agency.
Maybe they are exaggerating their own costs, but the exact number does not matter too much. More tax is being collected from the employment of lorry drivers: that is the point of the IR35 regulation. One way or another it will be paid for by people directly and indirectly using the services of lorry drivers. Someone might argue that prior to IR35, the haulage industry was immorally getting away without paying enough tax, but that someone must now accept the increased costs of certain goods, including to poorer people for whom such goods are a more significant portion of their income.
Increased barriers to immigration are also said to play a part here. It is undoubtedly true that increased immigration drives down wages as it increases supply, which is to say it drives down the cost of hiring lorry drivers, and drives down costs to everyone who is indirectly using their services. Quite possibly the remaining lorry drivers are happy about this shortage (although I do suspect that any thus increased earnings are just going towards the now higher taxes). Also happy are the people who want everyone to have higher wages and use terms such as “living wage”, even if (as I suspect) those people also want more freedom of movement without wanting any reduction in wages that comes with it.
In the long term, more immigration should not mean lower wages: there is no lump of labour; if there are more people then there is more work to be done. On the contrary, denser concentrations of people create efficiencies that decrease costs, which makes things cheaper, which is the same thing as increasing wages. But dynamics are often overlooked. If you suddenly reduce the supply of lorry drivers you are going to suddenly increase the price of them. All of the other effects take time. And some of those effects will be cost-cutting innovations that reduce the need for lorry drivers. So watch out, lorry drivers.
I am a computer programmer. There was a time when there were suddenly many computer programmers arriving from Europe. My wages did not go down. The increased supply of programmers meant that more projects were started, there were more interesting things to work on, more interesting people to work on them with, and in general much more opportunity. Now it is becoming harder to hire programmers. I suspect if this continues, a lot of projects will happen in places where it is not so hard to hire programmers. My wages will not go up. The equivalent problem for the lorry drivers might be that as things get more expensive, people buy less things. Everything gets less interesting. That is how economic decline looks and it will not be good for the remaining lorry drivers in the end.
I have my doubts about whether the shortage will become a real crisis. So far, supply chain crises as a result of Brexit and covid have proved remarkably short-lived, and supply chains remarkably robust. Some new equilibrium will be found. But relative costs do change, and the people who want higher taxes, more regulation, higher wages or less immigration, ought to have the downsides of their demands pointed out to them.
This seems to be a bit . . . counterintuitive.
If I increase the number of low-wage workers, it won’t pressure wages down? It will raise wages because more people means more market vitality?
If I double the supply of widgets, the price of widgets will increase because all of the extra widgets are increasing society’s acceptance of and demand for widgets?
I suppose that an increase in pop density will yield increased efficiency and lower prices in general throughout society, and lower prices for high-paid computer programmers, but I also suspect the brunt of the pain falls to the low-wage people who are being displaced by the low-wage immigrants. So, not much consolation to the now-cheaper lorry drivers.
“In the long term, more immigration should not mean lower wages”
Should is doing a lot of heavy lifting there…………
Not as relevant a comment as Bobby’s and Jim’s, but there i go.
Is your favored brand bottled in glass or plastic?
If the latter, then you would be much better off using a water filter, as i do. Water should not be left in plastic containers for long.
Even if your favored brand is bottled in glass, you might want to buy a water filter for Scottish reasons.
Of course mass immigration means lower wages than-would-otherwise-be-the-case – it also means higher rents and house prices (yes wages lower – and the cost of accommodation, and other things, higher). Supply and demand. There is an alternative to lower wages – but it is not “demand” (the “every pair of hands also means a mouth” fallacy), the alternative is mass unemployment
But the shortages in the supermarkets is not really caused by lack of lorry drivers anyway – it is caused by the general economic mess caused by the lockdowns, and the general chaos of an out of control Credit Bubble financial and monetary system. The reaction to 2008 was to make everything WORSE – the “hair of the dog” approach. Like a drunk “curing” a hangover by drinking more – Credit Bubble “cured” by creating a bigger Credit Bubble.
The economic mess is only just starting.
The United Kingdom no longer has enough farm land to feed the population (partly due to mass immigration) and manufacturing experts do not pay for all our imports.
Somewhere like Australia or New Zealand is going to hit hard times over the next few years – but then everywhere in the West will hit hard times.
But that is nothing compared to what is going to happen here.
And nothing is being done to stop it – no effort to get government spending under control, and no effort to deregulate the economy. IR35.
Every event that politicians, local and national, attend is about MORE government spending (on everything – including subsidies for business Corporate Welfare) and MORE regulations.
I do not know about other countries (perhaps it is different – perhaps it is not) – but the “training” (endless events) and conference, and briefing system, in this country is all about making government BIGGER and more controlling.
Officials and “experts” make policy – and many of these policy events are international.
That was true long before mass immigration. It is far more sensible to buy wheat (for example) from far less densely populated places that can produce it much more effectively.
That is what the service sector is for.
I’ve not heard of IR5. Is it intended to define independent contractors legally as employees, the way AB5 has done in California? AB5 has caused all sorts of problems with the trucking industry.
Well I’m a retired programmer and rates declined markedly in the late 80s when the government introduced “fasttrak” immigration for Indian programmers. But I guess YMMV.
William,
It’s IR35 and yes. It was introduced, I believe, because of foreigners working freelance inthe UK and keeping the gross. When the revenue asked for the tax two or three years down the line, the foreigners simply went home.
Low labour costs seem to hold back progress far as I can tell. You want efficiency incentives which pools of slave labour prevent.
There was an interesting business venture I was reading about where businessmen brought modern steam engines to India in the early 19th century to modernise their textile (I think) industry – they went bust. Wasn’t until the late 19th century that such a thing was profitable in India such was the cheapness of skilled labour.
Then there’s the stagnant Roman slave economy, the boost in productivity after the Black Death…
Seems to me that if lorry drivers are too expensive, there is an incentive there to revolutionise the whole sector for considerable benefit.
If immigration lowers wages then those claiming this need to explain how the US economy, and wages, boomed in relative terms in the period after the Civil War and through to 1914. That period saw vast immigration from Eastern and Southern Europe.
The lump of labour fallacy, like so many other zero-sum ideas, is hard to kill as it is rooted in evolutionary psychology, rather than logic.
William,
Yes, it’s sort of like AB5, but not quite as bad – there is at least the option of structuring things so that you don’t trigger the rules. There’s something of an industry around making sure you’re on the right side of the line.
The main problem over the past few years has been that HMRC don’t really understand the rules themselves and the majority of cases they bring to court they end up losing. Even their ‘are you caught by the IR35 rules’ questionnaire is hopeless and doesn’t take into account court precedent against them.
The latest wheeze was to switch the responsibility for determining IR35 status (and consequent liabilities) from the individual contractor to the organisation hiring them. Cue risk aversion in a lot of big organisations no longer taking people on outside of the rules…
Oh, and it should be said that an inside IR35 contract really is the worst of both worlds – you’re treated like an employee for tax purposes, but not for employment law purposes (no paid time off, pensions, etc.)
It’s not just lorry drivers that were affected. Computer programmers, builders, tv presenters, in short contractors across many industries. It was Labour who introduced it under the guise of ‘fairness’. The actual amount of tax revenue it seems to bring in is low and it really should be scrapped.
Bobby b: “If I double the supply of widgets, the price of widgets will increase because all of the extra widgets are increasing society’s acceptance of and demand for widgets?”
It’s more like the widgets are demanding services from the other widgets. And talking to each other and inventing better ways of widgetting.
Can’t it work either way, at different times? Law of the minimum and all that. If I have 20 “A”s and 20 “B”s and 14 “C”s, I can only make 14 “ABC”s, and the extra “A”s and “B”s have to await more “C”s before they can be used. “C” is the limiting factor.
In the time you note, labor was “C”. I don’t think labor is “C” anymore. Now, instead of being grabbed up and matched to other parts that are awaiting a match, labor is waiting for the other factors. So more labor means lower labor prices.
Indeed. Self-driving trucks.
Surprised that the Road Haulage Association didn’t identify long hours, sleeping away from home all work in a lorry cab, dreadful pay and poor terms and conditions as factors in the recruitment crisis for drivers.
But then an employers organisation wouldn’t, would it?
Rubbish job. About as popular as care work and call centre work.
Supply decent jobs and there’ll be a demand for them. That’s how the market works.
It’s not just lorry drivers that were affected. Computer programmers, builders, tv presenters, in short contractors across many industries. It was Labour who introduced it under the guise of ‘fairness’. The actual amount of tax revenue it seems to bring in is low and it really should be scrapped.
If I had not moved out of California I would no longer be able to work as a copy editor; I have four steady clients, and I’m pretty sure that all four of them give me more than 35 assignments a year, which would legally require all four of them to define me as a full time employee—but none of them has enough work for me actually to make me a full time employee. If Congress passes the Pro Act I may be forced into retirement, much against my will. All kinds of writers and editors in California found themselves being dropped by their clients.
Speaking as a chemist with not insignificant process industry experience, I struggle to understand what water filters are supposed to be doing.
Quite plainly there’s nothing in British tap water that needs to be filtered out – it’s clear, indeed star-bright, so has effectively no suspended solids.
otoh if you’re trying to remove something that’s dissolved in the water, filtration ain’t going to do it – if it’s a gas you’re worried about (Chlorine? Carbon Dioxide?) just warm the water up a bit, otherwise what you need is ion exchange or reverse osmosis, neither of which is what these passive table-top “rigs” do. At least, not unless they need frequent regeration – which I don’t believe is the case.
In short, I suspect our old friend the pacebo effect is at work here.
A classic example of corporatism, such as we were discussing in the thread on Mussolini – the state would rather deal with a few large fairly static firms than many small ones, even if the latter are where more economic growth occurs.
I guess I am lucky that, as it happens, my current work does not have the heavy IR35-involvement that my work of a few years back did – but that could change. Hence these changes passed me by; this is literally the first I’ve heard of them. Who can keep track of everything the state does? Very possibly not the prime minister, who maybe first learned of this HMRC reclassification of IR35 when he got the haulage association’s letter.
(If my current work situation were to change, I guess I’d have to investigate this, especially as regards how it affects those who created, own and run the organisation that employs them and contracts with others, as I do. Meanwhile, I am glad of the heads-up on it.)
P.S. To be absolutely fair, I can imagine that some aspects of this IR35 reclassification were not as immediately and utterly absurd as many things the state does (or that other states do – California’s AB5, for example). The combination of the longish lag times IR35 allowed for tax payment with the lockdown-induced return home of some with liabilities probably has resulted in an increase in late-payers and defaulters. My opinion of what I’ll think about how civil servants have addressed the problem when I’ve studied it does not mean I’m sure I’ll be saying there was absolutely no problem whatever to address.
As to whether immigration reduces wages in all circumstances, I don’t think so. Why should it be a universal rule? Seems to me like it would depend on the specifics.
More people mean more demand, more ‘economic units’, and grows the size of the cake – that I think is a given. But there’s all sorts of reasons why the cake might not grow enough to offset the extra supply of their services. Or if we are talking about a specific sector wages might be reduced (do more Poles mean enough new lorry drivers needed to offset the new Polish lorry drivers?), or maybe in the case of very low skilled labour they simply supply more than they demand ( if we had literal slaves their demand would be quite low I imagine).
If they send 100% of their money home in remittances then no demand has been generated in the UK. I’ve read economic texts about the benefits of remittances to an economy, I’ve not read one about an economy suffering due to remittances but it seems to be something of a zero sum game to me, at least on a national level (are we talking about the British economy, or the sum total of human wealth? I assume the former). Also if they are specifically focused on one specific sector, like road haulage for some reason, rather than the supply of their labour being distributed throughout the economy, then it might impact the wages of specific sectors quite a bit. Not an expert on the subject but as I understand it there are various reasons for that, like the cost of fuel and taxes are cheaper for European drivers vis a vis British ones.
It seems to me that migration to the US was fundamentally different. For starters they were not ‘temp workers’, they moved there permanently. And they were just any other citizen too, not disproportionately represented in certain sectors thanks to thinks like cheaper fuel or whatever. Their supply was spread out more evenly, their demand was not reduced by remittances or other such things.
Still anyway. As I see it, as I mentioned, this is ultimately going to be a good thing. As Perry said, driverless trucks. The end result will be less people required to do bad low paid jobs which nobody wants to do anyway if given a choice, and a more productive economy overall. And in the long term, it’s all down to productivity.
Stable-value price signals reflecting any commodity or service’s supply vs. demand are a function of economic incentive, corporate-individual opportunity, realistic resource-allocation.
When special-interest third parties selectively interfere with optimal transactions on any scale, resulting inefficiencies cripple supply, over-pricing demand on behalf of predatory administrative apparats.
Where lamprey officialdom’s parasitic mulct distorts markets’ efficient resource allocation, matching costs to benefits, enterprising participants will forego something-for-nothing “spread the wealth” and walk away.
Anarcho-syndicalists’ standard “socialist” response is simply to exterminate anyone not in-uniform. “Ye have made a desert, and have called it ‘peace’.”
More immigration means higher taxes and more regulations.
The welfare and public services that go to the immigrants (some American States tried to deny welfare and public services to at least ILLEGAL immigrants – but the Far-Left Courts would not allow that, and it would be the same here “human rights”), and the regulations that demand that everything is done in many languages – and the regulations that hold that people be punished for suggesting that the country was a better place before the mass immigration, rather than “celebrating” the new society (with fake smiles and false clapping).
Even if one holds that there is no such thing as a nation or a people (that it would make no difference at all if, for example, the Japan and Egypt swapped populations – that Japan and Egypt would have the same culture, be the same nations, as before) there is such as thing as the sheer size of population.
One could make the argument that New Zealand could do with more people (although that is debateable – and leaves out the rather important question of what-sort-of-people – does it really not matter?) – but the idea that United Kingdom, specifically England, is underpopulated – is utterly absurd.
Emigration was subsidised (not just by governments – but also by private charities) for many years – as this country was clearly over populated, that was when it had a much SMALLER population than it has now. Now we are told that the country is underpopulated (even though the population has never been higher) and we need unlimited mass immigration.
Should this policy be applied to other countries?
Should Israel declare a policy of “Open Borders” in order to get lower wages for truck drivers (whilst denying that this was the intention of the policy) – if so then there would be no Israel, it would soon cease to exist.
How about Australia? If Australia declared Open Borders it would soon become part of Indonesia – which is next door and has a population many times the size of the population of Australia.
How can it be a good policy for a nation, for that nation to destroy itself?
A policy of de facto open borders has worked so well in California – sarcasm alert.
Snorri: “you would be much better off using a water filter” — perhaps, although I might need a softener: I am not sure if filters can effectively reduce hardness.
“…I am not sure if filters can effectively reduce hardness…”
I’m sure.
They can’t.
“We must destroy the nation – in order to get lower wages, except that the policy it would not mean lower wages”.
If the policy would not lead to lower wages – then the policy is pointless, even from the point of view of the Corporations.
Still the problem may solve itself – as economic collapse will make Western nations less attractive places to immigrate to. Although there is still the matter of THE LAND.
The land itself is still worth taking – very much worth taking.
And that has happened before – including in what is now England (what is now England was not always England).
In the United States the (Marxist influenced) education system is clear that the farmers and ranchers have no right to the land – and the Federal Government is likely to go back to the Obama Administration idea that any land with a water supply is a matter for government control – which is de facto LAND NATIONALISATION (by the back door)
On the other hand – the migrating people want the land for their village communities (like back home in Central America). The “land reform” that the United States has long pushed in much of Latin America is now likely to the United States itself.
“Elections have consequences” and that includes Rigged Elections.
bobby b: “Can’t it work either way, at different times?”
I think so. I think the long term steady state analysis looks different from the dynamic analysis too.
the last toryboy: “Why should it be a universal rule? Seems to me like it would depend on the specifics.”
I think so. If markets were uniformly free the analysis would be easy. As it is, the state interferes differently with each sector. In their letter, the Road Haulage Association is asking for special visas just for lorry drivers, for example.
pete: “Rubbish job. About as popular as care work and call centre work.”
Yes, so you either have to pay more or find some poorer people who will do it for less. “Supply decent jobs and there’ll be a demand for them.” Yes. Everyone will have to pay for it, though. Or just buy less stuff. (Although I’m not sure jobs are “supplied” so much as “are there to be done”.)
Paul Marks: I am interested in persuading people (including immigrants) that freedom is a good idea. If I were to succeed your other points would be moot.
Peter MacFarlane: yes, I did suspect that. My quick Google left me in some doubt, but people will sell anything.
One of my neighbours is a long distance lorry driver. He travels the country with his loads, and is usually gone most of the week, coming home for weekends.
He loves his job, he enjoys driving, and the freedom of the open road. He dislikes office politics, and when it gets too much for him, he leaves and gets another job.
Personally I could not contemplate driving a lorry, but for him it’s a great job. If there is a shortage of drivers, it means he should get paid more. As far as I know, he always works as a company employee.
The IR35 fiasco largely arose because the Revenue convinced themselves that some employees were posing as being self-employed, and therefore avoided some taxes such as National Insurance. My solution would have been to abolish NI and merge it with income tax, which is why I am not a politician. If you add the NI paid by the employee and the employer, it can come to 25%, so that employment agency is right. It is a “hidden tax” that people really ought to know about.
Paul Marks writes: More immigration means higher taxes and more regulations.
That is a bold statement, requiring evidence. And that depends on whether you are talking about correlation or causation. Periods of high immigration can work alongside a more regulated and taxed state or come afterwards. There can be no such causal link that is apparent. Take one example: Sweden.
This famously social democratic country saw net emigration in the 19th century, then a period of stability – coinciding with its turning more socialist. Towards the end of the 20th Century, when the country was pruning some of the most egregious forms of Big Government, cutting some taxes, etc, immigration rose sharply, much of it Muslim. But that is a cultural, not economic, issue.
Above in this thread I also gave the case of the US after the Civil War. The federal government had expanded some powers during that war but as a share of GDP governed with a very light hand compared with today, and immigration from Eastern and Southern Europe was massive. And the economy grew, with the US turning to industry – the Gilded Age. (This book by Adrian Wooldridge and Alan Greenspan points out how small the US government was at the time.) Immigrants, such as those from southeast Asia, Cuba and Europe, have often brought entrepreneurial mindsets with them. Perhaps it is notable that in the 2020 election, the Republicans did well with Latin American voters descended from Cuban immigrants, given their memories of life under Castro. Ditto Korean-Americans, etc. (In the UK, you see the same with Indian immigrants who seem to be Thatcherites.)
The idea that immigrants take “our jobs” is a lazy trope, based on zero-sum assumptions not so different from those used by labour unions to justify the closed shop in industrial relations. I find it rather bemusing to see people on the free market end of the street deploying the same fallacy.
I like Rob’s point about how as a programmer he benefits from there being lots of other programmers around because this creates a mutually reinforcing cluster of work and ideas. It reminded me a bit of Julian L Simon’s point about how human creativity and intelligence is the ultimate resource, rebutting the Malthusian errors of those who see people as some sort of plague to be eradicated.
Crack open a jar of jobs issued by the Ministry of Job Supply then, sorted.
Reducing hardness is done with a chemical system called a water softener. But I used to have the impression that softened water was mildly toxic and should not be drunk.
William H. Stoddard: see, that’s why I thought my solution was such a good one. From the bottle: “This pure, refreshing Ashbeck Natural Mineral Water is sourced from the rolling hills of Eden Valley on the edge of the Lake District, in a protected Special Area of Conservation. The water flows deep below ground through rocks dating back millions of years. These ancient rocks naturally filter each drop of Ashbeck water and enrich it with minerals to give a clear, refreshing taste.”
How wholesome is that? But now Snorri is saying I’m being poisoned by the plastic bottle. I can’t win. It’s a wonder I’m still alive at all.
Rob (and Peter): Brita Maxtra call their products “water filters”, so i call then by that name. But yeah, i guess that they are water softeners.
I use a glass kettle (again, to avoid contact of drinking water with plastic, especially when the water is hot), and i can tell you that with a new filter, i see no limescale for about a month. (Normally i use the kettle once a day, maybe 2 or 3 times a week i use it twice.) When i start seeing limescale, i know that it’s time to change the filter. Then i postpone for a week or two.
When i replace the filter, not only the coffee tastes better, but the malt whisky too! (I dilute it with 3 or 4 parts of water.)
One word of caution: just as it is a nuisance to descale the kettle, it is also a nuisance to change the filter.
Rob, there is also the inflationary environment we are now living in, given the huge amounts of money printing going on. This article at CapX is an uncomfortable read. Many of the lazy assumptions of the current political class are about to be hit very hard.
Water softeners reduce the hardness of water by replacing calcium ions with sodium ions – hence the need to pour salt into your wishdosher to replace the sodium ions used in the wash. In those, the unwanted calcium ions are washed away by extra water.
If you soften hard water to drink it, you are increasing your salt intake.
The idea is that sodium salts are generally more soluble than calcium salts, so won’t precipitate around the element.
So water softeners are contrary to Nannystate rules about less salt in food, because the salt will kill you, within 100-150 years.
Note that naturally soft water hasn’t got the calcium or the replacement salt, so yes, it’s good in malt whisky. Or tea.
(It’s safe in those because the alcohol and caffeine serve a similar role to chlorine in killing bugs. Not to be drunk neat 🙂 ).