Another factor that is thought to have made an enormous difference to the UK labour
market is the recent influx of migrant labour.
In 2004, ten new member countries joined the EU, eight of which were from eastern
Europe. Since then, two more former Warsaw Pact countries (Bulgaria and Romania)
have also joined.
Higher than predicted immigration
In 2004, the UK was one of only three of the EU15 which did not suspend the free
movement of labour clauses of the Treaty of Rome, and the resulting influx of workers
into the UK far exceeded the official forecasts.
Rather than the 5,000-13,000 predicted by the government, 427,000 workers were on
the Workers Registration Scheme in the first two years.
This has prompted a vigorous political debate, which has been much more about the
uncertain social implications (housing, education, health, etc.) than the generally
positive economic consequences.
The economic pluses include filling skill gaps that might otherwise have led to
inflationary wage rises and higher interest rates.
The UK has been able to sustain above trend growth for longer than in the past whilst
containing inflation at historically low levels.
Labour supply is the usual constraint, and faster earnings growth arising from skill
shortages the early warning of nascent inflation.
The additional labour from eastern Europe (a high proportion of which anecdotal
reports claim is highly skilled, disciplined and motivated) is likely to have contributed
to the absence of the traditional pressures after 15 years of unbroken growth.