Memorandum submitted by Professional Contractors
Group
EXECUTIVE SUMMARY
1. PCG believes that the country's migration
strategy should work for the economic benefit of the UK, and we
are therefore pleased that the structure of the new points-based
immigration system should better allow for immigration routes
to be adapted to suit the changing needs of the UK economy
2. When considering the impact of immigration
on the economy, policy makers must take into account its effect
on skills policies and incentives to raise skill levels among
UK workers
3. The Migration Advisory Committee should avoid
placing too much reliance on employer perceptions of skill shortages
as a useful indicator of shortages in the labour market
4. Under the Points-Based System, sponsors
must be monitored closely to ensure they are complying with PBS
rules; the Government needs to ensure that punishment for abuse
of the immigration system is a sufficient deterrence
5. Intra-Company Transfer work permits are
being used to facilitate the offshoring of work from the UK, despite
a lack of firm evidence that the offshoring of work in vital sectors
has any positive impacts on the UK economy
6. The Government should ask the MAC to
undertake comprehensive research into the effects of offshoring
on the UK economy and skills base, in consultation with stakeholders
7. Unless and until the economic benefit
of offshoring to the UK has been proved conclusively, government
policy should not promote or encourage it
8. The provision of ICT work permits must
therefore be kept under careful control, and ICTs should only
be available in sectors where there are actual shortages in the
UK's workforce.
INTRODUCTION
9. The Professional Contractors Group is
the cross-sector representative body for freelancers in the UK.
10. All of PCG's members take on business risk
and supply their services to a range or succession of clients.
They therefore represent the flexible, skilled, knowledge-based
workforce on which the UK's future prosperity depends. They provide
IT, engineering, project management, marketing and other functions
in sectors including financial services, telecoms, oil and gas
and defence.
11. PCG represents freelancers who run their
own limited companies, unincorporated sole traders and freelancers
who operate via umbrella structures: it therefore represents the
very smallest enterprises in the UK, and considers the needs of
its members both as enterprises and as workers.
12. PCG has been campaigning for some years
on migration issues, mainly from an IT perspective, although the
engineering sector has also been of interest to us. We responded
to the consultation on the new Points-Based System Selective
Admission: Making Migration Work for Britain, and largely
welcomed the new measures outlined therein. We also responded
to the consultation on the establishment of the Migration Advisory
Committee, which we broadly welcomed, and to that body's recent
call for evidence.
POINTS-BASED
SYSTEM
13. PCG broadly welcomed the new points-based
immigration system as a scheme that should be more flexible and
responsive than the immigration system it succeeds. PCG believes
that the country's migration strategy should work for the economic
benefit of the UK, and we are therefore pleased that the nature
of the new PBS should allow for immigration routes to be adapted
to suit the changing needs of the UK economy.
14. PCG also believes that the debate over migration
cannot be divorced from the issue of skills. When deciding whether
it is sensible to use migrant labour to fill positions in the
UK's labour market, the Government must concern itself with the
effects that migration policy has on skills levels in the UK.
TIER 2 OF
THE POINTS-BASED
SYSTEM
15. The work permits with which PCG has
hitherto concerned itself will be covered by Tier 2 of PBS, for
skilled workers with a job offer. We are pleased to see that,
in order to pass the Resident Labour Market Test, the majority
of jobs under Tier 2 must be advertised on JobCentrePlus, or in
a fashion as agreed with the UK Border Agency in sector specific
Codes of Practice.
16. Under the previous immigration system, PCG
was aware of anecdotal evidence suggesting employers were advertising
jobs in obscure locations at low rates which would never attract
a skilled worker. By making sponsors advertise on a central portal
such as JobCentrePlus, other bodies will be able to monitor employers'
compliance with the rules more easily. That said, it is important
that the sector specific Codes of Practice agreed to by the UKBA
are robust, and the agency is able to detect instances where employers
have broken the Codes of Practice, and punish them for doing so.
MIGRATION ADVISORY
COMMITTEE
17. PCG welcomed the creation of the Migration
Advisory Committee as a body tasked with providing government
with independent and evidence-based advice on where labour market
shortages in skilled occupations exist that can sensibly be filled
by migration.
MIGRATION ADVISORY
COMMITTEE—TRANSFERABILITY
OF SKILLS
18. In our response to their recent call
for evidence, we called on the MAC to consider the transferability
of skills across occupations when deciding which occupations are
suffering from shortages. In many occupations, shortages can be
filled with workers in other occupations with adaptable skills.
The MAC therefore needs to be careful to investigate whether skilled
occupations are experiencing shortages of workers, not whether
there is a shortage of skilled workers undertaking a particular
occupation. The former would take transferability of skills into
account, whereas the latter would not.
MIGRATION ADVISORY
COMMITTEE—EMPLOYER
PERCEPTIONS OF
SHORTAGES
19. We were pleased to note the MAC's acknowledgement
in the call for evidence that employers may have an incentive
to exaggerate the problems of labour market shortages in order
to acquire the skills they need at low costs. This has ramifications
for how much reliance the MAC can place on employer perceptions
of shortages—one of the MAC's proposed indicators of shortages—as
a useful indicator that there are in fact shortages in the labour
market. PCG believes the MAC should place more reliance on other,
more objective, indicators, such as labour market statistics.
MIGRATION ADVISORY
COMMITTEE—INCENTIVES
TO UP-SKILL
20. The MAC also acknowledged that short
term migration may dampen the incentive for non-migrant workers
to acquire higher levels of skills. This disincentive to up-skill
can be detrimental not only in low-skilled occupations, but also
in highly-skilled sectors vital to the future growth of the economy.
For example, there is evidence of UK students being put off Science,
Technology, Engineering and Mathematics (STEM) subjects due to
the downward pressure on wages exerted in STEM occupations as
a result of the inflow of migrants in such sectors. If entry-level
jobs in STEM sectors come to be seen as poorly paid, UK workers
will be put off entering such sectors; they will not gain the
experience needed to climb the career ladder; and the economy
will be deprived of future populations of highly-skilled workers
in sectors vital to the UK's future as an innovative, high-skills
economy. This emphasises the importance of considering migration
and skills policies together when seeking to obtain the greatest
benefit for the UK economy.
MIGRATION ADVISORY
COMMITTEE—SECTOR
SKILLS COUNCILS
AND SECTOR
EXPERTS
21. PCG believes it is important that the
MAC makes use of the expertise of Sector Skills Councils and sector
experts. These bodies will be particularly important to the MAC
in the early stages of its research and compilation of the skills
shortage list as they have an excellent knowledge of the labour
market experiences in their sectors.
MIGRATION ADVISORY
COMMITTEE—RESEARCH
INTO OFFSHORING
22. As we mention below, research into the
wider economic impacts of offshoring is lacking. Currently, research
tends to focus on the impact of offshoring on low-skilled jobs
in developed countries. There is evidence, however, that wages
in the services sector have fallen in the UK as offshoring has
increased.[1]
A plausible explanation seems to be that more high-skilled activities
are being offshored in the services sector.
23. PCG believes that, as the body tasked by
the Government with advising it on matters relating to migration,
the MAC should undertake this research. This should be in full
consultation with stakeholders so that all interested parties
can submit evidence to support the research.
SPONSORSHIP
24. PCG welcomes the introduction of new
measures to police the immigration system more effectively. Bearing
in mind that sponsors will be given significant responsibilities
under PBS, it is imperative that sponsors are monitored closely
and that the threat of the loss of sponsorship status is real.
The Government must uphold its commitment in the PBS command paper
that "failing sponsors|will be removed from the list of approved
sponsors and may be prosecuted."
25. Once the UKBA has approved an organisation wishing
to sponsor migrants and issued it with its certificate, the agency
must regularly monitor the salaries paid by the sponsor to its
workers, via HMRC's records and other means; it must not just
take the sponsor's word for the salary being paid.
26. PCG would also like to see the UKBA
working with other bodies in ensuring sponsors are complying with
the law. Concerned parties should be encouraged to report abuses
to the UKBA, and the agency should make public the results of
action it has taken against non-compliant sponsors.
27. Above all, the Government needs to ensure
that the punishment for abuse of the immigration system is sufficient
to deter abuse.
INTRA-COMPANY
TRANSFERS AND
OFFSHORING
28. The one aspect of the immigration system
with which PCG has most concerned itself has been the use of Intra-Company
Transfer work permits. This is because the Government's approach
to the rules regarding ICTs has a significant influence on the
supply of skilled workers in the UK, particularly in the IT sector.
29. ICT work permits were originally intended
to allow a company to bring into the UK an employee based outside
the European Economic Area, without having to go through the time
consuming hoops of advertising, when that employee has company-specific
skills not available in the UK. These work permits are now often
obtained by a company in order to up-skill their overseas workers,
as part of the preparatory work for offshoring their operations
out of the UK completely. The UKBA has admitted that ICT workers
are coming into the UK without genuinely company specific skills;
indeed, they are often trained in the UK after arriving. The Government
has made it clear, however, that it would like to allow this practice
to continue.
30. It is the Government's prerogative to
acquiesce to the continued offshoring of work from the UK through
the use of easily available ICTs. PCG believes this to be an unwise
policy, however, given the lack of evidence regarding any positive
impacts that the offshoring of work in vital sectors will have
on the economy. Indeed, the Government itself has accepted that
offshoring causes short-term job losses, and sectors such as IT
where offshoring has been more widespread have seen record unemployment
in the UK.
31. It is far from the case that those operations
currently being offshored all involve low-skill, non-critical
work. In a recent member survey, PCG found that over 85% of our
members who are software programmers indicated that they were
aware of work previously undertaken by workers in their occupational
group being offshored within the last two years, with 41.7% perceiving
large amounts of work being offshored. Increasingly, entire projects
are being offshored, and firms are looking at offshoring as a
long-term strategy rather than just a short-term cost-cutting
exercise.
32. If employers continue to have easy access
to ICTs to allow them to offshore high-skill jobs, there will
be little incentive for them to provide the necessary investment
in training for domestic workers in those sectors where offshoring
is most prevalent, such as IT. As entry-level jobs in sectors
such as IT are offshored, the bottom rung of the career ladder
is removed from the reach of the UK's IT graduates. Research by
e-skills UK has shown that the number of students choosing to
study IT-related courses dropped by 43% between 1996 and 2001.
In an article in Computer Weekly in 2007, a careers consultant
at the University of Manchester attributed this drop to students
being put off IT courses "because of the perception that
IT jobs are being offshored".[2]
This decline in the number of highly-skilled graduates cannot
be good for the future prospects of the UK, and it runs counter
to the Government's clear desire to see greater skill levels in
the domestic workforce.
33. It is unknown whether offshoring offers
a sensible solution to filling labour market shortages in terms
of providing economic benefits to the UK. Unless and until the
economic benefit of offshoring to the UK has been proved conclusively,
however, PCG believes that it is not sensible for government policy
to promote or encourage it.
34. For that reason, PCG believes that the
provision of ICT work permits needs to be kept under careful control,
so that it fully takes into account the economic interests of
the UK. We were therefore pleased to see in the Statement of Intent
for Tier 2 of PBS that the points requirements for ICTs have been
made more demanding than was originally proposed, and will now
be partly based on qualifications and earnings.
35. While the long-term effects of offshoring
remain unclear, PCG believes that ICTs should only be available
in sectors where there are shortages in the UK's workforce, not
in sectors, such as IT, where there is an abundance of workers.
We therefore believe the Government should consider introducing
a form of the Resident Labour Market Test for ICTs. We would also
like the Government to alter its current policy, and to ensure
that ICT workers coming to the UK do indeed have relevant company
specific knowledge. Above all, the number of points needed to
obtain an ICT permit under PBS should be revised if it becomes
apparent that the current level of provision of ICTs is not in
the best interests of the UK economy.
June 2008
1 "Offshoring and the UK economy", Globalisation
and Economic Policy Centre, University of Nottingham, http://www.gep.org.uk/shared/shared_leverhulme/documents/GEP_Offshoring_Report_0608.pdf Back
2
"Getting better value with graduates", Computer Weekly
(13/03/2007), http://www.computerweekly.com/Articles/2007/03/13/222303/getting-better-value-with-graduates.htm Back
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