Sheryl Mcintosh's Blog: Is reduced labour supply a bad thing?

I have read a lot of late, some hidden, some more obvious like this, about the sharp drop of immigrants applying for job in the last year or so.

Up to 100,000 people fewer have come to the UK over the past year. This is undoubtedly having an effect at the very bottom of the work pyramid, but also higher up. At the bottom, it means agricultural workers, shop assitants and amazon packers are all able to see a small upturn in the wages they can demand.

Meanwhile, even as the BBC said, applications are a mere 20 per position rather than 25. To me this does not show much of a crisis. I have also been more aware of late of the situation in the USA. There, unemployment is at 3% and there is a starting to be a real war for talent rather than the high falutin' discussions about such a thing that are present in the Harvard Business Review.

Higher wages, means higher costs of production which could lead to higher prices overall and inflation. How a little bit of inflation is bad when the entire private and public economy is in a huge debt position escapes me a little - but you do have to be careful with the inflation genie.

For me the main issue will be how time plays out on the situation. Take the housing market, a big constraint is lack of supply, but the construction industry is at full tilt and is hurting the most from lack of supply and higher labour costs. So a labour shortage here will also reduce the supply of houses in the short and medium term. But reducing 100,000 people a year coming to the UK also lowers demand for housing in the long-term. It could balance out over time, but it could also mean a price squeeze on housing and rents in the short-term and balance in the longer term. Impossible really to predict.

Still, whoever voted Brexit for higher wages already has their reward.