Britain’s economy is in a tough spot — a fact not lost on new prime minister Rishi Sunak. One question he will have to grapple with is whether more immigration could help.
It’s a touchy subject in the Conservative party. Some believe additional immigration would raise growth and improve the outlook for the tattered public finances; others say it would be a betrayal of Brexit voters who wanted less immigration, not more.
“Mass immigration has already made our economic problems worse: we cannot expect a cause of our illness to be its cure,” Nick Timothy, former aide to previous Conservative prime minister Theresa May, wrote recently.
But “immigration is good” versus “immigration is bad” is a stale debate that has never served the country well. Sunak would do better to look at what is actually going on in the real economy.
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Since January 2021, the UK’s immigration policy has had two quite different strands. It is now fairly welcoming for people coming to do jobs above a certain skill and salary threshold, but for the most part it does not allow employers to hire people from abroad to do low-paid jobs.
This was a deliberate decision to try to wean the British economy off lower-paid migrant labour, which the government argued was bad for local workers and disincentivised employers from investing in technology and training.
On the higher-paid side, the policy has been pretty smooth so far. Plenty of people have come on skilled worker and healthcare visas — indeed, experts think it is possible that overall net migration is now running at higher levels than before the pandemic (though we don’t have official statistics on that yet).
Immigration wasn’t the cause of all Britain’s problems. But it won’t be an easy solution to them either
The academic evidence suggests that skilled migrants help to increase gross domestic product per capita and innovation. And the British public doesn’t seem to mind so far: opinion surveys suggest immigration has slipped well down the list of people’s concerns.
But there is a certain arrogance to the notion the UK government can just order up more skilled workers from abroad whenever it wants. With the pound so weak and the economy probably heading into recession, that isn’t a given. Other countries are seeking to attract skilled migrants too as they try to recover from the pandemic.
Over the past year or so, Germany, the US, Bulgaria and New Zealand among others have made changes to their immigration systems to make it easier to attract skilled workers.
If the UK wants to compete, it should reconsider the high fees it charges for its visas. The total cost for a single person entering the UK as a skilled worker for three years would be £5,681 (€5,770), for example, compared with about £270 for Canada and £1,900 for the US, according to a report by the All-Party Parliamentary Group on Migration.
The question of whether Britain should become more open to low-paid migrant workers is trickier. It’s clear that a number of sectors that had relied on EU workers under freedom of movement are now struggling with labour shortages, from hospitality to food and drink manufacturing.
In a sense, that was the point of the government’s policy — to put those employers under pressure to do something differently. It’s also hard to disentangle the effect of Brexit from other factors such as the pandemic, which has caused labour shortages in countries all around the world.
I think it’s clear that in some occupations, local workers have benefited from the end of freedom of movement. Many HGV drivers, for example, have seen pay rises in the range of 10 to 20 per cent since they found themselves in short supply, unions say.
Brexit wasn’t the only cause of the shortage, but for many years migration from the EU helped employers to limp on with an employment model based on relatively low pay for antisocial hours and a lot of responsibility.
That said, there are plenty of other sectors that have struggled to raise wages even though they can’t find enough staff. A study by the Institute for Fiscal Studies found that vacancies for lower-paid jobs rose a lot between 2019 and 2021, but there was no correlation between vacancy growth and wage growth.
Visas that tie workers to their employer and potentially expose them to illegal recruitment fees in their home country could be a recipe for a new and exploited group of workers in Britain’s economy.
Chris Forde, an academic who has been studying employer responses to Brexit, says there is also little sign yet of companies investing in automation as an alternative: “Employers we’ve spoken to have spoken about the quite profound challenges associated with automation — yes some processes can be automated...[but] they’re really expensive and they’re long-term investments.”
The lesson from this experience is that cutting off immigration isn’t the best tool with which to tackle problems such as low pay, poor working conditions or weak investment — especially when government action or inaction in other policy areas (such as dreadful enforcement of employment law) is pulling in the opposite direction.
But issuing a spree of visas for people in low-paid sectors isn’t risk-free either. Visas that tie workers to their employer and potentially expose them to illegal recruitment fees in their home country could be a recipe for a new and exploited group of workers in Britain’s economy. Nor would it change the country’s underlying problems with lax labour market rules and under-investment in technology and skills.
Immigration wasn’t the cause of all Britain’s problems. But it won’t be an easy solution to them either. - Copyright The Financial Times Limited 2022
