Immigration: A few questions

The latest ONS labour market figures contain two decades worth of data on employment by country of birth. Since immigration is such a hot topic at the moment, I thought I’d take a ramble through some of the figures.

How has the workforce changed over the last two decades?

We now have 5.6 million more people in work than we did 20 years ago. Of these, around 2 million were born in the UK. The number of UK born workers hasn’t increased by much over the last ten years or so.

emp-by-country

Source, ONS EMP06, February 2017.

Is this because the foreigners have been taking our jobs?

No. Employment rates are at an all-time high. A greater percentage of the UK-born working age population is in work now than at any other time on record. The rate for EU born workers is higher still because most of the UK born of working age who are not in work are sick or disabled. The EU’s sick and disabled stay in their own countries.


emp-rate

Source, ONS EMP06, February 2017.

What has happened since the recession?

There has been a small increase in the number of UK born in work but most of the employment growth has come from people born outside the UK. EU migrants account for around half the net job growth since the recession.

chg-in-emp-by-country

Source, ONS EMP06, February 2017.

Isn’t it a bit rich to boast about a jobs miracle then tell the people responsible for it they might have to leave the country?

Yes.

Hang on, though, if the number of UK born in work is barely rising, how come their employment rate has gone up?

The UK born 16-64 population is falling. If the number on the bottom of a fraction gets smaller and the number on the top increases, the percentage goes up. Therefore, even a small increase in the number in work makes the employment rate go up

As the demand for labour rises, migrants are making up the shortfall. The increase in employment we have seen since the recession wouldn’t have been possible without them.

As our population ages and previous baby booms work their way into retirement, it leaves us with a population profile that looks more like a beehive than the traditional pyramid. Without migrants padding out our working-age population, the shape would look even more top-heavy.

c4j5tkpwqaaruil-png-large

Chart by Michael O’Connor, using ONS data

What will happen if we send ’em all home after Brexit?

We probably won’t because, by the time we leave the EU, around 80 percent of EU citizens will have been here more than 5 years and so will be able to claim permanent residence. Of course, some will struggle to prove it and the government, should it be so inclined, might find all sorts of ways to make things difficult for them. Even so, it is unlikely that we will see a sudden and dramatic fall in the number of EU workers.

Screen Shot 2016-08-17 at 15.34.04

Chart by Social Market Foundation

Of course, processing all these applications will be a colossal task for an already over-stretched civil service but that’s one for another day.

So everything is going to be OK then?

Well not really. Our economy is based on assumptions about trade and the availability of labour. Employers who have had access to a huge pool of well-qualified English-speaking workers will find it difficult to adjust. The EU migrants won’t disappear overnight but it will become more difficult to recruit new people.

The latest employment figures suggest that, for the first time in recent years, the number of EU workers in the UK has fallen.

screen-shot-2017-02-17-at-17-33-34

The figure for the first quarter of this year may look even worse. Anecdotally, I hear stories of EU workers going home for Christmas and not coming back. Time will tell but it looks as though EU migration might have peaked. Even this slight fall already has employers worrying about a skills and labour shortage. If the government reduces immigration by anywhere near the amount it says it wants to, many businesses will struggle.

This is a bit like turning the tap off at the same time as pulling the plug out. Just as our UK born working age population has peaked, we have decided to make it more difficult for workers to come here from the rest of Europe.

Are these companies just crying wolf?

A few might be but many are going to find themselves in serious difficulty if migration is restricted or if EU workers simply decide they’ve had enough of us and don’t want to come here any more.

Some industries are heavily dependent on migrant workers and a labour shortage might put a lot of companies out of business.

Screen Shot 2016-08-17 at 15.14.38

Chart by Resolution Foundation

What might employers do? 

They could retrain existing workers to fill skill shortages and the government could help more people back into work. But most of the working age people who are not in work are disabled and, as Torsten Bell says, “we’re not about to send them out into the fields.”

A labour shortage might encourage some employers to relocate to where there are more people available. Most of the post recession job growth has been in London. If the supply of migrant labour is choked off, they might go further afield to find workers. It might also mean that the underemployed on precarious part-time or self-employment terms might find more secure work.

CplRJQ2WcAAR43d.png-large

Chart by Michael O’Connor, using ONS data

Then again, some employers might just move work abroad. If the EU workers can’t come here, multi-national firms might simply go to them. One HR director I was talking to recently said he may have to relocate his R&D function to central Europe.

It is possible that a labour shortage might give firms an incentive to invest in technology, thereby improving productivity. Brexit could be the catalyst for a the UK to become a world leader in robotics and artificial intelligence. That, however, would require a complete change in our business culture which has been short-termist and reluctant to invest for several decades.

What else could we do?

We could redefine ‘working age‘. If we can’t reinforce our working age population with migrants we will have to change our assumptions about when people retire. Older people are fitter and healthier than they used to be. Many are already working beyond what we used to think of as normal retirement age and, with the demise of defined benefit pension schemes, the next wave of over 65s might need the money. Raising the pension age to over 70 won’t be popular but it will probably happen sooner than we think.

So could this turn out to be quite bad?

It has all the makings of a complete clusterfuck.

It may well be somewhat challenging, yes.

Advertisements
This entry was posted in Uncategorized. Bookmark the permalink.

14 Responses to Immigration: A few questions

  1. Patricia Leighton says:

    You say little about non-EU migrants who are the majority, I think. What are the implications of a tougher migration policy for them and for the rest of us.

  2. I like some of those charts 😉

    Seriously though, how the demographics will turn out is a key question that we can’t answer. Let’s say for the sake of argument that a marvellous dividend from working-age migrants is helping out with paying for today’s oldsters who are almost entirely born in the UK. All those state pensions, all those end-of-life health costs on the NHS, the pensions credit for those who didn’t make enough contributions over their working lives, even the good chunk of housing benefit that goes to pensioners. They certainly take a lot of supporting! But jumping into our time machine and going 20 years into the future, 30 years, 40 years and maybe even as far as 50 years where we reach the limit of the OBR’s projections, won’t the population pyramid/beehive then have rather more oldsters *than there would otherwise have been* (to adopt that favourite Treasury turn of phrase). As unless today’s migrants go ‘home’ on retirement to somewhere they might not have been for decades, or literally work themselves into an early grave, then they will be here and have to be supported in their turn. In fact the latest OBR projections have so radically upped projections of health spending that if they are right then there isn’t the slightest hope of migration being – in the longer term – anywhere near an answer to the challenges of the future (as I blogged earlier this week https://medium.com/@StrongerInNos/soaraway-unsustainability-23a7d3713afe#.lii2u3lgx ). It’s hard to think of a suitable analogy that doesn’t have pejorative connotations (Payday loan? Pyrrhic victory? Tragedy of the Commons?) so let’s hope for the best as of course the OBR still says that however bad things might get fiscally, with high migration they will be at least be better *than they would otherwise have been*. Instead perhaps best to zoom out and away and look at the official EUROSTAT projections for populations throughout the EU in the longer term. By 2060 the UK’s has increased by 15 million, or nearly a quarter. But the German population has been literally decimated and the populations of much of Eastern Europe as well as Portugal and Greece cut by even more. If we’re going to manage to keep the balls in the air (or that bit further off the ground than they would otherwise have been) only by significant population growth driven by migration, what about everyone else?

    • Gary Simmons says:

      Michael/ all
      Take a look at the report I co-wrote with Julia Howes at Mercer. We are entering a massive workforce crisis, which turning the migration tap down will exacerbate. I believe the challenges are profound. Particularly with 3.5 m extra over 65s to support by 2030, and very possibly a smaller workforce than we have today to pay for it
      https://www.uk.mercer.com/our-thinking/brexit-emerging-british-workforce-crisis.html

      Apart form the chellenges to society, the challenges to business will be immense. May clients tell me thatEU migrants are returning to the rest of the EU for better/ more comfortable opportunities. Afterall, free movement is a two way street.

      It’s a problem that is t going away anytime soon

      • Dipper says:

        Well if we are going to have problems then other EU states are going to get crucified. The European Commission projections (see link further down) has Germany losing 10 million people due to a falling birthrate.

        And just to re-iterate the point, if you want targeted migration then that is not what the EU gives you. The EU gives you uncontrolled migration so you may end up importing lots of problems – you have no control over this.

        And to state the obvious, we do have some policy options. I notice lots of 70 year olds working in supermarkets and elsewhere, so employing more old people is an option. We could improve our productivity to liberate workers, and for a truly radical suggestion how about investing in training our young workers rather than leaving them to fend for themselves whilst we bring in fully trained staff from abroad.

  3. Jim says:

    Your stats assume the ‘UK born’ is the same as ‘not foreign’ which I think many people would not agree with. Just because Magda and Piotr have a baby in Norfolk does not make that baby culturally English, especially if there are lots of other Magdas and Piotrs for the child to grow up among. Ditto Mohammed and Aisha.

    The native culturally English are slowly being eroded – the age group 30-40 shows the level of foreign penetration, and although those non UK born immigrants are having UK born children doesn’t mean those children will grow up sharing the native cultural identity. Far more likely to be culturally the same as their parents. Its what happens when you allow too much foreign immigration in a short period of time – there is no necessity to integrate, you can live in a culture identical to your home one, as there’s lots of your fellow countrymen to associate with.

    • Dipper says:

      Whilst I normally agree with you Jim I’m not so sure here. The first wave of Polish immigration in East Anglia happened after the second world war, and I believe most of their children are as typically English as anyone but with a bit of added family history. And you can’t argue that new immigrants will keep themselves separate yet simultaneously erode the culture they are keeping separate from. Mass immigration of Pakistanis into Yorkshire hasn’t eroded traditional Yorkshire culture one bit.

      But it is an interesting question whether eastern europeans who are noticeably not reproducing in their countries of origins are choosing instead to have their children here.

  4. stewart says:

    Good post on a complex topic.

    There are many ways that participation rates can be increased. Employment rates in some regions are still about 6% lower than the South East . Many people do not have access to training places, for example we urgently need about 40k lorry drivers. In the 80s, they used to encourage worker mobility from the depressed regions but now it is so much cheaper to get people from abroad.. Employment rates for over 55s dip rapidly and we could, for example, have care obligations that can earn credits for free social care in later life. Many women would return to work if child care facilities were improved. Most university courses could easily be reduced to 2 years to the financial advantage of the students.

    You seem to suggest that , in the past, there was a fixed demand for labour needed to be satisfied. The economy adapted to use the factors of production according to their availability and price. The structure of the economy is very different today compared to what would have prevailed had we not had freedom of movement from the accession states. The classic example is the replacement of car wash machines with hand washes. Government policy would have altered to try and address skill shortages.

    I can’t see immigration coming down much. There are a lot of vested interests and it is all very difficult.

  5. Dipper says:

    okay. so our aging population means we need to import lots of workers.

    So how come its only us and Sweden who need to do this? Is Germany’s population getting younger? You’ve explained lots of things, but you haven’t explained why so few other countries in the EU face the same population pressures.

    source as always http://ec.europa.eu/economy_finance/publications/european_economy/2015/ee3_en.htm

  6. Dipper says:

    … and just to make a Brexit point, if you believe we need immigration to meet UK needs and fill UK employment gaps, then this can only be achieved by leaving the EU. What the EU gives us is unlimited immigration to meet the needs of the whole of the EU. It makes any planning on infrastructure practically impossible.

    • M. says:

      I don’t agree with your last sentence. It’s like being a Londoner and saying “What Britain gives us is unlimited immigration … It makes any planning on infrastructure (for London) practically impossible.”

      What we have in the UK is successive governments that have chosen not to plan for the future (as we see with pension & NHS crises caused by the aging population that was wholly foreseeable). That is our failing; not that of the EU.

      Furthermore, this “unlimited immigration” trope that you’ve echoed fails to mention the conditions that are part of the EU Directive concerning freedom of movement that Britain chose not to apply.

      • Dipper says:

        M. Your last point has some validity. However there was no sign of any UK government actually implementing that, so in the end the only way of avoiding 80million in the UK was to vote out.

        My view was and still is that the UK should probably be part of the EU and us leaving is a monumental cock-up by the political class in the UK and the EU. Two things conspired to get us here. Firstly successive UK governments that didn’t listen, didn’t look, didn’t ask questions and ended up with a proposition for continued membership that simply didn’t address the clear concerns of the majority of the population, and secondly the takeover of the EU by a hard-line federalist group that refuses to recognise any policy other than a federal EU dominated by central european interests meant continued membership was detrimental to the interests of the majority of the UK.

        And on the failure of planning bit – yes. My area is already bursting at the seams with hospitals and schools all over-crowded.The government is now taking decisive action – it has announced massive new house-building projects with no additional infrastructure. Again, a UK government that planned properly wasn’t on the ballot paper. The only way to stop the destruction of a functioning civic society under concrete was to vote out.

  7. Bina says:

    A couple of weeks ago the Sunday Times magazine ran an article entitled “The Forgotten Army” – this is the forever overlooked army of women whose skills and capabilities are always overlooked and are never counted in the sources/analyses used here. For ever creating false claims of ‘labour shortages’ by only including numbers that represent the cheap to employ from abroad (denuding other countries of their young, semi and skilled personnel) is seriously flawed. It is about time we as a nation did some proper workforce planning and developed and cherished the British born people and all their potential. And no, I do not think the only unemployed Brits are either sick or disabled. There are at least a million who are perfectly, fit, able and ready to enter the workforce but are not in receipt of benefits, pensions, etc….. Did none of you people read and understand the principles and issues covered in The Grapes of Wrath?

  8. Bina says:

    Oh, and just seen this too: http://bit.ly/2m4K6Vq

  9. anon says:

    But most of the working age people who are not in work are disabled and, as Torsten Bell says, “we’re not about to send them out into the fields.”

    Have you been to a job centre (or warehouse/supermarket/etc) lately? That is exactly what’s happening.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s