Immigration after Brexit

September 18, 2018

The Migration Advisory Committee report on EU migration is typically hard-headed and balanced and does not accept the often-repeated-as-fact argument that free movement has had clear economic benefits. As MAC Chair Alan Manning writes: “EEA migration as a whole has had neither the large negative effects claimed by some nor the clear benefits claimed by others.”

This is a remarkable statement in many ways given the consensus across so much of Whitehall and Westminster, and even more so among employers organisations and academics, that EU free movement has been a great economic boon.

The report argues for no special deal for EU citizens in the future but – and this will please most employers – a more light-touch version of the current regime for ALL high-skilled and medium-skilled immigrants, including the abolition of the 20,000 cap for so-called Tier 2 skilled workers from outside the EU (and a reduction in the cost and time of acquiring a visa for workers earning £30k or more).

The MAC also (in line with our own recommendations in Immigration after Brexit, January 2018) calls for a new Seasonal Agricultural Workers Scheme, an extension of the Youth Mobility Visa to younger EU citizens and an extension of the Intra-Company-Transfer scheme to  EU companies.

But it rightly proposes no special route for low-skilled workers from the EU, something that the report points out “is likely to be strongly opposed by the affected sectors.” Sectors like food manufacturing and hospitality will be particularly impacted as they currently record around 30 per cent and 20 per cent (respectively) of employees from the New Member States (NMS). It is surely hyperbolic to suggest, as the Resolution Foundation did, that this “represents the biggest change to the UK labour market in a generation.” The stock of existing workers are not all going to disappear and that will give companies time to adjust by increasing wages or automating more processes, though it might also be worth taking up the Policy Exchange proposal of anti-social hours visas for some low skill jobs.

This argument over the value of the high quality/low-skilled employment from the NMSs to the UK economy as a whole goes to the heart of the issue. In the MAC’s March interim report it said this: “When demand conditions are favourable, it is natural for firms to want to be able to expand output and employment while keeping costs down. It is not so clear this is in the interests of the wider society—it might be better for favourable demand to translate into higher productivity or wages but a smaller increase in employment.” Exactly!

Given that perspective, it is a little surprising that the MAC research found no negative impact on productivity from the high flows from the NMSs. However its findings were tentative and the lack of a negative impact on productivity may be due to the fact that on average NMS employees tend to be higher quality (for a given level of pay) than resident workers, which might partly compensate for more macro productivity-suppressing effects.

It is also surprising that the MAC’s final report found no evidence of reduced employer training budgets as a result of EU migration despite reporting evidence of exactly that in its interim report in March. (And it seems not to have considered the work of Francis Green at UCL who has found that training spend per employee fell by around 15 per cent between 2005 and 2011.)

The MAC also took issue with the often-heard claim that NMS migration has had a positive fiscal impact. It found that EEA/EU migrants as a whole pay more in than they take out in services and benefits – but this only applies to people earning £30k or more, a small proportion of workers from the NMSs.

The report says the impact on public services has been minimal, a finding that will be challenged by some given that it has been one of the main public complaints arising from the higher than expected NMS migration after 2004. One exception listed by the MAC report is housing: European migration was found to have pushed up house prices and lengthened waiting lists for social housing.

The MAC did not attempt to analyse the more subjective cultural/psychological impact on communities that are sometimes changed rapidly by NMS immigration nor did it look at overall population size issues, which drew the opposition of Lord Green of Migration Watch.

Overall, this is a solid piece of work that the Government should broadly accept. The proposal not to have a separate regime for EU citizens in the future is probably a sensible one. It provides political cover to liberalise some of the more bureaucratic aspects of the current skilled worker visa scheme. Moreover, because immigration (outside the rules of free movement) is a member state issue, there would have been no automatic reciprocity for a special regime from other EU states.

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