WHO BEARS THE BREXIT BRUNT? FEATURE
likely to be larger in these industries than in others, leading to greater exposure. The IFS research also found that the agriculture
sector and wood and paper product manufacturers may stand to gain from increased UK-EU trade barriers. If the UK left the EU without a trade deal, for example, increases in trade barriers are estimated to boost value added by around 11% in the agriculture and fishing industry and by around 3% in the wood, paper and printing industry. Increases in value added in these sectors are estimated to be smaller if the UK remained in the European Economic Area, but still positive. These impacts are due to UK firms in these industries increasing their market share in the UK as trade barriers cause the cost of EU imports, with which they compete, to rise. However, the industries that could benefit from higher trade barriers make up only a small share of employment, and the benefits to those involved in these industries would come at the expense of consumers who would face higher prices and reduced choice.
“ The agriculture sector and wood
and paper product manufacturers may stand to gain
The way in which changes in industry value
added due to trade barriers will impact workers depends on two main factors. The first factor is how businesses respond to these changes. Firms that experience reductions in value added due to trade barriers may reduce the size of their workforce or suppress the wages of their employees. Alternatively they may leave pay and employment unchanged and instead take a hit to their profits. If companies pass on some of the impact to workers (either in the form of job or pay cuts), the second factor that will determine the outcomes of adversely-affected workers is how easily they are able to find re- employment in other industries. This will depend on whether there are alternative employment opportunities in their home region, how easily workers can move to new locations if there are not, and whether they possess skills that are easily transferable between industries. This complexity makes it hard to anticipate
”
exactly how trade barriers are likely to affect workers. Nonetheless, it’s quite likely that workers employed in industries that experience large reductions in value added due to trade barriers face a higher risk of experiencing negative effects. To focus on the workers that are most exposed to negative impacts, the IFS researchers classified workers as ‘very highly exposed’ if they are employed in industries where value added is estimated to fall by more than 5%. Looking again across a range of trade policy scenarios, the analysis shows that very highly exposed workers are more likely to be male and to have low formal educational qualifications.
If the UK left the EU without a trade deal, for example, nearly 20% of men with low levels of formal qualifications (around 1 million workers) would be very highly exposed to negative impacts in comparison to 15% of highly educated men and less than 10% of highly educated women. This number rises to 25% among men with fewer educational qualifications in Northern Ireland and the West Midlands, suggesting that these workers are particularly at risk of negative impacts as alternative job opportunities in less-exposed industries would be harder to find. Workers in process, plant and machine
operative occupations also face a higher risk of negative effects with 29% of the workers in this occupation group – roughly half a million people – employed in industries where value added is estimated to fall by more than 5% in the event of a No Deal Brexit. Workers in these occupations tend to be older and are more likely to have skills that are specific to their current roles and industries of employment. As a result, they may find it particularly difficult to move to as well-paid employment in less adversely affected industries. Policymakers should therefore consider whether specific interventions (such as greater retraining and employment support) could help workers in these particularly highly exposed groups to adjust to the introduction of new trade barriers. While there remains considerable uncertainty
about how trade policy between the UK and the EU is likely to change in the coming years, this research shows we can be more certain about which industries and types of workers are most exposed to negative impacts due to increased barriers to trade. This means that, despite ongoing uncertainties, policymakers are in a position to assess whether interventions to mitigate the impacts of future trade barriers on the most adversely affected parts of the economy are warranted. n
i
Agnes Norris Keiller is a research economist at the Institute for Fiscal Studies. She is currently researching the labour market impacts of future trade policy scenarios in work funded under the ESRC’s UK in a Changing Europe initiative.
Email
mailbox@ifs.org.uk Web
www.ifs.org.uk/publications/13463
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