Brexit will harm lower-skilled workers in the UK

Erik Hurst | Jul 23, 2016

Sections Economics

Collections Brexit

While many people are focusing on the consequences of Brexit, I find the causes to be equally troubling. Much of the pro-Brexit media coverage prior to the vote focused on limiting immigration into the UK. These arguments resonated because, as within the US, the labor market has remained quite weak for workers with lower levels of schooling. There was a belief that migrants entering Britain were partly responsible for the weak labor market there. In fact, many of the pro-Brexit arguments primarily focused on this issue in the weeks prior to the vote.

However, this belief turns out not to have merit. Immigration played, at most, only a small part in weak demand for lower-skilled workers. The decline in manufacturing, and in routine jobs more broadly—within both the US and UK—has depressed employment rates and wages for those workers without a bachelor’s degree. That has nothing to do with immigration. 

I predict that Brexit will actually make lower-skilled workers in Britain much worse off. Leaving the EU may curtail immigration, but it will likely further serve to reduce Britain’s manufacturing industry—because it will be harder to ship goods abroad. 

One of the things I am most concerned with is that the stagnation of wages and declines in employment rates for lower-skilled workers are common across many industrialized countries. As these workers struggle, there is a strong populist movement that wants to limit immigration and restrict trade across countries. We are seeing similar patterns within the US: Donald Trump is promoting policies that are similar in spirit to those promoted by the politicians supporting Brexit, policies that restrict both immigration and trade.

While it is likely that Brexit will have large effects on the UK and the European economy broadly, the underlying factors that led to support of the referendum are also very much present in the US economy. I am really not sure how these factors will play out within the US political landscape.

For more from the Chicago Booth faculty on the fallout of the Brexit vote, visit our collection here.