Why the cap won’t fit

In the rush to tighten borders, the government is engaged in a disservice not only to the British public today, but to future generations of British workers
Faiza Shaheen
7 December 2010

The introduction of the migration cap in the UK has unleashed a Pandora's box of questions for Secretary of State, Theresa May. Who exactly should be restricted from entering the UK? At what limit should the cap be set? Will this tool really help to restrict migration? Is a cap beneficial for the UK economy? And, a question that has received almost no attention but seems important to ask, what is the impact on those developing countries from which migration to the UK will be restricted? It is in asking these questions that the disconnection between the facts and the policy become clear.

Migration was an important issue for British voters during the General Election in May 2010, indeed the Conservative party believe that the election results give them a mandate to be tough on migration. However, it’s important to note that the cap does not tackle the public’s grievance, which is actually more to do with the influx of Eastern European migrants working in jobs at the bottom end of the labour market. Thus, capping the number of highly skilled migrants is like trying to cure a headache with anti-dandruff shampoo. Instead, the government should be being tough on minimum wage enforcement, focusing efforts on trying to stimulate new economic activity to create jobs (interestingly levels of entrepreneurship are much higher among migrants), and be building more affordable housing to avoid resource feuds. 

If not to tackle the root of the migration problem in the UK, what then is the point of the migration cap? The answer is to signal that this new government is in control of and committed to lowering immigration to the UK. It is here, again, the new policy falls on its head, for it can do nothing to limit migration from EU countries, which makes up three quarters of those coming to the UK to work. Furthermore, this approach has the potential to hurt the UK’s economy and social fabric.

The business community, universities, think tanks and academics have been very vocal about the need for a cap to be set at a higher level. If not, they argue, UK business and research will suffer. Furthermore, the recent report from the Migration Advisory Committee calculated that a reduction of 10 thousand highly skilled migrants would result in a decline in GDP of 0.027 per cent in the following year. Perhaps in light of this backlash and evidence, Teresa May announced a cap last month of 21,700, higher than feared and not including intra-company transfers. However, beyond the short-term implications for the UK, little has been said about the longer term and global implications.

I’ve just finished working on a report looking at these two themes. The report goes back to the basics and looks at what is likely to happen to migration supply and migration demand between now and 2050. The results turn our current thinking on migration on its head. By projecting changes in emigration push factors in line with predicted economic growth in a number of current migrant source countries, including India, China and Nigeria, we found that, in aggregate, the number of people wanting to move from these countries will fall after 2035. Yes, that’s right, there will be fewer immigrants wanting to enter the UK.

While this decrease may be music to some people’s ears, there are two demand side factors that make this outcome a potential problem. Firstly, demographic change. The UK will be witnessing an ageing population, which will place considerable strain on pensions and welfare services. The Government Actuary Department (GAD) has projected that the dependency ratio – the ratio of children and those of state pension age to those of working age – will rise from 61 per cent in 2007 to 74 per cent by 2056. These projections assume net long-term migration of 147,000 per annum. The aim of the government is to push net migration to below 100,000 per annum, leading to greater pressures on the dependency ratio than those given in the GAD base-case scenario.

While the increase in the pension age will mitigate against this dependency ratio in part, it will not be enough to counter the surge in public spending that will be needed to maintain our current welfare system. So, unless we are planning to ask people to work until they are 75, we will need more working age migrants to work and pay taxes. This predicament will be compounded by even faster increases in the dependency ratio in other developed countries such as Germany and France and the diversion of migrants to new prosperous nations such as Brazil and India. Thus, it is possible that the UK, along with other developed countries, will be competing for migrants in a world where there will be fewer people willing to move and more potential destinations for them to go. Closing the door to migrants now will make the UK a less attractive destination in the future. Migration is not a tap that can be turned off and on – flows of new migrants rely on strong existing migrant networks in host countries.

The second, related, demand side factor is skill shortages. Already nearly 30 per cent of all NHS workers are migrants, and the social care sector relies heavily on foreign workers. In fact, when we compared potential growth industries in the UK with those already reliant on migrants, there was significant cross over, meaning more migrants will be needed to support the growth in these sectors.

There is, of course, an elephant in the room with this argument. Why can’t we train up the unemployed in the UK, of which there are currently 2.4 million, to do these jobs? I would agree that unemployment among the current UK population, especially among young people, must be tackled. However, the current reliance on migrants is not only about a skills mismatch, but rather the quality and pay of these jobs. Over half of the households deemed poor in this country, have at least one adult in work. Pay for some of the most important jobs in our society, like care for our children and grandparents, is woefully low and job security has also waned with the introduction of more part time and flexible contracts. This puts British people off taking these jobs, leaving a void for desperate migrants to fill.

Tackling this problem means again looking at the bottom end of the labour market and addressing problems in education and training as well as wages and career ladders. The sad fact is that our labour market is still suffering from de-industrialisation, with fewer and fewer jobs demanding practical skills and more demanding service and customer care skills. But not everyone is made for these new service jobs, and this leaves people on the margins of society.

If we continue to push for a much more educated workforce who work long hours, then the types of jobs that many migrants do – like cleaning and serving our coffee – will increase. That is the natural outcome of a polarised labour market where some people earn a lot, work a lot and have a number of service needs so they can spend their money and where others are employed to meet their demands. In line with our current trajectory, our labour market is likely to become increasingly polarised. Even if more British workers are forced into these jobs, we are still likely to need migrants. Only a major shift in our labour market would break this dependence.

Perhaps the biggest contradiction with the introduction of a migration cap is that it could actually increase the number of people wanting to come here in the short to medium term. The cap will do nothing to alleviate global inequality, the key migration push factor, and, in fact, increased restrictions in developed countries may prolong and deepen global inequality, slowing the process of convergence between the developing and developed world.

Of course the link between migration and development is complex, mediated by issues such as the brain drain and remittance flows, but again the fixation on the cap does nothing to tackle these core issues. And, while this government may not be cutting the budget for the Department for International Development and is flying out to India and China to forge greater business and trade links, they contradict themselves by preventing migrants coming from these countries. By effectively saying we want your goods and for you to buy our goods, but we don’t want your people, the UK risks angering key strategic economic players.

It is difficult not to be wholly disappointed by the choice of a migration cap – it is impractical, it does not deal with the real problems and it undermines the UK's ability to be a major world economic player in the future. It seems that in the rush to tighten borders, the government has over-looked some very important short term, long term and global implications of this policy. In doing so, this government is engaged in a disservice not only to the disgruntled British public today, but to future generations of British workers.




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