It’s easy to forget, but Brexit was a big shock when the result was announced. What is more shocking is the effect it can have an our view of the world, and also the fortunes of individual British people.

You can tell I have had a lucky life, because I don’t think I’ve ever been any more shocked than I was when I woke up on Friday June 24th 2016 to the news that the United Kingdom had voted to leave the European Union. I had been following the referendum campaign closely, and had come to the conclusion that however close the forecast polls showed the result would be in the run-up to the vote, angry British people would come to their senses and opt to make the best of what they had with their relationship with the EU (or else not vote at all). On the evening of June 23rd I was actually writing a (still unpublished) blog while at the same time looking at the early referendum results. By midnight, Nigel Farage had conceded that the Leave campaign had lost, and all seemed right in the world, so I went to bed. When I woke to switch off my alarm clock at 7:30 the next morning, there was a news alert on my lockscreen informing me that the UK had voted to leave the European Union.

Waking to live footage of Nigel Farage’s face completely consumed by an all-conquering grin was not a world that I ever imagined, and that morning really had a surreal, out-of-body experience vibe, like an alternate reality showing us what could happen if we really wanted to shake things up in the world. There was David Cameron swallowing his own tears on live TV by 10 O’ Clock in the morning. There were people who voted “Leave” on TV saying how they didn’t know their vote counted, and there were the main people who were to benefit from the result – Boris Johnson and Michael Gove – dodging questions and looking quite conspicuously like they had never wanted to win at all. Since that morning, history has been rewritten with the benefit of hindsight to portray the Leave vote as an absolutely inescapable inevitably ever since the UK joined the European Economic Community in 1973. We have had time to get accustomed to the result, so now we think it was obvious that they would vote Leave. But not many people said that on that morning, or on the preceding few months of the referendum campaign.

I have to admit that I was deeply depressed for a day or two after the referendum. I was lucky as my job required me to research the causes, consequences and intricacies of Brexit all day, so being distracted by the news actually made me work more. While many things were depressing about Brexit, the thing that got me most was that it destroyed my idea of the world as a place that was continuously striving for progress. Although bad things may and do happen, from terrorist attacks and war to the financial crisis, there had always been a sense, despite reactionary forces, that society was dealing with things and was moving forward. Wars end, bad election choices such as the two-term George W. Bush era were inherently limited, and there was always the possibility that something better was around the corner.

Brexit was different, because while both campaigns had portrayed the referendum choice as very simple, and was worded very simply as a yes or no question, the ramifications of a No vote were vast, unpredictable, and absolutely irreversible. If the UK leaves the EU, Russia will be admitted to the bloc before the UK has any chance of getting back in. It will take decades for the UK to adjust to Brexit, and perhaps a century before the UK is ever seen as anything other than an isolationist, xenophobic dinosaur still in love with its glory days of empire. A simple question was asked on June 23rd, but that didn’t mean there wasn’t a wrong answer. While the EU is far from perfect, it is absolutely undeniable that the existence of the union has made Europe a better place. The UK voted to leave this union, and decided to try and make it alone.

brexit

A Market for People

While there will be a diverse range of consequences for the UK and Europe, what is interesting to me is the effect of such a change in legal status on individual people. I am a labour economist, so I study the supply and demand for people in the marketplace of employment. Questions I research include the formation of wages, the strictness of employment protection, the effect of discrimination on hiring decisions, or the consequences of migration on the domestic economy. One of the founding blocks in labour economics is the wage (or earnings) equation, which shows the wages of an individual as a function of education, experience and other factors. If I have 6 years of third-level education (a Masters degree) and 5 years of work experience, I should theoretically earn more money than someone who has 4 years of education (a Bachelors degree) and 5 years of work experience. It is possible to isolate discrimination in the labour market is by aggregating a few thousand of these equations, and discovering that men and women (or black people and white people, gay people and non-gay people etc.) who have equal experience and education are paid differently. When you see a statistic that calls itself something like “the gender pay gap”, you should hope that they use this type of analysis, otherwise the statistic is useless.

Discrimination isn’t all about racists, far-right politics or sexists however. The most fascinating thing about discrimination is about how easy, and understandable, it can be.  Imagine you are an employer conducting job interviews, and have narrowed the field down to two candidates. Both jobseekers have equal education and experience, and have performed well at the job interview. One of them is a national of your country, and the other is from abroad. While the two look comparable on paper, there are certain unobservable differences: however fluent the foreigner is in the language of your country of operation, he/she will never be as good as a native speaker, and every few days a few seconds will be lost explaining some turn of phrase that he/she has never heard of. Over time, this would add up, and overall, it follows that it is much easier to hire the domestic candidate. While this is understandable, the decision was based on uncontrollable characteristics of the candidates, and thus is the dictionary definition of discrimination. In this hypothetical situation, the foreigner would need to be compensate for the language issue by having more education and experience than the domestic candidate to be even make it a difficult choice for the employer about who to hire. A compromise might be paying the foreigner (or woman) less, but that’s another story.

Brexit and Discrimination

The consequences of Brexit are very interesting when using this level of analysis. While we don’t yet know exactly what kind of a Brexit we will end up with, let us assume that Farage and Leave get what they wanted and end Freedom of Movement of People, and that the EU does not back down, and reciprocates with regards to British citizens in EU countries. Britons need a visa to work in the EU, and citizens of EU member states need a visa to work in the UK. In the previous pre-Brexit regime, UK citizens had the right to work in any EU member state and vice versa, but this right is now gone. Think of the wage equation in the former regime for a competition for a job between a British citizen in an EU country and another EU citizen in the same EU country. Let’s assume language isn’t an issue here as both candidates are non-native speakers, and both have the same level of the host country’s language. In the former regime, it would come down to further unobservable characteristics (of which there are many), but what about the post-Brexit case, where one of the candidates would require a work visa, while one doesn’t? If the two jobseekers are equally qualified, the obvious choice would be to take the uncomplicated road and go with the EU citizen rather than the administration required to hire a non-EU national.

What this case really means for British people is that on the continent, they soon will be in a situation where they will have to work harder to qualify for a job that in a pre-Brexit world, they would be instantly qualified for. In real terms, in the case of a hard Brexit, it means that the work experience and education of British people in Europe will soon be worth less than it previously was. British “expats” within the EU will see their human capital depreciate overnight, as they will lose their privileges to roam free in their continental playground. While this case may be familiar to Americans, Australians, and those from Asia, Latin America and Africa, those people are accustomed to this treatment. It’s going to be all-new to the post-Brexit UK.

Of course, the opposite is also true. Citizens of EU member states who apply for jobs within the UK will similarly see their human capital depreciate as a result of Brexit. The main differences here would be a) they did choose this situation, as the only people who had a choice in the matter were the UK voting public, and b) Citizens of other EU member states have 27 other countries to choose from, where they are free to work as if they were born there. Citizens of the UK will never have that option again. This is precisely why it is interesting: by voting for Brexit, the UK has set up a situation whereby it limits the freedom of its own citizens while at the same time degrading the value of their labour. The United Kingdom has voted in a resolution that will lead to discrimination against its citizens, and these citizens freely chose to do it.

Progress

The Brexit vote was depressing for a number of reasons: from a campaign point of view where both sides used variations of fear and hate to appeal to voters, and for the possible consequences of the UK leaving the EU. While there were legitimate reasons for the UK to want to leave the EU, these were not the reasons why the Leave campaign won. Leave won based on lies, hatred and ultimately the stupidity of the majority of British people in believing that there was an easy way to opt out of globalisation after decades of being deeply embedded within it. It was a vote against the modern world, and ultimately a vote against the progress of society. We will all get used to this new reality, but it is hard to see the future being great for the UK as a country and for all its individual citizens, who have all lost countless rights and privileges as a result of the vote. Inarguably, it is hardly a sign of progress when it is a fact that right now, while the UK is still an EU member, British people currently possess more rights than their children, or grandchildren ever will.

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