2016 11 – Immigration & the labour market

Immigration, the labour market and family policy

Labour’s big challenge.

by Christopher Winch

Immigration is one of the most important issues in British politics today. It was one of the drivers of the Brexit vote, is likely to be a major factor in Brexit negotiations and will continue to be a major issue in British politics post Brexit. It’s an issue which is much misunderstood. It is intimately connected with labour market and family policy and anyone who wants to make sense of it will have to grapple with labour market and family issues. These are areas which Labour has found it difficult to deal with in the past, but will have to  if it is to appeal to voters who have felt abandoned by Labour over the past twenty years or so.

First of all, a word about Corbyn’s conference speech and the way he has dealt with the issue. Predictably, his opponents have lambasted him for being out of touch with popular feeling because he has not directly blamed immigrants for the woes suffered by the indigenous population. Yet these are the same people who for years denied that immigration was a problem for the indigenous population and, indeed, who encouraged as much immigration as possible, particularly from the EU. Corbyn was absolutely right not to blame the ills resulting from immigration on immigrants themselves. Apart from a few criminals and spongers, the vast majority come here to work hard and to provide for their families, whether those families live here or in their native country. Corbyn drew attention to the strains on public services caused by austerity and the dreadful conditions of work in many parts of the economy. He also suggested that fewer people would want to come to Britain if poor employment conditions were clamped down on. He is to be praised for not indulging in cheap demagogy.

Nevertheless, if Labour does not address the underlying issues, immigration is likely to remain a running sore in British politics for decades to come, and steps to mitigate it need to be taken now, even if it is going to take a long time for them to come into full effect. One point that the Brexiteers were not so keen to emphasise was the fact that net immigration from non-EU countries is greater than that from the EU, an estimated 282,000 as opposed to 268,000 as of March 2016 (source Migration Watch). Brexit, even if it resulted in a complete ban on EU immigration would deal with less than half of the flow of immigrants coming to the UK. In addition, it is conservatively estimated that there are over 1 million illegal immigrants in the UK, by definition originating in non-EU countries. Because they exist under the radar, Education, Health, Social Security budgets do not account for them, putting further strain on resources and increasing indigenous resentment.

So we know that there is a big supply of immigrants. Now the question is, why would they want to come here? The obvious answer, which the anti-immigrant lobby are not so keen to draw attention to, is that there is a demand for them. This demand comes from successive governments who are not prepared to invest in an adequate supply of doctors, nurses, teachers and other professionals to provide our public services. There is also a demand for highly skilled workers in the private sector. Some, but not all of these are here because of the poor state of British vocational and professional education, about which more later. Finally, they are tacitly tolerated because the indigenous population is not terribly good at reproducing itself, thus feeding into the demand that employers have for more labour.

There is a huge amount of low-skill work available in Britain. To a certain extent, Britain has been deskilling itself, relying increasingly on low specification, low pay work. This is one of the reasons for the very low levels of productivity that were already in evidence before the recession of 2008, but which have increased since. Some, perhaps a lot, of this work is carried out in illegal or semi-legal conditions. Occasionally the stone is overturned and the creepy crawlies are seen. Such was the case with the tragic death of Chinese cockle-pickers in Morecambe Bay in 2004. A report by the BBC in 2014 suggested that the problem had got worse since then. In July five Gambian agency workers were crushed to death by a collapsing wall in a Birmingham scrapyard. None of the media or the political class seem to be interested in whether this is a one-off or the tip of the iceberg of a very nasty unregulated labour market.

EMPLOYER DEMAND

These cases illustrate an important point. There are plenty of desperate people who want to come to the UK to do badly paid jobs in often illegal or semi-legal conditions and, obviously, there are employers who are only too happy to take them on. These are jobs that local people do not want to do and which British people are not prepared to travel from their homes to do. They are one aspect of a ‘flexible’ labour market which depends on low skill labour to produce low spec products and services. The flexible labour market is a source of great pride to economic liberals of all kinds, ranging from UKIP to New Labour. Not surprisingly, none of them have been all that keen on making the connection between this flexibility and the ‘pull’ factor that it exerts on immigrants from all corners of the world.

So one issue that Labour could begin by dealing with would be to actually make the labour market less flexible, by increasing expenditure on the Factory Inspectorate to stamp out such practices (as the Germans are currently doing). That could be done relatively quickly, but the bigger challenge is to make various kinds of work more attractive to British people and thus reduce the pull factor for workers from overseas. This is more tricky and will take more time.

Merely cracking down on illegal working conditions and upping the minimum wage may not be enough, although it may help. The biggest problem is that employers have in the last ten years gone on a ‘training strike’. Gordon Brown seems to have convinced them that it is not their responsibility to train their workers  by getting the government to subsidise low level training and by encouraging the take up of largely worthless qualifications subsidised by government. They have also had a ‘free lunch’ of both skilled and unskilled labour from the EU and beyond. Most, with a few honourable exceptions, no longer see it as their business to train their workers and some are preferring self-employed labour to having an actual workforce. This tendency has been evident for some time in the construction industry but is spreading elsewhere.

The Tories are introducing an apprenticeship levy on large businesses (with over £3 million per annum payroll). In a future article we will return to how this is going to work. It will thus start to take effect on firms within the 200-250 employee and above range. Even if successful (and there are reasons for being sceptical), it will not affect a vast swathe of British business, much of which operates on a no-training, low-skill product strategy. This is also true, it should be said, of many of the larger employers, for instance in retail. Small employers (SMEs in the economic jargon) employ over 14.5  million out of a total workforce of over 24 million. They contributed 48% of turnover in the economy in 2013 (source ONS).   It is reasonable to assume that  a very large proportion of these do not train their employees and are also locked into a low spec, low skill business model that relies on low paid work, just the kind of work that will repel many locals and attract desperate immigrants. Labour faces a huge challenge in tackling this sector, making it more ambitious and persuading more British people to work in it. Given the localised nature of much SME employment, any strategy that it adopts will need to involve good knowledge of the local economy and labour market together with specialised help for firms who need to be persuaded to change their business model without too much bureaucracy and disruption. There are signs that Labour has cottoned on to this after the bleak Brown years. . Labour Shadow Brexit Secretary, Keir Starmer, said “I think it (immigration) should be reduced and it should be reduced by making sure we have the skills in this country that are needed for the jobs that need to be done.” He could have added that we need to create the skilled jobs that British people will want to take and that we need to help them acquire the ability to do those jobs.

The government can use investment to incentivise firms to move up the ‘value chain’ and it can provide specialised help. This ideally would involve the unions, local authorities and employer associations (although there are not many of these and they would need to be encouraged to form). This is a long-term tough project, but if Labour wants to do something for its working class supporters it will need to get stuck into this sooner or later and a good start would be to try and engage the trade union movement to support it. A hard Brexit might bring home to employers the need for a change of attitude, although one suspects that the deficit in low skilled workers will merely be made up from outside the EU, unless further measures are taken to reduce the demand for low skill work.

There probably does need to be more regulation of the labour market. As well as heightened policing of health, safety and wages, over time the entry requirements into work need to be toughened up by making wage levels dependent on appropriate qualifications (which can be paid for by links to productivity), by a renewed emphasis on collective bargaining and the spread of an occupational licence to practise via mandatory qualifications in higher skilled occupations. This will be another way of squeezing the demand for unskilled labour over time.

 

FAMILY POLICY.

UKIP, the Tories and New Labour were no friends of the family. Like many Western European countries, Britain has seen the non-immigrant birthrate fall below the replacement rate. This is another ‘pull’ factor for immigration, as employers (including the government) need to replace that part of the workforce that is retiring. One reason is that it is not a very attractive prospect for a young woman to leave employment to raise a family. A lack of financial support and sky-high nursery fees, together with the absence of family support networks makes this inevitable. Germany, Russia and Austria are trying to tackle this issue by introducing a basic income for parents who wish to stay at home with their children for the first years of their lives. Austria is the most generous, with the income in some cases extending for three years and for most for two and a half years. Rather than thinking about a universal basic income, Labour could consider a basic income for child care. Apart from anything else, this would prove to be very popular with many families and young women. Over time, it will decrease the immigrant pull factor in the labour market.

The other area in which Labour could make a short term impact will be to increase the low cost rented sector of housing through a programme of building in areas of shortage. It may be that legislation is necessary for some of this to work, but that should be an early priority of an incoming labour government. Reviving local economies outside the South East will alleviate the pressure on housing in the South East and bring more existing housing stock back into use.

Increasing the demand for skilled labour and increasing the home supply will go some way to reducing the pressures of immigration. But this needs to be done without making the British labour market even more attractive to immigrant labour. Some measure to restrict immigrant labour, by for example, not allowing immigrants to substitute for an equally qualified indigenous worker, would seem to be unavoidable. This is a nettle that Labour will need to grasp if it is to have a credible policy on migration.

 

EDUCATION.

One way of staunching the flow of skilled labour into Britain is by producing more of it ourselves. The government can simply train more doctors and nurses instead of bleating about shortages. It seems to have recognised this in the case of doctors, but it was simply foolish to suggest that some foreign doctors in the NHS would lose their jobs as a result. The bigger challenge is developing a workforce that can cope with more highly skilled work. When children fail to learn to read and do arithmetic at the age of eleven, it is usually too late for them to pick it up later. They become disaffected at secondary school and never get the opportunity to develop their talents in a useful way.  There is still much work to be done here and Labour needs to address this. Once secondary school becomes more meaningful then young people can think about what kind of career they wish to have. The British Labour and qualifications market is complex, localised and ever-shifting, so searching for a job requires specialist help, as well as advice on what is the best course for an individual young person. Michael Gove destroyed the career service and Labour should build it up again, not just within schools but also with a labour market intelligence capacity which could be linked with its attempts to revive local economies. It is worth noting that countries like Germany which have stable, well-understood vocational qualification systems and routes into the labour market take great care to provide comprehensive careers advice to young people from the age of 14. Parents are also closely involved. These countries have the lowest rates of youth unemployment in Europe.

 

Immigration will never be staunched through coercive measures. But Labour could do a great deal to make Britain a more attractive place to live and work for British people and, almost as a by-product, make desperate people less likely to want to come and work here, by reducing employer demand for them.

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