Tackling post-Brexit Facing the future: Policy report - CIPD
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
in partnership with Policy report June 2017 Facing the future: tackling post-Brexit labour and skills shortages
The CIPD is the professional body for HR and people development. The not-for-profit organisation champions better work and working lives and has been setting the benchmark for excellence in people and organisation development for more than 100 years. It has 140,000 members across the world, provides thought leadership through independent research on the world of work, and offers professional training and accreditation for those working in HR and learning and development. The National Institute of Economic and Social Research (NIESR) is Britain’s longest established independent research institute, founded in 1938. The vision of its founders was to carry out research to improve understanding of the economic and social forces that affect people’s lives, and the ways in which policy can bring about change. Seventy-five years later, this remains central to the NIESR’s ethos. It continues to apply expertise in both quantitative and qualitative methods and understanding of economic and social issues to current debates and to influence policy. The Institute is independent of all party political interests.
Facing the future: tackling post-Brexit
labour and skills shortages
Policy report
Contents
Introduction 2
Executive summary and policy recommendations 3
1 Migration trends and impact on the UK labour market 9
2 The profile of EU nationals in the UK labour market 17
3 Employer attitudes and behaviour towards the employment of migrant workers 23
4 Impact of the referendum result 33
5 Employer views on post-Brexit immigration policy 40
Conclusions 50
Methodology 56
References 59
Endnotes 60
Acknowledgements
This report was written by Gerwyn Davies of the CIPD and Dr Heather Rolfe of the National Institute of
Economic and Social Research, with contributions from colleagues at both organisations. We would like
to thank the many employers who took part in the research for this report: the 1,060 establishments that
responded to the survey, those in the 26 case study organisations and those who took part in regional
roundtables in Wales, Scotland, London, Manchester and the East Midlands. Heather Rolfe’s contribution
to the research was funded through the UK in a Changing Europe programme. It builds on the NIESR’s
earlier research with employers before and after the referendum.
In addition, we would like to thank the many experts who shared their thoughts on the report, especially
Ian Robinson of Fragomen plc and Ian Brinkley of the CIPD, who made significant contributions to the
content of the report.
1 Facing the future: tackling post-Brexit labour and skills shortagesIntroduction
One of the main factors in the UK In contrast, comparatively little Midlands and Wales. Overall, the
economy’s ability to grow and attention has been paid to the report’s recommendations are
compete is the country’s flexible challenges facing employers designed to help maintain and
labour market, which has played in terms of entrenched labour improve the supply of labour
a key role in equipping employers shortages for low-skilled roles. and skills for all sectors and not
with the skills and diverse As a result, this report places a just for those that can recruit the
workforce they need. particular emphasis on low-skilled ‘brightest and best’. While the UK’s
sectors of the economy – such as immigration policy has historically
A key element of this flexibility social care, hospitality and food focused on the highly skilled, new
has been freedom of movement manufacturing – which employ policies will be needed to meet the
of people across the EU, which relatively large numbers of EU UK’s substantial needs for labour
coupled with strong employment migrants. in some of our key industries and
growth in the UK, has attracted a services. Our report is aimed at
very large number of EU migrants In order to inform this debate, informing this process through
to come and live and work in the and provide recommendations suggesting policies and practices
UK in recent years. for policy development and to help address this challenge.
employment practice, the research
However following the vote to explores in detail how and why
leave the EU, it appears extremely employers recruit EU nationals. It
likely that the UK Government also sheds light on issues such as
will seek to control the number of skills shortages and the availability
migrant workers from the EU as it of UK nationals. In addition, the
negotiates Brexit. This remains the report assesses whether the
case following the recent General referendum decision has had any
Election, despite the absence of impact to-date on employers
a clear parliamentary majority in terms of the recruitment and
for one party, with both the retention of EU nationals.
Conservative and Labour parties
pledging in their manifestos to However, the report’s main
manage migration from the EU as purpose is to explore solutions
part of the UK’s exit from the EU. to the challenges employers are
facing on the ground in filling
Much of the debate about future vacancies and the role that
restrictions on EU migrants has EU nationals are playing in the
focused on the need to allow workforce in order to make policy
high-skilled workers to come to recommendations that work across
the UK, for example, earlier this all sectors. The report draws on 26
year the Government announced in-depth interviews with employers
it was committed to designing an from key sectors including social
immigration system ‘that allows us care, retail, healthcare, restaurants
to control numbers and encourage and manufacturing. In addition,
the brightest and best to come to the evidence includes a survey
this country’. of 1,060 employers and six focus
groups that took place in London,
Scotland, Manchester, the East
2 Facing the future: tackling post-Brexit labour and skills shortagesExecutive summary and policy
recommendations
Alongside access to the single
market, EU immigration policy
This report describes the potential
impact that migration restrictions
‘Alongside access to
is arguably the most important would have on employers and the single market,
issue facing employers and policy- how employers would respond,
makers resulting from the UK’s explaining the context in which and EU immigration
decision to leave the European the reasons why employers hire EU
Union. At the time of publication, nationals. The study recommends a policy is arguably
shortly after the General Election
result and with a hung parliament
set of workable policies that could
apply across economic sectors. As
the most important
in place, the terms of the UK’s exit it also points out, any new policies public policy issue
from the EU are unclear. However, also have to be workable for
both the Labour and Conservative migrants themselves, or they will facing employers
parties have committed to ending decide not to work in the UK.
freedom of movement of people and policy-makers
from the EU, so it is likely new
immigration policies for EU
What do employers want
from new immigration
resulting from the
workers will need to be developed.
The UK has experienced a major
policies?
Several clear conclusions emerge
UK’s decision to
increase in labour immigration from the report. Of these, the leave the European
from the EU over the past 15 years, two most important concern the
so it is understandable that many need for a safety net for recruiting Union.’
employers are concerned about unskilled or low-skilled workers
the Government’s stated intention from overseas to ease labour
to end free movement of labour. shortages, and an immigration
system that works for them.
There are also macro-economic Without these two provisions,
risks, given that much of the UK’s some of Britain’s key industries
strong labour market performance and services, including food and
both pre- and post-Brexit has drink manufacturing, hospitality
been driven by high employment and social care, are likely to sustain
rates among migrants. A central considerable damage.
issue in the political debate is how
to link the admission of migrant Employers across all sectors are
workers to the genuine skills unanimous in their desire to have
needs of employers. The previous an immigration system that is
government stated, ‘We will quick, fair, inexpensive, simple and
always want immigration, including unbureaucratic. Many managers
from EU countries, and especially of businesses and services fear
high-skilled immigration.’ But, as that a new immigration system,
our research shows, employers by restricting the supply of EU
also need lower-skilled workers, workers, will have a negative impact
and this presents a particular on their operations. Employers in
policy challenge. the public sector and those with
substantial needs for low-skilled
workers are especially concerned.
It is frequently commented that
such employers should meet
their needs by hiring more local,
3 Facing the future: tackling post-Brexit labour and skills shortages‘Employers are British workers, yet this presents a
challenge. Many employers refer to
difficulties facing government in
terms of EU nationals already in
concerned about the unattractiveness of work such employment and the management
as manufacturing and social care of future inflows of EU nationals.
the potential to British workers, as well as to low
levels of unemployment in their It is understandable that low-
complexity of localities. It is also frequently stated skilled employers are fearful
new immigration that such employers should raise
levels of pay. While many employers
of migration restrictions given
their reliance on migrants to fill
policies, at the wish to do so, employers in sectors vacancies. According to the survey
such as social care and hospitality data, difficulties filling semi-skilled
cost of checking highlight their inability to raise or unskilled vacancies with local
pay and employment conditions applicants is the most popular
workers’ status to attract local applicants without reason for recruiting EU nationals.
and of playing passing costs on to customers and
service users. At the same time,
More positively, some employers
are aware that if they were to
the role of policy many low-skilled employers from improve their job offer they might
sectors such as food manufacturing attract a wider pool of applicants.
enforcers.’ express some scepticism about their Indeed, one of the positive
ability to attract applicants from the outcomes from Brexit and the
domestic workforce, even if they prospect of migration restrictions is
were to increase wage rates. the recognition that employers may
have to target under-represented
Employers are concerned about groups in the UK labour market
the potential complexity of new such as older workers, women
immigration policies, at the cost returners and ex-offenders to
of checking workers’ status and of offset the prospect of labour or
playing the role of policy enforcers. skills shortages. This is evident in
Many are fearful of making a the retail sector, among others.
mistake, losing the right to hire
non-UK nationals from overseas and At the same time, it also seems
suffering reputational damage. At clear that some employers of
the same time, complex rules and low-skilled labour are doubtful
procedures will not deter employers about the impact that improving
from recruiting EU migrants, since pay and employment conditions,
they largely do so out of necessity investing in skills and exploring all
rather than preference or choice. recruitment channels would have
Difficult processes will simply add on stimulating interest among
cost to businesses and services applicants from the domestic
in what may be a more generally workforce. Poor image of their
challenging environment as Britain sector, a lack of progression
leaves the EU. opportunities and record low
levels of unemployment in areas
Employers and post-Brexit such as the south-west of England
alternatives and the East Midlands, alongside
Free movement has worked well other supply constraints – such as
for employers. However, many the suitability of some applicants
of the employers that took part for roles in many regions of the
in the research believe that the UK – indicate that employers may
Leave vote, combined with the need an additional labour shortage
Government’s stance on both safety net.
Brexit and immigration, will lead
to restrictions. They recognise Many employers are also reporting
that the situation is complex and high levels of anxiety among the
appreciate the administrative EU nationals that they currently
4 Facing the future: tackling post-Brexit labour and skills shortagesemploy in relation to their future tax records. These measures employers, who have less
employment status. In addition, will provide security both to scope to improve pay and
employers who report hiring EU citizens who are currently employment conditions than
fewer EU nationals since the UK’s working legally within the UK large firms, alongside SMEs
decision to leave the European and will give a reassuring boost and charities.
Union say that the depreciation in to employers who are concerned • Enabling employers to
sterling and the current uncertainty about their ability to retain and recruit EU nationals simply
about the employment status recruit EU nationals to the UK, by sponsoring an individual
of EU nationals are the most especially for skilled roles. after the one-off licence fee
important factors behind this. has been paid. The one-off
Alongside the following policy 2 The new arrangements for charge to register as a trusted
recommendations, employers tell immigration should be phased sponsor would reflect the
us that they would like to see in gradually to allow robust administration cost to the
a more positive narrative from systems to be set up and trialled Home Office, and could be
government about the valuable and to allow employers to carry complemented by a nominal
contributions that EU nationals can out more rigorous testing of fee for every EEA worker, as is
and do make, to prevent further local, regional and national the case for non-EU nationals.
loss of valuable workers. labour markets where they have The Certificate of Sponsorship
not already done so. It would assigned to an EU national
Our policy recommendations also help the vast majority of would be a secure document
1 At the point where negotiations employers who have yet to put containing biographical and
are completed, EU citizens in place any plans to prepare employment information and
already here, living and working for migration restrictions. We could serve as verifiable proof
in the UK, should be granted the recommend that new systems of employment; removing the
permanent right to remain in the are made operational at the need for EU workers to apply
UK. There are currently more than end of a three-year transitional for a visa and would bring
3 million such people, including period once EU negotiations forward the workers potential
more than 2 million employees, are completed. This will also starting date by 1–3 weeks.2
so the Government will need help employers whose future This would reduce processing
to devise a process that can be resourcing approaches are times and paperwork, which
easily administered by applicants dependent on the terms of the is identified as a concern by
and officials. The current UK visas UK’s exit from the EU. employers.
model, where over 3 million visas • Allowing third parties, who
are issued each year, provides 3 New policies for EU migration would have trusted sponsor
a useful template. However, it should be dove-tailed with status, to sponsor EEA
could be adapted to include a those of the current points- workers on behalf of low-
simple front-end digital process based system which applies to volume users of the system.
with relatively few documentary migration from outside the EEA. Trusted sponsor status would
requirements to make this a fast This would help to ensure some involve having to meet general
and easy online process. degree of policy continuity and requirements of following
clarity. However, in recognition good practice in trying to fill
The current requirement to hold of the huge administrative vacancies with a non-migrant.
comprehensive health insurance cost and burden this could This arrangement would
(and the other requirements potentially create, and EU appeal to smaller employers in
around tax receipts) should be migrants’ proximity and ability particular, who may not want
withdrawn, not least because to meet shorter-term demands to take on the work of being a
those applicants who have not for labour, this report suggests trusted sponsor. We propose
held a certificate during their that government puts in place that proxy organisations,
stay can normally retrospectively more favourable arrangements such as law firms or trade
apply for one from their for employers that recruit EEA and employer bodies, should
government. The burdensome workers. These include: be able to act as a trusted
requirement to prove a history of sponsor on their behalf and
employment could be reduced • Halving the sponsorship ensure compliance. The main
by allowing Home Office officials licence fee and introducing a advantage of this proposal is
measured access to HMRC reduced rate for public sector that it avoids the 4–6 month
5 Facing the future: tackling post-Brexit labour and skills shortages‘Some employers in period it takes for an employer
to obtain a licence, secure a
migrants and demonstrate a
commitment to investing in skills
certain sectors and Certificate of Sponsorship and in order not to sit the Resident
be awarded a visa. Labour Market Test (RLMT).
localities expect to
4 The current system that applies 6 The RLMT should be reviewed to
have recruitment to non-EEA migration should be reflect employer concerns that
difficulties no reviewed, in particular to reduce
its administrative and cost
many jobseekers apply for jobs
that are often unmatched with
matter how hard burden on employers. Currently, their aptitude and experience.
employers are subjected to a The requirement to advertise a
they try to recruit wide range of costs that include post for 28 days is not practical
a sponsorship licence, a health for jobs with low levels of skill
local applicants.’ surcharge, a skills levy and a because of short notice periods
fee for every non-EEA national and the need for flexibility.
they employ. At the very least, Therefore, we suggest reducing
we believe that the Government the period to 14 days, which
should consider halving the would be more in line with
sponsorship licence fee for public employers’ usual advertising and
sector employers, in line with recruitment practices. The existing
the reduced rate for employing RLMT route for non-EEA workers
EU nationals. Those costs are (Tier 2 General) could be brought
substantial and significantly into line at the same time.
higher than in most countries.
For all lower-skilled roles, visas
5 The current shortage could be granted on similar
occupation list compiled by the terms of the current Tier 2 in
Migration Advisory Committee allowing for an initial stay of
(MAC) should be extended to three years. Renewal might
include jobs at lower levels then be available for a period
of skill and salary for EEA of a further two years, which
workers only.3 Our view, based would also enable individuals to
on discussions with a wide transfer to other work-related
range of employers, is that visas, in particular at Tier 2. To
this would be a better solution be attractive to migrants visas
to addressing key labour should also confer the right of
shortages in the economy than dependents to live in the UK.
introducing an array of formal Existing evidence suggests this
sector-based schemes, which would not place undue demand
would inhibit labour mobility on public services.
and add complexity to the
system. Reflecting the specific 7 The Government should extend
needs of the Scottish labour the existing Youth Mobility
market and the existing shortage Scheme in place for nationals of
occupation list for Scotland some non-EU countries to make
only, the report recommends the system more light-touch.
that the existing separate This would effectively allow
arrangements for Scotland be 18–30-year-old EU migrants to
extended to include roles at low work in the UK for two years
levels of skill and salary. Under with no automatic right to
this system, employers would remain in the UK. Transfer to
have to demonstrate that they other work-related visas should
have explored all recruitment be possible at the end of this
channels, made efforts to period, for example to Tier 2 or
make the job attractive to non- to shortage occupations, low-
6 Facing the future: tackling post-Brexit labour and skills shortageswage employers are particularly long tail of workers without basic period of major adjustment for
interested in this idea. One way skills compared with our OECD businesses and services in Britain.
of ensuring that employers’ competitors.4 This is the result However, there is no doubt that
needs are met would be to of a failure of skills and training there is potential to improve
‘nudge’ EEA youth mobility policy by successive governments, current practice in relation to
workers towards sectors with characterised by constant training and development. This
shortages, such as hospitality. changes in direction. The various will be best achieved by focusing
initiatives, structures, institutions on making significant progress
A post-study worker route and incentives have either been in a limited number of areas,
should also be set up to allow of insufficient scale and authority building on current approaches
EU students with a bachelor’s to do much good, proved and recognising that meaningful
degree or above to remain in flawed or ineffectual in practice, change will be gradual and
the UK without requiring a job or have fallen victim to the requires a stable wider climate.
offer for two years, to protect constant chopping and changing
the UK’s status and reputation of policy. Bombarded with a As a result, to address these
as a place to study and work, confusing array of initiatives, weaknesses, the report calls for
and offer employers another many employers have failed to the Government to boost demand
light-touch route for recruiting take sufficient action. The area of for skills by:
EU migrants in response to intermediate skills has suffered
recruitment difficulties. As with particular neglect, with weak • ensuring industrial strategy
the youth mobility visa, transfer employer demand and investment, has a stronger focus on
to other work-related visas compared with higher- and lower- boosting the quality of people
should be possible once the skilled labour. This is most likely management capability and
post-study visa expires. linked to business models and identifying and matching
competitive strategies which side- skills across the economy,
8 To ensure that the immigration step intermediate skills and, in so working in partnership with
system is fair and meets the doing, make sectors less attractive the UK Productivity Council,
labour and skills’ needs of UK to British workers. Investors in People, employers,
employers, the report argues professional bodies, unions
that there is a strong case for and Growth Hubs and Local
abandoning the Government’s ‘Once in every generation, Enterprise Partnerships at a
policy objective to bring at least, the Government local and sector level
migration down to the tens panics about a perceived skills • broadening the apprenticeship
of thousands per year. Net shortage in the UK economy. It’s levy into a wider training levy
migration has not been as low a crisis. Everyone gets blamed. to help boost and optimise
as this target for 20 years, A report is commissioned. employer investment in skills
during which time the UK has Reforms are proposed. A new • improving the quality of
prospered. Some of our key quango is established. Deadlines business support, particularly
industries and services would are set. Not much seems to HR support for SMEs delivered
suffer severe harm should the change. Then there is another through Local Enterprise
target be reached. panic … And so it is once more.’ Partnerships and Business
Kevin Donovan, Association Growth Hubs to help them to
Addressing the UK’s labour for Learning Technology, build their people management
and skills shortages needs 27 January 2007, quoted in and development capability
The prospect of migration https://www.publications. • allocating 5% of the
restrictions will focus much parliament.uk/pa/cm200809/ Government’s £23 billion
needed attention on the cmselect/cmdius/48/4804.htm National Productivity
Government’s employment and Investment Fund towards
skills policy. And as the CIPD supporting skills development
has recently warned, the UK is It is tempting in reports of this and lifelong learning
currently sleepwalking into a low- kind to call for sweeping reforms, • asking the ONS to conduct an
value, low-skills economy, which the commitment of large-scale urgent review of training and
is hindered by relatively low levels public investment programmes skills statistics, which should be
of employer investment, poor and big policy about-turns. This updated annually.
management skills and a relatively is unrealistic, particularly in a
7 Facing the future: tackling post-Brexit labour and skills shortages‘...retaining At the same time, the Government
could help boost the supply of
in sectors such as social care,
agriculture and hospitality will be
access to EU skills to the UK labour market by: able to meet their needs from the
unemployed and economically
migrant labour • introducing active labour inactive. EU migration has proved
market policies that target particularly beneficial for sectors
is fundamental disadvantaged groups to help that have long struggled to recruit
not just to increase the supply of domestic
applicants to employers
the labour they need, through their
relative proximity, availability and
organisational • asking the Migration Advisory suitability.
Committee to produce a list of
success but to the labour shortage occupations Overall, the report highlights that
that includes a critical analysis retaining access to EU migrant
survival of many of employer practice in relation labour is fundamental not just to
businesses and to pay and employment
conditions, recruitment and skills
organisational success but to the
survival of many businesses and
services.’ investment services. This makes it imperative
• revisiting the potential for that any new immigration system is
personal learning accounts fit for purpose, for both employers
along the lines of the Individual and for EU migrants themselves.
Learning Accounts to address It also highlights the significance
the decline in adult skills of the interdependence of the
funding, provision and take-up immigration and skills systems,
• raise the quality of careers which, if tackled together, could
advice and guidance provided in make a significant and positive
schools by ensuring that schools contribution to the Government’s
that are judged by OFSTED principal objective of building a
to provide inadequate careers strong, fairer, global Britain.
advice to pupils cannot be
judged to be outstanding.
A number of these changes
are well overdue and have the
potential to make industries
and services more effective and
productive. However, they are
unlikely to mean that Britain
needs fewer migrants. Some of
the sectors on which we focus are
highly dependent on migrants now,
but have been for many decades.
It is highly unlikely that employers
8 Facing the future: tackling post-Brexit labour and skills shortages1M
igration trends and impact on the
UK labour market
Introduction
In 2013, the CIPD reviewed the
EU citizens, after 2006 almost all
the growth has come from the
‘The origins of
evidence and conducted a survey EU. By the end of 2016 there were migration have
on the employment of migrants just over 2.2 million EU migrants
in the UK.5 This section updates in work, or 7% of the total in the changed – whereas
the trends in migration and looks UK, compared with just under
at the evidence to date on the 0.9 million, or just over 3% of the before 2006 the
economic impact of migration on
the UK labour market and the UK
workforce, in the same quarter in
2006, a rise of 150%. In contrast,
main impetus
economy. Since the 2013 report
there has, of course, been the
non-EU migrants in work increased
by just over 100,000, or nearly
was from non-
Brexit vote in June 2016, and we 10%. The increase came initially EU citizens, after
consider some of the economic from the ‘A8 accession states’,
implications that lower inward including Poland, the Czech and 2006 almost all the
flows of migrants might have on
the UK economy. Throughout this
Slovak Republics, Hungary, Slovakia
and the Baltic states. Since 2012
growth has come
section, we classify migrants by
nationality rather than birth, as
there have also been significant
increases from the ‘core’ EU14,
from the EU.’
recommended by the ONS. likely driven by continued high
levels of unemployment in much
Migrants at work in the UK of the EU compared with the UK,
Official figures show that in the and from Bulgaria and Romania
final quarter of 2016, there were (A2 migrants) following lifting of
just over 3.5 million migrants, restrictions on migration from those
defined by nationality, or just under countries in January 2014.
11% of the employed workforce.
This compares with just over 2 Employment rates for EU
million in the same quarter in 2006, migrants have also increased,
or just under 7% of the employed and for those from the A8 are
workforce. This is a substantial significantly higher than for UK
increase over the period of just citizens. In contrast, employment
over 1.5 million, or 72%. The number rates have fallen slightly for non-
of people in work who were UK EU migrants, reflecting in part
citizens also increased, by just a higher proportion of students
over 1.1 million, or just over 4%. Of in non-EU inflows in recent
the total increase in employment years. Although employment
of 2.6 million, just under 58% rates appear to have fallen for
was accounted for by increasing A2 migrants, this is misleading.
migration. Employment rates also The rate declined between 2006
increased for both migrants and and 2012, reflecting the highly
UK citizens: for migrants, from just restrictive nature of migration
over 68% to just over 73% of the from those countries in that year,
working-age population, and for UK but once migration started to
citizens, from just over 73% to 75%. gather pace after restrictions were
lifted, employment rates have
The origins of migration have risen sharply. These high rates
changed – whereas before 2006 reflect the fact that migrants from
the main impetus was from non- the accession states are much
9 Facing the future: tackling post-Brexit labour and skills shortagesmore likely to come here for Migrant flows from non-EU countries decreased
work rather than to study or as The International Passenger Survey from 343,000 to 257,000, a fall of
dependants compared with other for long-term migration (people 25%. The share of EU citizens in
migrant groups, according to the who say they are likely to stay for the annual inflow has consequently
International Passenger Survey. more than one year) gives some increased from 33% in 2006 to 51%
information about the reason why in 2016.
There are three broad conclusions people are coming to the UK. The
that can be drawn from these latest figures at the time of writing Perhaps more surprisingly, it has
trends. First, there is nothing – for the year to September 2016 been increased inflows from the
to support the notion that – show that 525,000 non-British EU14 in recent years which have
increased migration has reduced citizens entered the UK. Once contributed the most to the rise in
employment for UK citizens – non-British citizens who left over EU migrants, up from 104,000 in
both employment levels and the same period are considered, 2006 to 165,000 in 2016, followed
employment rates for the latter the net inward flow was 273,000. by a sharp rise in migrants from
are significantly higher than in These overall figures are very like the A2 (Bulgaria and Romania) to
1997, when the current statistical those for 2006. 74,000 in 2016.
series first began. Second, EU
migration has made a substantial As might be expected, the In contrast, migrant flows from
contribution both to the overall composition of the flows has the A8 have been slowing, and by
increase in employment in the changed, with more people coming 2016 were significantly lower than
UK and the increase in the UK from the EU and fewer from in 2006, at 93,000 and 58,000
employment rate. Third, that outside the EU. Between 2006 respectively, a fall of 38%. This
contribution has increased over and 2016, the annual inflow from is partly the result of decreased
time, as employment rates for EU the EU increased from 170,000 to inflows compared with high levels
migrants have risen faster than for 268,000, a rise of 58%. Over the between 2006 and 2008, shortly
UK citizens and non-EU migrants. same period, the annual inflow after unrestricted migration from
Table 1: Total change in employment for non-UK and UK nationals, 2006–16
Total employment (Q4) 2006 Q4 2016 Q4 Change 000s Change %
Total UK citizens 27,249 28,435 1,186 4.4
Total non-UK 2,024 3,478 1,454 71.8
Non-EU 1,128 1,236 108 9.6
EU 895 2,242 1,347 150.5
EU14 505 930 425 84.1
EU8 349 1,013 664 190.3
EU2 32 286 254 793.8
Employment rates (Q4) 2006 Q4 2016 Q4 Change (percentage points)
Total UK citizens 73.3 75.0 1.7
Total non-UK 68.1 73.1 5.0
Non-EU 62.6 62.3 -0.3
EU 76.5 80.7 4.2
EU14 72.8 76.7 3.8
EU8 81.6 83.8 2.2
EU2* 75.6* 84.0* 8.4*
Note: *2012–16: There was a marked fall in the employment rate for A2 migrants between 2006 and 2012, when migration was highly restricted.
Source: Labour Force Survey6
10 Facing the future: tackling post-Brexit labour and skills shortagesthe A8 became possible. However, sentiment. It may also be a Moreover, the increase in outflows
there has also been a much more consequence of the fall in the and decrease in inflows appears
recent fall in inflows to a new value of the pound. Successive confined so far to the A8 migrant
low in 2016 compared with the post-Brexit surveys of employers in group. It is also possible therefore
previous year. Similarly, there was the CIPD’s Labour Market Outlook that other factors are at work, and
also an increased outflow in the (LMO) show that a significant share as we show later in this section,
year to December 2016. Outflows of those who knew they employed migrant decisions may also be
for A8 migrants also increased migrants have reported that at influenced by relative earnings and
between 2008 and 2010, but this least some of their workforce unemployment rates between the
was most likely a response to the was considering leaving the UK UK and migrants’ home states as
economic downturn in the UK. The as a result of Brexit. However, we well as other potential destinations
more recent increase in outflows cannot quantify the likely impact, in the EU. The fall in the pound,
has no obvious comparable and there is a big difference for example, will have made
economic driver. between considering and actually some jobs in the eurozone more
leaving. As we have only one post- attractive compared with similar
It is possible that some of Brexit statistical observation, we jobs in the UK.
these more recent changes are cannot yet be entirely confident
attributable to the Brexit vote that we are seeing an established
and the increase in anti-migrant trend rather than a temporary blip.
Table 2: Inflows of migrants by nationality, 2006–16 (000s)
Nationality 2006 2016 Change 000s Change %
All non-British 513 525 12 2.3
All non-EU 343 257 -86 -25.0
All EU 170 268 98 57.6
EU14 74 133 59 79.7
A8 93 58 -35 -37.6
A2 - 74 - -
Table 3: Net balance between inflows and outflows by nationality, 2006–16 (000s)
Nationality 2006 2016 Change 000s Change %
All non-British 322 329 7 2.2
All non-EU 218 164 -54 -24.8
All EU 104 165 61 58.7
EU14 30 81 51 170.0
A8 71 19 –52 -73.2
A2 - 64 - -
Note: figures are for year to December in 2006, year to September in 2016
Source: ONS, Long Term Migration Statistics, Table 1b, published in February 20177
11 Facing the future: tackling post-Brexit labour and skills shortagesWhy migrants are coming to the eurozone following the 2008 to any country where the labour
the UK crash. In contrast, A8 migrants market offers a good supply of
In 2015, most EU nationals entering were less likely to say they had jobs with wages significantly
the UK said they were coming come for work and more likely to higher than they can obtain in
for work (72%) or study (13%). say they were coming to study their home country, after allowing
Nationals from the EU14 were less or were accompanying someone for differences in living costs, the
likely to say they had come for in 2015 than they were in 2005, financial and social costs, and
work and more likely to say they most likely reflecting the greater barriers of moving to another
had come to study than nationals maturity of A8 migration in 2015. country. As we noted earlier,
from the accession states. In 2016, migrant flows can be affected by
about 68% of EU nationals said Non-EU nationals were much other factors than the migration
they came for work compared less likely to be coming for work- policy regime in both directions.
with 82% of nationals from the A8 related reasons and much more In the past, some migration has
and 73% of those from the A2. In likely to be coming to study, with been sensitive to the ups and
contrast, 18% of EU14 nationals just 32% entering for work-related downs of the economy, as we
had come to study compared with reasons and over 41% coming noted above for A8 migration, and
less than 10% of nationals from the to study in 2016. They were also it is likely that the recent increase
accession countries. significantly more likely than EU in migration for the EU14 is linked
nationals to be accompanying or to high unemployment in parts of
Overall, the share of EU nationals joining someone else (21%). Since the eurozone and may therefore
coming to work or study has not 2006 the share coming to study reverse if conditions improve. In
greatly changed since 2005, but has increased significantly, from this section, however, we look at
there have been some changes 36% to 41%, with the shares of relative indicators for some of the
pushing in different directions for those coming for work-related accession states: Poland, Romania
different groups of EU migrants. reasons remaining stable. and Bulgaria.
EU14 nationals were more likely
to say they had come to work in Labour market push and Since 2010 unemployment has
2016 than they did in 2006 and pull factors – wages, fallen significantly in Poland,
less likely to study, likely reflecting unemployment and education Romania and Bulgaria, and in all
increased economic migration from Migrants are likely to be attracted three countries it is well below
Table 4: Main reasons why migrants come to the UK (%)
2015 Work related Studying Accompanying
EU nationals 72.2 13.3 8.8
EU14 nationals 68.2 17.9 6.5
A8 nationals 81.8 5.5 9.1
A2 nationals 73.5 8.8 13.2
Non-EU nationals 31.7 41.2 21.3
2016 Work related Studying Accompanying
EU nationals 61.0 16.9 6.6
EU14 nationals 40.4 30.8 9.6
A8 nationals 84.0 6.2 3.7
A2 nationals
Non-EU nationals 31.7 36.2 23.5
Note: 2006 is year to December, 2016 is year to September. All figures long-term migrants who said they intended to stay for at least one year. Excludes other
reasons. A8 is countries who joined the EU in 2004 (Poland, Hungary, Czech Republic, Slovakia, Slovenia, Baltic States); A2 is Romania and Bulgaria, who joined in
2008. EU national total includes Malta, Cyprus (2004) and Croatia (2010). Work-related includes those who had a job and those seeking work. Other reasons and
those who gave no reason not shown.
Source: ONS, Long Term Migration Statistics, Table 3b, published February 20178
12 Facing the future: tackling post-Brexit labour and skills shortagesthe EU average. However, it is still in the UK.10 The gap with the way into the UK labour market
higher than in the UK, especially UK nonetheless remains large. for non-EU migrants rather
for younger workers, and long- The OECD estimates that annual than good qualifications and
term unemployment is also a earnings for full-time equivalents instituted tougher controls and
much bigger problem. The UK in Poland were 60% of UK criteria. The number of non-EU
labour market has expanded levels, expressed in US dollars at students entering non-university
significantly since 2010, as has purchasing power parities11 in 2015. institutions declined substantially.
that in Poland. The strong growth More up-to-date but unofficial The most recent figures suggest
in UK employment attracts estimates for 2016 – looking just some drop-off in applications
migrants, but the attraction of at monthly salaries in euros and from EU students, but it is not
migrants has been one reason not allowing for differences in yet conclusive that this is related
why employment has grown so living costs – give much bigger to Brexit. In some areas domestic
strongly. However, there has been differences, even allowing for the policy changes, such as the recent
weaker employment growth in depreciation in the pound.12 change in fees for student nurses,
Romania and Bulgaria despite may be more significant.
big falls in unemployment and As shown above, a significant
an increase in the employment share of migration comes from UK higher education is likely to
rate (the share of the working students attending UK universities remain a significant draw to both
age population in a job). One and higher education institutions. EU and non-EU students. However,
possible explanation is large- The UK has a good reputation we do not know yet what future
scale migration to elsewhere in internationally for the quality arrangements will be and future
the EU, including the UK. So, of education, especially in its charging levels for EU students
incentives for some to move to universities. Most UK universities once the UK leaves the EU. An
low unemployment countries like have been keen to attract foreign increase in price for EU students
the UK remains strong. students from outside the EU as might act as a disincentive to
they can charge them higher fees, study in the UK, especially if future
Differentials on wage rates are allowing a degree of cross-subsidy access to the UK labour market
likely to be an even bigger draw. for UK students. Students from becomes more expensive and
Statistical information on wage overseas have also been a source restrictive. Some UK employers
levels across the EU is often out of of high-skilled labour, especially may also attempt to attract more
date, covers only some countries, as many study for higher degrees. UK students because they will be
and is not consistent. However, However, we know relatively little cheaper and easier to recruit than
those estimates that do exist all about what happens to students students from the EU.
suggest that wages have been from the EU once they graduate,
growing much faster in Poland, including how long they stay. Any shortfall in EU students
Romania and Bulgaria. The latest could in principle be made up
ILO Global Wage report showed There was a rapid increase in by attracting an even higher
that in 2015 real wages increased students coming to the UK before proportion of students from non-
by nearly 10% in Bulgaria, just 2012, but the authorities suspected EU countries or encouraging an
over 6% in Romania, just over that some non-university even higher proportion of UK
4% in Poland, and just over 1% institutions were offering an easy young people to enter university.
Table 5: Unemployment in some EU countries compared with the UK (%)
Labour market indicators 2016 Q4 Bulgaria Poland Romania UK
Unemployment rate 6.7 5.6 5.6 4.7
Unemployment rate (25–29 years) 10.1 7.3 7.7 5.0
Long-term unemployment (share) 57.7 33.8 47.5 26.1
Employment growth 2010 Q4–2016 Q4 –1.2 5.0 1.0 8.6
Source: Eurostat9
13 Facing the future: tackling post-Brexit labour and skills shortages‘Most of the rise As the CIPD’s recent report on
skills made clear, however, it is
workforce.13 This echoes the findings
for the UK. Most show either no
in EU migration not apparent that the latter is an statistically significant impacts
effective public policy response on the employment or wages of
in more recent when the major challenges are natives or very small positive or
around the vocational training negative impacts.
years has been system and the skills and
accounted for by progression agenda for the whole
workforce.
A recent review of some of the
literature by the NIESR identifies
less skilled labour.’ a number of channels by which
The net impact is likely to be some migrants can plausibly contribute
reduction in the supply of high-skill to both innovation and productivity
labour via the education system growth.14 The results broadly reflect
from overseas, but at present those for employment, with mildly
we cannot say whether this will positive impacts for the UK.15, 16
be marginal or more significant. International evidence is a bit
Moreover, even if the overall more mixed, with more significant
impact remains modest, because negative impact on productivity
the share of EU students at UK in Spain but more positive
universities is relatively small, it evidence elsewhere. An important
could nonetheless be much more factor seems to be the skill mix
of a problem in some specialities. of migration, with higher skills
associated with greater benefits to
The impact of migration the host economy.18
on the labour market,
productivity and innovation Most of the rise in EU migration
Many studies have been conducted in more recent years has been
on the impact of migrants on the accounted for by less skilled
labour market. A recent review labour. We might therefore expect
of the evidence for the UK by the the positive association to have
London School of Economics (LSE) weakened, but it remains the
provides a fair summary of the case that on average EU migrants
consensus view of migration on are better educated than native
employment, unemployment and workers. Since 2008 productivity
wages: growth has been close to zero, while
migration from the EU has increased
‘We can confidently say that the from 3.5% to 7% of the workforce,
empirical evidence shows that EU leading some to make a spurious
immigration has not had significantly connection between the two trends.
negative effects on average However, the fall in productivity is
employment, wages, inequality or driven by broader changes in the
public services at the local level for economy, not by marginal changes
the UK-born. Nor, it should be said, in the composition of the migrant
are there large positive effects. Any workforce since 2008.
adverse experiences of UK-born
workers with regard to jobs and It now looks as if a significant
wages are more closely associated part of the productivity slowdown
with the biggest economic crash for across the OECD, including the
more than 80 years.’ UK, is due to a decline in the rate
of technological diffusion in new
The OECD has recently published digital technologies, with a large
a review of a large number of and persistent gap opening up
international studies on the impact between a relatively small group of
at local level on wages, employment productivity ‘leaders’ and the rest.
and unemployment on the domestic In principle a rapid decline in labour
14 Facing the future: tackling post-Brexit labour and skills shortagessupply might stimulate some UK
companies to invest more heavily in
migration would fall over the next
few years, dropping to just over
‘It is likely that
new technologies. We think this is 230,000 in 2017 and to 185,000 by future policy will
unlikely. First, some of the barriers 2021. As the most recent official
that prevent the laggards from statistics indicate, this process has be most restrictive
catching up, such as managerial already begun.
competencies,19 are structural in for migrants with
nature and cannot be addressed
quickly, and, second, there is little
So, the OBR has already factored
in a significant fall in net migration
low levels of skills,
evidence in the report that new in its own forecasts. The OBR and so any surge
technology is seen by many as a estimates that growth will be 1
realistic solution to a decline in low- percentage point lower between is likely to be in
skill migrant labour, either because 2017 and 2021 as a result. GDP
it is impractical or because of cost. per capita is expected to be 0.3 low-skill inward
Future labour supply and the
percentage points lower:
migration.’
implications for growth ‘In the absence of the referendum
The November 2016 report by the result we would have revised up
Office for Budget Responsibility cumulative potential output growth
(OBR) set out some of the by 1.0 percentage point due to
potential costs from Brexit. The higher net migration. On a per
OBR forecasts for future growth capita basis, cumulative growth
factor in the impact of net inward would have been 0.3 percentage
migration on overall population points higher because net migration
growth and on the participation adds proportionately more to the
rate – the share of people of working-age population than to the
working age in work or actively total population, thereby boosting
seeking work. the employment rate too.’ (OBR,
Economic and Fiscal Outlook, p45,
As the Government at the time had November 201620)
been unable to indicate what the
post-Brexit migration policy might The OBR might make further
be, the OBR has continued to use adjustments if evidence emerges
the population projections from that the slowdown in net migration
the Office for National Statistics is faster than anticipated in the
(ONS). The ONS publishes three ONS projections, or once it has a
sets of projections – central, high clearer view of the Government’s
and low – to reflect different migration policy. However, in the
assumptions about future levels of short to medium term it is possible
net inward migration and domestic that there could be a surge in some
demography. The OBR uses the groups of migrants entering the UK
central population projection for its before any new restrictions take
own growth forecast. effect. It is likely that future policy
will be most restrictive for migrants
However, the OBR says that with low levels of skills, and so
without the Brexit vote, it would any surge is likely to be in low-skill
have switched to the ‘high’ inward migration.
projection because, at the time of
the November forecast, the annual It is also possible that some UK
rate of net migration in 2016 had citizens already working across the
been over 300,000 with no sign EU might return to the UK in bigger
of a decline. In the light of Brexit, numbers than before if employment
the OBR decided to continue to opportunities for UK nationals in
use the ONS central population the EU become more restricted.
projections, which assume that net The cost of employing UK nationals
15 Facing the future: tackling post-Brexit labour and skills shortageswould likely increase, making them in employment and unemployment labour via EU students attending
less competitive against nationals rates, with mixed success, and again UK universities will decline. As the
from EU countries. The same we have yet to see what additional negative impact of rising migration
factors might reduce outflows of measures and policies are being on the employment prospects
UK nationals seeking work in the proposed that, over time, might and wages on UK citizens has
EU. Both will tend to increase the achieve more. been almost non-existent, we
domestic supply of labour in the would equally expect any decline
UK. Although it is impossible to Overview in migration to have little or no
quantify these impacts at present, it It remains the case that any positive impact at the aggregate
is very unlikely to offset a significant institution or commentator who level. However, we also expect
decline in EU migrant labour. pronounces confidently on the very little impact on aggregate
wider impact of Brexit on the productivity, as the overall impact of
As migrants have higher labour market is probably going to migration has been at best modest.
employment rates than UK be proved wrong. Indeed, until we
citizens, a substantial reduction in know the shape of UK migration The impacts will not be felt
migrants in the workforce would policy, have better insights into evenly, and sectors and localities
depress the overall employment whether significant numbers of where migrants form an above-
rate unless further efforts can be migrants are going to vote with average share of the workforce
made to increase the employment their feet, and what additional may experience more severe
rate for UK citizens. Employment or alternative public policy and consequences. As migrants tend to
rates are already at high levels by employer responses might be be drawn to expanding industries
both historical and international forthcoming, we cannot say for and localities, any significant
standards and, as we showed certain what the economic impact constraints on future growth in
above, have increased significantly will be. The balance of evidence so these sectors and areas will hamper
over the past decade. With far is that it will be negative, but the effective operation of the
unemployment in much of the whether it is a marginal impact or UK economy and labour market.
UK at historically low levels – and something more significant is at There is also evidence that positive
with the potential to fall to even present unknowable. productivity impacts from migration
lower levels, according to the are more significant for higher-skill
Bank of England – it will clearly We know that migration has labour in service industries,21 so
be challenging to sustain further made a significant contribution any fall in the supply of higher-skill
increases. in terms of employment levels migrant labour could have bigger
and the employment rate, and adverse consequences than we have
Successive governments have that contribution has increased allowed for up to now.
focused on the young and over the past decade. We also
disadvantaged groups where think that the UK is likely to In principle, many of these negative
employment rates are already remain an attractive destination impacts could be offset by further
well below the national average for EU migrants given significant increasing employment growth
with some success over the past differences in unemployment rates and the employment rate among
decade. These gains will have and wage levels. Nonetheless, UK citizens compared with the
been factored into the OBR to the extent that the voluntary significant increases already
projections in terms of their impact choices of migrants and the future achieved over the past decade. We
on the overall labour supply, so it shape of migration policy reduce will, however, need to see what
remains to be seen what additional labour supply, this will show up in additional or alternative policy
measures might be brought into economic growth and average living measures will be forthcoming from
play to increase employment rates. standards being somewhat lower the next government to achieve
Successive governments have also than would otherwise be the case. this. It will also depend on the
committed themselves to increasing effectiveness of the employer
employment opportunities for older It is also likely that a reduced response in retaining migrant
workers, and a significant part supply of migrants will further labour, developing alternative
of the growth in employment for increase levels of unfilled vacancies, sources of supply when this
UK citizens over the past decade already at record highs, and skill becomes necessary, and investing
has come from older workers. shortages may become a more in the remaining workforce. We
Successive governments have also serious problem. It is possible that discuss the employer response in
sought to reduce regional disparities the future supply of high-skilled more detail in this report.
16 Facing the future: tackling post-Brexit labour and skills shortages2T
he profile of EU nationals in the
UK labour market
While the last section tells the
story about EU migration so far in
Population Estimates survey to
help complete the profile of EU
‘Around two-
terms of overall trends, this section nationals in employment in the UK. thirds (65%) of UK
looks in more detail at the type of
sectors, occupations and working The significant growth in employers report
patterns typically undertaken by migration into the UK from the
the different groups that make up EU in particular is reflected in that they employ
the EU workforce. This section of
the report also draws on questions
the workforce profile of the
1,060 organisations surveyed for
non-UK nationals.’
placed in the CIPD’s spring 2017 this report. Overall, around two-
Labour Market Outlook (LMO) thirds (65%) of UK employers
survey, which was based on a report that they employ non-UK
representative sample of over nationals. This includes almost
1,000 employers. The survey six in ten (59%) establishments
provides snapshot data on the that employ non-UK nationals
prevalence of migrant employment, from the EU and four in ten (40%)
which employers recruit them, organisations that employ non-
and the types of jobs migrant UK nationals from outside the
workers are most likely to fill. This EU. The share of organisations
section also considers the ONS’s that employ non-UK nationals
Labour Force Survey and Annual is especially high in the public
Figure 1: Profile of establishments that employ non-UK nationals (%)
63
59 59
51
48
40
38
35
32 33
30
23
All employers Private sector Public sector Voluntary sector
Yes - EU nationals Yes - non-EU nationals No
Base: total: n=1,059; private: n=759; public: n=190; voluntary: n=110
Source: Labour Market Outlook spring 2017 (CIPD/The Adecco Group 2017)
17 Facing the future: tackling post-Brexit labour and skills shortagesYou can also read
