After four years of waiting since the referendum result, three consultations with business, and countless media reports, last week finally saw the announcement of the government’s post-Brexit immigration system. And despite its contents being contained in a mere 12 page policy statement, it represents the biggest shift in the UK’s immigration policy in a generation.
The new policy statement announces that free movement will end from the beginning of next year. In future, EU citizens looking to work in the UK will for the most part need to be sponsored by an eligible employer, as happens now for non-EU citizens. Migrants will need employers to sponsor them for work in occupations defined as at least medium-skilled and will need to be paid a salary of at least £25,600. For migrants with PhDs or for those looking to work in occupations with shortages, the minimum salary threshold will be lowered. Immigration into work defined as ‘low-skilled’ will be prohibited altogether.
While these proposals will liberalise the current rules for non-EU workers, they will make it far harder for EU citizens to live and work in the UK. According to IPPR’s analysis, around 70 per cent of EU migrant employees working in the UK would be ineligible for a skilled work visa if they had to apply under the new rules. The ineligibility rates are even higher in sectors such as hospitality, manufacturing, and transport and storage. While EU migrants currently living here will be protected under the government’s ‘settled status’ scheme, the new rules will make it far harder for businesses to recruit workers from the EU in future.
Employers have already sounded the alarm, warning that the new system could lead to severe labour shortages. Many commentators have questioned how the UK will fill all the jobs that migrants would have been doing. The Home Secretary Priti Patel has raised the idea of filling these vacancies by recruiting from the ‘economically inactive’ population – that is, people who are not working and who are not actively seeking work, such as students and carers of family members.
In trying to comprehend the implications of these changes to our immigration system, some of the analysis has missed the mark. In the medium-to-long term, restricting immigration is unlikely to lead to mass vacancies that need to be filled by British workers; just as increasing immigration is unlikely to displace British workers and lead to higher unemployment. Neither is reducing immigration expected to increase wages; just as higher levels of immigration in recent years have not led to lower wages for domestic workers.
Instead, reducing immigration will over time both reduce the supply of labour – because there will be fewer people in the workforce – and the demand for labour – because there will be fewer people buying goods and services. So these proposals are unlikely to create a dramatic escalation of vacancies or an increase in wages in the long run; instead the labour market will adapt over time, demand for labour will fall, and the economy will grow at a slower pace.
Such a dramatic change in immigration policy, however, is likely to face serious difficulties. Indeed, there are three critical challenges for the government in implementing the new system.
The first challenge is timing. The government wants to introduce the new points-based system at the beginning of next year. This leaves little time for business to prepare or to get all the right processes in place. Combined with all the other changes the UK is looking to implement next year as it leaves the single market, this could lead to chaos for business. The timing also risks creating confusion among employers about how and when to apply the new rules as part of their recruitment processes. As a result, EU citizens currently living here could face discrimination under the new system, despite the government’s commitment to maintain all their legal rights.
The second challenge is the restriction on ‘low-skilled’ occupations. The government’s definition of skills is too narrow, excluding jobs such as care workers, carpenters, ambulance staff, test engineers, and construction supervisors. This will affect sectors that are critical to the government’s broader economic and social agenda, such as construction and social care. By preventing immigration into these occupations, growth in the construction sector will decline – making it harder for the UK to meet its housebuilding targets and infrastructure ambitions. And the workforce crisis in the social care sector will intensify, despite the growing needs of our ageing population.
The third challenge is the salary thresholds. The ‘points-based’ element of the government’s proposals will allow employers to offer salaries lower than £25,600 for jobs designated as being in shortage. The £25,600 figure is the 25th percentile salary for jobs at the eligible skill level, so wages below this level will generally be unusually low for the relevant occupation. Evidence from the Migration Advisory Committee indicates that salaries of migrants on the skilled worker route tend to cluster around the lower thresholds – suggesting that many employers will pay the minimum they can get away with. But one of the best ways of addressing job shortages in the long term is to improve wages. Offering lower salaries to migrants in these occupations could therefore perversely incentivise low pay and therefore make it harder to address shortages in the long term – as well as giving a raw deal for migrant workers. It also risks attracting unscrupulous employers into the system who may use the low salary thresholds to underpay and exploit migrant workers.
So what’s the solution? There are three main priorities. First the government should arrange a transition period for next year to help employers to adapt to the new immigration rules and to avoid any immediate disruptive impacts.
Second, there should be a broader understanding of what constitutes a ‘skilled occupation’ to truly reflect the contribution of migrants to the UK economy – including, for instance, jobs such as care workers and construction supervisors. This could be delivered through expanding the shortage occupation list to include any occupation that is a labour priority, based on the ambitions of the UK’s industrial strategy and the needs of our public services. This could include occupations currently defined as ‘low-skilled’ according to the current system.
Finally, there should be additional safeguards for those migrants at risk of being paid particularly poorly for their job because they work in an occupation on the shortage list and so face a lower salary threshold. For instance, the government could require employers who use this route to show they are responsible by demonstrating a track record of investing in the skills of their workforce, by paying the real living wage to all their staff, and by committing to increase the wages of their migrant workers over time. This would help to guard against unscrupulous employers using this route to exploit or underpay migrant workers.
Compared with the government’s policy statement, these proposals would make it easier for some employers to recruit workers from outside the UK, while at the same time encouraging a higher-wage, higher-skills economy by incentivising responsible employment.
But will the government listen? The Home Office has said that this is only the first stage of rolling out their points-based system and they are open to further reforms. Once the system is implemented next year, the pressure to change course is likely to build. While it’s been four years already, we may have to wait a little longer for all the parts of the post-Brexit immigration policy to fall into place.