Why a reliance on skilled immigration puts the UK skills system at risk

31 May 2018

By Sophie Brownlee

‘The test should ensure people coming here are filling gaps in the labour market, not taking jobs British people could do,’ said Amber Rudd at the 2016 Conservative Party Conference. Yet the BBC reported recently that more than 1,600 IT specialists and engineers offered jobs in the UK were denied visas between December and March. This is problematic for the national economy because the UK is increasingly facing a shortage of workers adequately equipped with the skills necessary to be competitive and secure in today’s job market. Employers are therefore struggling to fill skilled vacancies and growth is consequently held back. And the problem is getting worse. Currently employers are struggling to fill 1 in 3 vacancies for technical roles due to skills shortages. Can we have a thriving economy if we fail to equip our workers for the future yet also reject those who have the skills we lack?

Chart 1: Percentage of vacancies that were difficult to fill due to skills shortages, UK, 2011 -2015 [1]

It makes little economic sense to place arbitrary limits on skilled immigration for technical positions for which employers are already struggling to fill vacancies. We face a housing crisis yet construction is a sector facing acute technical skills shortages. The industry itself warned of a ‘cliff edge’ if EU workers, who make up 9% of the workforce, were not able to remain living and working in the UK.

However, while such a crackdown is damaging in the short term, a reliance on skilled immigration has reduced the incentive to revitalise the UK skills system for too long. Skilled immigration should only ever act as a compliment to an effective domestic skills system, not a substitute.

A reliance on skilled immigration is damaging because it cannot be tailored to meet the significant local and regional variation in skills needs. For example, the skills shortage rate for skilled trades roles is only 26% in Cheshire and Warrington LEP but as high as 73% in the Black Country LEP. In Thames Valley Berkshire LEP 64% of skilled driver vacancies were difficult to fill due to skills shortages. A regional immigration policy is feasible but would be complex; not only would new political institutions be required at the regional level but it’s also difficult to objectively define what migration is ‘needed’ at the subnational level. Investing in the UK skills system is a long-term, sustainable strategy to addressing regional inequalities and skills shortages. A regional immigration policy would complement this but not be a substitution.

Chart 2: Varying skills shortage rates by LEP for skilled trades roles [2]

Done well, our skills system could be a powerful engine of inclusive growth and a means to achieving a more equal labour market. Currently 60% of people living in poverty in the UK are in working households, and working more is simply not the answer. UK productivity has been stagnating since 2011, despite our total hours worked rising strongly, which is not good for living standards. Our productivity lags behind that of Germany, France and Italy, even while the former’s hours worked per worker have fallen by nearly 100 hours since 2000. Ours have fallen by 24. Instead of focusing on just getting people into work, we need to be focusing on getting people into the right kind of work. This could mean higher wages, increased job security from having more transferable skills, and better access to the local job market with the right skills for that area. More people would also be able to access these skilled jobs, particularly important for those who otherwise might not have entered higher or further education.

For workers on the National Living Wage, being employed in even a semi-technical role – as a manufacturing operative or fitness instructor, for example – could give them a pay rise of almost £14,000 per year over their current salary. Semi-technical roles typically require Level 2 qualifications (Level 2 NVQ or GCSEs A*-C) but it is possible for people to enter such roles without having done an FE course or apprenticeship. For core-technical roles, that require Level 3 qualifications, the potential premium for a 35-hour week rises to £21,150 per annum. Getting people into the right kind of work, therefore, can be part of the process of inclusive growth and a way to boost UK productivity. By narrowing the skills gap between our workers and our industries we would make ourselves more competitive, more productive and a more inclusive society.

While the persistent failure of the UK skills policy is a complex story, the fundamental issue undermining the system is a lack of useful, clear information. The system has been destabilised by multiple piecemeal attempts at reform and individuals still face a complex landscape of FE courses and education choices, with little information to guide them. Prospective learners face information failures on course quality, institution quality, local demand, and career prospects. At the provider level more FE colleges are operating in a deficit, reducing any incentives they may have had to meet local existing and emerging demand for skills. On a national scale, the data deficit undermines our understanding of how qualifications impact on productivity and consequently what FE courses are preferable to boost production. For more information on how we could improve our skills system, see the Centre’s recent report.

But it need not be a binary choice. A liberal skilled immigration system should, and can, complement a well-functioning UK skills system, not just be a substitute for it. A well-balanced system would make the most of skilled immigrants and enable UK workers to be trained in a way that contributes best to the UK economy. Immigration is not a viable alternative to building a functioning skills system. But fixing the UK skills gap won’t happen overnight. It will take years for initiatives like the National Retraining Scheme, announced in December 2017, to translate into skilled workers in the workplace. Meanwhile, we are rolling out large-scale infrastructure projects like HS2, and developing a burgeoning technology sector.

Immigration is an easy target for politicians to ease communities’ concerns about cultural integration and a lack of jobs for UK workers. But acting tough on skilled immigration makes no sense when we do not have an effective enough system to fill skilled vacancies ourselves. These are vacancies that, with targeted FE courses, transparent information on learning, and good links to employers, UK workers could fill. But are people ready to ask that of themselves? The UK needs a cultural shift to make lifelong learning attractive, affordable and acceptable to encourage upskilling and reskilling to meet our labour market needs.

A system that blends skilled immigration with a properly functioning, locally-driven skills development programme will be capable of filling a large proportion of our skilled vacancies with a consequential positive impact on the UK economy.

Notes

[1] Source: Based on Employer Skills Surveys from 2005–2015. The 2005–2009 surveys are not comparable with subsequent surveys as the analysis switches from individual nations to the whole of the UK, yet the findings on skilled trades are consistent.

[2]: Source: UK Commission for Employment and Skills (2016) Employer Skills Survey 2015. Available at: https://www.gov.uk/government/publications/ukcesemployer-skills-survey-2015-uk-report