Impact On Scotland’s Economy Of Reducing Migration Into Lower-skilled Work


Employment, European Union, Policy, Population, Visas/Work Permits

The Scottish Government’s recent paper(read here) on the implications of Brexit for Scotland’s economic performance suggests restrictions on European migration could increase skills shortages with adverse implications for the economy.

The paper provides neither references nor any evidence to support this assertion. In fact, the impact of immigration on the Scottish economy is far less than on the rest of the UK.

There are fewer migrants employed in the Scottish workforce compared with the UK as a whole while a majority (just under 65%) of such workers are from Eastern Europe (EU8 and EU2) and are employed in lower-skilled work which does not add significantly to public finances.

Population figures released last week by the ONS reveal that the share of EU-born migrants in Scotland as a proportion of its population is lower than that for the UK as a whole (3.6% versus 5% respectively), as Table 1 below demonstrates.

Table 1. EU-born residents as proportion of UK and Scottish total populations (thousands), ONS Annual Population Survey for 2015, published August 2016.

scotland-and-brexit-paper-sept-2016-table-1

Labour Force Survey (LFS) analysis of the period from April to June 2016 suggests that 5.5% (or 143,000) of the total workforce in Scotland were EU-born (compared with a UK-wide figure of just under 7.4%). As highlighted in Table 2 below, the largest proportion of EU migrants working in Scotland are from Eastern Europe.

Table 2: Adults in employment in Scotland and UK by Country of Birth, LFS and ONS Labour Market Survey, April-June 2016.

scotland-and-brexit-paper-sept-2016-table-2

Analysis of the LFS confirms that the majority of EU migrants in employment in Scotland are in lower-skilled jobs. Just under 70% of EU migrants in Scotland surveyed for the quarter October to December 2015, and who arrived between 2005 and 2015, were working in lower-skilled jobs, while 30% were working in higher-skilled jobs.[1] Even analysis conducted by the Scottish Government admits that the majority of EU8 migrants are working in lower-skilled jobs with low pay.[2] A recent report by the independent Migration Advisory Committee found that this type of migration has only a neutral impact on UK-born employment rates, fiscal contribution, GDP per head or productivity.[3]

As for those going into higher-skilled jobs (National Qualification Framework Level 6 and above), they could still be able to take up UK employment if, as has been proposed, a work permit scheme was introduced restricting EU migration for employment in the same way that non-EU labour migration is currently managed. It should also be possible to maintain freedom of movement for EU students, the self-sufficient and tourists as that would be in the interests of EU member states as well as those of the UK.[4]

The Scottish Government’s paper also suggests that EU migrants help to offset the demographic pressures that both Scotland and the UK as a whole will face as a result of ageing populations. An ageing population is inevitable in Western societies where birth rates are low and health care is extending lives. However, this also means that it is possible to work for longer. Raising the retirement age is one of the most effective means of decreasing the dependency ratio. As the LSE’s Professor Michael Murphy argues, partly because immigrants age too, ‘immigration is not a long-term solution for population ageing’.[5]

Nor are high rates of international migration to Scotland necessary for Scotland’s population growth. Recent research by Migration Watch UK[6] found that cutting out EU migration for lower-skilled work, thereby reducing net international migration to Scotland by about 4,000 a year, would leave overall migration at just under 16,000 year. This is broadly in line with projections by National Records of Scotland that foresee the population (currently just under 5.4 million) growing by 7%, or 340,000, by 2039. Indeed, over the last decade a substantial proportion (32%) of net migration to Scotland has been comprised of flows from other parts of the UK. There is no contradiction between reducing migration into lower-skilled work from the EU and maintaining the steady but cautious population growth which many Scots wish to see.

The main thrust of the rest of the Scottish Government’s paper is to assert that if the UK adopted an alternative trading relationship with the EU, it could potentially reduce Scottish GDP by up to £11.2 billion per year by 2030. This is highly questionable as it simply calculates a Scottish share of losses projected in pre-referendum forecasts on the basis of population share in the UK. As noted by the Financial Times, the predictions ‘make no attempt to account for Scotland’s profile’ – a smaller financial sector and high exports to other parts of the UK which would be subject to barriers in the event of independence, and worsening public finances.[7] The forecasts are themselves primarily based on assumed changes to trade flows as the result of exit from the EU, yet no consideration has been given to the extent to which the Scottish economy might differ from the rest of the UK as to the effect of such measures. For example, Scotland exported 6.3% of the goods exported from the UK in Q1 2014, whereas her population of 5.4 million is 8.3% that of the UK’s 65.1 million.[8] If Scotland is less dependent on exports than the UK as a whole, or has a different pattern of foreign trade, then any trade impact following Brexit would, of course, have a different impact.

[1] Quarterly Labour Force Survey, October-December 2015. Types of employment for EU migrants by year of first arrival in the UK 2005-2015 are broken down into nine categories, five of which (‘Category 4 – Administrative And Secretarial Occupations’, ‘Category 6 – Caring, Leisure And Other Service Occupations’, ‘Category 7 – Sales And Customer Service Occupations’, ‘Category 8 – Process, Plant And Machine Operatives’ and ‘Category 9 – Elementary Occupations’) are considered to be lower-skilled. The higher-skilled areas are ‘Category 1 -Managers, Directors And Senior Officials’, ‘Category 2 – Professional Occupations’, ‘Category 3  – Associate Professional And Technical Occupations ‘and ‘Category 5 – ‘Skilled Trades Occupations’. Out of an extrapolated figure of more than 107,000, just under 73,700 were estimated to be in lower-skilled work and around 33,600 were estimated to be in higher-skilled work.

[2] Scottish Government Social Research, ‘Characteristics and Intentions of Migrants to and Emigrants from Scotland – Review of Existing Evidence’, 2011, URL: http://www.gov.scot/resource/doc/340928/0113194.pdf

[3] Migration Advisory Committee, ‘Migration and the Labour Market’, June 2016, URL: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/547697/MAC-_report_immigration_and_the_labour_market.pdf

[4] Migration Watch UK briefing paper, ‘UK Immigration policy outside the EU’, January 2016, URL: http://www.migrationwatchuk.org/briefing-paper/371

[5] Professor Michael Murphy, LSE website,‘Migration does not slow rate of ageing population’, 14th June 2016, URL: http://www.lse.ac.uk/newsAndMedia/news/archives/2016/06/Migration-does-not-slow-rate-of-ageing-population.aspx

[6] Migration Watch UK briefing paper, ‘Net Migration and Scotland’s population’, June 2016, URL: http://www.migrationwatchuk.org/briefing-paper/385

[7] Financial Times, 25th August 2016, URL: http://www.ft.com/cms/s/0/12dffac8-69e4-11e6-ae5b-a7cc5dd5a28c.html#axzz4IIDvkejQ

[8] ONS, ‘Economy’ summary, June 2014, URL: http://webarchive.nationalarchives.gov.uk/20160105160709/http://www.ons.gov.uk/ons/guide-method/compendiums/compendium-of-uk-statistics/economy/index.html

 

21st September 2016

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