The key inhibitors of wage growth include affordability, public sector pay restraint and added costs such as the National Living Wage
Date: 30/09/2014 Duration: 00:17:57
In this podcast we discuss the impact of increasing numbers of migrant workers on the UK workforce and in particular the effect that this is having on young people as they seek employment. We speak to Gerwyn Davies, Public Policy Adviser at the CIPD, who sets the scene for the numbers of migrant workers compared to 10 years ago. We discuss the rising number of skilled EU workers entering the UK workforce and the impact on the UK employment rate. We also speak to Alex Gennie, Senior Research Fellow, IPPR (Institute for Public Policy Research) and Sinead Lawrence, Senior Policy Adviser, CBI (Confederation of British Industry) about how the employment landscape is changing in general and why it is important to consider the impact of EU migrant workers as part of this changing landscape. We go on to discuss what EU migrants bring to the workforce in terms of skills and values and the effect this is having on young people in particular.
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Philippa Lamb: welcome to the podcast. This time we’re focusing on migrant workers from the EU. Now we all know their numbers are rising but what impact is this having on the UK workforce? Well joining me to assess that is Gerwyn Davies, Public Policy Adviser, CIPD; Alex Gennie, Senior Research Fellow, Institute for Public Policy Research and Sinead Lawrence, Senior Policy Adviser, CBI.
Now Gerwyn just before we get into a wider discussion can we do a bit of scene-setting because we’re recording this in a week where we’ve been hearing that immigration is now the topic of most concern to voters. We’re talking today about EU immigrants, how many have we seen coming to the UK in the past decade?
Gerwyn Davies: Well we now have a situation where 1.75 million people are employed in UK organisations that are EU migrants and that is roughly double what it was ten years ago. So we’ve seen a big meteoric rise during that period and a big reason for that of course is enlargement which is a decision taken by the Labour Government to accept countries from eastern Europe such as Poland and Slovakia which allowed them unrestricted access to the UK labour market.
PL: Okay are we taking more than other Eurozone countries?
GD: We are and that's partly due to that decision. We were one of three countries, the other two being Sweden and the Republic of Ireland to accept them in 2004 and of course the UK being the largest economy of those three accepted a disproportionately large number and what we’ve seen as a result is not just a high number of migrants coming from those countries in 2004 but we’ve actually seen the concentration grow because migrants that have come in have referred their relatives or friends to their own employers and networks have built up over that time.
PL: I think it’s fair to say employers have largely welcomed them haven’t they? Most of them have found work.
GD: Yes they have and it’s noticeable how the employment rate of EU migrants has increased during that period. Ten years ago their employment rate was 62%, it’s now 81%, it’s among the highest of all nationalities and it just shows how valuable they have been to UK employers.
PL: And I think there is a general perception that most of the work is low grade but that's not entirely the case is it?
GD: No we’ve seen an increase in the number of highly skilled, mid skilled and low skilled but it’s definitely true that the highest proportion of migrants in particular are in low skilled jobs. We know that more than one in five jobs in the UK now is occupied by a low skilled migrant and a disproportionate number of those are EU8.
PL: Okay now we’ll talk about this in more detail in a moment but how big a factor has that been then for UK jobseekers?
GD: Well that’s up for debate and there are lots of varied opinions about this but if you look at the employment rate which is the central measure used by economists to judge what impact it’s had, the UK employment rate has remained fairly stable which suggests that perhaps it hasn’t had that much of an impact, although we have seen EU employment rates go up during that period. But it is interesting to note that young people’s employment rate has actually fallen during that period. And it’s even more interesting because we know that young people are employed in the same roles, in the same sectors, as migrants. And that combined with a squeezing out of mid-level skilled jobs means that there are far fewer jobs to compete for among a far larger pool of applicants.
PL: So this has particularly been an issue for young unskilled British workers?
GD: Yes we also know from various international evidence, not least the OECD, that the basic skills of our young people don’t match favourably with our international counterparts. In contrast our older people do. So we do have a long tale of people without basic skills. So you've all heard of the term NEETS and the high number of those in the UK and it’s unsurprising therefore to see that they are perhaps missing out on jobs compared with what are often a lot older and highly qualified graduates from the European Union.
PL: Okay and there's also been a suggestion hasn’t there that I think probably right at the bottom of the job market that EU immigrants have driven down wages.
GD: The evidence of that is a lot more limited and of course we have protection in the form of the national minimum wage, which employers have to adhere to. However as the Migration Advisory Committee recently pointed out the actual enforcement of that policy is relatively poor. The very slim prospect of an employer actually getting inspected but there is no evidence to suggest, certainly as far as the CIPD is concerned because every employer that we’ve interviewed has said that they follow the minimum wage and actually there's no difference whatsoever between migrants and UK workers employed in exactly the same role.
PL: But I suppose the possibility is there in a greyer part of the economy, that unscrupulous employers might be paying below.
PL: Okay well let’s widen this out now and bring Alex and Sinead in and I think it would be interesting to know how you all feel the landscape, the employment generally is changing as these EU migrant numbers rise.
Sinead Lawrence: I think we’ve seen huge changes to the labour market which aren’t simply driven by EU migration but actually wider changes to do with the level of skill required for jobs, young people are staying in education longer; older people are staying in the workforce longer, so there's lots of structural changes and we need to look at migration as part of that and not think that it’s simply the driver of changes in the labour market.
PL: Alex what do you reckon?
Alex Gennie: I would agree with that. The labour market has been changing; migration has been a part of it but migrants aren’t coming because the UK’s labour market is so flexible, they're not all coming to take jobs from British workers.
PL: Yeah though as Gerwyn’s been saying they’ve been very successful haven’t they in finding work, is it possible to say what they bring to an employer that perhaps British workers don’t?
GD: There are a whole range of reasons why employers do take them on. One is the perception, at least among some, that they have a greater work ethic, that's not perhaps been borne out in our evidence as much as has been at least argued by some academics. The skillset is an interesting one and especially the softer skills, so customer service skills, teamwork and basic respect and courtesy both for customers but also for your colleagues has emerged as a big issue in this research and that relates to the big buzz word in HR which is about values. So are migrants embracing values in a way that perhaps some UK workers aren’t? Some employers are telling us that that's the case.
PL: It is interesting isn’t it, this idea of aligning the values of your workers with the organisation that generally on all sorts of levels you get a better outcome if you do that. I don't know what you think Sinead amongst the CBI, you represent employers, have you had a sense that they’re finding this and that this is predisposing them in favour perhaps of looking at people who are perhaps more culturally aligned with their organisations?
SL: I think something which comes out from our research is that employers think school leavers and young people don’t have enough understanding of how the world of work operates and maybe that fits in with values and thinking about what’s the workplace like, how can I succeed in that environment and obviously employers have got a big role to play in helping to develop that understanding, it’s not something we can leave to the education system alone.
PL: Yeah I mean is that an age thing as well because Gerwyn you were saying that these people they tend to be that bit older and obviously we learn those skills don’t we with age?
GD: Absolutely it’s in fact the conclusion that we’ve reached in our research, it’s not about nationality it’s entirely about age and qualifications and you do pick up those employability skills as you go through your career. I think of myself as a 19 year old, wet behind the ears graduate and I'm embarrassed almost by the employability skills I had then and obviously I've picked them up over time.
AG: And if you think about the profile of these workers they do tend to be highly motivated, they’ve made the decision to migrate to another country which is not an easy thing to do.
PL: Yes they’re a self-selecting group in the first place aren’t they?
AG: Exactly so they were coming to seek work, they might have a job lined up already, they tend to be slightly older, in their mid-20s, they will have had some experience already and they have this strong level of motivation which is something that employers really respond to.
PL: One of the things that seems to be coming out of the research reports is that perhaps immigrants, perhaps unsurprisingly, aren’t so preoccupied with career progression in the jobs that they’re looking for and of course there has been a suggestion that young Brits are a bit slow to accept jobs where they don’t see a direct line of progression and I don't know whether any of you feel that you've seen that?
GD: Well I think they evidence is mixed but what we’ve also seen is that migrants actually feel very frustrated with their prospects. I think a lot of them have come over as graduates, perhaps with an initial expectation to just maybe stay here for a short while but actually with so many people, including myself, being based in London, when I consider 20 years ago I was only going to be here for three years, you stay, you build up a network and you try to forge a career.
PL: Do you think Sinead there's any possibility people are taking, you know, is this a way of cutting training budgets to put it baldly because if you’re not looking at people with a long-term career progression in mind you can just take them on and not spend that sort of resource on them can't you?
SL: We don’t actually see the evidence that people are limiting their training budgets and bringing in fully formed workers. People want to develop their staff, many places have individualised training, they want to offer these opportunities, they want to offer progression, so it’s just about how do we explain to people from the UK and from elsewhere how to access that training, how to make the most of those opportunities for progression, and I don't think this is an either or.
GD: Can I just add to that I think one of the real finds of this research is that it does quash that idea that employers are recruiting migrants because they are off the shelf, readymade graduates, in order to avoid their responsibilities to train their staff, actually the reverse is true. What we’ve found is a relationship between formal training provision and what I mean by that is apprenticeships, internships, work experience and hiring migrants. So if you hire migrants or employ migrants you’re much more likely to offer those formal training schemes than you are if you don’t. I think that's a really important conclusion.
PL: So there's no sense in which employers are actively preferring EU immigrants they’re just the right people for the job?
GD: In the vast majority of cases I would argue that's definitely the case that it is a result of normal activity that was a recurrent message from employers to us that they’re simply recruiting the best person for the job. However it’s certainly the case that in a minority of cases employers are actively recruiting migrants from overseas.
PL: And do we know why they’re doing that?
GD: Simply they just can't find the staff. So we’re seeing for instance NHS hospitals can't find enough nurses, so obvious countries at the moment, for obvious reasons are Portugal, Spain and Italy because the employment rate is so high there.
PL: And it’s interesting you say that employers are favouring workers with that degree of skill because I think perhaps in the past it was fair to say they favoured unskilled or low skilled immigrant workers because they had better attrition rates than UK workers in those really low grade jobs but this is something else isn’t it?
GD: Yes but it also underlines the dividend that EU migrants bring to employers across a skills spectrum. They are very positive about the contribution that EU migrants make and it really does call into question any calls from politicians for more stringent conditions to be imposed on EU migrants and in particular the free movement of labour principle.
PL: Yeah I mean this is the interesting question isn’t it? It’s a big issue in the run up to the General Election, we’ll hear a lot more about it, I’d be interested to know what your respective organisations think government policy should be on this?
AG: Well at IPPR we’ve been doing quite a lot on the Government’s migration policy specifically related to EU migrants. The current Government has a net migration target so they’re trying to reduce net immigration levels to below the hundreds of thousands every year but they’re trying to do this through tweaks to the benefit system which in our view are not going to have any impact on the numbers. Most EU migrants are coming for work or for study, they’re not coming simply to live off the state so in our view the approach taken has, you know, it’s not going to get the government to where they want to be in terms of their stated policy but it’s also not going to do anything to deal with some of the other issues that we’ve been talking about.
PL: Yes I mean as we’ve said most of these people are employed aren’t they so benefit changes don’t impact on them at all.
PL: And as we heard with the announcement this week no one seems very clear what the numbers are on this anyway, even government can't give us statistics on how many would be affected by reducing the benefit capacity. So as you say...
AG: Yes so in our view the government policy should be much more focused on improving skills, on identifying those people who are out of work in the UK who need additional support and focusing the efforts there, as well as on addressing some of the social impacts of migration that people are concerned about.
PL: What’s the CBI’s position?
SL: I think it’s important for us to remember that free movement of labour is just part of the free market in Europe and that offers huge benefits for the UK economy and for people, creating jobs, attracting inward investment and also the freedom for people that we can also move anywhere in the EU and get a job, and that's a great freedom for us as well about building skills, attracting investment, creating jobs and it’s important to remember many migrants coming into the country are actually generating jobs and creating work for British people too. And like you say Alex then making sure our skill system, our education system, equips the UK people and young people to compete for work is really important alongside that.
PL: I mean obviously we have a skills cap for non-EU immigrants should we be looking at that for EU workers as well?
AG: In our view that would undermine the principle of the freedom of movement. If you start imposing caps then you have to think about how many and from which countries and that really would call for the UK to withdraw from the EU essentially if we’re going to start going down that route.
PL: A very difficult thing to achieve.
PL: It has been mooted.
GD: Yes the challenge is on raising the skill levels of UK young people in particular and I think there are some things that they could be looking to tweak, what we’re seeing is a disproportionately high number of apprenticeships that are going to people aged 25 and above is over 40% and some of those are actually going to migrants so government needs to look at perhaps creating a financial incentive or two in order for more apprentices to be aged 25 and under.
PL: Obviously we’ve heard a lot about youth unemployment over the last few years and certainly during the economic downturn, we’re seeing better numbers now but so much has played into this, have we developed as a nation into a group of employers who are largely are a bit reluctant to take on young workers, they’re just seen as a bit of a problem rather than an opportunity?
GD: Well certainly the evidence suggests that that is the case but it’s about perception rather than reality, what we also know from the evidence is that employers are very happy with the graduates and the school leavers that they take on, so it’s about changing the perception of the performance of UK young people rather than the reality.
PL: Would you agree with that Sinead?
SL: I think building up the relationships between employers and schools and colleges and universities is a really good way to do that.
PL: And we have been talking about this for a long time haven’t we, more engagement between employers and young people are we really going to see that?
SL: It’s a long running issue and I think reforming the school system to really get every young person leaving school with the attitudes, the attributes, the skills to succeed is still a challenge but we’re moving in the right direction.
GD: I think perhaps what we have talked a lot less about is the role of further education colleges and I think it’s specifically within the context of some of the sectors we’re talking about, hotels, catering and leisure being a case in point, a number of employers said that they had no relationship with them when they were courses that were directly related to their work and that seems to be a missed opportunity that’s actually recognised by employers. What’s missing is a degree of ownership and what we’re currently considering is perhaps some onus on FE colleges to actually provide not just the careers advice but that progression into employment.
PL: And the time is now isn’t it? I'm thinking that we’ve got eight more candidate countries hoping to join the EU, that's what, a combined population of over 90 million, this isn’t going to go away is it? So now is the time for us to pour this resource and thinking into how we’re going to upskill young people in terms of abilities as well as hard skills to actually compete.
GD: Absolutely and of course the labour market is improving massively as well so at the moment employers have been quite lucky in the sense that they’ve had a supply of labour whereas it could be soon upon us where we have a situation where the labour market becomes very tight and therefore the message from us is that employers really need to start, not just addressing some of these issues but actually investing a lot more in their own staff if we’re to avoid that skill shortage scenario that many of us now fear in the future.
PL: Thank you all very much indeed. Sinead, Alex, Gerwyn thanks.
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