MAC to the future

This morning the Migration Advisory Committee (MAC) released the final report in its year-long (plus) investigation into EU migration. The report is arguably the most comprehensive assessment of how migration has affected the UK over the past two decades, dealing with topics as diverse as the labour market, housing, public finances and subjective wellbeing. In doing so, it has injected some much-needed evidence into the debate about migration.

As well as looking back at how migration has affected the country, the Committee casts its eyes to the future and recommends how the UK’s migration system should be redesigned as we leave the European Union. Its recommendations, if implemented, would represent the most significant shake-up of our migration system in a generation. Given the reports’ breadth it will take time to digest it all, so below I’ve analysed three important ramifications of the MAC’s policy proposals.

1) The big change for lower-paying sectors

The MAC argues that for “lower-skilled workers, we do not see the need for a work-related scheme”. This will anger many lower-paying sectors, which the MAC admits as much when it says: “we know that some sectors will lobby intensively against this proposal”. So who will be doing the lobbying? EU migrants account for around a fifth of employees in food manufacturing, hotels, domestic personnel and logistics, and around a tenth of staff in bars and restaurants.

However, the MAC points out that “most of the existing stock would remain”. It is not just the amount of EU workers in a sector that matters, but also the level of staff turnover. We can get a sense of which sectors will feel the pinch first by examining the rate at which people move out of the sector to take up new jobs. The figure below shows that, of those sectors that tend to employ a lot of migrants, hospitality, retail and the arts could feel the squeeze first. By contrast health and social work may have more time to adjust.

While health and social work may have more time to adjust than sectors with higher levels of staff turnover, the MAC is not blind to the challenges the sector faces. On the contrary it says “We are seriously concerned about social care but this sector needs a policy wider than just migration policy to fix its many problems.” The MAC should be applauded for pointing out that access to migrant labour will not solve the problems of poor pay and conditions in the sector. However a significant fall in lower-skilled migration could add to the sector’s difficulties. The table below lists 31 occupations paid £1 more and £1 less than care workers and senior care workers (highlighted in bold).

It is often said that care struggles to attract staff who would prefer to work for similar wages in other sectors. Catering staff, nursing assistants, childminders, beauticians, cab drivers, hospital porters and storage staff are all paid similar amounts to care workers and migrants account for a similar share of employees in these occupations. If lower-skilled migration declines care could find itself competing over a smaller pool of labour, exacerbating the challenges the sector already faces.

2) Tier 2 Visas for mid-skilled workers

The MAC recommends that mid-skilled occupations be brought into the General Tier 2 Visa system. In a world without free movement this is sensible; many EU migrants currently fill mid-skilled roles in which relatively few UK workers currently possess the necessary skills.

So which occupations may find themselves in the Tier 2 system in future? The figure below shows occupations in which between a quarter and a half of people have a degree, along with the share of people in those occupations who are EU nationals. If more mid-skilled roles are going to be included in the Tier-2 system then those at the top of the figure below are good candidates. It looks as though some sectors that may see a big fall in lower-skilled labour (such as hospitality and logistics) may also find it harder to hire for mid-skilled roles unless the Tier 2 system is expanded. It also looks as though the private sector will feel the pinch more; EU nationals form a relatively small proportion of mid-skilled roles in government, welfare, housing, protective services (fire, police) and other associate professionals in the public sector.

3) Retaining the current £30,000 salary threshold for Visas

The MAC’s recommendation that the current salary thresholds remain unchanged could worry some sectors. The current threshold is £30,000 per year or the ‘appropriate rate’ for the job offered (whichever is higher). Previous analysis has shown that around three-quarters of EU nationals working in the UK would not meet current visa rules. To get a sense of which occupations are most likely to struggle to meet these requirements the figure below analyses the same 19 occupations as above but this time compares EU nationals as a share of employment and the share of EU nationals that currently earn less than £30,000. Those occupations in the top right of the chart are likely to be most affected if the current salary thresholds are not revised.

Hospitality is a sector where it could be hard to bring in mid-skilled staff, along with broader customer service roles, sports and fitness and some health professionals. In fact, in the majority of these occupations more than half of EU nationals do not currently meet the salary threshold.

The MAC has thrown down the gauntlet to firms and the government. If implemented its recommendations would fundamentally reshape the UK labour market and, based on our survey of firms for our recent Work in Brexit Britain book, the majority of businesses who employ significant numbers of migrants are not ready. Three quarters said that a reduction in migrant labour would profoundly affect their business, yet a majority thought fundamental change unlikely. Nevertheless this shouldn’t lead to defeatism, with the necessary time to adjust firms will be able to adjust.

As the MAC itself admits, what it did not do today is unpack the politics of this. What migration regime the country ultimately decides upon will depend, in part, on the nature of the relationship with the European Union after we leave and what is perceived as sellable to the British public. The danger is that, with negotiations ongoing and because of the politically-charged nature of the issue, the Committee’s work is ignored. To avoid this we now need clear guidance from the government about what happens next.

Today the MAC answered some big questions. However, as the debate moves from the economic to the political sphere, we’re reminded that some of the hardest questions surrounding migration are political ones. Over to you Prime Minister.