Brexit and Immigration: The Looming Labour Market Crisis

By Erica Consterdine

With Brexit little more than a year away, one of the most pressing issues remains unresolved – immigration. Policymakers are grappling with how to satisfy both public and business demands for restrictive and expansive approaches to immigration respectively. This article considers the factors that have shaped the structural dependence of EU labour, with a focus on three low skill sectors that will be severely affected by the termination of free movement.

 

With Brexit little more than a year away, one of the most pressing issues and the issue that arguably drove the British public to vote for Leave, remains unresolved – immigration. Whilst the British public has long been in favour of reducing immigration, the high level of public concern has been more recent, gravitating from a marginal concern of a small minority, to what voters consider as one of the most important issues facing Britain.1 At the same time, numerous sectors rely on EU citizens at both the high and especially the low end of the skills spectrum to fill labour market demands. This leaves the British political establishment grappling with how to satisfy both public and business demands for restrictive and expansive approaches to immigration respectively.

Whilst the British public has long been in favour of reducing immigration, the high level of public concern has been more recent, gravitating from a marginal concern of a small minority, to what voters consider as one of the most important issues facing Britain.

Yet the structural dependence on immigrant labour is a product of the UK’s own making. Britain’s liberal labour market underpinned by labour market flexibility has long been heralded as a key success factor for the UK’s economy. But the liberal model of capitalism is key to understanding the dependence on migrant labour. Political decisions beyond immigration controls have created intractable path dependence that has determined the reliance on migrant labour and the dilemma policymakers now face. This article considers the factors that have shaped the structural dependence of EU labour to Britain, with a focus on three low skill sectors that will be severely affected by the termination of free movement.

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Segmented and liberal labour market

The British system of political economy has typically been regarded as a liberal market economy.2 The UK’s reliance on EU labour stems from its mode of capitalism: low employment protection, light regulations and a large low-wage sector.There is consequently a lack of coordinated wage bargaining arrangements, and firms primarily coordinate their activities via competition market arrangements. As a result, there are incentives for employers to delay costly technological advancements in favour of depending on low-wage labour.4 Declining apprenticeship and training schemes in Britain have further fostered the reliance on importing labour. Coupled with decades of deregulation, these have lowered incentives for employers to invest in skills and training for the domestic labour force.

Piore5 famously argued that the labour market is divided into primary and secondary sectors otherwise known as the dual labour market hypothesis. The primary sector offers stable well-paid employment to skilled workers, whilst the secondary is comprised of low-paid, low-skilled jobs – the so-called 3D jobs – where migrants are concentrated. Piore argued that the variability in economies (high/low of production) create a need for flexible workers who can be dismissed in periods of reduced activity. With limited social status and entitlements to belong, migrants concentrate in the secondary sector as national workers who aspire for “long-term career prospects to define their social position, shun such work”.6 Key to this dualism is temporal flexibility − not exclusive to migrants but more generally precarious workers − where employers can transfer business risks on to workers through atypical, insecure and precarious contracts.

Declining apprenticeship and training schemes in Britain have further fostered the reliance on importing labour. Coupled with decades of deregulation, these have lowered incentives for employers to invest in skills and training for the domestic labour force.

Whilst minimal regulations can be viewed as a positive incentive for furture migrants entering the labour market as qualifications are easily recognised, the light touch approach to employment protection has concordantly led to an increasingly precarious workforce stuck in a cycle of low pay and low quality jobs. This is far from being exclusive to migrants as reflected by the commissioned Taylor Review exploring low quality jobs.7 Zero hour contracts that provide little to no employment protection have dramatically increased in the last five years across the workforce, and research has highlighted that a quarter of all low-paid workers remain permanently stuck in low pay, with just under half fluctuating between low and medium pay over the last 10 years.8 Nonetheless, migrants are one of the key victims in the vicious low pay cycle, as Piore’s thesis highlights. Free market economics combined with austerity measures have accelerated demand for low wage labour where migrants dominate.

Whilst Brexit raises questions about labour market and skills shortages at both the high and low end of the labour market, in lieu of opening Tier 3 (low skill) of the current points-based system for the first time or establishing sector specific schemes, it is the latter which is problematic for policymakers and especially three sectors where pathways for legal immigration are non-existent in the absence of free mobility.

 

National Health Service (NHS) and social care

The NHS has long been a source of pride for the UK yet the advent of Brexit and consequential end of free movement could represent a major threat to its sustainability. The NHS is structurally dependent on migrant labour; research has singled out the UK as one of the developed countries that relies most on importing doctors trained abroad, with approximately 11 percent of the workforce being EU nationals.9

Whilst non-EU migrants make up a larger proportion of the NHS workforce, EU migrants comprise approximately 10 percent of registered doctors and seven percent of registered nurses.10 The number of EU nationals in health and social care workforce has grown exponentially in the past eight years up to 209,000 people in 2016, a rise of 72 percent.11 As policy has become increasingly restrictive since 2010, with higher salary and skills thresholds to pass, the NHS has struggled to recruit non-EU migrants. With tentative signs that EU nationals are already leaving the UK due to the uncertainty of Brexit, labour shortages are likely to be rife.

Yet the NHS staffing crisis and structural dependence on EU migrants is, at the very least in part, of the government’s own making. In social care, pressures for cost containment following government-led austerity measures, have led to a deterioration of working conditions, with EU migrants being the few willing to take up the low pay and antisocial hours these jobs demand. With tightening health budgets due to continuing austerity, employers in social care lack the resources to offer better pay and progression, leading to precarious atypical contracts such as zero hour contracts and agency work, dominating in the sector. The UK’s liberal labour market has meant that investment in training and skills has been low, leading to mismatches between labour demand and supply. No better is this demonstrated with the nursing sector; the government terminated bursaries for student nurses and midwives in 2017, leading to a dramatic, but unsurprising, 23 percent decline in applications.12 The government has cut their nose to spite their face.

 

Retail and hospitality

Retail and hospitality are the two largest low paying sectors in the UK, with the service industry accruing 80 percent of all UK economic output in 2016.13 Retail and hospitality are also structurally dependent on EU labour to fill labour market demands, with 12 and 10 percent of the workforce being comprised of EU nationals respectively.14 Aside from the flexibility many migrant workers offer, many employers in these sectors are also attracted by the diversity and strong work ethic migrants are said to bring. The end of free movement will likely pose a challenge for these industries, highlighted by the British Retail Consortium who claim that just over a fifth of retail firms have had EU staff leaving the UK already.15

Much like social care and confirming Piore’s segmented labour market hypothesis, migrant workers make a substantial proportion of the sector due to undesirable working conditions and pay. Again, atypical, insecure and precarious contracts are the norm, with 61 percent of employers in hotels, catering and accommodation using zero hour contracts for example.16

The UK’s light-touch employment protection model then drives the demand for migrant labour in these sectors, with UK workers deterred by the low pay and low quality jobs offered. With limited political appetite to tackle the low pay, low quality cycle the UK finds itself in – demonstrated by feeble response to the Taylor review in 201817 − there are limited solutions as to how attract British workers to these jobs. But the government have encouraged this situation by advocating insecure contracts, which bring little to no job security.

Whilst these sectors necessarily rely on a flexible labour force, the industry has suffered from an image/reputation problem – seen as a stopgap for young individuals before entering the professional ladder. To make these jobs attractive, the sector with support from the government − through reforms in the education system and public campaigns − need to rebrand the sector and offer career progression routes that will retain staff, which offer a ladder and a way out of the low pay cycle. In lieu of EU migrants willing to take on such conditions and in the absence of efforts to make this an attractive sector to workers where pay is decent and workers are valued, overwhelming shortages seem inevitable.

 

Agriculture & horticulture

Whilst reliance on EU labour in social care and retail and hospitality has been a relatively recent phenomenon, the structural dependence on migrant labour in agriculture and horticulture has long been embedded. In 2017, 98 percent of the seasonal workforce were EU migrants,18 leading the House of Lords to conclude that “the recruitment challenge will become a crisis if the government do not swiftly take measures,19 a crisis which could threaten food security and raise costs.20 Like retail, despite free movement continuing 47 percent of agricultural providers were already unable to meet labour demands in 2017 due to the uncertainty of Brexit deterring EU nationals.21

But again the staffing crisis is of the government’s own making. The labour market shortages in agriculture have been exacerbated by the closure of the 70-year long Seasonal Agricultural Workers Scheme (SAWS) in 2013. This was despite the Migration Advisory Committee’s predictions that in the medium term farmers were likely to experience increasing difficulties in sourcing required labour,22 a prediction made before Brexit was even anticipated.

Whilst technological developments could attract British workers by making work less labour intensive, if employers face detrimental labour shortages in the medium-long term, the wide-scale mechanisation of agricultural production may be inevitable.

Like other low skill sectors, poor pay and working conditions in agriculture have deterred British workers from filling labour market demands. Yet increasingly tight profit margins as a result of consumer and retail demands make increasing wages an unappealing option. The seasonal and therefore temporary nature of agricultural work is at odds with a welfare system that provides no incentive for unemployed claimants to return to work for a short period – a situation the government could and should address. And rural locations where agriculture is necessarily concentrated make relocation costs exponentially high for such short-term precarious work.

The future cost − or opportunity – in lieu of immigration will ultimately be a shift towards mechanisation, automation, outsourcing and offshoring. Whilst technological developments could attract British workers by making work less labour intensive, if employers face detrimental labour shortages in the medium-long term, the wide-scale mechanisation of agricultural production may be inevitable. Whilst this brings with it opportunities, increases productivity and represents inevitable technological progress, it also brings jobs displacement. This raises major questions for the world of work, skills forecasting, as well as utilitarian or moral questions about the purpose of work, and what kind of labour market the UK hopes to build.

 

Conclusion

The government face mounting pressure to resolve these structural mismatches. Whilst a number of policy options exist, in the event of no free movement, policymakers will need to consider how to reform low pay sectors that struggle to recruit and retain British workers. Ultimately the UK’s dilemma is of its own making. The structural dependence on EU labour fundamentally highlights the low pay vicious cycle embedded in the UK’s labour market – an issue the government must stop dodging and begin to tackle if it is to resolve the looming immigration question. It also highlights how poor policy decisions in one arena can spillover to cause contractions in the labour market. To overcome these mismatches, the UK needs to reform its mode of capitalism23. Whether such a revolution is feasible is another question.

Featured Image: Passport control at Heathrow Airport. Credit: PA

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About the Author

Dr. Erica Constardine is a Research Fellow in the Sussex Centre Migration Research (SCMR) and Department of Politics (LPS). Her research focusses on immigration politics and policymaking. Her book Labour’s Immigration Policy: The Making of the Migration State was published by Palgrave Macmillan in 2017. 

 

References:

  1. Ipsos-Mori. (2015) “Issues facing Britain: August 2015 Issues Index”. Available from: https://www.ipsos-mori.com/researchpublications/researcharchive/3614/EconomistIpsos-MORI-August-2015-Issues-Index.aspx [Accessed 15 September 2015].
  2. Hall, Peter A. Varieties of capitalism: The institutional foundations of comparative advantage. Edited by David W. Soskice. Oxford: Oxford University Press, 2001.
  3. http://blogs.lse.ac.uk/politicsandpolicy/to-be-less-dependent-on-immigration-britain-must-change-its-model-of-capitalism/
  4. Menz, Georg. The political economy of managed migration: Nonstate actors, Europeanization, and the politics of designing migration policies. OUP Oxford, 2008.
  5. Piore, Michael J. “Birds of passage: migrant labor and industrial societies”. (1979).
  6. Ibid
  7. https://www.gov.uk/government/publications/good-work-the-taylor-review-of-modern-working-practices
  8. https://www.gov.uk/government/news/low-pay-and-progression-in-the-labour-market
  9. https://fullfact.org/immigration/immigration-and-nhs-staff/
  10. House of Commons, 2018, NHS staff from overseas: statistics. Number 7738. House of Commons Library.
  11. https://www.theguardian.com/society/2017/jul/05/brexit-fears-exodus-eu-health-social-care-workforce
  12. https://www.theguardian.com/education/2017/feb/02/nursing-degree-applications-slump-after-nhs-bursaries-abolished
  13. https://www.ft.com/content/2ce78f36-ed2e-11e5-888e-2eadd5fbc4a4
  14. http://ukandeu.ac.uk/fact-figures/where-do-eu-migrants-in-the-uk-work/
  15. http://www.bbc.co.uk/news/business-41545184
  16. https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/articles/contractsthatdonotguaranteeaminimumnumberofhours/mar2017
  17. https://www.gov.uk/government/publications/government-response-to-the-taylor-review-of-modern-working-practices
  18. Grimwood, G. G. and T. Mcguiness (2017) Migrant Workers in Agriculture, House of Commons Library Briefing Paper Number 7987
  19. National Farmers Union [NFU] (2017) Drop in seasonal workers leaves some farms critically short. https://www.nfuonline.com/news/latest-news/drop-in-seasonal-workers-leaves-some-farms-critically-short/
  20. Sumption, M. (2017). Labour immigration after Brexit: questions and trade-offs in designing a work permit system for EU citizens. Oxford Review of Economic Policy33(suppl_1), S45-S53; Grimwood, G. G. and T. Mcguiness (2017) Migrant Workers in Agriculture, House of Commons Library Briefing Paper Number 7987
  21. National Farmers Union [NFU] (2017) Drop in seasonal workers leaves some farms critically short. https://www.nfuonline.com/news/latest-news/drop-in-seasonal-workers-leaves-some-farms-critically-short/
  22. Migration Advisory Committee [MAC] (2013). Migrant Seasonal Workers. London: MAC.
  23. http://blogs.lse.ac.uk/politicsandpolicy/to-be-less-dependent-on-immigration-britain-must-change-its-model-of-capitalism/

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