Yet the frustration of low-income Brexiteers is founded in very real economic changes—including globalization and economic liberalization—that have caused average workers’ incomes to stagnate for decades. Median income has shown no growth in either the United States or the U.K. in the 21st century. In the United States, most households have experienced little income growth since the 1970s.
New economic evidence clearly shows that globalization can harm low- and middle-income workers. The rise of trade with China substantially accelerated the decline of manufacturing in the West. To stay competitive, Western industries have introduced technologies that have further displaced workers.
While the impacts of immigration are small overall, research suggests they may be important when concentrated on the most disadvantaged.
For workers who lose their jobs, whether through trade, technology, or immigration, the transition to new work is slower than economists had expected. Some are pushed out of the workforce permanently. Many more experience substantial and lasting pay cuts.
The result is unemployment, wage stagnation, greater welfare dependence, and increased criminal activity—characteristic of many of the communities that voted in favor of leaving the EU.
Balancing Openness With Support: The ‘Grand Bargain’
The fault is not, however, with globalization and economic liberalism (or in shorthand, “economic openness”). Both of these forces operate to make countries as a whole significantly richer.
Increases in economic openness must, however, be undertaken with the understanding that the gains in wealth will not be spread evenly. There are winners and losers.
