Europe’s Arms Race Is Creating Boomtowns. Why Are Locals So Unhappy? (and an example of why labor supply curves slope upward)

New investment in French and British towns brings jobs but sparks division and resentment

By Sune Engel Rasmussen of The WSJ. 

Sometimes when there is a new product or government policy that leads to higher incomes for some locals but not all it stirs up conflicts. This seems like another example of that. 

Excerpts:

"In Barrow-in-Furness (in UK), an impoverished shipbuilding town in northwestern England, a multibillion-dollar contract to build nuclear submarines has highlighted inequality and pulled workers from other professions.

Residents of Bergerac, a cobblestoned French town famous for its wines, complain that all they have received from a revamped explosives factory are empty promises and drones in their skies."

"But the salaries and benefits offered by BAE draw workers from other professions, leaving the town bereft of mechanics, driving instructors and nurses. On a recent evening in a local pub, two builders asked other patrons for recommendations for tradesmen and were told they had to wait several weeks."

"The sudden influx of money and workers has sent real-estate prices soaring. Some housing has been converted into rental properties shared between several households."

"After the war began in Ukraine, the explosives manufacturer Eurenco invested 200 million euros, or about $230 million, to revive French gunpowder production at a government-owned site on the outskirts of Bergerac.

The factory now employs 600 people, up from 200 before the Ukraine war. Its annual revenue has tripled to €580 million from around €190 million over the same period."

"So far Bergerac has seen little of that money, according to local officials. Many Eurenco employees come from out of town"

This is because the process "requires specialized engineering skills that aren’t present in Bergerac." 

"“I would prefer that the jobs were created in schools and hospitals, that they put money toward health and education,” said Mathieu Brand, co-president of La Traverse, a community-driven cultural center."

The part in red above illustrates the issue with labor supply curves. Why do they slope upward?

1. As W increases, workers from other industries enter the market in question, so L increases. When W increases, we assume it increases in one market only. For example, if the wage paid to janitors increases, convenience store clerks will apply to become janitors.

2. As W increases, nonworkers enter the market in question. Some workers who were not previously working in any market, will start to apply for jobs if the wage rises high enough. Examples might be stay at home spouses and students.

So number one is at work here in this article.

Related posts:

Come Make $100,000, the Billboard Says: Police Departments Are Hustling For Recruits (especially when wages are rising for other jobs) (2024) (this article has a more detailed look at labor supply curves) 

Inter-industry competition can affect labor markets (2023) (this was about an auto related company in Alabama that was not only competing for workers with other firms in its industry but also with restaurants and retailers)