The labour market and ‘foreign bricklayers on £1000 a week’

Perhaps you are starting to look at labour markets, which economists usually understand in terms of the supply of, and demand for, labour services. This is a good example of these two forces coming together to determine wage rates.

Firstly, start to think about the supply of bricklayers. According to sources quoted by the BBC, there is a shortage of skilled Britons in the trade. The finding was revealed by Manpower, whose research is said to have confirmed industry fears of a lack of suitably-trained workers. The report showed there were clearly "very wide issues in terms of available skills for the construction sector as whole".

Why should there be a shortage of workers when wages (typically £500 a week) can rise to £1000 a week?

Perhaps it’s best to think about this in terms of the price elasticity of supply (PES) for bricklayers. PES measures the extent to which higher prices (in this case, wages) leads to an increase in the supply of labour. It looks like PES in this case is highly inelastic. If you drew a supply curve for bricklayers it would be quite steep. Why?

It’s likely to be because this skilled trade can’t be learned overnight. Furthermore, one commentator adds "the profession has not been that attractive for new entrants during the downturn, which is combined by an aging workforce and lots of people leaving the sector”. Another adds that “a cut in bricklayers' pay during the recession was a significant reason why there was now a shortage in the industry. If you add that to the amount of non-paid days through the winter then, you are no better off than people working in Tesco or Asda. The backlash of that is a lot of good bricklayers bailed out and changed jobs."

In other words, the UK workforce lost a lot of bricklayers during the recession. Now a construction recovery is underway, we are faced with a shortage that can’t be addressed overnight. The construction industry has a bad reputation in this respect. Steve Murphy, general secretary of construction union Ucatt, said any skill shortages were a direct result of the industry "failing to invest in the future. The industry goes to great lengths not to employ workers directly and in that environment it is unsurprising that companies are not prepared to invest in apprentices, the workers of the future”.

Now let’s consider demand. The demand for labour is said to be a ‘derived demand’. In other words, the demand for the skills of bricklayers is derived from the demand for construction. And that seems to be rising strongly.

According to Manpower's research, prospects in the construction industry are at their strongest level since 2007. "Across the board there is a drive in the industry to recruit people of all trades”. The Home Builders Federation said the huge increase in house-building activity had started after the launch of the government's Help to Buy scheme.

A spokesman for the Department for Communities and Local Government says planning permission had been granted on 230,000 new homes in the last year. Manpower's survey of more than 2,000 employers in all sectors suggests larger companies are set to lead a job creation "charge" early next year. Utilities were found to be the most optimistic industry, on the back of investment by energy firms. 2014 was a bumper year for jobseekers, with the highest level of job creation in 40 years.

When a wall of demand like this hits a limited supply of workers (and that supply is relatively price inelastic), conditions are right for wages to double. That’s why we read stories in the press about foreign bricklayers enticed to Britain by the high wages.

Last word to Charles Balson from Leigh-on-Sea, Essex, is a bricklayer who told the BBC £1,000 per week can be the going rate for experienced bricklayers. "It's a fair wage because it's a skilled trade. It takes years of experience to earn that kind of money," he told the BBC. "But it's terrible that people from overseas are being paid that sort of money. Companies should be pumping some of that into teaching young lads in this country."

Business Secretary Vince Cable said the government was working closely with the construction sector "to ensure it has the talent it needs to grow through a mixture of industry-designed apprenticeships and employer-led training".