The poor would bare the brunt of a post-Brexit recessionby Tony Yates / May 12, 2016 / Leave a comment
Read more: Iain Duncan Smith—the quest of a quiet man
On Tuesday, Iain Duncan Smith gave a short speech on why the EU is a force for, in his words, “social injustice.” In it, he focused attention on the impact that Brexit might have on those at the poorest end of the income and wealth scale. He said: “The EU, particularly for the UK, has become a force for social injustice…[and] despite its grand, early intentions has become a friend of the haves rather than the have-nots.”
These words play on a resentment the Leave campaign knows is keenly felt, and which is arguably evidenced by the rise of UKIP in areas removed (in distance and in income) from prosperous, metropolitan areas of the UK. But the claim that Brexit would ease social injustice is in many respects problematic, and does the poor who he seeks to champion a disservice.
A central focus of the resentment stoked by IDS is migration. Writing for Prospect, John Springford of the Centre for European Reform has already dealt with two common tropes regarding migration: that immigration has driven down wages (largely false), and that migrants are a burden on public services (false). In fact, although migrants take jobs when they come, they also create others with their own spending power (and to think otherwise is to fall prey to what economists call the “lump of labour fallacy”). And since migrants are younger, healthier, and more economically active than the average domestic resident, they are net contributors to the welfare system.
But a key worry for the “have-nots,” that is not much dwelled on, however, is the consequences of a recession that might follow a vote to leave the EU. The UK might experience a shock immediately following the referendum.
This risk has been signaled not just by the Treasury, whose motives many might doubt, but also by the Bank of England, and most recently by the National Institute for Economic and Social Research.
The scenario is that there is a sharp fall in…