Migration Advisory Committee

EEA Workers in the UK Labour Market: An Interim Update

The Migration Advisory Committee (“MAC”) has published an interim update on its work for government on the current and likely future patterns of EEA migration and the impacts of that migration on the UK economy and society.

What is the MAC?

The MAC is a body of economists with significant expertise on labour market issues. The committee is independent from government and receives periodic requests from the Home Secretary to provide expert advice on trends in the labour market in order to inform the development of UK’s immigration policy. In July 2017, the Home Secretary asked the MAC to set out the current patterns of European Economic Area (EEA) migration into the UK and their impact on the UK’s economy and society. The intention is to provide an evidence based report for the design of a new migration system at the end of the post-Brexit implementation period in 2021.

The Update

The MAC has been asked to submit its full report in September 2018. The update summarises the response to the Call for Evidence the MAC published in July 2017. The MAC received 417 responses to this request for stakeholder evidence. Responses came from a range of employers across industry sectors and regions of the UK. The update is a “half-time” summary of the evidence received from stakeholders and the overarching themes that are emerging.

Caution

This interim update does not include recommendations on the framework for a new immigration system for the UK. The work is for a system due to come into force from 2021. Once the report has been published in September 2018, the government will introduce a White Paper on future immigration policy in October followed by an Immigration Bill 2018. The update is a just one staging post in long process of policy development. The MAC says:

“A thriving business sector is vital but it is part of the means to the end of providing a high quality of life for UK residents, an objective that the MAC has always used in evaluating migration policy. How the lives of UK residents are affected by EEA migration requires a full assessment of the impacts of that migration, not just the perspectives of employers. Our final report will consider a wide range of impacts: on wages, unemployment, prices, productivity, and training, the provision of public services, public finances, community cohesion and well-being. Nothing in this update should be used to prejudge our conclusions on these questions.”

Why do businesses employ EEA migrants?

The update summarises reasons employers provided for identifying EEA migrants as the best candidates for a job, including:

  • The necessary skills are scarce among the UK born workforce;
  • Migrants often have a higher motivation to work so are more productive and reliable;
  • Migrants are prepared to do jobs in difficult conditions that UK born workers are not interested in; and/or
  • Low unemployment means a low supply of UK born workers.

Skill Shortages

EEA migrants are employed across a range of high and low-skilled jobs. There was a spike in supply of migrants to medium and low-skilled jobs following EU expansion in 2004. Many businesses adapted their operating models in response to this supply.

“Many employers disputed labelling jobs in their sector as low-skilled or unskilled. Some expressed concern that workers in these jobs would not be eligible for work permits if the current non-EEA Tier 2 systems are extended to EEA migrants and they were not classified as sufficiently skilled.”

Work Motivation and Flexibility

Many employers expressed the view that EEA migrants are more motivated and flexible than non-UK born workers. The MAC view is that it is hard to assess objectively many of these claims:

“It seemed plausible to us that EEA migrants are sometimes a “high quality”, eager workforce compared to UK-born workers in similar conditions. If wages are equal (we shall consider wages in due course) then they are a higher quality for the same cost.”

Low Unemployment

The MAC emphasises that the UK unemployment rate is currently low, and the ratio of vacancies to unemployment is high.

“Low unemployment does make it harder for business to recruit and retain workers because workers have more options. Low unemployment makes life easier and better for workers and this is important; it is a good thing.”

Wages

There is a significant difference between EEA migrants from the older member states (those who were EEA members before 2004) who earn 12% more than the UK born and migrants from the new member states who earn 27% less than UK born workers.

“The UK has experienced a period of declining real wages in recent years, the worst decade according to some estimates for over 200 years. The timing of this seems more closely linked to the financial crisis than the expansion of the EU in 2004, and has affected UK born workers of all skill levels, not just those in lower skilled jobs where the increase in EEA migration has been concentrated.”

Attitudes to Future Restrictions on the Flow of EEA Migrants

In responding to the Call for Evidence, employers have underlined their concern about the prospect of restrictions of the ability to recruit EEA migrants once the UK leaves the EU. Employers are fearful about what the future migration system might be. Higher skilled sectors which currently use the Tier 2 system to recruit non-EEA migrant workers expressed negative views of that system, identifying it as time consuming, costly and overly complex. Concern was raised both about the rules and the caps in that system being applied in the future to EEA migrants.

The tone of the update suggests that the MAC is thinking in an alternative direction to employers:

“The MAC view is that it is unsurprising that business does not welcome restrictions on their ability to hire, seeing such restrictions is likely to make a harder job even harder. The views of business are important but they should not be the only analysis to be considered. Historically, many employers were hostile on grounds of cost and burden to the Equal Pay Act and the National Minimum Wage, legislation now thought to be a “good thing” including by business.”

The MAC recognises the concern from business that there are no workable alternatives to the supply of EEA migrant labour, in which case businesses might grow more slowly, contract or even disappear. However the response in the update is balanced:

“The MAC view is that it is important to be clear about what the consequences of restricting migration would be. Lower migration would very likely lead to lower growth in total employment, and lower output growth. It would not necessarily mean lower growth in output per head which is more closely connected to living standards. There is little evidence that, over long periods of time, countries that have had higher rates of labour force growth have had higher rates of growth output per head. However, there is no doubt that some types of migration can raise productivity and output growth may be desirable if the extra output improves the government finances; our final report will discuss the physical impacts of EEA migration.”

Conclusion

The update does not conclude with recommendations. The purpose of the update is to provide a summary of the evidence received so far and an indication of the committee’s approach to its final report. Three conclusions emerge:

  • “Employers have increased their employment of EEA migrant labour following the accession of new member states in 2004. Before 2004, EEA migration was primarily high-skilled; this has continued but migration from new member states has been heavily concentrated in lower-skilled jobs. In many lower-skilled sectors, 2004 marked a point at which high-quality workers became available at a reasonable wage and employers in some sectors took advantage of the opportunities this offered.
  • Why Does Businesses Employ EEA Migrants? The simple answer is because they are the best available candidates. Understandably, employers are unenthusiastic about the prospect of restrictions on the pool of possible workers.
  • What is best for an individual employer is not necessarily best for the welfare of the resident population, which is the criterion the MAC uses when evaluating migration policy. To assess that requires a detailed study of the impacts of EEA migration of different skill levels: our final report will consider these.”

How we can help

Please contact your Magrath Sheldrick representative for advice on UK immigration policy and post-Brexit planning. Alternatively please write to us at [email protected]