We all want a high-wage, high-skill economy. But what does that look like? For Suella Braverman, speaking at the National Conservatism conference earlier this week, it’s one in which British workers are “trained up” to pick fruit, slaughter pigs and drive HGVs, so we are “less dependent on low-skilled foreign labour”. Meanwhile, we can only assume that we will continue to rely on immigrants to staff the NHS, work in care homes, and take high-paid jobs in the IT and finance sectors – all sectors in which the post-Brexit immigration system has led to significant increases in the number of people coming to work here.
It’s easy to mock the Home Secretary’s words, but they highlight some difficult challenges for any government seeking to boost productivity and wages. One of the key promises made by Vote Leave during the Brexit referendum was to end free movement and introduce “a fairer immigration system that is better for Britain, stops discriminating on the basis of where you come from, and instead allows us to pick people on the basis of skills”. And – in contrast with other Brexit promises – this one has been, by and large, delivered. But even for – indeed, perhaps especially for – its proponents, the new system isn’t necessarily yielding the desired results.
The first challenge is that the shift to higher-skilled migration has increased, rather than reduced, the overall numbers. Vote Leave carefully, albeit disingenuously, avoided any explicit promises to reduce immigration numbers. Indeed, Boris Johnson ditched David Cameron’s economically illiterate and politically damaging “tens of thousands” target for net migration. Nevertheless, many Brexiteers, including the Home Secretary, feel betrayed by the fact that immigration – even after taking account of those coming under the special Ukraine and Hong Kong schemes – is going up not down.
But this precisely reflects the success of the new system; those coming here to work are typically either coming in higher-paid or higher-skilled jobs in the private sector, or, alternatively, in the NHS and care. The rising numbers are driven by demand in these sectors, and will help the UK make the transition to a higher wage, higher productivity economy. Here, Brexit – or at least the expectations of some Brexiteers – is a victim of its own success. The exception is low-paid jobs in social care, where it is the government’s own continued refusal to fund and regulate properly that keeps wages down, and means it has had to introduce a special visa route for low-paid workers to avoid a greater staffing crisis.
The second challenge is even harder. A further intended benefit of moving to a more skills-based approach to work migration was, precisely as the Home Secretary says, to encourage employers to train more British workers and pay them better – though, as noted above, the largest single employer in the country, the government, conspicuously refuses to practice what it preaches. But what about the private sector? Under the new system, it’s very hard for people to come here to work in relatively low-paid jobs in sectors such as hospitality. Economic theory suggests that this should result in some increase in relative wages in these sectors, albeit empirical evidence from the UK suggests that any increase is likely to be quite small (and will mostly be passed on to consumers in the form of higher prices).
Data released this week by the Office for National Statistics suggests that even if we anecdotally observe higher wages for specialised occupations – like HGV drivers – there is very little to suggest this is happening at the level of the labour market as a whole. Take hospitality, probably the sector in which employers’ complaints about labour shortages after the end of free movement are most vociferous. The labour market statistics show that compared with three years ago, before the pandemic, real wages in the accommodation and food services sector – which employs around 2 million people – have actually fallen by about 3 per cent, while real pay in the transport sector has also fallen. Meanwhile, those in finance and insurance have risen by about 5 per cent. Correlation is not causation but it’s hard to reconcile these figures with the view that it was the availability of relatively cheap, flexible workers from Europe that was keeping wages down.
What this suggests is that the glass is both half full and half empty. The new system has indeed resulted in a tilt towards higher-skilled, higher-paid migrants, in occupations that are in high demand. That’s good news. It also means that efforts to reduce work-related migration are likely to damage the economy and make it harder to move to a high-wage economy. Broadly, the new system is working as intended, and there’s no good case for major changes.
However, the continued persistence of low pay and poor conditions in lower-paid occupations – at the same time as there are widespread shortages – also illustrate the limits of migration policy. Simply reducing the availability of workers is not a substitute for a broader strategy for improving skills and productivity in the UK workforce, and hence raising pay. That will require a range of policies, particularly around education and training, and sustained investment from both public and private sectors. Sadly, so far, ministers seem to prefer soundbites.
[See also: Why Suella Braverman is unsackable]