Examination of Witnesses (Questions 463
- 479)
TUESDAY 8 JANUARY 2008
Mr John Martin and Mr Georges Lemaitre
Q463 Chairman: Good
afternoon and welcome to you both. Many thanks for giving up your
time to come and give evidence to us this afternoon. Thank you
too for your paper, which was circulated yesterday, which was
very informative. I know you are old hands here and have been
here before, but it is perhaps worthwhile my repeating the rules
of the game and that is, if you can speak reasonably slowly and
speak up that helps very much in terms of recording the procedures.
Again, in terms of formalities, if you would like to start off
by introducing yourselves and then, if you feel like making any
introductory remarks, that is fine. If not, we will move straight
on to the questions. If you would like to introduce yourselves
first.
Mr Martin: Thank you very much, my Lord Chairman.
It is a great pleasure for me to be here again to give evidence
in front of you. My name is John Martin and I am the Director
for Employment, Labour and Social Affairs at the OECD, and part
of my responsibility is the field of international migration.
I am accompanied by my colleague George Lemaitre who is one of
our senior analysts in the field of international migration.
Q464 Chairman:
Thank you. Would you like to make any introductory remarks?
Mr Martin: I think not since we have already
submitted quite a lot of material. It is probably going to be
more useful for your Lordships if you ask us some questions and
we do our very best to answer them. We will split up the responsibility
between us for replying. We may indeed have some supplementaries
to each other's answers as it were.
Q465 Chairman:
Perhaps I could start by asking you for your views on what are
the key differences, if any, between the UK's planned points-based
system and those of other high income countries, such as Australia
and Canada? Are there any lessons that you think the UK can learn
from other countries' points-based systems?
Mr Lemaitre: I think it would be more accurate
to say that the UK has two points-based systems, Tier 1 and Tier
2. The orientation is very different in each of the two systems.
If we were to draw an analogy between the Canadian and the Australian
systems and the UK's proposed one, Tier 1 is much more similar
to the Australian and Canadian settlement-based migration system
and Tier 2 is fairly similar to their temporary migration programme.
The first is oriented towards very highly skilled young people,
recent graduates and older migrants, who have a very high salary
in their countries of origin. The second one is much more geared
towards answering the needs of the labour market. The systems
relative to the Australian and Canadian ones are far simpler in
their criteria. The Australian and Canadian systems are very complex;
they have many more criteria for awarding points. I think there
is a certain merit to the simplicity and objectivity in the UK
approach. The Australian system has much more in the way of pre-screening
of the candidates. As for the UK system, it does a pre-screening
for language competency, but it also does a pre-screening for
the occupations. I am talking here about settlement-based migration.
You have to have an occupation that is on a skilled occupation
list for instance. There is also a screening on the basis of qualifications,
which is a sort of a pre-recognition process to see if they are
appropriate for the occupation that has been specified and there
is also a certain amount of experience required, either an Australian
qualification or one or two years of work experience. The Australian
settlement-based migration system also has an element of response
to the needs of the labour market similar to the Tier 2 system
in the UK, but it is not a strong element in the selection. The
Canadian system tends to be a much flatter system in the sense
that the points tend to be awarded on a continuous basis. I think
anyone from 21 to 49 years of age gets the same age points. There
is only five points difference between a PhD and a Bachelor's
degree. The points vary from five to 25. On language, you are
awarded points for all levels of competency, except none at all.
It allows for many more possibilities of entry. There is probably
much more room for playing on the margins. They are much more
complex systems than the UK one. I think there is lots to be said
for having the clear and simple criteria that are in the UK system.
So you have the settlement migration system, that is Tier 1. Tier
2, with its labour market orientation, is very similar in certain
respects to the Canadian and Australian temporary migration programmes,
which are also skilled migration programmes, which are intended
to respond to the needs of the labour market on a short-term basis,
but where there are possible passageways from the temporary to
the permanent system. Roughly speaking, that summarises the differences.
The weak link in the chain with respect to Tier 1 is the fact
that the earnings criterion is based on earnings in the country
of origin. It is going to be very difficult to verify in practice
that the earnings recorded are accurate. I think that just about
covers it.
Mr Martin: I would just like to add one additional
point which George mentioned because I think it is worth bringing
out. The more that you try to develop a system that has elaborate
pre-screening on a wide range of different characteristics, whether
it is educational attainment, earnings, skills, age, applying
some of this to spouses and relatives, the more it is a costly
and more bureaucratic system to administer. So you also have to
take into account that the more elaborate the system you try to
develop, the more costly it is probably going to be to administer.
I think it is fair to say that the Australian system and the Canadian
one to some extent are fairly costly systems to administer.
Q466 Lord Skidelsky:
In the Canadian system is there any easier entry for Americans
or does it apply to all foreign entrants? I am just thinking whether
there is a comparison with the A8 situation in the UK.
Mr Lemaitre: There is no preference at all within
the Canadian system for any nationality. The Australian system
has free movement for New Zealand citizens. That is the only comparable
situation there.
Q467 Lord Layard:
As you know, we have recently set up this independent Migration
Advisory Committee to advise on the need for migrant workers to
fill labour shortages. How feasible is it to identify skills shortages
and, also, to identify which are suitable for filling with migrants?
How do you think this can be done, and what can we learn from
international experience?
Mr Martin: As you probably know, I am rather
sceptical about the ability of much of these methods to identify
labour and skill shortages in anything other than a very short-run
context. With regard to the specific issues surrounding migrant
workers, let me just cite two examples which I think certainly
give grounds for caution. One is, for example, the issue concerning
shortages of doctors and nurses and the extent to which these
can or cannot be filled by migrants from other countries. A second
example is towards the end of the 1990s, with the great IT bubble,
there was an enormous emphasis on the need to recruit more IT
specialists. Many countries expanded the capacity in their migration
regimes to recruit skilled IT specialists from abroad. In fact,
Germany, for example, instituted a Green Card system with very
much this objective in mind. When the bubble burst, the need for
these specialists suddenly disappeared and the migration regime
suddenly had to cut back on this particular labour which was thought
to be in shortage. One has to be somewhat sceptical because the
record even for the ability to predict domestic skill shortages
and use that information to influence information and training
decisions in OECD countries would give grounds for some caution.
That is not to say that it is not useful to have indications based
on real-world vacancy and unemployment data, perceptions from
employers' surveys and the like, to give you some broad signals
about where you might want to orient your education and training
systems and the information that you might want to give to your
citizens. The ability to turn off and on in some sense migrant
workers and migration policies in order to ease such skill and
labour shortages in a very short-term fashion does seem to me
to be rather unlikely except in the specific circumstances of
industries that have strongly seasonal and predictable patterns
of demand, such as hotels or restaurants and agricultural industries,
sectors where migrant workers in many countries do fulfil an important
role in that.
Mr Lemaitre: That being said, I think there
are a number of countries which do have shortage occupation lists
which are identified in various fashions. In Australia there are
points awarded for occupations that are on a list. This list is
put together by the Department of Education, Employment and Workplace
Relations. It is considered to be occupations that are in national
demand with sustained employment prospects. In other words, they
are not considered to be temporary shortages, they are considered
to be structural shortages. In Spain there is a very elaborate
system that it has developed at regional level. There are objective
criteria applied, namely vacancies by occupation compared to unemployed
persons in the same occupations and these are determined at regional
level; there are essentially quotas established by occupation
and region. This is an overly complicated and rigid system but,
in practice, there is a certain flexibility in moving across occupations
and an employer can always choose an occupation that is on a list
but use a person in another area.
Q468 Lord Layard:
I understand that there is another parallel criterion, which is
whether the employer who is proposing to employ you, regardless
of the name of the job, has been unable to fill that vacancy in
more than a certain amount of time. Do you think that that criterion
can be made to work or not?
Mr Martin: This kind of criterion, saying there
is an employer with a specific job vacancy which he or she has
been unable to fill for a certain time on the domestic labour
market, of course does exist; it is the underlying principle of
the H1B visa in the United States. The employer is supposed to
pass a labour market test to demonstrate to you that he or she
has been unable to fill this vacancy from the current unemployment
pool in the local region or within the country as a whole. A number
of countries do indeed apply such a criterion. The Tier 2 system
in the UK of permits will apply a variant of that. You can go
further, for example, as some people have argued, and say, "Let
the employers determine the needs. We need X number of IT specialists
and we're unable to find them locally. Give us X number of visas
so that we can bring in these workers from abroad and in return
we'll pay the fees and process these workers." That is a
perfectly understandable system, but of course it puts the employer
in the driving seat and that is an issue that you need to consider,
whether you are prepared to vest all that responsibility or that
key role in your system in the employer so that it becomes in
some sense a demand-driven system where the employer tells you
that he has this number of vacancies, he cannot fill them domestically
within a reasonable time and, therefore, he asks you to give him
the permits so that he can bring in these workers.
Q469 Lord Lawson of Blaby:
Another action is whether we really want to pretend the price
mechanism does not exist, which is the underlying basis of everything
that you have just been saying. I am not saying you are advocating
that but that is the description.
Mr Martin: If I went one step further and said
we establish a number of permits and allow employers to bid for
those permits and pay a price for those permits, I would then
in some sense have replicated an auction market in which employers
could purchase the migration permits and pay a price that in some
sense resembled a market price so long as there was a reasonable
auction. Many academics have argued this as a way of dealing with
precisely the issue that the question raised, but there is no
country at the moment that has been willing to allow the market
for shortages and the market for immigrants to be determined in
this way by employers. It is true that many countries charge fees
to employers to process permits for migrant workers, but these
fees are essentially usually presented as administrative fees
or, in the case of the H1B visa, there is a small element of the
fee which is supposed to be earmarked for training.
Lord Lawson of Blaby: The point I was
making is that, as you say in your paper, "Managing Migration—Are
Quotas and Numerical Limits the Solution?", which I think
contains an excellent analysis of the situation, it is all very
well for employers to say we cannot get anybody because they are
not prepared to pay a particular price and they would have to
pay more to get local labour, you say that that has a down side
too. There is no such thing as an absolute shortage, it is related
to what you are prepared to pay, and that is why I say in a sense
this analysis during the earlier part of your answer is vitiated
because it ignores the price mechanism and by the price mechanism
I am not talking about the price for quotas or individual permits,
I am talking about the price for labour.
Q470 Lord Macdonald of Tradeston:
Do you think that governments should set quotas for immigration,
and what has been the international experience of quotas? How
are they set and are they effective in managing immigration?
Mr Lemaitre: When we talk about quotas we need
to be clear about the terms we are using here. There are numerical
limits, there are targets that the Canadians and Australians set,
targets to be achieved, targets for various types of migration,
skilled migration, family migration, humanitarian migration. When
we talk about quotas, we are talking about disaggregating the
total according to nationality or occupation. Italy, for example,
has bilateral agreements with a number of origin countries. Each
of those countries is assigned a particular quota of labour migration
entries and that quota is in fact a maximum. The number of people
that arrive cannot exceed that number. The United States has certain
maxima with respect to migration in certain categories. Switzerland
has a maximum for the total labour migration. In the past that
total was so high that it was never achieved. This only changed
when they brought in the free movement of people from the European
Union. Then that maximum was almost immediately reached. The term
here has to be understood in different ways. The Australians and
Canadians have tended to use this essentially to demonstrate that
migration is well managed, that they can set it at a particular
figure and that they can achieve it. The aim is not to come under
it but to achieve the target level. Some of the forms of migration
which every country deals with are non-discretionary, the migration
of immediate family, refugees, so how do they set targets for
this? They do not really have any policy control over it, but
from past experience they know roughly how many people to expect
in these categories and they know from the number of asylum seekers
in the pipeline how many refugees they are going to get, so they
can set numbers for these categories as well. You have a total
figure for Canada and Australia that describes each of the various
types of migration. It takes a fairly good administration of the
system to achieve these targets. Some of it is handled simply
by controlling the processing procedures. They say the advantage
of this is—and it is really a public relations goal to a
certain extent—to demonstrate to the population that migration
is under control to a large extent, and I think it has achieved
its objectives in this area. One of the problems with this is
that you need to be sure that you do not set quotas too low. You
need to avoid the creation of a backlog. This has been the major
problem historically with this type of system. Canada currently
has a backlog of 750,000 to 800,000 or so persons who essentially
satisfy the criteria for immigration but who cannot get in because
a certain maximum has been established and there just is not room.
Other countries have ways of dealing with this. The Australians
control this process through their pre-screening to a certain
extent and through also setting the points threshold very high
and by allowing people that are just under the threshold into
a pool, so you can play around with the numbers at that point
a little bit. New Zealand deals with it essentially by soliciting
expressions of interest from potential immigrants and then essentially
only inviting certain persons who have desirable characteristics
to apply. So there you have a way of putting in a numerical limit
or a quota of some sort and having some control over the situation.
The existence of a backlog in both the United States and Canada
is creating some major problems essentially because it creates
lots of frustration. Some of the migrants ended up coming over
in anticipation of eventually getting accepted. This is a problem
that needs to be dealt with very carefully when you set up this
kind of system.
Q471 Lord Kingsdown:
If you are going to set quotas, you seem to me to be possibly
the victim of two things which you cannot control yourself: the
first one is your own immigration and the second is the re-migration
of earlier immigrants. You cannot stop them doing this, either
of those categories. Does one know what sort of numbers are involved
in this? I find myself needing some convincing about quotas, given
these two uncertainties in the background.
Mr Lemaitre: The Australians and Canadians historically
have attempted to modify the numbers according to the business
cycle; in other words, the numbers have gone up during an upswing
and gone down during a downswing. Canada deviated from that behaviour
in the early Nineties. The number of people that you are going
to allow in is essentially based on—I cannot say that it
is based on any strong scientific basis—historical experience
of what the economy can absorb and what labour needs are expected
to be. If the quotas are too low, clearly you are going to have
labour shortages. In a situation of strong labour shortages that
is not going to be a good thing. If your maximums are very high,
as occurred in Canada during certain recessions in the Eighties
and the Nineties, what happens at that point is that your immigrants
take much longer to integrate, to get a job and it becomes a very
costly proposition for the receiving country.
Mr Martin: No OECD country really controls outflows
of the population. In fact, there are very few countries in the
world—maybe North Korea and one or two others—that
actually control systematically the emigration of their citizens.
Secondly, the phenomenon of re-migration or return migration is
an important thing to bear in mind, but again it is very difficult
to predict, it is not well captured in much of the statistics.
I do not think there is any way in which you could adapt a quota
that would allow systematically either for a good estimate of
emigration or return migration without presumably some overall
impact on the population or the total labour force over some period.
Lord Kingsdown: It seems to me to put
rather a big question mark over quotas.
Chairman: Enough said, I think!
Q472 Lord Paul:
Some of the evidence which we have received, and also every now
and then you read in the press, is the criticism that the economic
benefits of immigration really are not that much for the pre-existing
population. Can you tell us the experience in the other countries?
What can the Government do to make this more beneficial to the
local population?
Mr Martin: This is a subject for which there
is evidence, not just for the United Kingdom but also for a range
of other countries. Broadly speaking, I would say that the opening
statement that you made is roughly correct, ie if you look at
the impact of increased immigration on economic growth, there
are essentially two direct mechanisms. One is the increase in
the labour force, which is noticeable, but given that the inflows
in most cases tend to be rather small relative to the existing
size of the labour force, you are not going to get a huge increase
in the growth rate in the short run through that mechanism, though
you will get some impact. In the UK I have seen some estimates
which would suggest that anything between 15 and 20% of the growth
rate over the past decade can be attributed directly to the impact
of immigration in raising the labour force in the UK.
Q473 Lord Lawson of Blaby:
That is GDP?
Mr Martin: Yes. The second mechanism would be
through the impact on productivity, which is the effect that you
were referring to, my Lord. Here the evidence is much more difficult
in some senses perhaps to interpret because much depends on the
type of immigrant that you are getting and the impact on the labour
market and occupations in which they are finding work. If they
are finding work in above-average paid occupations, you may get
a positive impact on maginal productivity and therefore on productivity
per head, but if you bring in immigrants who have either below-average
skills or who are trading down into occupations below their current
educational attainment, then that may also lead to a decline in
average measured productivity per head in the economy, at least
temporarily before they would move out of these occupations and
into better-paid jobs. I think the best evidence on this would
suggest that if you look at the impact of the recent types of
immigration into the UK, on average this has brought in people
with higher skills than much of the native population and therefore
there appears to have been a small upward impact in terms of productivity
in the UK. I would say that this has also been borne out in some
other countries. It is certainly the case in my own country, Ireland,
over the past ten years or so. We have systematically had a large
influx of immigrants from the A8 countries and on average these
tend to be better educated than the native Irish workforce. These
immigrants had higher rates of labour force participation and
employment than their native-born counterparts, even though they
earned on average 15% less in 2005. There are other arguments
that economists would make about whether you bring in enough high-skilled
immigrants who can have a positive complementarity to investment
in research and development and innovation. There is not much
empirical evidence on this as distinct from theoretical evidence.
I think there are perhaps two areas in which policy could directly
try to increase somewhat the benefits. One is putting more emphasis
on selection and, in particular, trying to select more highly
educated and more highly skilled workers. That does seem to be
one mechanism by which you can do it. Remember, if everybody else
is trying to fish in the international pool for talent, you may
have a bit of a problem here as a country trying to attract the
brightest and best to your shore as distinct from other shores.
The second is the age effect. As my colleague Georges Lemaitre
pointed out, some of the countries that do selection already try
to select younger workers. This is because the public finance
benefits from immigrants are likely to be higher, the younger
the immigrants in terms of their working-life cycle. We see there
are some quite interesting differences in countries such as Australia,
Canada, New Zealand and the UK in terms of how many points they
award based on the age of the immigrants. Clearly if you want
to maximise the public finance benefits, you should want to take
younger, more skilled immigrants, preferably with no dependents
and, putting it bluntly, preferably they would leave at the age
of 65 before they start running down their claims on pensions
and health. As we all know, that is a non-starter.
Q474 Lord Lamont of Lerwick:
Would you say there are any arguments for unskilled immigration?
You have made a powerful point about the life cycle and the costs
of retirement. If there is no unskilled immigration, we are told
there are certain occupations where it will just not be filled.
What would be the answer to that? Investment? Mechanisation? There
are some jobs where that does not really appear possible and maybe
those jobs would just go unfilled.
Mr Martin: I think you have partly provided
the answer yourself, my Lord. It is clear that there are a range
of occupations in many OECD countries in which, for a variety
of reasons, including higher aspirations, social welfare benefits,
thresholds, unionisation, et cetera, domestic workers are rather
unwilling to take up these jobs at the prevailing wage rates and
conditions of work. As a result, many of these jobs, which are
in certain services, including domestic services, are increasingly
being filled by immigrants. There is a demand there and there
will continue to be a demand in the future for these kinds of
skills and occupations, and they will be filled in many cases
by immigrants, either legal or undocumented, as is sometimes the
case in quite a number of OECD countries.
Q475 Lord Paul:
Is it not the case, without countries specifying age groups, that
most of the immigrants are of a much younger age anyway?
Mr Martin: Yes, I think this is certainly true
because if you look at it from the viewpoint of the immigrant
themselves, that is the selection process that takes place abroad,
who decides to emigrate and under what circumstances, it is very
clear that that process is age-selective and it does tend to be
concentrated among younger immigrants. You also have to bear in
mind, my Lord, that if you select the principal immigrant on the
basis of his or her age as well as education and experience, once
they are in your country they then may have rights to bring in
family dependants, whether it is spouses, relatives, children
or further established relatives, which in turn also entails some
claims on public services and the like. As my colleague pointed
out earlier, in Australia you directly select roughly about 30%
of the immigrants, but they then have the right later on to bring
in further dependants.
Q476 Lord Griffiths of Fforestfach:
If you look at the empirical literature which you have read, over
the last ten or 15 years in the UK on immigration, what is the
impact on GDP per capita of the existing population?
Mr Martin: I think that is a very, very difficult
question to answer. My reading of the literature—and I think
some other people could read it slightly differently—would
be that there is a very small positive impact on GDP per head
through the direct impact on average earnings and through the
contributions, that for the moment are in the short and medium
term, to the balance on the public finances. I do think that the
evidence that I have read and the calculations that I have seen
and the ones that we have done in the past would suggest that,
at least in the short to medium term, there has been a positive
impact on the public finances in the UK as a whole, and to the
extent that there is, that then that accrues to the native-born
population. My rough answer would be a very small positive balance.
Q477 Lord Lamont of Lerwick:
Do you think migration in any sense causes employers and governments
not to invest sufficiently in training?
Mr Martin: That is a very good question. There
is virtually no evidence that I am aware of on this that would
give you a satisfactory answer to that question. You might certainly
feel that in the short term, if employers have significant shortages,
they have two possibilities. One is to invest in either attracting
more native workers or investing more in the training of their
existing workforce or appealing to migrants. To the extent that
they are able to do the latter and the costs of training are high,
then there may be some short-term trade-off in this area. I am
not aware of any good empirical evidence that would demonstrate
this or that would demonstrate that any short-term trade-off actually
transformed itself into a medium or long-term one. I would be
rather surprised because much will then depend on whether you
bring in migrants who are already trained. Remember, that improves
the productivity of the capital stock and the native workers that
you have already working in these occupations. So in turn that
may give you more incentive, because your profits have increased,
to invest more in training both natives and migrants, but all
this is very theoretical, I have to admit.
Mr Lemaitre: When talking about a trade-off
between migration and the training of domestic workers, the implication
is that there is a certain possibility of choice about whether
or not to let in migrants, but in the last three or four years
most of the movements into the United Kingdom have been free movements,
non-discretionary. Once you make the decision to allow this type
of migration, you no longer have any more discretion about cutting
things off or slowing things down. The same applies to lots of
different types of migration. This was the object of the paper
that we presented to you; it was actually to illustrate that non-discretionary
migration accounts for a significant proportion of migration in
many countries.
Q478 Lord Lawson of Blaby:
But not in the UK. As your paper points out, there is a striking
difference between the UK and Western Europe. In the rest of Western
Europe, certainly the countries covered by your study, discretionary
migration is a small proportion of the total. In the UK it is
the majority, 51%.
Mr Lemaitre: That is no longer the case, not
with free movement. I think those numbers applied to before free
movement. When you think about the enlargement countries, that
is largely non-discretionary now.
Q479 Lord Lawson of Blaby:
It is still higher in the UK, is it not, than in the rest of Western
Europe?
Mr Lemaitre: The discretionary part probably
is, because you do have much more labour migration. I do not think
it is as high as 50% now because you have had huge inflows, a
free movement-type of migration. The trade-off that you are talking
about arises only for that part of migration over which governments
have some sort of policy control and this is essentially the Tier
1 and Tier 2 type, but certainly not the free movement type of
migration.
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