Labour Shortages and Immigration in UK – Too often attitudes seem decided by whether someone is generally for or against immigration

Can the shortages of workers reported by the UK’s food and drink sector be solved by making it easier to hire migrants? How will wages in these sectors change? And is there a conflict between short- and long-term fixes? Alan Manning sets out the trade-offs involved in answering these questions.

There are pros and cons to using migration to resolve shortages. They have to be understood to arrive at an informed decision; too often attitudes seem decided by whether someone is generally for or against immigration.

Solutions to shortages

If the shortage is caused by a lack of people with the necessary skills, then the best long-term solution is to increase training. But if the shortage is acute and it takes time to train workers, migration is a very tempting stop-gap. The risk, however, is that allowing migration removes the pressure to train more and a temporary policy becomes a permanent one.

To give one example, in 2016, the Migration Advisory Committee considered whether nurses should be placed on the shortage occupation list (SOL) to receive priority in the allocation of work permits. The Department of Health (as it then was) argued that this was needed as a short- term measure before their ambitious plans to train more nurses came to fruition.

To nobody’s great surprise, this did not happen, and nurses remain on the SOL to this day.
For shortages in the food and drink sector, HGV driving stands out as the job where there might be a shortage of people with the necessary licence. But getting an HGV licence takes much less time than training to be a nurse or doctor; in normal times about eight to 10 weeks. The pandemic has led to a bottleneck in obtaining new licences. But the long-standing shortages in this sector are probably the result of a training model where workers have to find the time and money themselves and do not consider that the pay and conditions are worth it.

Where the shortage is caused by poor pay and/or conditions, the obvious solution is to improve them. That should increase the supply of people who want to work in the sector, but may also
raise prices and reduce the demand for workers. There is a long-standing academic debate about the link between immigration and wages; the many current reports linking a lack of migrants to labour shortages and rising wages probably shifts the balance of evidence a bit towards the view that migration can sometimes affect pay.

But the economics leads us to expect bigger impacts in the short run than in the long run. Over time, business models adjust, leading to a smaller rise in wages. Workers in these sectors currently being offered higher wages might be well advised to take advantage of the current situation as it may not last forever.

Sectors where shortages are caused by poor pay, conditions and low status are unable to recruit and retain workers in the open labour market; people who could do these jobs vote with their feet and go elsewhere. This is why these sectors like visa schemes, which provide them with a ring-fenced supply of migrants who are unable to leave for more attractive jobs. These schemes need to be justified by an argument that one wants to give privileged access to labour for the sectors covered.

So far, the government has announced a handful of ring-fenced schemes – for drivers, poultry workers and pork butchers. These may be one-offs or the start of a new trend.

Chosen excerpts by Job Market Monitor. Read the whole story @  UK labour shortages and immigration: looking at the evidence