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Westminster’s bogus immigration consensus

Reliance on migrants is hurting workers and limiting innovation

Artillery Row

“We want to encourage and welcome highly skilled immigrants to Britain, whilst maintaining control so that we can plan and pay for public services.”

Such were the words of Boris Johnson in November 2019, a matter of days before his historic general election victory. The Conservative manifesto struck a similar note, pledging “there will be fewer low-skilled migrants and overall numbers will come down”. Notably, the very same manifesto also contained a commitment to improving workers’ rights.

Bricklayers and plasterers were added to the shortage occupation list

Four years, two prime ministers, one global pandemic and one major war later, these pledges feel like a distant memory. The commitment to the electorate still stands, however. Two-thirds of voters say they believe immigration is too high. This includes young people and Londoners, putting paid to the myth that only the provincial and the old are concerned. Migration is a top-three issue in surveys of all voters and a top-two issue for Conservatives. Migration scepticism is not only widespread, it’s also efficiently distributed — research from Onward shows there is a migration-sceptic majority in 75 per cent of parliamentary constituencies.

Lower numbers, higher skills: this was Johnson’s 2019 offer. It may seem puzzling, then, that earlier this month bricklayers, plasterers and other construction workers were added to the shortage occupation list, the smoothed-entry pathway onto the post-Brexit work visa scheme. It must seem more curious still for construction workers themselves, 67 per cent of whom voted to Leave the EU (concerns about immigration was the second most popular reason for voting for Brexit).

The Home Office is now reported to be in talks with several governments to secure further work visas for European waiters, baristas and au pairs. Employers in hospitality, retail and similar sectors say they are unable to fill their vacancies and will not be able to continue trading. That is, unless they are provided with a new pipeline of young workers from the continent — doubtless on very low wages. The economy needs it, we are told.

Do we really need these workers? Not everyone thinks so. Professor Alan Manning of the LSE told the Financial Times that it isn’t right to talk about a “labour shortage. Rather, employers are advertising jobs British workers aren’t prepared to do, given the pay and conditions on offer. The fact that employers can’t fill a role doesn’t mean there’s a shortage — it may be that they are offering bad jobs. Perversely, pro-immigration liberals sometimes argue that border controls are protectionist. Another way of seeing it is that employers are seeking to distort the market in their favour by lobbying the Government for a ring-fenced supply of labour.

In 2022 net migration was 606,000. That is more than double the annual 2019 figure of 219,000 (the most recent number not distorted by the pandemic) and almost double the figure when the country voted to leave the EU in 2016. For historical context, net migration to Britain was around zero before 1994. The post-Brexit Future Borders and Immigration System may have technically given us “control”, but it has failed to deliver on either of the promises made in 2019.

It’s alarming, then, that a Downing Street spokesperson recently said that the current policy is “striking the right balance. It’s true that cutting immigration is not easy and involves some tough trade-offs. Voters are generally sympathetic to the 210,000 Ukrainians who have arrived since the beginning of the war. Likewise, they are more positive about health care workers, who make up nearly 100,000 of new arrivals. It must be accepted that reducing immigration might mean paying certain workers more, which means tough choices for some businesses.

Nevertheless, it’s clear the “skilled worker” visa programme is far too liberal and does not provide the control and reductions that voters rightly expected. The main salary threshold for the skilled worker route is £26,200, just 80 per cent of the median wage. For some jobs, this is just £20,960. On skill level and earnings potential, it simply cannot be argued that au pairs and baristas fit the bill. Bricklaying is certainly skilled work, but are these skills of which British people are incapable?

Creating a near-limitless supply of workers making below average earnings compounds existing problems, including the UK’s chronically low pay. As research by Oxford’s Migration Observatory and the Migration Advisory Committee (MAC) has shown, immigration has a negative effect on the wages of local lower-skilled workers. It gives more power to employers by giving them more choice, undermining the bargaining position of British wage-earners. It also puts downward pressure on working conditions: migrant workers enjoy fewer rights and rely on visas to remain in the country, making them less likely to quit. Why employ a British worker with labour protections when you can go for a migrant with very few?

Increasing the supply of labour undermines pay and conditions

Orthodox economists say immigration doesn’t displace local workers, calling this the “lump of labour fallacy”. There isn’t an amount of fixed demand for work, they argue — migrants themselves will need goods and services, leading to more jobs and so on. However, economists and thinkers such as Ha-Joon Chang and Michael Lind dispute this, arguing that increasing the supply of labour — particularly from poorer countries — does by definition undermine pay and conditions. It increases the monopsony power of bosses, allowing them to engage in wage arbitrage. The anti-inflationary (read: wage-reducing) effect of immigration has been noted by Goldman Sachs, the Bank of England and the IMF. Indeed, a former Chancellor has even recommended increasing immigration specifically to keep wages down. The minimum wage provides some protection, but it does nothing for those hoping to make any more than this.

The pay of HGV drivers has gone up stratospherically since Brexit, far above the inflation rate. In Plymouth, annual salaries went up by £3,000. Workers in London pubs have received amongst the biggest pay rises in the country. Nearly a third of hospitality employers say they are raising pay and conditions to remain attractive to workers. Clearly, in some areas migration control has increased the real value of labour.

This will present challenges for some businesses. Reliance on immigration reduces the incentive to invest in labour-saving technologies; switching to automation will be costly up-front, but would help improve Britain’s cripplingly poor productivity. In customer-facing businesses like restaurants, this won’t be possible. The answer to unprofitable businesses cannot be de facto corporate welfare via immigration, though. Is a business wholly reliant on poorly paid overseas labour really fit for purpose?

High immigration is how Whitehall is wired. The Treasury is always supportive as it increases GDP figures (purely by adding more people to the country). This has the effect of making Britain look less indebted as it lowers the debt-to-GDP ratio. Immigration can improve productivity figures by importing more productive workers. However, it doesn’t improve the output of local workers at all. Of course, Whitehall accounting doesn’t measure the less tangible impact of immigration on wages or people’s quality of life.

The business lobby says British workers simply don’t have the right skills. Traditionally, society expected that employers would train their workers. Skilled employees don’t come ready-made — you have to invest in them. They add value to your company (more value than they are paid), and in return they receive training that increases their own market value. Reserving cheap, instantly accessible labour for employers short-circuits our social contract. Migration, for these vested interests, is an easy answer.

Immigration in the hundreds of thousands must be viewed as a feature of hyper-globalisation. It erodes the status of British workers, to say nothing of the extra pressures placed on housing and public services. It loads the dice in favour of business against labour. This is not only unfair to British workers; it’s also unfair to the migrants coming to work for low pay, sometimes living in very cramped conditions. It also drains talent and manpower from their countries of origin.

The vote to leave the EU was a revolt against the impact of hyper-globalisation on British communities, and the economic distortions caused by immigration are a big part of that story. Immigration supporters include the Whitehall machine, corporate lobbyists and our powerful financial sector, but the voters know the status quo isn’t right. Concern about immigration is only written off as mindless jingoism by those who are its beneficiaries. To those competing with the whole world for jobs, it’s a matter of bread and butter.

A new consensus on immigration emerged amongst the electorate some 20 years ago. It’s time Westminster caught up.

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