Will managed migration help the UK skills challenge ?

1
Will managed migration help the UK skills
challenge ?

• Richard Pearson
• University of Leicester
• in Melbourne, 16 February 2006

2
Contents

• The UK skills challenge
• Migration the story so far
• The UK governments proposals
• Will the policy work for skills (not the
  political or process point of view)
• Presenting a policy not an academic perspective
• Particular interest in how we can link skill
  needs and migration numbers

3
UK Growth

• 10 years economic growth but slowing
• A good long term average but not so much better
  than EU
• But low productivity v US EU
• Low unemployment at around 5, just starting to
  rise
• But skill shortages
• Wage pressures benign
• Low inflation at around 2
• Focus on knowledge society

4
The 3 skill challenges

• Employers expressed needs
• Unarticulated needs eg higher levels/quality
  health care workers,
• Workforce needs

5
Employers skill problems

• Issue since at least 1845
• Many employer surveys show one in four suffering
• Hard to measure asking employers has problems
• Good surveys now segment
• Skill Shortages
• Hard to Fill Vacancies
• Skill Gaps
• In this way problems less acute only 4 with
  skill shortages (only 21 of all vacancies)
• Are Skill Gaps a ve sign of business change or
  transition ?
• Do we have a low skill equilibrium ?

6
All types of occupations affected

• One in four graduate recruiters have shortages
• Engineers and sometimes IT
• Nurses doctors, social care
• Skilled craftsmen and technicians
• But also low skilled, and office based
  occupations
• Project management skills
• Congitive skills growing in importance
• Location eg London/S East a big dimension

7
Workforce skills

• International skill comparisons a major policy
  focus since early 1980s
• UK has
• Good stock of high level skills - 25 have a
  degree
• Good graduate supply
• Poor craft/technician skills and training
• 1/3rd lack basic skills
• 40 not functionally numerate
• 16 not literate, across age groups
• Unknown number workshy or not work ready
• And
• Low unemployment
• High employment rate

8
Low/no skills are a big problem

• Welfare dependency
• Crime anti social behaviour
• Poorer health
• Teenage births
• Shorter lives
• Maintained through generations
• Linked to poor parenting, health, housing, peer
  pressure/clusters, location
• Policy now trying joined up local area
  initiatives inc housing, childcare, transport,
  parenting,

9
Future skills demand

• Hard to be sure but
• Public services been driving job growth
• Demand polarising
• Hi level eg professionals and managers
• Low skilled services
• New and existing w/force need to improve skills
  eg 70 of 2020 w/force already completed their
  basic education and training

10
The way ahead is complex

• Competitors investing fast
• 18 major national initiatives since 1990
• Multiple targets set and ignored
• More than 24 institutions currently involved plus
  colleges/schools, employers and individuals

11
Some skill responses

• HE (over) expanded on econ grounds leading to
  over qualification ?
• New Deal helped frictional unemployment but big
  drivers now employability, basic skills, location
• ETP 5bn helping basic skills in work place
• Further/vocational education still the cinderella
  (now shifting to employer demand as driver)
• Joined up/local area initiatives now linking
  skills, housing, parenting
• More planning co-ordination by locality,
  sector, occupation

12
What is the solution ?

• Training and skills are only part of the solution
  to productivity and GDP growth also need
  innovative firms, RD, infrastructure etc.
• And if training is not working ? lets try
  Migration

13
Migration in UK the context

• Long history
• Settlements going back 2000 years
• 1600s Recorded brain drain with French
  headhunting ship workers, silver smiths
• Regular migration flows since 1700s
• Immigration/race a big issue in the 1960s 70s
• Net outflows in 1970s and early 1980s
• Brain Drain big issue since 1980s
• Immigration now back in the headlines
• Some scares with Single market in 1992
• Illegal immigration
• Sangatt reception centre
• In 2004 UK one of few to immediately open borders
  for work for the Accession countries
• The Polish plumber
• Race relations
• The Daily Mail

14
Recent trends

• Global labour markets at the top eg foreign
  nationals have headed BA, GSK, ONS, QCA, RCN,
  Vodaphone
• Economic growth
• UK a major draw for those in IT, finance,
  biotechnology and health
• Opening borders, global pressures

15
Some key inflow numbers

• In 2004 over 580,000 entered the UK to work or
  live, a figure that risen dramatically
• New Zealand, Spain, Ireland, Austria, and Germany
  have larger inflows per capita.
• 100,000 were returning UK nationals, including
  some brain drainers
• 140,000 entered on work permits the largest
  numbers from India, the US, S. Africa and New
  Zealand.
• 60,000 working holiday makers
• 290,000 have entered from the accessions states
  in eastern Europe since May 2004 (85,000 went to
  Ireland).
• Others entered as asylum seekers, domestic
  employees, and through family links.

16
Asylum removals

• 50,000 asylum seekers were granted settlement ie
  refugee status in 2003 (included big backlog)
• 61,000 applied for such status then but number
  since fallen
• 55,000 removals in 2004 (mainly non asylum
  seekers)
• UK has fewer asylum applications relative to its
  population than eg Switzerland, Sweden, Belgium,
  Netherlands, Germany
• The numbers claiming asylum globally has fallen
  in recent years

17
What is often overlooked

• 360,000 people left the UK to live overseas in
  2003
• Two thirds were UK nationals.
• The net inflow to the UK was just over 220,000
• Migration drives over half of the projected
  population growth to 2030

18
Foreign born in the UK

• 4.9 million in the UK, over 8 of the population
  and over 10 of working age population.
• Much lower than in Austria, France and Germany,
  as well as in Australia, Canada, New Zealand and
  the USA
• High concentrations in finance, IT, hospitality,
  health and education sectors.
• 45 live in London, (1 in 3 of working age
  population).
• Half of the new nurses in 2002 (mainly non EU)
• 10 of nurses, 16 of dentists, 25 of doctors
• 60 of those working in London hotels and
  restaurants.
• One in four employers expects to recruit from
  overseas in the next year.
• White migrants do better than black migrants
• Skills of asylum seekers and refugees often
  wasted

19
The official view

• Bank of England migrants are holding down
  inflation..
• Treasury ..immigration makes an annual net
  contribution of 2.5 billion to the economy and a
  1 increase in inward migration is associated
  with an increase of GDP of over 1 ..
• DWP Lower illegals, Higher employment
  output, Possibly higher u/e claimants, slower
  wage growth..

20
Current policy

• 50 entry schemes
• Seen as bureaucratic, and not transparent
• Refugees are dealt with separately
• Restrictions on recruiting health and related
  workers from developing countries
• Allocation of work permits simplified in recent
  years from employer driven to be skill based
• Work of Sector Skills Panels advise on sectors
  shortages opaque

21
The governments proposals

• A simple points based 5 Tier entry scheme
• Tier 1 for investors and the highly skilled who
  would help maximise growth and productivity in
  the UK
• Tier 2 for skilled workers with a job offer
  where there are skill shortages
• Tier 3 for limited numbers to fill specific low
  skill jobs
• Tier 4 for students
• Tier 5 for visiting workers, development
  schemes and youth mobility/cultural exchanges etc
  
• Points would take account of factors such as
  previous salary, skills, age, English language
  following the Australian model.

22
The 3 Skills Tiers

• Tier 1 for investors and the highly skilled as
  defined by points scores.
• Tier 2 for skilled workers with a job offer
  where there are skill shortages.
• A new Skills Advisory Body to advise
• Possibly employers proving difficulties, and
  Auctions.
• Salary seen as the best indicator of the
  individuals contribution to the UK economy
• May be regional criteria, Scotland already has
  its own migration agenda.
• Applicants are likely to need the support of a
  sponsor or job offer.
• Tier 3 for limited numbers to fill specific low
  skill jobs.
• The government does not see a need for low skill
  immigration for non EEA nationals following EU
  enlargement.
• The Skills Advisory Body to advise on any short
  term needs in sectors such as hospitality,
  agriculture, and food processing .
• Likely to need the support of a sponsor or job
  offer.
• Possibly quotas managed by an accredited
  operator who selection and manage workers
  including their return, through eg (witholding)
  compulsory remittances or bonds.
• Tiers 1 and 2 - family members can accompany
  them, and long term residence after five years if
  they meet the necessary conditions. Tier 3 would
  be for a time limited stay.

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Major issues for the SAB

• How can the Skills Advisory Body (SAB)
• Forecast long term skill needs (employers,
  models, benchmarking, cost benefit, DELPHI?)
• Assess supply side
• Balance the impact of interventions eg
• wages, technology, smarter working,
• internal flows ?
• EU flows ?
• Emigration ?
• Manage lobbying/suspect evidence
• How should the points be allocated eg past
  earnings, occupation
• How will the consequences for source countries be
  considered
• How far ahead, and with what detail will
  points/occupations be designated to allow
  employers and individuals to plan ahead?
• Will the SAB or the government set the
  points/quotas and hence migrant numbers?

24
Some other issues

• Linking Tier 1and 2 with citizenship
• How would an auction work ?
• How ensure consistent local decisions ?
• Employers not happy with devolved decisions
• Role of employers in helping integration
• Legal sanctions on employers, colleges, migrants
  eg fines, Bonds, witheld remittances

25
Will migration solve the UK skills challenge ?

• It depends on numbers and skills but
• It should help employers in the short term
• But it may also
• Reduce employers incentive to invest in training,
  innovation etc and reduce long competitiveness
• Accentuate regional differences
• Reduce wage growth
• Raise unemployment at all levels by crowding out
  indigenous workers
• Further reduce opportunities for those with poor
  skills