170.To the extent that the Government has set out a direction of travel for how it wishes to manage migration of EU nationals in future, that direction of travel seems to consist of three elements: first, that high-skilled immigration will remain welcome; second, that low-skilled immigration is potentially of concern; and third, that the UK should seek to reduce dependency on low-cost migrant labour.
171.The Prime Minister has said that “we will always want immigration, especially high-skilled immigration”, while the Chancellor has said he could not “conceive of any circumstance in which we would want to impede or prevent the flow of highly-skilled, highly-paid people”. On low-skilled immigration, the Prime Minister has made reference to people finding themselves “out of work or on lower wages because of low-skilled immigration”, and to net migration putting “a downward pressure on wages for working class people”. The Chancellor has suggested that public concern relates to “people competing for entry-level jobs with people in the UK”, and has highlighted a disparity in qualifications between British and EU nationals: “It is a challenge for somebody who has perhaps been long-term unemployed and excluded from the labour market, and who has very low levels of qualification or educational attainment, to compete with somebody from eastern Europe who perhaps has a degree-level qualification but is seeking to work in an entry-level job.”
172.The Chancellor has also indicated that the Government will seek to make progress against its “long-term objective” of reducing net migration the tens of thousands through “a combination of upskilling in our own population to fill gaps … and investment of capital, for example in the agricultural and horticultural sectors”. He has suggested that in these sectors “there are steps of automation that can be taken by investing capital but are not taken when access to low-cost labour is available”.
173.It will be clear from these quotations that the debate around low-skilled immigration to some extent overlaps with the debate on EU immigration, in part because a significant proportion of EU nationals in the UK are thought to be working in ‘low-skilled’ jobs. In 2013, an estimated 42% of the total stock of migrants in low-skilled jobs were born in the EU. That figure had risen to 76% in the year ending September 2016. As shown in Figure 9, EU nationals made up around 5% of those in employment in the ‘high’, ‘upper middle’ and ‘lower middle’ skill categories, but around 15% of those in the ‘low’ skill category in the year ending September 2016. Mr Goodwill told us that “the reason [he] specifically mentioned low-skilled migration in the context of Brexit is that we do not get low-skilled, low-wage people coming from outside the EU. We shut off that particular route as we were members of an EU that was enlarging.”
Source: ONS, Annual Population Survey
174.In view of how the Government appears to be framing the problem that its future migration policy in respect of EU nationals will seek to address, we sought our witnesses’ views on the links between low-skilled migration, wages, skills and industrial strategy.
175.It will be clear from the statements by Ministers quoted above that references to “low-skilled” immigration can be misleading. As Madeleine Sumption, Director of Oxford University’s Migration Observatory, told us, the nature of the job is more important than the skill of the individual doing it, because “there are a lot of people who come in who are highly educated, but they are working in low-wage positions”. The TUC made the same point, suggesting that there was “quite a lot of evidence that migrants from Eastern Europe are, on average, doing jobs that are further below their skill capability than domestic workers, although it also applies to a whole range of domestic workers”.
176.A second point witnesses emphasised was that the salary for a job is an inadequate proxy for skill. The Institute of Directors argued that “the Government must not confuse something like a salary with a skill set”, and warned that “what is defined by policymakers as an unskilled or low-skilled job would often be considered a skilled job by general members of the public”, citing nursing as an example. NHS Employers cautioned against using “salary and earnings … as a proxy for economic worth and economic contribution”, noting that “the vast majority of people in our sector are at a disadvantage relative to that, because as public sector employers or social care employers our salaries do not compete”. Universities UK warned that “a number of vital professional services staff, lab technicians and language assistants might not meet the [salary] level currently required, and would therefore be restricted from entering universities”.
177.Professor Alan Manning, Chair of the Migration Advisory Committee (MAC), told us that when talking about low-skilled work, “the definition of ‘low-skilled’ is that [people] are not tied to a particular sector in the same way that a doctor would be”. In their 2014 report on Migrants in low-skilled work, the MAC noted that there was “no single objective definition of low-skilled jobs”, but indicated they were mostly using the Standard Occupational Classification produced by the Office for National Statistics.
178.The Minister, Mr Goodwill, told us:
“As part of the Government’s policy of upskilling our economy and encouraging people into work, we do need to look at whether British people who are unemployed, who could do these jobs, need to be given the incentives to take those jobs. Some have argued that the way that immigration has depressed wages in some of the very low-skilled jobs has made those jobs less attractive to British workers.”
179. We asked our witnesses whether there was evidence to support claims that immigration is depressing wages in low-skilled jobs. Professor Manning rehearsed the conclusion of the MAC’s 2014 report on Migrants in low-skilled work, that “overall the impacts of migrants on average wages and on the wage distribution … were modest and tended to be positive at the top of the wage distribution and negative at the bottom”. Professor Manning emphasised that “overall the positive and negative effects were modest, so the word ‘modest’ is quite important”. He also noted that:
“Overall, the UK has had a very tough time with real wages ever since the start of the financial crisis. Real wages fell really substantially and by the largest amount since the 1950s. That was spread across the distribution from bottom to top. If you asked which group did least badly, it was workers at the bottom. The reason for that is primarily—and this is one of the other factors that is important—because of the minimum wage and because of the national living wage. Although the studies say that wages at the bottom might have been a little higher in the absence of migration, the estimated size of the impacts are small.”
180.The TUC noted that “there is some of evidence of [migration] holding down wage levels at the lower end of the economy”, while emphasising that the effect had been “very nugatory”. The TUC also suggested that looking at averages was not necessarily helpful:
“There are still pockets where low-skilled workers have been brought in from the European Union specifically to undermine terms and conditions in a very particular sector. We would say there are other ways of addressing that than broad-brush approaches to the economy generally.”
181.Witnesses identified the self-employed and posted workers—which are categories in their own right under EU free movement rules—as meriting further scrutiny in any debate on the effect of migration on wages. Professor Manning emphasised that everything he had said about the evidence “relates to employees”, but that “a lot of the complaints are about self-employed people”, citing builders as an example. He warned that “the data on the earnings of the self-employed is non-existent. If you asked what research has been done on the impact of immigration on the earnings of the self-employed, the answer is zero”. The TUC noted that in the construction sector, they had been involved in disputes where migrant workers “were employed through agencies and umbrella companies, and facilitated through a false self-employment route, effectively undercutting [a] national agreement”. The TUC also highlighted the Posted Workers Directive, suggesting that:
“The UK operates a system that does not enforce the rate for the job, as decided by collective bargaining, for posted workers. That means that where you have workers brought over from other countries who would be covered by the posted workers directive, their wages tend to be lower than the going rate, for instance in engineering and construction.”
182.We also asked our witnesses whether reducing low-skilled immigration could lead to higher wages for resident low-skilled workers. Professor Manning told us: “That would be one of the implications that you might draw from these studies, but do not expect too big a rise, so do not expect that will compensate people for the low wage growth that we have had because of the financial crisis and low productivity growth in the economy as a whole.” He emphasised the need for a sense of perspective and an awareness of other factors influencing wages, such as inflation and productivity growth: “Immigration is just one part of that and maybe not even the most important part.”
183.The CBI judged that any impact on wages from a reduction in immigration would not be “dramatic”, and expressed concern that “if we believe that immigration is one of the primary causes of slow wage growth, then we are looking slightly in the wrong place”. The TUC told us that although a “relatively simple, at-a-stroke way of increasing wages in low-paid sectors … would be fantastic”, immigration was not the reason for low pay in specific sectors. They instead attributed low pay to “problems of enforcement, the reduction in the strength of trade unions and collective bargaining, and so on”.
184.The NFU did not expect increased wages to result from a fall in EU immigration. NHS Employers also did not expect “changes in the migration system would affect what we pay”, adding that it was “a matter of government policy to restrict what we pay; it has been for the last six years and will be for the next three years.” In respect of the social care sector, the TUC suggested that unions in the care sector “do not push for increasingly higher wages”, because “the business model operating in social care simply does not provide for that”. In their view, “the solution to how much you pay care workers is the amount of money that goes into social care, not the sources of labour supply”.
185.Employers could respond to reduced availability of EU migrants to fill low-skilled jobs in other ways. Jonathan Portes suggested that responses could be expected to differ a lot from sector to sector, and ranged from “simply shutting down and going out of business”, to higher wages, or investment in labour-saving machinery. He noted that “unemployment in the UK is already pretty low at the moment, so it seems unlikely that the main way employers would adjust … would be simply by hiring Brits”. He also raised the prospect that wage rises “would presumably in a competitive market be passed on to consumers, although employers might have to reduce profits if they were making enough.”
186.Professor Manning suggested it was important to “ask questions about whether things have to be the way they are”, and that “you might want all sectors to think about having to compete for labour and, if they fail to compete for labour, whether that is a sector where labour is used most productively”. Jonathan Portes cited the strawberry sector as an example, which was “quite a lot bigger than it used to be before we had the availability of flexible labour from eastern Europe. There are plenty of other countries that can grow strawberries. That is one possible response”.
187.The NFU highlighted relocation overseas as another possible response from employers. They told us that their growers “have businesses globally, so if they cannot find the workforce here they will have no choice other than to move those businesses outside the UK”. They too cited the strawberry sector, noting that “we are now 50% self-sufficient in strawberries. It is something that we have taken for granted and not realised is a huge success story.”
188.Like Jonathan Portes, Professor Manning suggested employers might have the option to produce using more or less capital-intensive techniques. The feasibility of such investment will vary between sectors. The NFU told us that mechanisation of fruit harvesting was “probably 10 years away”, and that it would take “massive investment” to bring it about. The result was that growers with global businesses “will … move those businesses outside the UK, without the mechanisation and without the workforce”.
189.The prospect of increased costs being passed on in prices paid by consumers was raised by several witnesses. Minette Batters, Deputy President of the NFU, told us: “When I hear talk about people paying more for British, it is not something farmers want to see, and it is certainly not something the consumers want to see.” The TUC judged that “there is no automatic relationship between what you pay a worker and the price to the consumer, because it is subject to many other factors”, including how much you can increase productivity and how capitalised the sector can be.
190.One effect that the Government seems keen to bring about is an increase in investment in the skills of UK workers. Mr Goodwill told us that “the Government are committed to training our own people”, and that “many would suggest that one of the reasons why we have had to rely on labour coming in from the European Union and outside is because we have not had those skills available for our people”. He cited the Immigration Skills Charge of £1,000 per Certificate of Sponsorship per year, which employers sponsoring non-EU migrants under Tier 2 will have to pay from April 2017, and said it had been suggested to the Government that a similar scheme “could apply to the EU”.
191.The Institute of Directors told us: “The best way to control immigration and reduce employers’ reliance on recruitment from overseas is to increase the supply of British workers with the skills that those employers need.” They advocated “looking holistically at our education system and seeing what needs to be done there to reform and to ensure that we are producing graduates and school leavers with the kind of skills that employers need”.
192.The Chartered Institute of Personnel and Development have also highlighted what they describe as a “skills mismatch in the graduate labour market”. They suggest that while the UK’s higher education sector has expanded rapidly in recent decades, the increase in the number of graduates has not been matched by an increase in high-skilled jobs. They report that in 2010, 58.8% of UK graduates were in non-graduate jobs—and that comparisons across Europe suggested this percentage was exceeded only by Greece and Estonia.
193.As regards incentives to train resident workers, Professor Manning suggested that one might understand “why an employer might think, ‘I need a trained worker. I have two options. I can train up a British youngster but that costs money and takes some time, or I can bring in a ready-trained worker’”. He emphasised, however, that there was not a sufficiently strong evidence base to judge whether such behaviour was widespread.
194.Professor Manning highlighted the Department of Health’s request that nurses be placed on the shortage occupation list, and told us the MAC had been concerned that “one of the reasons for the shortage was that some years ago the Department of Health had cut training places for nurses, even though those courses were oversubscribed by residents, so it was partly in some sense a problem of their own making”. He believed that it was not so much that the Department had anticipated that they would be able to call on migrant nurses, but that they were under financial pressure to make economies, and “that is one of the places they decided to make economies”.
195.More broadly, Professor Sir David Metcalf, former Chair of the Migration Advisory Committee, has suggested that “in the public sector, there is a potential trade-off between spending levels and immigration”, arguing that “constraints on public spending often generate greater immigration”. He has cited paramedics, the care sector, science and maths teachers, as well as nurses, as examples. Jonathan Portes and Unite made the related point that in the public sector, and notably in the care sector, how employers might respond to a reduction in the supply of EU migrant workers was a question of public policy: “More money, less care, or some combination”.
196.As for increasing the supply of resident workers, Professor Manning pointed out that, although UK nationals may not wish to do certain jobs on current terms and conditions, “those are not necessarily so fixed in stone”. He continued: “If you have very demanding work, you have to offer a wage premium to people to do that work, just as you would generally have to offer a premium to get people to work anti-social hours and so on.”
197.Employers were less confident about the prospect of being able to avoid labour shortages by hiring resident workers. The British Chambers of Commerce argued that “to a certain extent there will always be those [low-skilled] opportunities and, in the context of the highly developed, diverse economy that we have, they are less attractive.” They emphasised the “need to make sure that we can access the labour required”, and warned that “it is going to be very difficult to do that purely through UK workers”.
198.The NFU noted that businesses growing food and other crops were in “very rural locations”, and questioned whether their workforce needs could be met by resident workers: “In Kent, they need 10,000 workers, and only 600 people are currently unemployed. Will people go from other parts of the country to Kent, to live in these very rural locations and do those jobs?” NHS Employers warned that training requirements meant that there was a “lead-in time” for increasing the number of UK nationals able to fill NHS posts such as doctors, nurses and therapists.
199.To the extent that the Government has set out a direction of travel for how it wishes to manage migration of EU nationals in future, that vision seems to consist of three elements: first, that high-skilled immigration will remain welcome; second, that low-skilled immigration is potentially of concern; and third, that the UK should seek to reduce dependency on low-cost migrant labour. Each of these elements merits closer scrutiny.
200.It is not self-evident to us that migration for high-skilled work should be treated preferentially relative to migration for low-skilled work—not least as the increase in the number of graduates in the UK has not been matched by an increase in high-skilled jobs.
201.The Government is making a link between the availability of migrant labour from the EU and the incentive to train or upgrade the skills of resident workers in the UK. The evidence we took suggests that there is not a sufficiently strong evidence base to judge whether that link is robust. Nor is it clear why any such link should exist for low-skilled work but not high-skilled work.
202.We note that when it comes to investing in the skills of the resident workforce, successive Governments have not led the way: doctors, teachers and nurses feature prominently among the migrant workers recruited through the Shortage Occupation List. In the case of nurses, the MAC has suggested that this may reflect a failure to invest in training places, and a reluctance to use pay to aid recruitment and retention. In the public sector, there may thus be a trade-off between spending levels and immigration: reducing immigration in the future may require more public investment upfront. This presents the Government with hard choices—for example, nurses’ pay accounted for about one tenth of NHS expenditure in England at the time of the MAC’s report in March 2016.
203.Reducing EU immigration is unlikely to provide a quick fix for low wages. Indeed, the evidence we took suggests that the effect of migration on wages at the bottom of the wage distribution has been modest, and that other factors such as the National Minimum Wage, National Living Wage and inflation were more significant in driving (or impeding) real wage growth. There does, however, appear to be a case for examining more closely the effect that self-employed EU migrant workers and posted workers may have had on the UK labour market before devising any new, post-Brexit arrangements for EU immigration in these categories or their future equivalents.
204.As for the Government’s assumption that resident UK workers will eventually fill the jobs vacated by EU migrant workers, the evidence base to support or refute that assumption is simply not there. The outlook may in any event vary sector by sector, and hinge not only on skills but also on factors such as labour mobility within the UK and the potential effect of incentives such as higher wages. We therefore recommend that the Government focuses on improving its evidence base before further entrenching the skills-based immigration policy that the UK already operates in respect of non-EU nationals.
205.Were the UK to adopt immigration rules for EU nationals that restricted, or indeed choked off, the supply of EU nationals to fill low-skilled jobs, employers’ responses would probably vary sector by sector, and it has been beyond the scope of our inquiry to examine those potential responses in detail. But if the Government’s ultimate objective is to reduce dependency on low-cost migrant labour, the considerations in play will reach well beyond immigration policy: a reassessment of the Government’s industrial strategy, its education and skills policy, and its public spending plans may also be required. We must recognise that crucial sectors of the economy are highly dependent on migrant labour. It is essential that any changes do not endanger the vibrancy of the UK economy, and that any transition to a new equilibrium is phased in gradually over time, as the evidence base available to policy-makers becomes more robust.
228 Theresa May MP, Speech on The Government’s negotiation objectives for exiting the EU, 17 January 2017: [accessed 28 February 2017]
229 Oral evidence taken before the Treasury Committee, 12 December 2016 (Session 2016–17), (Philip Hammond MP)
230 Theresa May MP, Speech to the Conservative Party Conference on Brexit, 2 October 2016: [accessed 28 February 2017]
231 Theresa May MP, Speech on The Government’s negotiation objectives for exiting the EU, 17 January 2017: [accessed 28 February 2017]
232 Oral Evidence taken before the House of Commons Treasury Committee, 19 October 2016 (Session 2016–17), (Philip Hammond MP)
233 Oral evidence taken before the European Union Select Committee, 26 January 2017 (Session 2015–16),
234 Oral evidence taken before the House of Commons Treasury Committee, 12 December 2016 (Session 2016–17), (Philip Hammond MP)
235 Migration Advisory Committee, Migrants in low-skilled work, Summary Report (July 2014), p 7 figure 2: [accessed 22 February 2017]
236 508,000 EU nationals out of a total of 668,000 migrants in low-skilled jobs. Adding UK nationals, a total of 3,375,000 individuals were in low-skilled employment in the year ending September 2016. Figures from ONS (2 March 2017): [accessed 2 March 2017].
237 The ONS uses the Standard Occupational Classification (SOC) to categorise skill levels.
243 Written evidence from Universities UK (), para 43
245 Migration Advisory Committee, Migrants in low-skilled work, Summary Report, (July 2014), p 5: [accessed 22 February 2017]
247 See for example as well as the quotes in para 171.
253 Under EU law, a ‘posted worker’ is an employee who is sent by his or her employer to carry out a service in another EU Member States on a temporary basis. The rules around posted workers are set out in Directive 96/71/EC concerning the posting of workers in the framework of the provision of services (, 21 January 2017, pp 1–6). Those rules have since been supplemented by Directive 2014/67/EU on enforcement of the 1996 Directive (, 28 May 2014, pp 11–31). The Commission has also published a further proposal () that would require posted workers to receive equal pay and working conditions compared to local workers. The Commission’s proposal attracted ‘reasoned opinions’ suggesting that the proposal was in breach of the principle of subsidiarity from 14 chambers of national Parliaments in 11 Member States (the EU8, EU2 and Denmark), thereby triggering the so-called ‘yellow-card’ procedure. The Commission re-examined its proposal, as provided for under that procedure, but decided to maintain it (as opposed to withdrawing or amending it).
272 See for example and .
278 Chartered Institute for Personnel and Development, Over-qualification and skills mismatch in the graduate labour market (August 2015) [accessed 22 February 2017]
279 Ibid., Figure 3.2
282 Professor David Metcalf, Work Immigration and the Labour Market, Section 7 (June 2016): [accessed 22 February 2017]
283 , see also