Since the Brexit vote, much has been made about the people left behind. This is a class of people who are closely associated with the election of President Trump and, as soon as we have seemingly interlinked events, it has been pronounced to be a trend. There is a world of difference between Brexit and the election of President Trump, but it does pay to consider the similarities between them, especially in terms of what they may bode for the future.
Exactly who are the people left behind? That is a hard question to answer because it is such a broad category that encompasses a wide variety of life experiences. In one context, they are working people who are struggling to make ends meet - the 'JAMs' (Just About Managing) who have entered our discourse. In another context, the people left behind are portrayed as an almost feral under-class, who are not working and are reliant upon a combination of state hand-outs, work in the black economy, and petty crime, to get by. There is an element of truth in both of these caricatures, but it is not the whole truth.
It might help if we were to consider how this situation came about. Over the past 40 years, we have seen the constant decline of the white working class. In the 1970s and 1980s, this was a phenomenon brought about by the automation of factory processes. This was a response to the labour militancy and wage inflation of the 1970s (robots don't strike, take extended tea breaks, and demand ever rising pay increases). It was given a political edge in the 1980s that expressed itself in the popularity of the Thatcherite social aspiration.
The direction of de-industrialisation changed in the 1990s and 2000s. Empowered by improved global transport links, the exercise of organisational control using the Internet, and the availability of very cheap labour on a global scale, companies moved their already de-populated manufacturing from Europe and North America to, primarily, East Asia. Those manufacturing jobs that survived the wave of automation were shipped abroad.
At this point, we might ask about what happened to the displaced labour. The impact of the wave of automation was to swell the numbers of unemployed. The 1970s and 1980s were decades of mass unemployment. In the 1970s, unemployment stayed within the band of 4% to 6%. This was at a time when full employment was a policy objective. In the 1980s, full employment was no longer a policy objective and the unemployment rate rose to 12%, stayed in that region for the best part of the decade, and then started to fall until the early 1990s.
In John Major's recession of the 1990s, the unemployment rate went from 7% to over 10%, but the nature of it was quite different. Whilst Thatcher's recession of the 1980s was essentially a blue collar recession, Major's recession was essentially a white collar one. The impact of automation had moved from the factory floor into the office. There then followed a long period of prosperity during the New Labour years. Unemployment fell from over 10% to under 5% in this period. During the financial crisis of 2007, it rose again to 8%, but has trended downwards over this decade to currently stand in the region of 5%. We now find ourselves at broadly the same place as we were in the 1970s, when full employment was a target objective of government. Why don't we have mass unemployment with all of this de-industrialisation?
The surplus labour displaced by the decline of manufacturing has been absorbed by the growth of the service sector in the economy. Manufacturing, as a percentage of GDP, has declined from over 40% in 1973 to just 19% in 2009. The important change here is that service sector jobs, compared to manufacturing sector jobs, tend to have a wider span of skill sets and a much varied degree of productivity. Some jobs, such as specialist legal staff, are highly skilled and highly productive, and command very high salaries. Some jobs, such as flipping burgers, are relatively low skilled and have low productivity, and consequently are stuck in the region of the minimum wage. This is really important because it is a critical factor in explaining the dramatic rise in inequality over this period.
To the narrative of de-industrialisation, falling productivity, and growing inequality, we need to add the final toxin - immigration. The former Chancellor, George Osborne, used to boast that the UK, between 2010 and 2015, created more jobs than the other EU 27 nations together. In the absence of mass unemployment, one can see that immigration was an employment escape valve that prevented wages from rising amidst a potential labour shortage. The evidence suggests that immigration has helped to keep wages low, and this has fuelled the resentment towards newcomers in some traditional working class communities.
We can focus on the impact of immigration in the jobs market, but that is not the whole story. Coupled with the immigration of the last 15 years or so is the era of austerity since 2010. The scope and provision of public services has been reduced significantly. There is fierce competition for school places, hospital beds, even library books. However, the impact of austerity has not been spread evenly. It has disproportionately been felt in local authority provision - the point at which most state provision is enjoyed by most of the population. It has created the feeling that government is some remote object and has nurtured a resentment across England. Local communities feel that they have not received their fair share of public resources, and that London has received far more than it's fair share. This is borne out by the data, local authority spending per head is far higher in London than elsewhere in England. It has created an anti-metropolitan mood in the country.
That mood was expressed in the Brexit vote. It is seen that London benefits greatly from membership of the EU, whilst the rest of the country pays the cost in terms of depressed wages and over-burdened public services. A similar phenomenon has been experienced in the United States. It has the familiar theme of factory automation followed by off-shoring. In the face of stagnant wages, people maintained their standard of living by taking on debt. The credit crunch exposed the perils of this strategy, which has fuelled much of the anger in the US. The focus in America appears to be more on jobs moved abroad than in the UK, but it also has the toxic narrative of immigration holding down wages and burdening public services. This is the backdrop to President Trump winning the US Presidential election.
In considering who the people are who have been left behind, there appears to be a sharp dichotomy between those who have gained from the process that we could view as globalisation - the movement of jobs out of the US and UK, and the movement of people into the US and UK - and those who have lost from it. The stark rise in inequality suggests that the mechanisms to allow the 'winners' to compensate the 'losers' are either not in place or are not functioning properly. This is what is fuelling the anger amongst those left behind.
The angry people left behind have given us Brexit in the UK and President Trump in the US. Both sets of voters see a form of disengagement as the answer to their problems. Perhaps they are right? However, a far more interesting question concerns what happens if they are wrong? What happens of Brexit goes badly? What happens if President Trump fails to 'Make America Great Again'? These are questions to which we shall turn in the future.
Stephen Aguilar-Millan
© The European Futures Observatory 2017
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