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MIGRANT LABOUR & UK PRODUCTIVITY: THE TRUTH

Author: Richard Snarey

Published date: 2020/02

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​This week, we came across an insightful commentary piece in The Times, where David Smith applied cold, hard facts to dispel the myth that cheap migrant labour has negatively affected productivity levels in the UK. 

Smith’s comments follow news of the government’s proposed points-based immigration system, which effectively opens the door to high-skilled professionals while closing it to low-skilled workers. With employment at record levels but investment and productivity weak, ministers have concluded that the problem lies with businesses employing cheap workers from Europe rather than investing in making efficiencies. 

However, what’s the real link between low-skilled migrant workers and the productivity of the UK as a whole? Here, we take a look...

Productivity: The Facts 

According to Migration Watch UK, UK GDP per capita is many times higher today than it was in the mid-nineteenth century, whereas it would only be twice as high if productivity had remained constant. While higher productivity rates have undoubtedly driven this growth, levels in the UK are admittedly low in comparison to other developed countries. For example, in 2016, we were 9 per cent below productivity in Italy, 22 per cent lower than the USA and France, and more than 25 per cent lower than Germany. 

Is This Due To Low-Skilled Migrant Workers? 

The productivity shortfall in the UK has, in fact, been a longstanding one and is attributed to differences in a range of economic characteristics, including: 

  • Amount of business investment 

  • Quality of education and training 

  • Quality of firm-level management 

  • Labour market factors. 

Of course, cheap migrant labour could be included as one of the ‘labour market factors’, so let’s take a closer at the stats. Between 2009 and 2019, employment in the UK rose by 3.8 million as productivity fell over the same period. Of this, around 2.5 million were UK nationals compared to approximately 700,000 EU migrants. 

On the face of things, 700,000 (although nowhere close the amount of UK workers) seems significant, but this figure splits even further, with approximately 500,000 of those from the EU14. 

The EU14 grouping includes citizens of Austria, Belgium, Denmark, Finland, France, Germany, Greece, Republic of Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain and Sweden who recorded median annual earnings of £32,300 in 2018. This would place EU14 workers in the highly-skilled bracket and therefore still likely to enter the UK in line with the new points-based immigration system. 

That leaves approximately 200,000 EU low-skilled migrants coming to the UK, with median earnings recorded at around £21,000. 

These 200,000 workers account for just 8 per cent of the total workforce growth over the previous decade. With this in mind, it’s difficult to make any real connection between low-skilled migrant workers from Europe and the UK’s dip in productivity in this period. 

What’s Going To Happen? 

UK business owners have expressed concerns over limiting low-skilled workers entering the UK. It’s predicted there will be significant labour shortages in a range of sectors, with logistics, building, retail and care likely to be hit the hardest. 

However, the government is remaining steadfast with its plans to limit low-skilled workers entering the country, stating that UK businesses will need to “adapt and adjust” to the changes. The policy states: “It is important that employers move away from a reliance on the UK’s immigration system as an alternative in staff retention, productivity and wider investment in technology and automation.” 

While the statistics don’t suggest productivity will dramatically increase as a result of reducing the number of low-skilled migrant workers in the UK, we can only hope some positive effects on the UK economy will arise from the changes. 

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