We have record immigration. So why are we so short of workers?
Readers may know, if they wake early enough, that the Office for National Statistics (ONS) releases some statistics — on topics such as inflation, wages and the public finances — at 7am. This, I have to say, is not universally popular with those who have to instantly analyse and report them.
For some of the most consequential statistics, however, the ONS still sticks to the more leisurely 9.30am release time. This was true of its bombshell revisions to pandemic gross domestic product (GDP) figures a few weeks ago. It was also true of the latest immigration figures, also quite a bombshell.
These showed, you will remember, that net migration to the UK (immigration minus emigration) in the most recent 12 months for which figures are available — up to the end of June this year — was 672,000. The ONS tried to make the best of the situation by pointing out that this was slightly down on the figure for the whole of last year, which was 745,000.
That, however, merely drew attention to the size of that 2022 figure, easily the biggest on record. I am old enough to remember when a net migration figure of 333,000 — for 2015, released during the EU referendum campaign — helped swing the leave vote. That 2015 figure, by the way, has now been revised down to 303,000.
If you are thinking at this point, “Oh no, not another immigration piece”, my aim today is limited to answering a simple question: how come, when net migration is so high, we still have such a tight labour market and so many job vacancies?
To try to answer it, let me start with some statistics, covering last year’s record net migration of 745,000. It consisted of non-EU net immigration of 873,000, offset by a net outflow of 123,000 EU citizens and a 4,000 net emigration of Britons. If that does not get you to exactly 745,000, any difference is due to rounding.
It has become more difficult to assess what is happening to employment among migrant workers because of problems with the official Labour Force Survey, which everybody hopes will be resolved in the next few months.
A good substitute, for now, however, are the PAYE (pay as you earn) figures from HM Revenue & Customs. These show that there has been a rise in the number of non-EU workers in the UK, partly offset by a fall in EU workers. In 2022, the number of non-EU workers rose by 416,000, outstripping a 273,000 increase in employment among UK nationals as the economy recovered from the pandemic. There was a 13,000 drop in the number of EU workers, continuing a trend seen since December 2019, during which time the number of EU workers has dropped by some 160,000, while non-EU worker numbers have risen by about 630,000.
That 630,000, however, has to be set against non-EU migration over the same period of 1.47 million. It confirms that most non-EU net migration to the UK is not for work purposes. This chimes with the ONS’s own figures, covering the slightly later period to June this year.
Non-EU migrants who come to the UK for work purposes bring with them almost as many dependants — and numbers arriving for work are exceeded by those coming to the UK to study. Students also bring dependants, numbers of whom have been swelled by arrivals from Nigeria and India, the ONS says, though not as many as with workers. International students are the lifeblood of many of our universities, though recent evidence suggests that they are staying for longer, on average, than earlier cohorts.
Non-EU migrants also come to the UK for family reasons, or to seek asylum. Those arriving on British national (overseas) passports from Hong Kong, most of whom have not been integrated into the UK labour market, and fleeing the war in Ukraine, which swelled the figures before, between them accounted for only 8 per cent of non-EU immigration in the latest 12 months.
The situation we appear to have, then, is that record levels of migration are co-existing with a tight labour market and — while the total has been falling in recent months — nearly a million job vacancies.
There is a domestic explanation, which is the rise in economic inactivity since the start of the pandemic, with about 1.5 million people economically inactive because of long-term ill health. The increase in working-age inactivity since late 2019 is, however, now only about 300,000 — about 1 per cent of employment. If those people were brought back into the active workforce — as the government, with a series of measures announced around the autumn statement, is trying to do — it would make a difference, though might not be transformative.
There is another explanation, which is the change in the composition of migration to and from the UK. This is a point made by S&P, the ratings agency, in a generally downbeat assessment of the outlook for the UK economy next year.
As S&P put it in a report a few days ago: “Admittedly, net immigration has remained high even though fewer EU workers are now part of the UK labour market. Yet the skill set of the non-EU immigrants is different and their participation in the labour market is lower. Many are students or refugees. Consequently, immigration does not necessarily help fill the gaps in industries where the workforce is lacking.”
That is true. EU migrants came to the UK to work, and some still do, though they are now outweighed by those who are leaving. They were part of a UK labour market that was flexible and responsive, and associated with a long rise in employment, including for UK nationals.
That has now gone, and the danger is that the government makes things worse by tightening the conditions under which migrant workers can come to the UK — by raising the qualifying salary level for worker visas, or changing the rules under which foreign recruits on the shortage occupation list can be paid lower salaries than is the norm for the sector. Organisations already struggling to recruit may find it even harder, damaging the economy and its recovery prospects. It is not a happy prospect.
PS
December has arrived, and it is a bit chilly, so that can mean only two things. The first is that the countdown has begun for my Christmas quiz, which will appear here on Christmas Eve.
I’m giving you advance warning, because last year I introduced an innovation, which was that I would reward the best multiple entries from a school with a talk from me. Before you say it, second prize was not two talks. Anyway, the comfortable winner was Emmanuel College in Gateshead, and I spent a most enjoyable day there last spring.
It would be good, therefore, to see entries from schools, colleges and other organisations. Individual entries will also be encouraged, and for those prizewinners I can’t promise to come to your houses, but I do have books to give away.
The second thing the season brings, by popular request (genuinely), is the return of some jokes. The flood into my inbox during the pandemic has turned into a trickle, but I have a few.
Martin Keenan of Bristol hasn’t given up. He tells me he accidentally passed his wife a glue stick rather than a chapstick, and she’s still not talking to him. An economic one: in the supermarket the other day, he swapped 100 raisins for 50 sultanas, and still can’t believe the currant exchange rate. He is also a bit worried about Christmas: because of a typo, he has sent his wish list to Satan.
Speaking of the devil, the ever-reliable David Lewis takes us back to the rich vein of jokes about the legal profession. A young lawyer is working late one night when Satan appears before him. “How would you like to win every case for the rest of your life?” the devil says. “Your clients will love you, your colleagues envy you, and you’ll make embarrassing sums of money.
“All I want in exchange,” he adds, “is your wife’s soul, your children’s souls, the souls of your parents and grandparents, and the souls of all your friends and law partners.”
The young lawyer listens intently, before saying: “OK — what’s the catch?”
Now I’ve set the hare running, I need more material. So over to you.
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