43. Seventh supplementary memorandum
submitted by the Immigration and Nationality Directorate, Home
Office
LABOUR MARKET
ISSUES
Background
Migration is vital to our economy, and the economic
impact of migration has been a positive one—contributing
to economic growth and increasing employment. Migration policy
is designed to allow the migrants we need into the UK at the same
time as maintaining our borders and security, preventing abuse
of the system and ensuring that other impacts—for example
on public services—are managed effectively. Fulfilling these
objectives provides the public confidence which is vital to any
immigration system.
From a labour market perspective, policies on
employment-related migration are intended to ensure that migration
contributes to the economy and fills important gaps in the labour
market whilst, at the same time, complementing policies towards
the resident workforce. This means that our focus should be primarily
on attracting the most highly-skilled migrants, and those who
will take up opportunities that cannot be filled from within the
UK or EU.
Migration as a whole contributes to economic
growth and HM Treasury attributes 10-15% of trend growth forecasts
to migration.[36]
More importantly, migrants can also improve GDP per head. This
effect comes in two ways: not only are migrants more likely to
be of working age than the population as a whole, but where they
are more highly skilled, they will also be more likely to contribute
to productivity. It is for this reason that our discretionary
migration routes particularly focus on the higher skilled.
Overall migrants have a lower employment rate,
yet higher average wage rates, than the population as a whole.
And figures for 2001 showed that migrants generated 10% of GDP
despite accounting for just 8% of those in employment.[37]
Current employment-related migration policy
focuses on the work permit system—in 2005 there were over
157,000 work permit applications, of which 82% were approved.
There were also over 17,500 successful applications to come to
or remain in the UK under the Highly Skilled Migrant Programme—where
an individual is assessed according to their previous earnings,
work experience, age and significant achievements.
Migration policy has thus had a key role in
ensuring that the UK economy remains dynamic and flexible. In
recent years the contribution to the delivery of public services
has been particularly important. Approximately, 30% of work permits
for example are currently issued in the health sector.
Applications for Work Permits (2005)[38]
|
| Industry Breakdown | Applications
(2005)
| per cent |
|
| Total | 157,951
| 100 |
| Health and Medical | 47,353
| 30.0 |
| Computer Services | 23,303
| 14.8 |
| Hospitality and Catering | 18,329
| 11.6 |
| Admin, Bus. and Management | 17,323
| 11.0 |
| Education and Cultural Activities | 11,623
| 7.4 |
| Financial Services | 9,135
| 5.8 |
| Entertainment and Leisure | 5,768
| 3.7 |
| Manufacturing | 4,973
| 3.1 |
| Construction and Land Services | 3,470
| 2.2 |
| Retail and Related | 3,091
| 2.0 |
|
| Source: Work Permits (UK), MI. |
| |
General Policy
Overall at present, approximately 11.6% of the working age
population was born abroad.[39]
There are a number of routes by which migrants can come into the
UK—some explicitly to work and some where the principal
reason is not work such for family reunion, cultural exchange,
humanitarian or study reasons. It is important to note however
that in these cases the migrants concerned are also entitled and
likely to be playing a part in the labour market. It should also
be noted that the single largest source region for non-UK born
individuals is the wider EU (24.4%)—which of course is not
subject to immigration control. The next two highest regions by
migrants' country of birth are the Indian Sub-Continent (22.8%)
and Africa (20.8%).[40]
As in other countries, the principal focus of UK migration
policy has been high-skilled migrants. This ties in with wider
government policies to improve the skills base in the UK, encourage
enterprise and entrepreneurship, attract high-value added activity
and improve the ability of firms to benefit from knowledge networks
and spillovers.[41]
As noted above, this is partly because higher skilled migrants
are more likely to have a positive effect on productivity and
economic growth per head. This also relates to the positive externalities
which are likely to arise from having more skilled migrants (and
thus a more skilled overall workforce)—eg more skilled workers
can boost the use and development of technology and innovation.
There is little or no evidence of migrants having an adverse
effect on the labour market outcomes of non-migrants in the UK—whether
the migrants are doing high or low-skilled work.[42]
However, it can be expected that any risk of displacement will
be lower with higher skilled migrants where there is less likelihood
of a resident worker being available and since migrants bringing
higher skills into the economy are more likely to lead to the
creation of new jobs.
The available evidence suggests that migrants in the UK have
made a disproportionate contribution to the public finances. Again,
average figures mask the different contributions that different
types of immigrants are likely to make. High skilled migrants
have a disproportionately positive fiscal effect—not only
paying more taxes than they claim in government expenditure by
virtue of skill level and higher wages, but being extremely limited
in their access to public funds. For the higher skilled routes
(eg HSMP and work permits) migrants have limited entitlement to
public funds.
The focus on high skilled migration is not to say that there
is never any need for low-skilled migration. This can help retain
flexibility in the labour market and meet important labour market
needs. However, there is more likely to be a supply of workers
to fill these jobs whether they are from the domestic population
or the migrant population. There are for example a large number
of migrants who are already in the UK and/or are arriving under
the non-employment related routes who are potentially available
to meet labour market shortages. This includes migrants from the
existing and recently enlarged EU. Over 300,000 migrants from
the new member states have registered for the Workers Registration
Scheme since enlargement in May 2004. It is for this reason that
the Government is proposing to phase out the Seasonal Agricultural
Workers Scheme and the Sector Based Scheme, which are the principal
low-skilled routes. Both of these are quota-based and in 2005
nearly 23,000 migrants were approved under these schemes. Too
great an emphasis on low-skilled migration may also risk the displacement
of technology in the sectors concerned, with an associated tension
with the government's wider policies on skills and technology.
There is some evidence in the US to this effect, although the
effects (and possible responses) are likely to vary from sector
to sector (in some industries there is clearly less scope for
industrial restructuring). Similarly, considerable numbers of
low-skilled migrants can create sectors which simply become dependent
on a continuing supply of low-skilled migrants.
This variety of routes by which migrants enter the UK underpins
the heterogeneity of migrants in terms of labour market outcomes.
This in turn reflects a number of factors including around a migrant's
characteristics (including nationality, skills, English language
ability, time in the UK etc.)
As noted above, migrants (defined as the foreign born) have
a lower employment rate, but earn more, than the non-migrant population.
But here again the average wage rates mask a wide variety in outcomes—migrants
tend to be disproportionately represented at both ends of the
wage (and skills) distribution.
The key with this is to ensure flexibility and responsiveness
around labour migration, within a managed system—and in
the lower-skilled end of the labour market, issues around control
become more important than they are at the higher skill levels.
Points Based System
The Points Based System is designed to rationalise the existing
complex set of migration routes and introduce a more objective
and transparent decision-making process. As in other areas of
migration policy, it has been developed by the Home Office in
close collaboration with other government departments, especially
HMT and DWP, and will provide a clear system which can meet the
economy's need for migrant labour, as broadly set out above, at
the same time as linking in to other labour market policies.
In this regard, it also provides an opportunity to develop
and improve the current employment-related routes. For example,
the analysis carried out on developing the framework for the PBS
has identified that the current criteria for awarding points under
the Highly Skilled Migrant Programme need some refinement to ensure
that the system picks up those migrants most likely to be successful
in the UK labour market. This is reflected in the proposals for
Tier 1 of the new system which emphasises previous earnings, qualifications
and age as objective attributes for which a migrant will score
points. These characteristics act as proxies for a migrant's likely
success in the labour market.
Tier 2 of the new system will provide an employer-led element
whereby employers who are on a list of approved sponsors will
be able to bring in migrant workers who meet the basic criteria
(principally relating to a minimum skills and, in some cases,
salary threshold) as set out in the Command Paper. The proposed
Skills Advisory Body will assist in this process by identifying
(on the basis of available economic indicators and specific sectoral
knowledge) occupations where there are particular shortages for
which the process for bringing migrant workers becomes easier
for the employer. For those occupations not identified by the
Skills Advisory Body the employer will be expected to test the
resident labour market to explore whether a domestic worker is
available to fill the vacancy in question.
As discussed above, the key with respect to low-skilled labour
is to remain flexible and responsive in order to be open to the
possibility of low-skilled migration routes where there is a clearly
identified shortage which cannot be met and where migration is
deemed to be the most appropriate response. In this regard, it
is also worth noting that in addition to the non-labour related
migration, migrants who enter the UK through Tiers 4 and 5 of
the new system (ie students and youth mobility/ temporary workers)
will up to a point be able to work freely.
The purpose of the Points-Based System or the work of the
Skills Advisory Body in particular is not to forecast demand for
labour migration into the future. In a dynamic and flexible labour
market like the UK such an exercise is not a task which government
should necessarily be attempting. Rather, the PBS puts into place
a clear structure by which the migrants the economy needs can
come to the UK within a broad framework of control designed to
curb abuse, promote integration and protect security.
March 2006
36
HMT "Trend growth: Recent Developments and Prospects",
April 2002. Back
37
HMT PQ answer, May 2002. Back
38
Total number includes all types of work permit (work permits,
first permissions, changes of employment and extensions). It does
not include applications under the Sector Based Scheme. Back
39
LFS Autumn 2005. Back
40
LFS Autumn 2005. Back
41
See eg Department of Trade and Industry Five Year Programme,
November 2004; HM Treasury Skills in the Global Economy December
2004. Back
42
See eg The Local Labour Market Effects of Immigration in the
UK, C Dustmann et al, Home Office On-Line Report 06/03, 2003.
The impact of free movement of workers from Central and Eastern
Europe on the UK labour market, Department for Work and Pensions
Working Paper No 29, February 2006. Back
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