by Ed West
Tuesday, 22
June 2021

What’s causing the rise in hospitality wages?

Experts will have a clever explanation, but the answer seems obvious
by Ed West
Two new hires at the Westminster local. Credit: Getty

The one thing everyone knows about the Black Death is that higher death rates among the poor (around 50%, compared to 25% for the gentry), led to rocketing peasant wages.

At the time the Crown’s response was to pass a number of laws, such as the 1351 Statute of Labourers, which made it illegal to demand higher wages than before the plague, and attacked the “malice of servants” who “for the sake of their own comfort and greed completely disregard the said ordinance” and demand “outrageous wages”.

Anyone who tried to charge above pre-plague prices was given three day’s imprisonment in the stocks. As with most market-fixing legislation, it didn’t work because the labour of peasants was just worth too much; if you didn’t pay them a certain amount, they wouldn’t do the job. When the authorities built stocks in Gloucestershire to punish those who took wages higher than the maximum permitted, they had to pay the carpenter who built it 5 and a half pence a day, twice the legal limit.

If only Edward III’s government were able to do what 21st century Westminster governments have got used to doing, importing cheaper workers from abroad to keep wages down. Luckily that wasn’t available, because higher wages tend to lead people to invest in mechanical improvements, and this may even have led to the invention of printing.

The current pandemic appears to be having a similar effect on the job market, albeit to a much smaller degree, as the Black Plague several centuries ago.

As today’s Times reports, wages in hospitality are now rocketing. This has, until now, been reported as “labour shortage” rather than “wage rises”, as if it’s a bad thing. Most news reporting rather echoes the poet William Langland’s complaint of peasants that “Draught-ale was not good enough for them anymore, nor bacon, but they must have fresh meat or fish, fried or baked”.

For the past quarter century most economists have been in agreement that high immigration doesn’t depress the wages for native workers in direct competition; there are some dissenters, notably George Borjas, but generally the consensus has been that, although supply and demand are the central facts of the discipline, in this case it doesn’t apply because complex reasons.

I’m not an economist, and I have Taleb-levels of respect for the profession, but it always struck me as obviously untrue; it’s the sort of clever counter-intuitive idea that sells books and sounds intelligent, like the early expert advice that masks don’t protect from Covid because when did covering your mouth with cloth stop infection? Most of the time, counter-intuitive ideas are wrong and the obvious, boring things your granny believed are right; if you have more workers entering a market, wages will go down for those in competition.

So why are wages rocketing? I’m sure economists have a clever explanation for it, but the exodus of one million migrant workers since the epidemic began seems like the obvious one.

Or perhaps it’s all a bit more complicated than that, or something.

Join the discussion

  • I think the fact that economists are so wrong on this may be connected to the number of foreign students paying higher fees in universities.

  • It’s very hard to convince a person of something when their job depends on them not being convinced of it.

  • Yes and it’s time the same realisation was applied to housing and other services, all of which apparently suffered no negative impacts because of very large scale immigration in the last 15 years. Its 40+ years since I studied economics at school, but one of the first things we covered was supply and demand. Apart from certain exceptions, (which I can’t recall haha except I think luxury items might be one of them) if supply exceeds demand (as in the case of labour) the price of that commodity will go down. It was ever thus, ask the dockers waiting at the gates for a job. If demand exceeds supply either the price of the commidity(housing) rises or in the case of certain commodities, supply has to be rationed in some way(health care appointments, school class sizes). It’s not racist or zenophobic to state this, it’s an economic fact of life. The living standards of the working class were sacrificed to the belief in open borders.

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