The Migration Advisory Committee (MAC) has published an interim report on EEA workers in the UK labour market and the impact of migration on the UK ahead of a final report due in September 2018. The final report should steer the UK government on what immigration system the UK should adopt at the end of the Brexit transitional period in 2021.
The interim report is 67 pages long with an annex of 173 pages so we have highlighted some of the key themes from the report below:
- 2004 marked a point at which high-quality EU migrant workers became available at a reasonable wage, leading to increased EEA migrant employment especially in many lower-skilled sectors. Before 2004 EEA migration was primarily high-skilled.
- Fears about the future migration system were particularly great in lower-skilled sectors where many workers would not be eligible under Tier 2 of the Points Based System. The depreciation of the pound following the referendum result and the perception that the UK is a less attractive place to be for a migrant, set against a reviving Eurozone and rising incomes in Eastern Europe, have made it harder to recruit in a number of sectors.
- On paper there is a wage differential depending on where an EEA migrant comes from. Those from an older member state (an EEA member state before 2004) tend to earn more than UK-born workers (12% more), whereas those from the newer member states tend to earn less (27% less). Workers from the old member states seem to be paid much the same as an equivalent UK-born worker. Workers from new member states are paid 4% less in low-skilled jobs.
- The vast majority of employers responding to the Call for Evidence seek the best available candidate to fill vacancies regardless of their immigration status. Cost is not usually the determining factor. The MAC’s view is that this amounts to saying it is possible to hire a given quality of worker for lower wages if they are EEA migrants than if they are UK-born.
- The common reasons why employers consider EEA migrant workers might be the best (or only) candidate for a job are:
- they have the skills which are scarce among the UK workforce;
- they often have a higher motivation to work even when the hours are long or unsociable;
- they are prepared to do jobs in difficult conditions that the UK-born workforce are not interested in, or in sectors that the UK workers view as unattractive; and/or
- a tight domestic labour market due to low unemployment.
- The MAC believes it is hard to assess many of these claims objectively. For example, higher motivation to work may be due to EEA migrants generally being healthier (fit enough to migrate). Low wages may also be part of the image problem despite many employers denying this.
- The MAC does not find it credible that employers claim that wages are irrelevant to their ability to recruit and retain in the current labour market where wage growth is weak and unemployment is low. An individual employer should always be able to fill the job if a sufficiently high wage is offered, notwithstanding skills shortages. Government and employers will need to take action together to ensure UK-born workers are appropriately trained to address the reported skill shortages. Firms with the highest productivity are best placed to recruit and retain workers.
- Declining wages is linked to the financial crisis rather than the expansion of the EU, and has affected UK-born workers of all skill levels, not just those in lower-skilled jobs where the increases in EEA migration have been concentrated.
- Many employers see no alternatives to EEA migrant labour; restrictions on the ability to recruit them will therefore mean businesses might be forced to relocate to Europe to access EU labour without restrictions. The MAC thinks it is important to be clear about what the consequences of restricting migration would be for the UK. In the absence of clarity about what the restrictions might be, it is difficult to assess how effective any contingency plan / counter strategies will be.
- Training UK-born workers to fill skills shortages may be a feasible long-term strategy but in the short-term EEA migrants may still be needed to fill the gap (especially the case for occupations where training takes many years).
- Investment and innovation options that could reduce reliance on EEA migrants are currently limited. Businesses will need to develop contingency plans to prepare for a changing and tighter labour market with increased competition for labour.
- Reduced EU migration may stop the growth or even reduce the population of Northern England, Scotland, Wales and Northern Ireland in the long-term.
- A more restrictive migration policy would only lead to large numbers of unfilled vacancies in the short-term. Available evidence suggests growth in employment is largely driven in the long-run by growth in the labour force.
The report does not say how EEA migration will fit into the current immigration system post 2020 but our advice is for employers to consider their current workforce and how a more restrictive immigration system could affect its business. How would it affect your ability to hire if employing EEA nationals was to be more expensive or administratively cumbersome?
EEA nationals in the UK should apply for registration documents and British citizenship (if possible) at the earliest available opportunity.