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Boris Johnson is asking for trouble by promising a high-wage economy


Those who hoped (or feared) that experience in office might change Boris Johnson will find this week’s Conservative Party conference a source of disappointment (or relief).

His media interviews and speech at the podium were quintessentially Johnson’s. Depending on your point of view, he was relaxed, humorous, mostly unflappable, charismatic, and exuded confidence and optimism; or, conversely, evasive, violent, unprepared, frivolous and complacent. Most of us have already decided which description best describes it, and whether we care about it or not.

It was a conference at which there were practically no political statements. That’s not necessarily a bad thing – announcements made to party supporters don’t always stand up to scrutiny, and budget and expenditure reviews are done three weeks later – but this government can be criticized for its lack of policy coherence. It may have been a conference to dispel this perception, assuming that this opinion worried the prime minister. It turns out not.

And the atmosphere seemed to be cheerful, reflecting the fact that the Conservative polls remained stable despite the circumstances. Most commentators (and many Conservative MPs) assumed that the government would lag behind Labor in the fall – and that could still happen. But the government has already announced large and manifest tax increases and has seen shortages at gas stations and supermarkets. Nevertheless, according to opinion polls, he is still in the lead.

The fuel shortage approach reveals Johnson’s mode of operation. Yes, it is true that in many countries around the world, including China, there is a shortage of truck drivers (the information that struck the prime minister is so startling that he throws it in every interview); yes, the UK gas shortage was driven by a surge in demand, not a drop in supply; and yes, not all driver shortages are a result of Brexit. However, it is quite clear that quick abandonment of freedom of movement in the midst of the pandemic, worsened the bad situation (as many predicted, including, no doubt, government officials).

Initially, the government sought to solve this problem defensively by making the points listed above. The arguments were flimsy, but they might have been enough to overcome several days of disruption, but the prime minister took a different path: the problem of the shortage of truck drivers would be solved by increasing the pay for truck drivers, because workers from the EU would no longer interfere with them. ; what is the advantage of Brexit; and that was part of the plan from the beginning. The transition can be a little painful, but we end up with better paid truck drivers and, for that matter, social workers, fruit pickers, construction workers, and maintenance personnel. “We will move from a low-skilled low-wage economy dependent on immigration to a highly skilled and high-wage economy based on the empowerment of UK citizens,” he argues.

From an economic point of view, this is nonsense. If we pay people more without increasing productivity, the costs are simply passed on to consumers. The argument that the path to greater prosperity is simply to pay yourself more could have been used by union leaders in the 1970s, but it is curious when put forward by a conservative prime minister. An analogy can also be drawn to trade protectionism: tariffs can raise the wages of some workers, but these workers are also consumers and they will also face higher costs.

Economics, of course, will always trump politics in Johnson’s eyes. A more closed economy results in lower growth rates, but this appeals to the instincts of many voters. Instead of being defensive, the prime minister was out of the game. He advocates less immigration and higher wages; his opponents are in favor of higher immigration, lower wages and the abolition of Brexit. If there are problems, it is the business’s fault for not raising the salary.

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Will this work? Johnson can take some comfort in the fact that he has a list of dubious economic statements that did not cost him political losses. Brexit will benefit £ 350 million a week in public finance; we will conclude a major trade deal with the United States; our trade deal with the EU will remove all tariff and non-tariff barriers. None of these statements were true, but they were comfortable for him at the time.

He hopes this is another example. However, there are risks of taking responsibility for the deficit and raising expectations for real wage growth. Living standards by no means necessarily will rise as inflation rises, Universal Credit claimants. lose £ 1,040 a year and tax increases take effect. Fuel or food shortages may persist. When it comes to encouraging more business investment, Johnson’s push for a tough Brexit doesn’t mean that it was his priority.

This is not the first time the prime minister has embarked on a political adventure. At some point his luck would run out, but when he left Manchester, both Johnson and the Conservative Party in general seemed to believe that such a moment was not inevitable. However, if Boris Johnson wants to be judged in terms of business investment, productivity gains, and sustained wage growth, he is asking for trouble.

[See also: The gulf between Boris Johnson and Rishi Sunak should worry the Tories]

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