Will managed migration help the UK skills challenge ?

Richard Pearson

University of Leicester in Melbourne, 16 February 2006

Contents

• The UK skills challenge

• Migration – the story so far

• The UK government’s proposals

• Will the policy ‘work’ for skills (not the political or process point of view)

Presenting a policy not an academic perspective

Particular interest in how we can link skill needs and migration numbers

UK Growth

• 10 years economic growth but slowing• A good long term average but not so much

better than EU • But low productivity v US & EU • Low unemployment at around 5%, just starting

to rise• But skill shortages• Wage pressures benign• Low inflation at around 2 %• Focus on knowledge society

The 3 skill challenges

• Employers expressed needs

• Unarticulated needs eg higher levels/quality; health & care workers,

• Workforce needs

Employers’ skill problems• Issue since at least 1845

• Many employer surveys show one in four suffering

• Hard to measure – asking employers has problems

• Good surveys now segment :

Skill ShortagesHard to Fill Vacancies Skill Gaps

• In this way problems less acute – only 4 % with skill shortages (only 21% of all vacancies)

• Are Skill Gaps a + ve sign of business change or transition ?

• Do we have a low skill equilibrium ?

All types of occupations affected

• One in four graduate recruiters have ‘shortages’

• Engineers and sometimes IT

• Nurses & doctors, social care

• Skilled craftsmen and technicians

• But also low skilled, and office based occupations

• Project management skills

• Congitive skills growing in importance

• Location eg London/S East a big dimension

Workforce skillsInternational skill comparisons a major policy focus since early 1980s

UK has• Good stock of high level skills - 25 % have a degree • Good graduate supply• Poor craft/technician skills and training• 1/3rd lack basic skills• 40% not functionally numerate• 16% not literate, across age groups• Unknown number ‘workshy’ or not work ready

And• Low unemployment • High employment rate

Low/no skills are a big problem

• Welfare dependency • Crime & anti social behaviour• Poorer health• Teenage births • Shorter lives • Maintained through generations• Linked to poor parenting, health, housing, peer

pressure/clusters, location • Policy now trying joined up ‘local area’ initiatives

inc housing, childcare, transport, parenting,

Future skills demand

• Hard to be sure but • Public services been driving job growth• Demand polarising :

– Hi level eg professionals and managers– Low skilled services

• New and existing w/force need to improve skills eg 70% of 2020 w/force already completed their basic education and training

The way ahead is complex

• Competitors investing fast• 18 major national initiatives since 1990• Multiple targets set and ignored• More than 24 institutions currently involved plus

colleges/schools, employers and individuals

Some skill responses

• HE (over) expanded on econ grounds leading to over qualification ?

• New Deal helped frictional unemployment but big drivers now employability, basic skills, location

• ETP £5bn + helping basic skills in work place

• Further/vocational education still the cinderella (now shifting to employer demand as driver)

• Joined up/local area initiatives now linking skills, housing, parenting

• More planning & co-ordination by locality, sector, occupation

What is the solution ?

• Training and skills are only part of the solution to productivity and GDP growth – also need innovative firms, R&D, infrastructure etc.

• And if training is not working ? lets try Migration

Migration in UK – the context

• Long history Settlements going back 2000 years 1600s Recorded brain drain with French headhunting ship workers, silver smiths Regular migration flows since 1700s

• Immigration/race a big issue in the 1960s & 70s

• Net outflows in 1970s and early 1980s

• Brain Drain big issue since 1980s

• Immigration now back in the headlines– Some scares with Single market in 1992– Illegal immigration– Sangatt reception centre – In 2004 UK one of few to immediately open borders for work for the Accession countries – The ‘Polish plumber’ – Race relations – The Daily Mail

• Migration a big and growing issue throughout developed and developing world

Recent trends

• Global labour markets at the top eg foreign nationals have headed BA, GSK, ONS, QCA, RCN, Vodaphone

• Economic growth• UK a major draw for those in IT, finance,

biotechnology and health • Opening borders, global pressures

Some key inflow numbers • In 2004 over 580,000 entered the UK to work or live, a figure that risen

dramatically

• New Zealand, Spain, Ireland, Austria, and Germany have larger inflows per capita.

• 100,000 were returning UK nationals, including some ‘brain drainers’

• 140,000 entered on work permits the largest numbers from India, the US, S. Africa and New Zealand.

• 60,000 working holiday makers

• 290,000 have entered from the accessions states in eastern Europe since May 2004 (85,000 went to Ireland).

• Others entered as asylum seekers, domestic employees, and through family links.

Asylum & removals • 50,000 asylum seekers were granted settlement ie refugee status in

2003 (included big backlog)

• 61,000 applied for such status then but number since fallen

• 55,000 removals in 2004 (mainly non asylum seekers)

• UK has fewer asylum applications relative to its population than eg Switzerland, Sweden, Belgium, Netherlands, Germany

• The numbers claiming asylum globally has fallen in recent years

What is often overlooked

• 360,000 people left the UK to live overseas in 2003

• Two thirds were UK nationals.

• The net inflow to the UK was just over 220,000

• Migration drives over half of the projected population growth to 2030

Foreign born in the UK• 4.9 million in the UK, over 8 % of the population and over 10% of

working age population. • Much lower than in Austria, France and Germany, as well as in

Australia, Canada, New Zealand and the USA • High concentrations in finance, IT, hospitality, health and education

sectors. • 45 % live in London, (1 in 3 of working age population). • Half of the new nurses in 2002 (mainly non EU) • 10% of nurses, 16 % of dentists, 25 % of doctors • 60 % of those working in London hotels and restaurants. • One in four employers expects to recruit from overseas in the next

year.• ‘White’ migrants do better than black migrants• Skills of asylum seekers and refugees often wasted

The official view

• Bank of England ‘…migrants are holding down inflation..’

• Treasury ‘..immigration makes an annual net contribution of £2.5 billion to the economy and a 1 % increase in inward migration is associated with an increase of GDP of over 1 %..’

• DWP ‘… Lower illegals, Higher employment & output, Possibly higher u/e claimants, slower wage growth..’

Current policy• 50 + entry schemes

• Seen as bureaucratic, and not transparent

• Refugees are dealt with separately

• Restrictions on recruiting health and related workers from developing countries

• Allocation of work permits simplified in recent years from employer driven to be skill based

• Work of Sector Skills Panels advise on sectors shortages opaque

The government’s proposals

A simple points based 5 Tier entry scheme• Tier 1 : for investors and the highly skilled who would

help maximise growth and productivity in the UK • Tier 2 : for skilled workers with a job offer where there

are skill shortages • Tier 3 : for limited numbers to fill specific low skill jobs • Tier 4 : for students • Tier 5 : for visiting workers, development schemes and

youth mobility/cultural exchanges etc Points would take account of factors such as previous

salary, skills, age, English language following the Australian model.

The 3 Skills Tiers

Tier 1 : for investors and the highly skilled as defined by points scores.

Tier 2 : for skilled workers with a job offer where there are skill shortages. A new Skills Advisory Body to advise Possibly employers ‘proving’ difficulties, and Auctions. Salary seen as the best indicator of the individual’s contribution to the UK economy May be regional criteria, Scotland already has its own migration agenda. Applicants are likely to need the support of a sponsor or job offer.

Tier 3 : for limited numbers to fill specific low skill jobs. The government does not see a need for low skill immigration for non EEA nationals following EU enlargement. The Skills Advisory Body to advise on any short term needs in sectors such as hospitality, agriculture, and food processing . Likely to need the support of a sponsor or job offer. Possibly quotas managed by an accredited operator who selection and manage workers including their return, through eg (witholding) compulsory remittances or bonds.

Tiers 1 and 2 - family members can accompany them, and long term residence after five years if they meet the necessary conditions. Tier 3 would be for a time limited stay.

Decisions would be taken at the point of application.

Fines and bonds would help ensure compliance

Major issues for the SAB

How can the Skills Advisory Body (SAB)

• Forecast long term skill needs (employers, models, benchmarking, cost benefit, DELPHI?)• Assess supply side• Balance the impact of ‘interventions’ eg

• wages, technology, smarter working, • internal flows ?• EU flows ?• Emigration ?

• Manage lobbying/suspect evidence

How should the points be allocated eg past earnings, occupation

How will the consequences for source countries be considered

How far ahead, and with what detail will points/occupations be designated to allow employers and individuals to plan ahead?

Will the SAB or the government set the points/quotas and hence migrant numbers?

Some other issues

• Linking Tier 1and 2 with citizenship

• How would an auction work ?

• How ensure consistent local decisions ?

• Employers not happy with devolved decisions

• Role of employers in helping integration

• Legal sanctions on employers, colleges, migrants eg fines, Bonds, witheld remittances

Will migration solve the UK skills challenge ?

• It depends on numbers and skills but

• It should help employers in the short term

But it may also

• Reduce employers incentive to invest in training, innovation etc and reduce long competitiveness

• Accentuate regional differences

• Reduce wage growth

• Raise unemployment at all levels by crowding out indigenous workers

• Further reduce opportunities for those with poor skills