Limits on Migration
Limits on Tier 1 and Tier 2 for 2011/12 and supporting policies
Migration Advisory Committee
November 2010 Migration Advisory Committee 1st Floor Green Park House 29 Wellesley Road Croydon CR0 2AJ www.ukba.homeoffice.gov.uk/mac e-mail: [email protected] Limits on Migration: Limits on Tier 1 and Tier 2 for 2011/12 and supporting policies
Migration Advisory Committee
November 2010
Contents
Chairman’s foreword 1
Migration Advisory Committee and secretariat 5
Summary 7
List of tables and figures 19
Chapter 1: Introduction 23 1.1 The Migration Advisory Committee 23 1.2 What we were asked to do 23 1.3 Our interpretation of the question 24 1.4 Scope of this work 25 1.5 Our approach 25 1.6 Structure of this report 26 1.7 Thank you 27
Chapter 2: Policy context 29 2.1 Introduction 29 2.2 Routes of migration to the UK 29 2.3 Dependants and the right to family life 31 2.4 Asylum 32 2.5 Tier 1 33 2.6 Tier 2 41 2.7 Other routes of migration 46 2.8 Policy and consultation on limits 48 2.9 MAC consultation on levels of limits 50 2.10 International comparisons 51 2.11 Implications 54 Limits on Migration
Chapter 3: Data context 55 3.1 Introduction 55 3.2 The UK economy 55 3.3 The UK labour market 57 3.4 Overview of migration data sources 63 3.5 Net migration and population growth 63 3.6 Tier 1 and Tier 2 context 75 3.7 Migrants and the labour market 88 3.8 International comparisons 100 3.9 Implications 100
Chapter 4: What we did 103 4.1 Introduction 103 4.2 How we consulted 103 4.3 Consultation evidence received 105 4.4 Analytical work programme 113
Chapter 5: Analytical framework 115 5.1 Introduction 115 5.2 Frameworks for analysing limits on migration 115 5.3 Our framework 117 5.4 Implications 120
Chapter 6: Objective 122 6.1 Introduction 122 6.2 Defining the objective for net migration 122 6.3 Accounting for flows outside the scope of a limit 124 6.4 Estimating the implications for Tiers 1 and 2 129 6.5 Implications 132
Chapter 7: Economic impacts 134 7.1 Introduction 134 7.2 Economic growth and GDP per capita 135 7.3 Inflation 155 7.4 Labour market 157 7.5 Net fiscal impacts 163 7.6 Conclusions 167 Chapter 8: Public service and social impacts 169 8.1 Introduction 169 8.2 Provision of health services 169 8.3 Consumption of health services 175 8.4 Provision of social services 181 8.5 Consumption of social services 184 8.6 Provision of education services 185 8.7 Consumption of education services 189 8.8 Housing 196 8.9 Crime and justice 203 8.10 Congestion 208 8.11 Social cohesion and integration 211 8.12 Conclusions 218
Chapter 9: Limits and policy options 221 9.1 Introduction 221 9.2 Coverage of limits on Tiers 1 and 2 223 9.3 Trajectory 232 9.4 Numerical levels of limits on Tiers 1 and 2 237 9.5 Balance between Tiers 1 and 2 239 9.6 Levels of limits on Tiers 1 and 2 in 2011/12 241 9.7 Policy options for Tier 1 245 9.8 Policy options for Tier 2: Options for all routes 254 9.9 Policy options for Tier 2: Intra-company transfer route 257 9.10 Policy options for Tier 2: Combining the Resident Labour Market Test and shortage 263 occupation routes 9.11 Policy options for Tier 2: Resident Labour Market Test route 263 9.12 Policy options for Tier 2: Shortage occupation route 265 9.13 Policy on settlement 267 9.14 Impact analysis 268
Chapter 10: Conclusion 274 10.1 Context 274 10.2 Summary of economic, public service and social impacts 274 10.3 Summary of required limits and policy options 276 10.4 Next steps and future work 278 Limits on Migration
Annexes
Annex A: Consultation 280 A.1 List of organisations that submitted evidence and did not request anonymity 280 A.2 Indicative list of organisations / individuals met with 284
Annex B: Estimating policy impacts on net migration 289 B.1 Introduction 289 B.2 Estimating the impact of visa reductions (out-of-country) on non-EU inflows 289 B.3 Estimating the impact of visa reductions on outflows and net migration 295 B.4 Estimating impacts of in-country policies 305 B.5 Uncertainty and volatility in net migration flows 305
Annex C: Summary of required limits calculations 313 C.1 Introduction 313 C.2 Summary table of options A and B and an alternative option 314 Abbreviations 315
References 317 Chairman’s Foreword
In June this year Three main channels of migration exist: the Home Secretary work, study, and family. And there are three commissioned the citizenship groups: British, European Economic Migration Advisory Area (EEA) and non-EEA. This can be Committee (MAC) to expressed as a three by three matrix with nine advise on the level at cells. In this report, the MAC is only dealing which “limits on Tier with one of the nine cells, namely the non-EEA 1 and Tier 2 of the work route. In 2009 work-related non-EEA Points Based System migration, excluding dependants, accounted (PBS) be set for their for 1-in-5 of the non-EEA inflow and just one first year of operation tenth of the total inflows. And Tiers 1 and 2 of in 2011/12 in order to contribute to achieving the PBS comprised only half of the non-EEA the Government’s aim of reducing net migration work inflow. So, even if Tiers 1 and 2 were shut to an annual level of tens of thousands by the down, it is unlikely that net migration would fall end of this Parliament”. In doing so, we were to tens of thousands. This goal can only be asked to take account of economic, public achieved by also cutting net migration under service and social impacts. the study and family routes.
The Long Term International Migration (LTIM) It has been necessary to make a number of statistics, which record changes to country of judgements and assumptions in providing our residence of more than one year, show that in advice, including: the assumed initial level of 2009 net migration had risen by 33,000 from net migration in 2010; the precise nature of the 2008 to 196,000. It is this measure which ‘tens Government’s net migration objective for the of thousands’ refers to. However, the Annual end of this Parliament; the trajectory in terms Population Survey (APS) tells a significantly of how quickly migration flows move towards different story about net migration. The LTIM that objective; the extent to which EEA migrants and APS data measure different things, will replace limited non-EEA migrants; the but there is merit in examining all available likely relationship between the LTIM data and information. This will apply in particular when visa numbers; the number of dependants per the results of the 2011 UK Population Census main visa holder; and, crucially, the share of are available: after the last census, in 2001, reductions in net non-EU migration to be borne it was found that the LTIM data were under- by the work routes, rather than by the student counting out migration. and family routes.
Until 1998 net annual migration (LTIM) was Two possible sets of limits on Tiers 1 and 2 are never above 80,000. Since 1998 it has never presented, which can be viewed as defining been below 140,000, and it has exceeded a potential range. These limits comprise the the 200,000 mark in three of those years. first tranche of the reduction in the non-EU Therefore, the Government’s wish to limit net work inflow required to reach the tens of migration is wholly understandable. thousands net migration figure by the end of
1 Limits on Migration
this Parliament. In both of the two scenarios for limited periods but choose to settle here and we have assumed that the study and family make the UK their home. And whilst there is no routes bear their pro-rata share of the required quantitative evidence that foreign-born migrants reduction, but have made different assumptions are directly displacing resident workers, it is about the fraction of the pro-rata share of non- possible that the open-ended provision of EEA work-related routes borne by Tiers 1 migrant labour is creating an environment that and 2. means businesses and those responsible for education and training do not focus sufficient It would be remiss not to point out that there effort on increasing the skills and potential of is widespread concern among employers the resident population. regarding the impact that limits on migration could have. Many major companies – including It is plausible that any small adverse impact those responsible for substantial UK investment of a limit on GDP and the public finances will and jobs – argue for the intra-company transfer be partially offset via: recruiting from the UK element of Tier 2 to be excluded. Public sector unemployed or inactive; recruiting from the employers argue for flexible limits which EU; and in the longer-term by up-skilling UK could be interpreted as requesting that any workers and changing production methods limit should not apply to them. Bodies such (capital deepening). But, in the meantime, as the Trades Union Congress (TUC) and it is vital that the allocation mechanism to UK Commission for Employment and Skills implement any proposed limits on Tiers 1 (UKCES) also oppose such limits. and 2 targets for exclusion those marginal migrants who contribute least to the UK. Such a response is not surprising. The This implies giving priority, for example, to introduction of the PBS coupled with the migration that leads to foreign direct investment global recession has already caused the work and employment of UK workers, or which component of the non-EU LTIM inflow to halve contributes significantly to the public finances. between 2004 and 2009. In 2009 there were Some priority may also be required for limited 50,000 work-related visas issued under Tier migration into vital public services such as 1 General plus Tier 2. The further reduction health, education and social care. in work visas needed to bring net migration down to tens of thousands by the end of this On the basis of the above, the MAC suggests Parliament is non-trivial. For 2011/12 we that more stringent reductions should be estimate that the required reduction falls into made to Tier 1 than Tier 2, given the weight the range of 6,300 to 12,600, a fall of between of evidence we received from employers 13 and 25 per cent. presenting strong arguments in support of Tier 2. Under Tier 1 we suggest making the Post- Evidence distilled in this report suggests that Study Work Route (PSWR) more selective and non-EU Tier 1 and Tier 2 migrants, at present for out-of-country applicants we propose raising levels: have a small positive impact on GDP earnings and qualification thresholds. The issue per head; do not increase inflationary pressure; of salary multipliers (which convert pay in a contribute positively to net public finances; foreign country to UK sterling) also needs play a small but important part in the provision urgent resolution. of education, health and social services; increase pressure in the housing market a Tier 2 will, however, have to share some of little; and probably have little effect on crime the burden. The points thresholds need to be and cohesion. recalibrated to ensure those migrants who contribute the most economically are given On the other hand, as the Home Office’s priority. The intra-company transfer route Migrant Journey Analysis has made clear, needs to become more selective in terms of migrants coming to the UK to work add to the which migrants can come for only three years population and many individuals not only come and those who can come for longer. The use
2 of allowances under this route, which we are This report shows what needs to be done concerned could lead to undercutting of UK in 2011/12 for the work route to make a workers, also needs to be examined. The reasonable progress towards the tens of shortage occupation list should be reviewed, thousands net migration objective for this and may have to become more selective in Parliament. The MAC’s future work programme terms of targeting those more skilled migrants will be decided by the Government. But we that cannot be sourced in sufficient quantity are assuming that this is an iterative process from within the EEA. and that we shall be asked to advise on subsequent limits once the evidence in this Limits on work visas could be eased if, for report is digested and policies are introduced example: the study and family routes bear more concerning the work, study and family routes. than their pro-rata share of any cuts; in-country work extensions and switching are limited to We have only had 3 months to report. The MAC boost the outflow from Tiers 1 and 2; and the is especially grateful to our corporate partners link between work visas and settlement is for their written and face-to-face evidence, weakened. But these latter two policies, even particularly those who hosted events on our if pursued, are unlikely to have much of an behalf, allowing us to consult more widely than impact on the net migration figures that will be in any of our previous reviews. We received available by the end of this Parliament. On the over 400 written submissions and met over other hand, if the study and family routes do not 1,000 firms and other organisations. Our bear their proportionate share, the work visa small, hard working secretariat has, as ever, limit will have to be tightened over and above been professional, innovative and gracious – our suggestions, with possible serious long upholding the best traditions of public service. term consequences for investment and job generation.
Professor David Metcalf CBE
3
The Migration Advisory Committee and secretariat
UK Commission for Employment and Skills Chair Members representative
Professor Dr Diane Coyle OBE Dr Martin Ruhs Professor David Metcalf CBE Mike Campbell OBE
UK Border Agency representative
Professor Professor Jonathan Wadsworth Rob Wilson
The secretariat:
Vanna Aldin; Samantha Allen; Anne Ball; Alex Barr; Ros Coles; Cordella Jonathan Sedgwick Dawson; Stephen Earl; Jeremy Franklin; Mark Franks (head of secretariat); Kathy Hennessy; Dan James; Daniel Livingstone; Kate Mieske (secondee); Daniel Pease; Shazhad Rafiq (secondee); Andrew Watton
5
Summary
Our task 4. We consider whether in-country migrants switching into, and extending under, Tier 1 1. The Migration Advisory Committee General and the relevant routes of Tier 2 (MAC) is a non-departmental public body should be included within the limit. We also comprised of economists and migration examine whether dependants of migrants experts which provides transparent, coming under relevant routes should independent and evidence-based advice to be included. the Government on migration issues. The questions we address are determined by 5. Throughout this process we have been the Government. The Government decides mindful that we are operating in a broader whether or not to accept our advice. context. The Government is simultaneously consulting on the mechanism for limits on 2. We have been commissioned by the Tiers 1 and 2 of the PBS. The Government Government to answer the following may subsequently amend policy in areas question: at what levels should limits on not directly within our remit for this report, Tier 1 and Tier 2 of the Points Based such as student and family migration, and System be set for their first full year of the rules relating to settlement. operation in 2011/12, in order to contribute to achieving the Government’s aim of 6. We are also acting in a climate of some reducing net migration to an annual level uncertainty. Net migration is influenced of tens of thousands by the end of this by factors effectively outside the control Parliament, and taking into account social of migration policy, such as British and and public service impacts as well as EU migration. There is also limited data economic impacts? availability, and the scope for reconciling the different data sources that are critical 3. We provide, in our report, an assessment to this work is similarly limited. of the required limits for Tiers 1 and 2 of the Points Based System (PBS) in 2011/12. 7. We have taken a pragmatic approach to The limit for Tier 1 will apply to the current the above issues. Where we have needed Tier 1 General route only. The Post-Study to make assumptions, we have done so. Work Route (PSWR) is outside the scope We have made all efforts to ensure that the of the Tier 1 limit. The Entrepreneur and assumptions are well informed, and explicit. Investor routes under Tier 1 are also Where there are uncertainties, we highlight excluded. The limit for Tier 2 will cover that. We also make suggestions as to how the current Resident Labour Market Test the use of evidence and analysis to guide (RLMT) and shortage occupation routes. development of policy on migration limits We also consider whether the limit should may be made as robust as possible over cover the intra-company transfer route, and future years. advise that route should be included. The Tier 2 limit will not apply to the sportspeople and ministers of religion routes.
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Policy context 13. The shortage occupation route of Tier 2 is for migrants entering occupations on 8. The PBS is for migrants from outside the shortage occupation lists for the UK and European Economic Area (EEA) who wish Scotland. Since 2008 the MAC has been to work or study in the UK. It has five tiers responsible for recommending the shortage in total, including Tiers 1 and 2, which are occupation lists to the Government. the focus of this report. 14. Under the Resident Labour Market 9. Out-of-country applications are those Test (RLMT) route of Tier 2 sponsoring made when the applicant is outside the UK. employers are required to advertise the In-country applications consist of switching relevant vacancy through Jobcentre Plus and extension applications, and are the and, as agreed in a sector code of practice, means whereby applicants can switch for at least four weeks, before employing a from one route into another, or extend migrant from outside the EEA. within one. 15. The intra-company transfer route 10. PBS migrants can bring their children, is used by employees of multi-national spouses, civil partners, same sex partners, companies with at least 12 months and unmarried partners but no other company experience, for employment in dependants into the UK, providing the a skilled job in a UK-based branch of main applicant can support them without the organisation. claiming benefits. Data context 11. The Tier 1 General route is for persons who wish to obtain highly skilled 16. The Government’s intention is that its employment in the UK. Applicants are objective to reduce net migration will be awarded points based on qualifications, measured by the International Passenger previous earnings, UK experience, age, Survey (IPS). Net Long Term International English language skills and available Migration (LTIM), based on the IPS, was maintenance funds. To reflect differences 196,000 in 2009. By the same measure, net in income levels across the world the UK migration of non-EU nationals in 2009 was Border Agency uses what are known as 184,000. These are provisional estimates. salary multipliers to bring salaries earned overseas in line with their UK equivalents. 17. Non-EU work-related migrant inflows rose from 26,000 in 1994, to 114,000 in 12. Tier 2 is for skilled migrants. A 2004, before falling to 55,000 in 2009. The successful applicant must have an offer numbers coming for family reasons rose of employment from a sponsor employer from 33,000 in 1994 to 74,000 in 2004, and be coming to fill a job at National before falling to 54,000 in 2009. Non- Qualification Framework level 3 (or EU student inflows rose, from 30,000 to equivalent) or above. Points are awarded 110,000, between 1994 and 2004. But, for different requirements, including in contrast to the work and family routes, qualifications and prospective earnings. student inflows continued to rise between Applicants for Tier 2 must have a sponsor, 2004 and 2009, reaching 163,000. which is a UK-based organisation that wishes to employ the applicant in 18. Visa data are not directly comparable the UK, licensed to undertake certain with the IPS data. In 2009 approximately responsibilities to help with 50,000 out-of-country visas were issued migration control. to main migrants through Tier 1 and 2 routes within scope for this report. It is this number that provides the starting point for
8 the required reductions in Tiers 1 and 2. It • Population projections: these could breaks down as follows: be used to identify a level of annual net migration that achieves, or avoids, • 13,900 under the Tier 1 General route; certain population targets, if this was seen as consistent with the objectives for • 300 under the Highly Skilled Migrant migration policy. Programme (Tier 1 predecessor); • Historical comparison: this approach • 22,000 under the intra-company would identify a past period where net transfer route; migration was at a level that is consistent with its desired level, and examine what • 8,600 under the RLMT and shortage share work-related migration contributed occupation routes combined; and to net or gross migration at the time.
• 5,200 under work permit route (Tier 2 • International comparison: this approach predecessor). would identify developed countries similar to the UK in which migrants make 19. In the same year, 42,000 out-of- up a smaller proportion of the total labour country visas were issued to dependants force without any apparent detrimental of Tier 1 and 2 migrants. Both the main impact on economic performance. migrant and dependant numbers above exclude in-country visas issued to Tier 1 22. Although each of the above frameworks and 2 migrants. provides a potentially useful guide to the assessment of economic, public service 20. In 2008, of 18 OECD countries and social impacts of migration, there are sampled, the UK ranked 13th highest in conceptual and practical limitations to terms of the proportion of foreign-born each of them. Furthermore, the MAC is inflows relative to the population, and 12th acting within the boundaries of an existing in terms of the proportion of the population Government objective for net migration. that is foreign-born. Therefore, our framework for this report is based around three themes: Methodology • Which criteria should be taken into 21. Various analytical frameworks could, account when developing limits for in principle, potentially inform the setting Tiers 1 and 2? of targets for migration or limits on work- related migration: • What precise objective for net migration, and PBS migration, would be consistent • A cost-benefit framework: all impacts of with the Government’s aim to reduce net migration, including the social and public migration to the tens of thousands by the impacts, would be assigned an economic end of this Parliament? value, and only those migrants who will make a positive net contribution, and no • What trajectory, for Tier 1 and Tier 2 others, would be admitted. migration over time, is most desirable in order to achieve the objective? • Net fiscal analysis: this approach attempts to compare what migrants Corporate partner views contribute to the public finances in terms of tax receipts, with what they take out in 23. In our report corporate partners, or terms of consumption of public services. partners, means all individuals or bodies with an interest in our work and its
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outcomes. In our consultation document, of very skilled non-EEA workers who will published on 30 June, we set out specific be required. Partners acknowledge that questions which we believed needed to employers have a role to play in up-skilling be addressed to inform our consideration the UK workforce, but believe this to be a of the above issues. We received over responsibility for the Government too. 400 written responses to our consultation, and attended a large number of meetings 28. It was put to us that skilled migrants’ and events, meeting face-to-face with net contribution to the public finances is approximately 1,000 of our partners. positive, with corporate partners arguing that most Tier 1 and 2 migrants pay far 24. There was widespread concern in excess of average tax and use fewer amongst the employers who submitted public services. The role that migrants evidence to us regarding restrictions on play in providing key public services was migration. They argued that restrictions emphasised. In education, there were some could affect businesses’ ability to be reports that dependants placed pressure competitive, stunt economic recovery, on places and that schools needed to cater and lead to reduced investment. Some for more diverse languages. More negative concerns were expressed more directly social impacts of migration were reported in relation to the policy of migration limits where new and emerging communities itself. Some argued that limiting Tiers 1 and were developing in areas which had not 2 would not address the real areas of public previously received large volumes of concern about migration. Others did favour migration. Areas which have seen migrants limits on migration, in view of the impacts arriving for many years had adapted well, on use of public services and society we were told. at large. Economic, public service and 25. Arguments were made that dependants social impacts should be limited because they do not contribute as much, economically speaking, 29. We were asked to consider public as main migrants, although others believed service and social impacts of migration, as that dependants should not be limited even well as economic impacts. We conducted a if main migrants were. review of the data and academic literature in relation to the economic, public service 26. Many partners believe that the policy and social impacts of migration, and underpinning the introduction of limits assessed it alongside evidence received will be a critical consideration. Partners from our partners. There is virtually no recognise that, in a scenario where there is academic literature in relation to specific more demand for non-EEA migration than impacts of Tier 1 and 2 migrants, but we places available, judgements will need to consider the implications of the more be made regarding the relative value of general literature for the likely impacts of applications to make sure the benefit of those migrants. non-EEA migration is maximised. 30. All things being equal, migration clearly 27. Up-skilling was a strong theme. has a positive impact on Gross Domestic Employers told us that it takes a Product (GDP), through its effect on the considerable length of time to train skilled size of the UK workforce. The impact workers. Some believe that, although of migration overall on GDP per head, in time there would be scope to up-skill which is the more relevant metric in many resident workers to do some skilled jobs, cases, is less clear-cut. This impact will there would always remain a proportion be influenced by the impact of migrants
10 on productivity, trade, investment and skill to resident workers and capital, and hence development of resident workers. It is likely are less likely to place downwards pressure that Tier 1 and 2 migrants, on average, on pay than those competing with less have a positive impact on GDP per-head. skilled workers. Tier 1 and Tier 2 migration is unlikely to reduce the employment of 31. A reduction in migration through Tiers resident workers in the aggregate, but there 1 and 2 will have significant effects on is repeated anecdotal evidence of negative the micro-economy, in terms of impacts effects being felt by individuals at the local on individual sectors and occupations. level in certain sectors and occupations. For instance, the occupation ‘IT, software professionals’ accounts for 27 per cent 37. Based on the available evidence it can of total Tier 2 Certificates of Sponsorship be inferred that Tier 1 and Tier 2 migrants issued, and 48 per cent of those issued are highly likely, on average, to make a under the intra-company transfer route. positive net fiscal contribution, especially in the short-term. If these migrants remain 32. Nonetheless, in the short-term, the in the UK, they will age and make a greater overall impacts on GDP and GDP per head call over time on state services such as will be relatively small. In the longer-term, pensions and healthcare. Migration through the effects may be more significant, due to Tiers 1 and 2 can lead to settlement. a continued accumulation over time of the Migration that does not lead to settlement relatively small static effects. is more likely to have a positive effect on government finances than migration 33. The economy will adjust to some that does. extent in response to a reduced supply of migrants. Employers will have stronger 38. Regarding provision of public incentives to train UK workers, and services, migrants, including Tier 1 there may be expansion in sectors and and 2 migrants, help alleviate skill occupations that are less reliant on shortages in key public service migrant workers. occupations in areas such as health and education. In the longer-term, the extent 34. Additionally, migration policy that is more to which Tier 1 and 2 migration alleviates selective in its design can ensure that those shortages, and relieves pressure on migrants who make the biggest economic wages in the fiscally constrained public contribution to the UK economy can still sector, will depend on training and come. It is critically important that policy on up-skilling of the resident population. skills and migration is used to mitigate any adverse impacts that would otherwise occur, 39. Migrants, naturally, also contribute to particularly in relation to those sectors and consumption of public services. Tier 1 occupations most affected. and 2 migrants are likely to be relatively light consumers of health services in the 35. Any impact of Tier 1 and Tier 2 short term, as they tend to be young and migration on inflation is likely to be healthy on arrival in the country. In the very modest. It should not be a major longer term the impact will increase as consideration in setting limits for Tiers those migrants become older. They are 1 and 2. likely to consume education services corresponding to the number and age of 36. Migration has significant impacts across the children they have, both upon and after the wage distribution in the labour market. arrival in the UK. Significant numbers of Evidence suggests that Tier 1 and 2 child dependants do accompany Tier 1 and migrants are more likely to be complements 2 migrants. As well as consuming public
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services, migrants also fund them, through migration of 50,000, the UK population is their contribution to tax receipts. projected to rise by 4.5 million less between 2009 and 2035 than under the Office for 40. Migrants also interact with the housing National Statistics’ principal projection market. There is some evidence that (based on net migration of 180,000 migrants, through adding to the population, per annum). exert upward pressure on house prices. However, in the short term, Tier 1 and Limits on Tier 1 and Tier 2 in 2011/12 2 migrants are more likely to directly contribute to higher rents, albeit also 45. The Government’s objective is that indirectly to higher house prices through net migration be reduced to the tens the buy to let market. In the longer term of thousands by the end of the current their impact is likely to shift from rents to Parliament. This objective could, in house prices, as they move from the private principle, imply net migration of any level rented sector to the owner occupier sector. above zero but below 100,000.
41. The impact on crime is likely to 46. Because it is the Government’s chosen differ between migrant groups. The total measure, analysis of net migration in our amount of crime committed by Tier 1 and report is based on LTIM, as measured 2 migrants is likely to be small due to the by the (IPS). Potential reasons for using selection mechanism of the PBS which this measure are that it is the official ensures that they are highly employed, well and most commonly reported measure paid and highly educated. of net migration.
42. Tier 1 and 2 migrants will contribute 47. There are a number of issues to total congestion. They are likely to associated with using the IPS data. First, generate more congestion than the average because the IPS is a sample survey, the UK resident, reflecting the fact that they are resulting estimates of net migration have more likely to work, and therefore live, wide error margins. Second, it is not in London. straightforward to estimate the impact of changes in the number of visas issued on 43. Locally concentrated surges in net IPS migration. Third, there is inherent migration may have a negative impact on uncertainty involved in assessing what social cohesion, although the difficulties may happen in the future: for example, in defining social cohesion, and the migrants and employers may change their absence of comprehensive data, make the behaviour in response to changes in policy relationship difficult to estimate. It is not and economic circumstances, in the UK possible to estimate with any degree of and abroad. confidence the likely impact of Tier 1 and 2 migrants on social cohesion: they are often 48. Given the scale of uncertainty, and employed in the provision of public services assuming that the upside and downside and are likely to have good English risks are equally balanced, the best language skills, and these factors may help chance of achieving net migration in to mitigate any potential negative impacts. the tens of thousands is to aim for the middle of the range. For the purposes of 44. Many of the public service and social our main calculations in this report we impacts of Tier 1 and 2 migration, both therefore assume a precise objective positive and negative, will increase and for net migration of 50,000 in April 2015. fall in line with the impact on population. This assumption does not constitute a Over the long term, migration has a non judgement about what the Government’s trivial impact on population. With annual net precise objective is, nor what it should be.
12 49. A major additional source of uncertainty • Net migration of non-EU nationals in is that the Government has no direct 2010/11 is held constant at its 2009 level. control, through migration policy, over some components of net migration, such 52. Even closing all non-EU work-related as British and EU migration. These flows migration routes altogether would not may change, and will have consequent bring net migration down to the tens of impacts on net migration, regardless thousands on its own. To reach the tens of of what immigration policy is adopted. thousands, the student and family routes Taken literally, the Government’s objective will have to take a substantial share of would imply stricter limits on non-EEA any overall reduction. Therefore, in order migration if, for instance, Bulgarians and to assess the contribution that Tiers 1 and Romanians gaining free access to the UK 2 might make towards reducing net non- labour market leads to an increase in net EU migration, it is necessary to consider EU migration from those countries. The what contribution other routes may make. reverse logic would also apply if net EU In the absence of a formal comparison of migration fell due to other countries, such the costs and benefits of migration through as Germany, fully opening their borders to different routes, a potential starting point is workers from the A8 countries that acceded to look at each route’s proportionate share to the EU in 2004. in migration inflows. On this simple basis, we identify two potential options: 50. The Labour Force Survey (LFS) and the Annual Population Survey (APS) provide • Option A: Tier 1 and 2 main applicants other alternative potential measures of make a combined contribution on behalf net migration of non-UK nationals, using a of all work-related migration: 20 per cent different methodology. Net migration may of the reduction in non-EU migration. be calculated from the change in numbers of non-UK and non-EEA nationals in the UK • Option B: Tier 1 and 2 main applicants population between two years. The APS make a combined contribution in estimates that net migration of non-EEA proportion to their actual share of IPS nationals was 53,000 in 2009, considerably inflows: 10 per cent of the total reduction. below the IPS non-EU estimate of 184,000. This would additionally require that Tier The LFS and APS measures of net 5 and permit-free employment also migration exhibit considerable volatility, and make a 10 per cent contribution to there are a number of reasons why these reducing net migration, in proportion data sources provide different estimates to to their share of inflows. the IPS. Further examination of these data sources would be justified. 53. On the basis of our numerous assumptions, for net LTIM to reach 50,000 51. For reasons set out above, it is not by April 2015 requires that it falls at a possible to reliably forecast future net rate of 36,500 per year from 2011/12 to migration to and from the UK. Nonetheless, 2014/15. The corresponding reductions that our analysis is based on two basic working would need to come from Tier 1 plus Tier 2, assumptions, which have some basis on in net migration terms, are in the range of past trends: 3,650 to 7,300 per year, with options A and B as the top and bottom ends of that range • Net flows of British, EU and the non-IPS respectively. Under these assumptions, components of net migration over which the remainder of the required reduction the Government has limited control are will need to come from the student and held constant from 2009 levels, until family routes. 2010/11, and further until the end of this Parliament.
13 Limits on Migration
54. Translating the above analysis into in the IPS. The result of this is that options limits on Tiers 1 and 2 requires us to define A and B, as defined in terms of IPS data, the coverage of the limit, specifically in substantially underestimate the required relation to three issues: reduction in the number of visas issued. We therefore compare visa flows with those • Should the Tier 1 and 2 limits apply to recorded in the IPS and derive scaling out-of-country migration only, or also factors to allow us to translate between cover in-country migrants switching visa data and the IPS. The correct scaling from other routes or extending within a factor to use is subject to some uncertainty, particular route? On the basis of both but we use the best estimate currently practical and economic considerations, available. The scaling factor plays an we decide to exclude in-country important role in driving the overall results. applicants from our limits for 2011/12. 57. Our best estimate is that the • Should dependants of main migrants Government objective to reduce net also be included within the Tier 1 and migration to the tens of thousands over 2 limits? On the basis that dependant the lifetime of this Parliament implies a numbers should fall broadly in line with reduction of between 6,300 and main applicants anyway, we exclude 12,600 Tier 1 and 2 visas to be issued dependants from our limits. in 2011/12.
• Should intra-company transfers be 58. In order to calculate limits from these included in the Tier 2 limit? On the reductions, we use the latest annual basis that this is the largest of the four published full-year visa data, from 2009, Tier 1 and 2 routes we are concerned as our baseline. The baseline figure, as set with, we include intra-company transfers out in paragraph 18 above, is 50,000. The in our limits. total required limit for Tier 1 General and Tier 2 combined in 2011/12 is 55. We are also required to consider therefore between 37,400 and 43,700. the trajectory for non-EEA work-related The Government may choose to apply our migration over this Parliament. On balance, reductions to a more recent baseline before we think there is merit in the argument that the actual annual limits are put in place in employers should be given time to adjust April 2011. to limits on migration, and this implies that limits on Tiers 1 and 2 should become 59. The next step is to translate the increasingly restrictive over time. A linear total reduction in Tier 1 and 2 visas into trajectory, with identical cuts year-on-year separate reductions for Tier 1 General on between 2011/12 and 2014/15, would the one hand, and Tier 2 on the other. On be consistent with this. A trajectory that balance, the evidence supports a greater delayed the largest cuts until later on would proportionate reduction to Tier 1 than risk employers limiting or delaying action to Tier 2 in 2011/12. We apportion the required to accelerate the training and up- reduction in net migration between the two skilling of UK workers. In addition, plotting a routes on that basis. trajectory is not an exact science, meaning that there is an argument for simplicity. 60. For Tier 1 General the required overall Therefore, we assume a linear trajectory reduction could translate into a cut in the for 2011/12. number of entry clearance visas, compared to 2009, in the range of 3,150 to 6,300. For 56. Volumes of visas issued for work- Tier 2 the required overall reduction could related migration are considerably higher translate into a corresponding cut also in than the inflows of work-related migrants the range of 3,150 to 6,300.
14 61. The above limits and reductions do not • Family migration takes less than its include dependants. If dependants were to proportionate share of the required be included in the limits, the limits would reduction in net migration, meaning that need to be higher to reflect that. In our larger cuts have to be found elsewhere. report we calculate how much higher, using historic visa data on the ratio of dependants • Non-EEA students take a to main migrants under Tier 1 General and disproportionately low share of the Tier 2. reduction in overall net migration, or continue to rise rapidly as in recent years. 62. Options A and B are based on numerous necessary assumptions and • Flows through the PSWR remain at their judgements. Some of the assumptions are current levels, or increase. required due to the inherent uncertainty involved in trying to influence overall net • The ratio of dependants to main migration using Tier 1 and 2 migration as applicants increases from 2009 levels. a lever. The assumptions made about British and EU migration are in that 64. Alternatively, the Government would be category. The Government has little able to aim towards the higher end of our control over these factors. Some of the range, or potentially even above it other required assumptions are with regard (i.e. may need to make the least severe to migration policy and its objectives, which cuts to visas in 2011/12) under the the Government does have some control following circumstances: over. The final decision as to which precise limits to use needs to be influenced by • The Government decides to aim for various considerations. overall net migration of higher than 50,000, targeting, for instance, a figure of 63. The Government may need to aim 80,000 or 90,000 instead. towards the lower end of our range, or potentially even below it (i.e. may need to • Policy is put in place so that out-of- make the deepest cuts to visas in 2011/12) country reductions to Tiers 1 and 2 can under the following circumstances: be traded-off against increased outflows achieved through reductions in in-country • Tiers 1 and 2 bear the total proportion extensions and switching (although it of the total cut in migration relative to is important to note that the required inflows through all economic routes, limits currently hold outflows constant, including Tier 5 (i.e. 20 per cent), rather during a period when inflows will fall, than simply in proportion to the shares of meaning that some such policy to boost Tiers 1 and 2 alone (i.e. 10 per cent). the ratio of outflows to inflows will be required anyway to keep in line with the • The Government decides to aim for required trajectory for net migration). The overall net migration of below 50,000, in full impacts of action to boost outflows, order to be more confident of achieving however, may not be experienced by the net migration of below 100,000. end of this Parliament.
• The Government decides to aim to • Family or student migration takes more reduce net migration to the tens of than its proportionate share of the thousands by 2013, the last complete required reduction in net migration. year for which LTIM data will be available by the time of the General Election in • Flows through the PSWR fall, or the May 2015. route is closed down altogether.
15 Limits on Migration
• The ratio of main migrants to dependants • Taking action to ensure that the skills rises, possibly as a result of policies with and training system plays a key role in this aim in mind. systematically identifying and addressing shortages, of economically or otherwise 65. In addition, the Government could aim important workers, that might otherwise to achieve less than 10 and 20 per cent occur as a result of, or be exacerbated of its objective for net migration through by, limits on work-related migration. reductions to Tiers 1 and 2, possibly on the basis that those tiers are judged to • Recalibrating the Tier 1 General be more economically beneficial, and points table in order to ensure that that work accounted for a higher share it appropriately selects the most of non-EU migration in the early to mid- skilled migrants. 1990s, when net migration was last in the tens of thousands. It could also choose to • Introducing the requirement to be apportion visas between Tiers 1 and 2 on employed in a skilled graduate-level a different basis to that which we have occupation at the Tier 1 extension stage. used above. • Revising the methodology for updating the 66. Another policy option is to consider multipliers so that new salary multipliers whether the link between work-related are put in place as quickly as possible. migration and settlement should be weakened. Such a policy could have • Amending the points calibration for Tier significant effects on net migration in the 2 in order to ensure that only the most long term, although less so before the end skilled migrants can come to the UK of the current Parliament. under this Tier.
Supporting Policies • Scaling down the allowances used for points purposes in relation to the 67. One of the criteria we applied, when points required for earnings for intra- we reviewed Tiers 1 and 2 of the PBS for company transfers. the former Government in 2009, was to ensure better identification and attraction of • Applying criteria at the extension migrants who have the most to contribute stage for intra-company transfers that to the UK. If there is a limit on work-related are more selective than those at the migration from outside the EEA, and that point of initial entry. ceiling is reached, any migrant to the UK displaces another who would otherwise • Giving consideration to strengthening the have been able to come. This means that RLMT route through the introduction of a identifying and attracting the migrants certification regime. who have the most to contribute to the UK becomes even more critical. • Commissioning the MAC to review the shortage occupation lists in the context of 68. We make policy suggestions to the limits. accompany our analysis of the required limits which focus, in particular, on 69. In addition, we note that migrants who improving the selectivity of the system. report that they are coming to the UK for Some key suggestions are: under 12 months do not count towards the LTIM inflow. We suggest that visas of under 12 months duration under Tier 2 could be
16 excluded from the limit on that Tier if, and change in future years. Limits on work- only if, either: related migration for future years will need to be based on consideration of factors that • such short-term visa holders will not be are not yet fully known, including: permitted to switch in-country to other work-related routes; or • the mechanisms that will ultimately be put in place for Tiers 1 and 2 alongside • any in-country visas issued in cases the introduction of annual limits; where such migrants are permitted to switch are counted towards the • evidence on the economic, public (otherwise out-of-country) limits on Tiers service and social impacts of the limits 1 and 2. and mechanisms;
70. The numerical limit for Tiers 1 and 2 • future policy on other economic routes for presented above was calculated on the non-EEA migrants outside the scope of assumption that all visas, including those of limits set out in this report, including Tier less than 12 months’ duration are covered 5 and the PSWR; by the limit. If visas lasting for less than12 months were to be excluded, the levels • future policy on the student and of the limits would need to be adjusted to family routes; account for this. • future policy on switching, extensions 71. We additionally suggest that the and permanent settlement in the UK; and Government reviews its policy in relation to settlement, and considers whether • future net flows of UK and EEA migrants explicit economic criteria should be applied to and from the UK. to decisions regarding whether or not migrants are allowed to settle permanently 74. Data on PBS migrants, in terms of in the UK. their characteristics and labour market outcomes, are still limited. For example, 72. We also suggest that consideration the UK Border Agency does not currently be given to whether, in future years, a publish the points scored by successful proportion of visas should be auctioned, Tier 1 and 2 applicants. We welcome the within the limits on Tiers 1 and 2. This recent improvements to the management would mean that, if a worker was so information systems, and acknowledge the economically critical that a sponsored data improvements that have resulted from employer was prepared to pay whatever that, but we urge the UK Border Agency to amount was required to bring that person consider further steps required to facilitate into the UK, there would be allowance in the collection and the accessibility of the system for such cases. relevant data on PBS migrants.
Next steps 75. Our report highlights gaps in the existing evidence base, particularly around 73. The MAC will be happy to advise the social and public service impacts the Government on limits on Tiers 1 and of migration. The MAC has a small 2 for future years, and other issues as research budget, and we will consider appropriate. We emphasise that our report commissioning research to best address sets out required limits for 2011/12 only. some of the key evidence gaps in this area. The level and coverage of limits may
17
List of tables and figures
Tables
Chapter 2
Table 2.1 Points under the Tier 1 General route
Table 2.2 Points for age for a Tier 1 General extension application on or after 6 April 2010
Table 2.3 Points for qualifications for aTier 1 General extension application on or after 6 April 2010
Table 2.4 Points for previous earnings for a Tier 1 General extension application on or after 6 April 2010
Table 2.5 Points for UK experience for Tier 1 General extension application on or after 6 April 2010
Table 2.6 Salary bands and income conversion factors currently used in Tier 1 of the Points Based System
Table 2.7 Points under the Post-Study Work Route
Table 2.8 Points and requirements under Tier 2 of the Points Based System
Chapter 3
Table 3.1 International Gross Domestic Product growth projections
Table 3.2 Granted main applications for Tiers 1 and 2 and their predecessor routes, 2009
Table 3.3 Granted dependant applications for Tiers 1 and 2 and their predecessor routes, 2009
Table 3.4 Grants of employment-related settlement, 2007 to 2009
Table 3.5 Percentage of Tier 1 and 2 main applicants and dependants by sex, 2009 Q1 to 2010 Q1
19 Limits on Migration
Table 3.6 Top 10 migrant nationalities of approved applications through Tiers 1 and 2, 2009 Q1 to 2010 Q1
Table 3.7 Out-of-country entry clearance visas for Tier 4 and students, Tier 5 and permit-free employment, 2007 to 2009
Table 3.8 Estimates of the percentage of migrants who entered the UK in 2004 and who still had valid leave to remain in 2009
Table 3.9 Employment rates and employment levels by country of birth, 2010 Q2
Table 3.10 Employment rates of non-EEA born individuals by main reason for coming to the UK, 2010 Q1 and Q2
Table 3.11 Top 10 Tier 2 jobs by 4-digit SOC occupation, July 2009 to June 2010
Table 3.12 Median salary for Tier 2 jobs by 2-digit SOC occupation and Tier 2 route, July 2009 to June 2010
Table 3.13 Stocks of non-UK born migrants by regions of the UK, 2004 to 2009
Table 3.14 Flows of long-term migrants to and from countries and regions of the UK, 2008
Chapter 6
Table 6.1 Estimates of Long Term International Migration by nationality and reason for migration, 2009
Table 6.2 Calculating the reduction in net non-EU migration required to meet the Government’s objective of ‘tens of thousands’
Table 6.3 Non-EU International Passenger Survey inflows by reason for migration and assumed contributions of Tier 1 and 2 migrants and dependants, 2009
Table 6.4 Options for required net Long Term International Migration reductions per year, 2011/12 to 2014/15
Chapter 7
Table 7.1 Illustrative estimates of the one-year impact of a reduction in net migration of 10,000 on GDP and GDP per capita
Table 7.2 Ratio of revenue to expenditure for A8 migrants and non-migrants
Chapter 8
Table 8.1 Tenure by country of birth and number of years since last arrival in UK
20 Chapter 9
Table 9.1 Converting options for lower International Passenger Survey work-related migration inflow into reduction in visas for Tiers 1 and 2 in 2011/12
Table 9.2 Apportioning visa reductions for main applicants between Tiers 1 and 2 for a 2011/12 annual limit
Table 9.3 Top 10 migrant nationalities of approved main applications through Tier 1 General, 2009 Q1 to 2010 Q1
Table 9.4 MAC recommendations on points, salary and qualifications for Tier 2 of the Points Based System Figures
Chapter 3
Figure 3.1 One quarter and four quarter growth of real Gross Domestic Product, UK, 1974 Q2 to 2010 Q2 (provisional)
Figure 3.2 UK working age employment rate, Apr 1974 to May 2010
Figure 3.3 UK unemployment rate, Apr 1974 to May 2010 UK claimant count rate, Apr 1974 to Jul 2010
Figure 3.4 Total vacancies, Mar-Jun 2001 to Apr-Jul 2010 Total redundancies, Mar-Jun 2001 to Feb-May 2010
Figure 3.5 Average earnings growth, Great Britain, Jun-Aug 1997 to Mar-Jun 2010
Figure 3.6 Jobcentre vacancies, claimant count and vacancies per claimant by occupation, Great Britain, July 2008, July 2009 and July 2010
Figure 3.7 Flows of long-term migrants to and from the UK and net long-term migration by citizenship, 1991 to 2009 (provisional)
Figure 3.8 Inflows and outflows of long-term migrants by reason for migration, 2009 (provisional)
Figure 3.9 Inflows and outflows of long-term migrants by usual occupation prior to migration, 2008
Figure 3.10 Inflows of non-EU long-term migrants by reason for migration measured by the International Passenger Survey (IPS), 1991 to 2009
Figure 3.11 Proportion of the UK population born outside the UK and outside the European Economic Area (EEA), 1994 Q1 to 2010 Q2
21 Limits on Migration
Figure 3.12 Comparison of net migration estimates from the Labour Force Survey, Annual Population Survey and International Passenger Survey, 1995 to 2009
Figure 3.13 UK population projections between 2010 and 2035 according to various assumptions of the annual level of net migration
Figure 3.14 Out-of-country entry clearance visas for main applicants for Tiers 1, 2, 4, 5, family and settlement, 2009
Figure 3.15 Quarterly out-of-country entry clearance visas for main applicants for Tiers 1 and 2, 2007 Q1 to 2010 Q2
Figure 3.16 Age breakdown of granted Tier 1 and 2 main migrants and their dependants, 2009 Q1 to 2010 Q1
Figure 3.17 Distribution of Tier 1 migrants in employment by 1-digit SOC occupation, Feb to Apr 2009
Figure 3.18 Distribution of Tier 2 jobs by 2-digit SOC occupation, July 2009 to June 2010
Figure 3.19 Proportion of the UK-born and non-UK born population by highest qualification held and the proportion of the population by age last in education, 2009 Q3 to 2010 Q2
Figure 3.20 Distribution of full-time earnings of UK, EEA and non-EEA born individuals, 2009 Q3 to 2010 Q2
Figure 3.21 Distribution of entry salaries recorded on Tier 2 Certificates of Sponsorship used by route, 2009
Figure 3.22 Inflows and stock of foreign-born migrants as a proportion of the population in OECD countries, 2008
Chapter 6
Figure 6.1 Probability distribution around the assumption that future British, EU and non-IPS net migration will stay constant over time
22 Chapter 1 Introduction
1.1 The Migration Advisory 1.3 The Government published Limits Committee on non-EU economic migration: a consultation (UK Border Agency, 1.1 The Migration Advisory Committee 2010a) on 28 June 2010. In this (MAC) is a non-departmental paper, the Government announced public body comprised of that it will consult on how an economists and migration experts annual limit for Tiers 1 and 2 of which provides transparent, the PBS will work in practice, independent and evidence-based and the mechanism through advice to the Government on which it should be achieved. The migration issues. The questions Government also announced that we address are determined by the it had commissioned the MAC to Government. Previously we have consult and provide advice on the provided advice on the design levels at which the first annual of Tiers 1 and 2 of the Points limits on migration should Based System (PBS) for managed be set. migration, the shortage occupation lists used under Tier 2, and 1.4 On the same date the Home transitional labour market access Secretary wrote to the Chair of for citizens of new European the MAC setting out the precise Union (EU) accession states. question on which the MAC should advise: “at what levels should 1.2 What we were asked to do limits on Tier 1 and Tier 2 of the Points Based System be set for 1.2 On 20 May 2010, the Coalition their first full year of operation in Government published a paper 2011/12, in order to contribute to which committed the Government achieving the Government’s aim to introducing an annual limit on of reducing net migration to an the number of non-EU economic annual level of tens of thousands migrants admitted into the UK to by the end of this Parliament, and live and work. The paper states taking into account social and “We will introduce an annual public service impacts as well as limit on the number of non-EU economic impacts?”. The Home economic migrants admitted into Secretary asked that the MAC the UK to live and work. We will report by the end of consider jointly the mechanism for September 2010. implementing the limit” (Cabinet Office, 2010).
23 Limits on Migration
1.3 Our interpretation of the scope for reducing inflows the question of work-related migrants from outside the EEA, as opposed to 1.5 The commissioning letter stated the family or student routes. We that the Government has an aim are not reviewing the family or of reducing overall net migration student routes in this report, so we (i.e. including migration flows of have had to make assumptions British, other European Economic about future numbers coming Area (EEA), and non-EEA through those routes. nationals) to an annual level of tens of thousands by the end of 1.9 The numerical limits for Tiers 1 this Parliament. We take that aim and 2 that we believe are required as given and do not assess the in order to meet the Government’s impacts of this policy regarding aim largely flow from the overall net migration. This report arithmetic that follows from the is not a critique of whether or not two questions above, and the limits should be placed on overall assumptions we make in relation net migration. It focuses on how to them. Tiers 1 and 2 may contribute towards achieving the 1.10 Alongside the above, we have given aim. examined the evidence on economic, public service and 1.6 The numerical limits on overall social impacts of migration in net migration hinge on two detail. These impacts, and how considerations: they may be mitigated, influence our consideration of specific • First, what does the target range issues of policy design. The of ‘tens of thousands’ imply in design of the underpinning policy terms of the precise objective is as important as the numerical for net migration? levels of the limits on Tiers 1 and 2, if not more so. • Second, what proportion of the required total reduction in net 1.11 The report presents findings in migration should come from three critical areas: reduced flows throughTiers 1 and 2? • It calculates numerical limits for 2011/12, based 1.7 Addressing the first of these on our interpretation of the questions requires that we Government’s aim to reduce consider the Government’s aim, net migration to the tens of and what in practical terms needs thousands. to be done in order to be confident of achieving it. This is influenced • It sets out different policy substantially by factors over options for how any reductions which the Government has limited in migration through Tiers 1 control, including migration of and 2 may be achieved in the British and EU citizens. most beneficial manner with reference to the economic, 1.8 The second question requires public service and social that we make assumptions about impacts of such reductions.
24 • It suggests avenues for sportspeople and ministers of further analysis and gathering religion routes. of evidence so that future decisions can be based on the 1.15 The Government is consulting best possible understanding of on whether dependants of main the issues involved. migrants through these routes should be included within a limit. 1.12 We trust that this report will be We consider the implications of of assistance to the Government doing so. by highlighting some of the key balances that need to be struck in 1.5 Our approach reducing net migration. 1.16 On 30 June 2010 we published 1.4 Scope of this work on our website a consultation document (MAC, 2010b) and sent 1.13 Only Tiers 1 and 2 of the PBS are a copy of this document to our in scope for this work. The limit for corporate partners (throughout Tier 1 will apply to the current Tier this report where we refer to 1 General route only. We consider either ‘corporate partners’ or just whether in-country migrants ‘partners’ we mean all parties switching into, and extending with an interest in our work and under, Tier 1 General should its outcomes, so both private and be included within the limit. The public sector employers, trade Post-Study Work Route (PSWR) unions, representative bodies and is outside the scope of the limit: private individuals are all included the Home Secretary has said that within this term). The document the Government will be reviewing asked that responses be provided other migration routes and by 7 September 2010. bringing forward further proposals in due course. The Investor and 1.17 In addressing the question the Entrepreneur routes under Tier 1 Government posed to us, we are also excluded. identified three main themes that we needed to address, namely: 1.14 The limit for Tier 2 will cover the current Resident Labour • What criteria should be Market Test (RLMT) and taken into account when shortage occupation routes. considering limits for Tiers 1 The Government is consulting and 2, and how should those on whether these routes should criteria be balanced? be merged. We also consider whether the limit should cover • What precise objective for the intra-company transfer net migration, and PBS route, although we note that migration, would be consistent the Government is consulting with the Government’s aim to on whether this route should be reduce net migration to the included in the limit. As with Tier tens of thousands by the end 1, both out-of-country migrants of this Parliament? and in-country switchers and extenders are potentially in-scope. • What trajectory, for Tier 1 and The limit will not apply to the elite Tier 2 migration over time,
25 Limits on Migration
is most desirable in order to assumptions, we have done so. achieve the objective? We have also made all efforts to ensure that the assumptions 1.18 In our consultation document, are well informed, and explicit. we set out specific questions Where there are uncertainties, which we believed needed to we highlight them. We also be addressed to inform our make suggestions as to how the consideration of the above use of evidence and analysis to issues. We received over 400 guide development of policy on written responses to our call migration limits may be made for evidence, and attended a as robust as possible over large number of meetings and future years. events, meeting face-to-face with approximately 1,000 of 1.6 Structure of this report our partners. We reviewed the relevant academic literature and 1.21 The early chapters provide context consulted with leading academics. to our report. Chapter 2 provides We also carried out in-house details of the policy on limits analysis. Further details of these on migration, the design of the activities, and how we brought PBS, and other relevant aspects the information, evidence and of policy and legislation. It also data together to form our final briefly reviews relevant practice in conclusions, are presented in other countries. Chapter 3 sets out this report. and discusses data on migration, migrant characteristics, the labour 1.19 Throughout this process we market and the UK economy. have been mindful that we are operating in a broader context. 1.22 In Chapters 4 and 5 we discuss The Government is simultaneously our approach to this work in more consulting on the mechanism for detail. Chapter 4 discusses how limits on Tiers 1 and 2 of the PBS. we carried out our consultation As mentioned above, whether and provides an analysis of the the Government’s objective for responses we received. Chapter net migration is achieved will also 5 discusses potential frameworks be influenced by any subsequent for analysing limits on migration in policy changes made in areas not general, and our specific analytical directly within our remit for this approach to considering limits for report, such as student and family Tiers 1 and 2 of the PBS. migration, as well as by changes to rules relating to settlement and 1.23 Chapters 6 to 9 provide our citizenship. It will also be affected main analysis of the evidence by factors effectively outside the and data we examined. First, control of migration policy, such as in Chapter 6 we set out our British and EU migration. Finally, quantitative analysis of the role there are limited data available, work-related non-EEA migration and the scope for fully reconciling may play in contributing to the different data sources is limited. Government’s overall objective for net immigration. Next, we consider 1.20 We have taken a pragmatic the evidence in relation to the approach to the above issues. economic impacts (Chapter 7) Where we have needed to make and the public service and social
26 impacts (Chapter 8) of migration. Chapter 9 sets out the limits for Tiers 1 and 2 in 2011/12 that we believe are required to meet the Government’s objective and examines potential policy options to underpin the limits.
1.24 In Chapter 10 we summarise our conclusions and describe next steps and areas for future research.
1.7 Thank you
1.25 We are extremely grateful to all the organisations and individuals who responded to our consultation, who we met with, and who took the trouble to give us their views. We are particularly grateful to those organisations that hosted events for us or who coordinated responses to our call for evidence; they helped us to access a wider range of opinions and evidence than would otherwise have been possible. Lists of those who responded to our consultation (and who have not asked for anonymity), and those who met with us are provided as annexes to this report.
27
Chapter 2 Policy context
2.1 Introduction 2.2 Routes of migration to the UK 2.1 In this chapter we set out a brief overview of the main routes via 2.3 This section summarises the main which migrants can come to the routes of migration to the UK, UK, together with a more detailed starting with migration by returning look at Tier 1 and Tier 2 of the British citizens and by nationals Points Based System (PBS). from within the European Union. The chapter also describes the Government’s policy on limits, its Returning British citizens and consultation on Tiers 1 and 2, and UK ancestry gives details of our consultation on the levels of the limits. Then 2.4 British citizens have the right to we consider policies introduced by live and work in the UK without other countries to limit migration. being subject to immigration Finally, we draw out relevant control. Nationals from implications and issues for Commonwealth countries with consideration later in this report. at least one grandparent born in the UK (including the Channel 2.2 The particular focus is on Tiers Islands and the Isle of Man and, if 1 and 2 of the PBS, as they are the grandparent was born before most directly in scope for this 31 March 1922, the Republic of report. Nonetheless, because Ireland) have the right to live and Tier 1 and 2 migrants make work in the UK. up only a component of total migration, we also discuss other European Economic Area migration routes that have relevance to and automatic entitlements the Government’s overall aim of reducing net migration to the ‘tens 2.5 Nationals of the European of thousands’. Economic Area (EEA)1, Swiss nationals and their families have
1 Nationals of Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Irish Republic, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom. Iceland, Liechtenstein and Norway are not members of the European Union (EU) but citizens of these countries have the same rights to enter, live in and work in the United Kingdom as EU citizens. Switzerland is not in the EEA, but its nationals are subject to the same immigration control processes as those for EEA countries. References to policy in relation to EEA (non-EEA) nationals in this report therefore include (exclude) Switzerland.
29 Limits on Migration
the right to come to the UK to visit, establish themselves in business live or work. Family is defined as: in the UK and successful applicants must be able to • a partner; demonstrate that they have the ability and commitment to do so. • a child or a partner’s child; Successful initial applications are given 12 months permission • a grandchild or a partner’s to enter or stay in the UK, with grandchild providing the the possibility of a three year grandchildren are dependent extension. At the end of that four on them; and year period, the Turkish national can apply for settlement in the UK. • a parent or grandparent and a partner’s parent or grandparent. Points Based System
2.6 Czech, Estonian, Hungarian, 2.10 Persons not covered by the Latvian, Lithuanian, Polish, provisions outlined above, and Slovakian or Slovenian nationals who are coming to the UK for the need to register, with some purpose of work or study, must exceptions, under the Worker generally apply under the PBS Registration Scheme if they are for managed migration. There taking up employment in the UK. are some other non-PBS extant See our report on restrictions on routes which regulate economic A8 nationals for more information migration (for example, the about this scheme (MAC, 2009a). business visitor route) and these are discussed later in this chapter. 2.7 Nationals of Bulgaria or Romania The PBS consists of five Tiers: may need permission to work in the UK. See our report on • Tier 1: Highly skilled individuals restrictions on A2 nationals for to contribute to growth and more information (MAC, 2008b). productivity. Tier 1 is discussed in detail below. 2.8 After an EEA national has lived in the UK for a continuous • Tier 2: Skilled workers with a period of five years, they can job offer to fill gaps in UK labour apply for confirmation of force. Tier 2 is discussed in permanent residence. detail below.
Turkish nationals • Tier 3: Low skilled workers needed to fill specific temporary 2.9 Under the European Community labour shortages. Tier 3 has Association Agreement (ECAA) never been open, and is with Turkey, Turkish nationals presently suspended. can apply to enter the UK in the Turkish ECAA business category, • Tier 4: Students. This route is or to switch into this category if outside the scope of this report they are already here legally in and is therefore not described a different category. This route in detail. is only for persons intending to
30 • Tier 5: Youth mobility and from one route into another. temporary workers. Those Generally speaking, persons can allowed to work in the UK only switch in-country to a PBS for a limited period of time route if they are currently in the to satisfy primarily non- UK under another PBS route or economic objectives. one of the deleted routes that were replaced by the PBS 2.11 To qualify for each tier, in 2008. individuals must earn a given number of points in relation to 2.15 In the past, some PBS migrants requirements such as education have claimed that material and qualifications, current or published by the UK Border prospective earnings, and Agency at the time they came maintenance. Requirements, and to the UK created a legitimate their associated points, vary by expectation that they would be tier and the entry route through allowed to extend their stay. For which the immigrant is applying. its part, the UK Border Agency The system is designed to be maintains that its guidance only flexible, and the requirements sets out the criteria that exist for and points can be changed by the applications made at that time. Government at any time. We make no judgements, either implicitly or explicitly, on such In-country, out-of-country and legal matters in this report. But, switching applications where such factors have potential relevance to the issues under 2.12 Applications to migrate to the UK discussion, we make reference through the PBS can be made to them. in-country or out-of-country. In- country applications are made 2.3 Dependants and the right while the applicant is present to family life in the UK having secured entry through one of the primary routes 2.16 Article 8 of the European outlined in this chapter. This will Convention on Human Rights involve making an application states: “Everyone has the right to either extend an existing to respect for his private and permission to stay under the same family life, his home and his route or applying to switch into correspondence. There shall another route from the route under be no interference by a public which the initial permission to authority with the exercise of come to the UK was granted. this right except such as is in accordance with the law and is 2.13 Out-of-country applications are necessary in a democratic society made from outside of the UK, in the interests of national security, either in the applicant’s country of public safety or the economic origin or another country, and are well-being of the country, for the made via UK diplomatic posts. prevention of disorder or crime, for the protection of health or morals, 2.14 Switching applications are made or for the protection of the rights in-country and are the means and freedoms of others.” whereby applicants can switch
31 Limits on Migration
2.17 The Human Rights Act 1998 2.21 As well as partners and children incorporates the European under 18, the following relatives Convention into UK law. The can apply to join a settled person UK’s obligations under Article in the UK if they are financially 8 will need to be taken into wholly or mainly dependent on account in placing limits on the the person. They must also be ability of dependants to join main adequately accommodated and applicants in the UK. maintained without recourse to public finds, and have no other Dependants of settled persons close relatives in their own country to whom they could turn for 2.18 Non-EEA and non-Swiss nationals financial support: can come to or remain in the UK as the partners, children or elderly • widowed mothers and widowed dependant relatives of people who fathers aged 65 or over; are already settled in the UK (i.e. who have the right to permanent • parents or grandparents who residence here). are travelling together, if one of them is aged 65 or over; and, 2.19 With some exceptions, persons who are the husband, wife, civil • if there are exceptional partner or unmarried/same-sex compassionate circumstances, partner of a settled person will be sons, daughters, sisters, given permission to come and live brothers, uncles and aunts here for 27 months, or to remain over the age of 18, and here for another 2 years if they parents and grandparents are already in the UK when they under the age of 65. apply. Shortly before the end of this period, they will be able to Dependants of Points Based apply for permission to settle System migrants permanently in the UK. If they are the fiance(e) or proposed civil 2.22 PBS migrants can bring their partner of a settled person, they children, spouses, civil partners, will be given permission to enter same sex partners, and unmarried and live here for six months while partners, providing the main they get married or register their applicant can support them civil partnership. They can then without claiming benefits. PBS apply to switch into the category of migrants are not able to bring husband, wife or civil partner. other dependants into the UK.
2.20 Persons who are settled in the 2.4 Asylum UK may be able to bring their children, or child dependants, to 2.23 Applications for asylum are live here permanently. Children considered under the 1951 United cannot normally come to settle in Nations Convention Relating the UK unless both parents are to the Status of Refugees. To settled here or have been given be recognised as a refugee, permission to come and applicants must have left their settle here. country and be unable to go back because they have a well-founded
32 fear of persecution because of • Investor: for high net worth race, religion, nationality, political individuals making a substantial opinion, or membership of a financial investment in the UK. particular social group. 2.27 Even if applicants gain sufficient 2.24 A person who comes to the UK points, the application may still be to seek asylum can include their refused for other reasons, such as dependants in their application previous migration abuses. for asylum, if those dependants have travelled with them to the 2.28 The first annual limit for Tier 1 will UK. Persons granted asylum can apply to main migrants through the apply to be reunited with their pre- General route only. We discuss existing families (the spouse, civil that route, and the Post-Study partner or unmarried/same-sex Work Route in more detail below, partner plus any children under before discussing dependants of 18 who formed part of the family Tier 1 migrants. unit at the time the refugee left) through the UK Border Agency Tier 1 General Route family reunion programme. The UK Border Agency may 2.29 The Tier 1 General route is for allow family reunion for persons who wish to obtain highly other family members on skilled employment in the UK. compassionate grounds. Applicants are awarded points based on qualifications, previous 2.5 Tier 1 earnings, UK experience, age, English language skills and 2.25 Tier 1 of the PBS allows skilled available maintenance funds. persons to come to the UK to take up employment, subject to gaining 2.30 Persons can apply under the Tier sufficient points. Persons coming 1 General route if they are: under Tier 1 do not require an offer of employment before they • already in the UK in an come to the UK. immigration category from which switching into the highly skilled 2.26 Tier 1 currently has four routes: worker route is permitted; or
• General (Highly Skilled • already in the UK under the Tier Worker): for persons who 1 General route and wish to wish to obtain highly skilled extend their permission to stay employment in the UK; within this route; or
• Post-Study Work Route: for • already in the UK under the international graduates who previous Highly Skilled Migrant have studied in the UK; Programme, and wish to extend their permission to stay and are • Entrepreneur: for those wishing eligible to switch into the Tier 1 to invest in the UK by setting General route; or up or taking over, and being actively involved in the running of, a business; and
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• outside the UK and eligible 2.32 Table 2.1 illustrates how the to apply for permission to requisite points can be achieved enter the UK under the Tier 1 under the current Tier 1 General General route. route for initial applications. This table reflects the changes to the 2.31 Under Tier 1 General, the initial total point requirement following the leave to remain entitlement is two introduction of interim limits on 28 years, followed by an extension June 2010. It is otherwise consistent of up to three years subject to with recommendations the MAC evidence that the individual is in made when we last reviewed Tier highly skilled employment. 1, at the request of the former Government, in MAC (2009e).
Table 2.1: Points under the Tier 1 General route
Route / requirement Points criteria
General Qualifications Bachelor’s 30 (100 points Master’s 35 required) PhD 45
80 points Previous Under £25,000 0 Earnings required £25,000 - £29,999 5 (£s per annum) (1) £30,000 - £34,999 15 £35,000 - £39,999 20 £40,000 - £49,999 25 £50,000 - £54,999 30 £55,000 - £64,999 35 £65,000 - £74,999 40 £75,000 - £149,999 45 £150,000 or above 80 Age 29 or under 20 30 to 34 10 35 to 39 5 Over 40 0 £25,000 or higher previous earnings or 5 qualifications were gained in the UK
20 points English language (2) (10 points) required Maintenance (3) (10 points) Notes: (1) An earnings multiplier applies to overseas earnings for initial applications. There are 5 bands of multiplier, ranging from 1 to 11.4, depending on the country in which money was earned. (2) English Language requirements may be met by either: passing an English language test (equivalent to grade C or above at GCSE level or level 6.5 on the International English Language Testing System – General Training or Academic Module), being a national of a majority English speaking country, or having taken a degree taught in English. (3) Maintenance is set at £2,400 plus start-up costs of £400. If there are dependants, maintenance for the first dependant is set at £1,600 and at £800 for each subsequent dependant. Source: UK Border Agency, 2010
34 Extensions under Tier 1 General Points awarded for an extension application under Tier 1 General 2.33 After 2 years of living and working in the UK under Tier 1, migrants 2.34 The tables below show the points can apply to extend their stay awarded to migrants already in under this route for a further the UK under Tier 1 General and three years (or two years if they who wish to extend their stay. are a Tier 1 General migrant These tables set out the extension whose permission to stay was arrangements for migrants whose granted before 6 April 2010). At permission to stay in the UK was the end of this period, migrants granted on or after 6 April 2010. may have lived continuously in Different arrangements apply to the UK for five years and can extension applications by Tier 1 apply to settle here permanently. migrants whose permission to stay A Tier 1 migrant who is not then was granted prior to that. eligible for settlement can apply for permission to extend their stay 2.35 Table 2.2 shows the points under Tier 1 General again. awarded for age to migrants whose permission to enter or stay was granted on or after 6 April 2010.
Table 2.2: Points for age for a Tier 1 General extension application on or after 6 April 2010
Age on date of application Points
Under 32 years 20 32 to 36 years 10 37 to 41 years 5 42 years or over 0 Source: UK Border Agency, 2010
2.36 Table 2.3 shows the points enter or stay was granted on or awarded for qualifications to after 6 April 2010. migrants whose permission to
Table 2.3: Points for qualifications for a ierT 1 General extension application on or after 6 April 2010
Qualification Points
Bachelor’s degree 30 Master’s degree 35 PhD 45 Source: UK Border Agency, 2010
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Table 2.4: Points for previous earnings for a Tier 1 General extension application on or after 6 April 2010
Previous earnings Points
£25,000-£29,999 5 £30,000-£34,999 15 £35,000-£39,999 20 £40,000-£49,999 25 £50,000-£54,999 30 £55,000-£64,999 35 £65,000-£74,999 40 £75,000-£149,999 45 £150,000 or more 80 Source: UK Border Agency, 2010
2.37 Table 2.4 shows the points enter or stay was granted on or awarded for previous earnings after 6 April 2010. to migrants whose permission to
Table 2.5: Points for UK experience for a Tier 1 General extension application on or after 6 April 2010
Type of UK experience Points
Migrant successfully scores points for previous earnings, and £25,000 or more of those earnings 5 were made in the UK
Source: UK Border Agency, 2010
2.38 Table 2.5 shows the points 2.40 Migrants applying for a Tier awarded for UK experience to 1 extension must also score migrants whose permission to 10 points for the maintenance enter or stay was granted on or requirement. In-country applicants after 6 April 2010. will meet this if they can show that they have £800 in available funds, 2.39 Migrants will meet the English and out-of-country applicants will language requirement for a Tier meet this if they can show they 1 General extension if they were have access to £2,800 in available given permission to stay under funds. The applicant must be a Tier 1 category (other than able to show that the relevant investors or post-study workers), funds have been in their account or were given permission to stay for at least three months before as a highly skilled migrant under they apply, and be able to send the immigration rules that came documents that show the money into force on 5 December 2006. has been there for that time.
36 Tier 1 Documentary evidence passed an English language test (the original test result 2.41 Original documents must be certificate); and, supplied, rather than copies. Applicants must supply two recent • sufficient funds to cover the passport photographs together maintenance requirement: with their passport, along with evidence relating to the proof of: maintenance requirement must be in the form of cash funds. • their qualifications: usually the Other accounts or financial original certificate of award; instruments, for example, shares, bonds, pension funds • their previous earnings, or agreed overdraft facilities, corroborated by usually at least are not accepted as evidence of two of the following for each relevant funds. source of earnings claimed: Use of salary multipliers in • payslips; Tier 1 General
• personal bank statements; 2.42 To reflect differences in income levels across the world, and in the • letter from employer; pay of equally skilled workers, the earnings level required to score • official tax document; points varies depending on where the applicant was working at the • dividend vouchers; time they earned the money. The UK Border Agency uses a • letter from managing agent or series of calculations (known as accountant; salary multipliers) to bring salaries previously earned overseas in line • invoice explanations or payment with UK equivalents. The level summaries; of uplift depends on the average income in the country in which the • company or business accounts; earnings were made.
• UK experience: there are 2.43 Our report on Tier 1 of the PBS no specific documentary (MAC, 2009e) set out how the requirements for claims for UK Border Agency calculates the earnings made in the UK salary conversion rates. The broad because the necessary rationale behind the calculation documentation will have been appears to be as follows: sent to prove previous earnings; • Poorer countries are generally • knowledge of English language: characterised as having lower proof that the applicant is a GDP per capita, reflecting national of a majority English lower productivity. Even after a speaking country (usually their spot exchange rate is applied, passport), or proof they have individuals from these countries will have lower average incomes than those in the UK.
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• Countries with low average someone in the top 10 per cent incomes are also characterised of the income distribution in a by a smaller proportion of Band A country is equally skilled employment in occupations to someone in the top 1 per cent that would be considered in a Band E country. ‘highly skilled’ in the UK. For example, a nuclear physicist • Income percentiles were taken could be in the top 1 per cent from the World Bank’s Global of the pay distribution within Income Inequality database for a less developed country, but some countries in 1993. only within the top 10 per cent of the distribution in a country • Conversion rates were then developed to a similar level as calculated by comparing the the UK. equivalent points in the earnings distribution between the UK 2.44 The salary conversion model and the appropriate band. takes the above factors into For example, for Band E, the account by defining where ‘highly average 99th percentile of the skilled’ individuals sit within each income distribution for countries country’s earnings distribution in with data available would be order to generate the appropriate compared to the 90th percentile conversion rate. in the UK. From this, in the case of Band E, a multiplier of 11.4 2.45 As set out in MAC (2009e), the is calculated. methodology was seemingly developed along the • We were told that the original following lines: work also compared the wages of several occupations across • Countries were allocated to five countries as a broad sense- bands according to GDP per check of the magnitude of the capita on a purchasing power multipliers; however, the data on parity (PPP) basis in 2002. this were very limited.
• Band A consists of the countries 2.46 Table 2.6 provides the current with highest GDP per capita conversion rates used by UK (PPP), and Band E the lowest. Border Agency for each band and a selection of countries included • It was assumed that the top within these bands. 10 per cent of the income distribution for Band A countries 2.47 In our report on Tier 1 (MAC, is ‘highly skilled’ based on, we 2009e), we expressed concerns presume, the assumption that about the way the salary 10 per cent of the UK workforce multipliers are calculated, and is highly skilled. For countries in recommended that the former Band B, the assumption is that Government carried out a full the equivalent ‘highly skilled’ review of the salary conversion group is the top 5 per cent; model. Our concerns are for Band C it is 3 per cent; for discussed in more detail in Band D it is 2 per cent and; for Chapter 9. Band E it is 1 per cent. Broadly speaking, this implies that
38 Table 2.6: Salary bands and income conversion factors currently used in Tier 1 of the Points Based System
Band Conversion rate Selection of countries by band
A 1 Australia, Canada, Japan, Kuwait, USA
B 2.3 Argentina, Barbados, Botswana, Chile, Libya, Malaysia, Mexico, New Zealand, Saudi Arabia, Venezuela
C 3.2 Albania, Algeria, Belarus, Brazil, China, Egypt, El Salvador, Iran, Jamaica, Russia, South Africa, Tonga
D 5.3 Angola, Armenia, Bangladesh, Burma, India, Iraq, Mongolia, Pakistan, Serbia, Ukraine, Zimbabwe
E 11.4 Afghanistan, Burundi, Congo (Democratic Republic of), Chad, Mozambique, Nigeria, Somalia, Uganda
Source: UK Border Agency, 2010
Post-Study Work Route
2.48 The Tier 1 Post-Study Work Route (PSWR) of the PBS allows non-EEA graduates, who have graduated from a recognised UK Higher Education Institution (HEI), to work in the UK for up to two years without the need to have a sponsor employer. These graduates can switch into another tier of the PBS, provided they meet the relevant requirements.
2.49 Table 2.7 shows how the requisite points can be obtained under the PSWR.
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Table 2.7: Points under the Post-Study Work Route
Post-Study Work Has successfully obtained either: Route (95 points required) • A UK recognised degree at bachelor’s level or above (20 points); or
• A UK recognised Postgraduate Certificate in Education,Professional Graduate Diploma of Education, or Professional Graduate Diploma in Education obtained in Scotland (20 points); or
• An HND from a Scottish institution (20 points).
At a UK institution that is either a UK recognised or listed body; or on the Tier 4 sponsors register (20 points).
Obtained the qualifications while in the UK with student leave or as a dependant of someone with valid leave in an immigration category permitting the bringing in of dependants (20 points).
Made the application within 12 months of obtaining the eligible qualification (15 points).
English language (1) (10 points)
Maintenance (2) (10 points)
Notes: (1) English Language requirements may be met by either: passing an English language test (equivalent to grade C or above at GCSE level), being a national of a majority English speaking country, or having taken a degree taught in English. (2) Maintenance is set at £2,400 plus start-up costs of £400. If there are dependants, maintenance for the first dependant is set at £1,600 and at £800 for each subsequent dependant. Source: UK Border Agency, 2010
2.50 In our report on Tier 1 (MAC, spouses, civil partners, same 2009e) we made several sex partners, and unmarried recommendations to the partners) into the UK if they can former Government in relation prove that they can maintain to this route. One was that it them. Dependants of migrants commissions a detailed analysis of under Tier 1 are not able to switch the economic returns to studying into any PBS tier other than as at particular institutions and for a dependant of a successful particular degree subjects. We applicant. If dependants said that the Government should subsequently wish to apply to be then review whether the current in the UK in their own right, they policy with regard to equal PSWR must first leave the UK in order to allowance for graduates of all do this. Dependants granted leave qualifying institutions and degree to enter or remain can take on any subjects should be amended. employment provided that the PBS migrant has been granted more Dependants than 12 months permission to stay in the UK, subject to the following 2.51 Successful applicants under Tier restriction: there is a prohibition on 1, including under the PSWR, undertaking employment as may bring dependants (children, a doctor in training.
40 2.52 In MAC (2009c) we looked at here. The other three routes are dependants of PBS migrants and described in detail below. concluded, on the basis of poor data and incomplete evidence, 2.56 Tier 2 also includes switching that on balance dependants from the Post-Study Work Route should probably continue to category of Tier 1. Applicants need be allowed to accompany the to have a sponsoring employer principal migrant to the UK and and, if they satisfy certain that there should not be any requirements, can score 30 points restrictions placed on their ability for sponsorship based on previous to work here. However, this experience with that company, line of argument needs to be without the requirement for that reconsidered in the light of the company to carry out the Resident new policy of limits on migration, Labour Market Test (RLMT). as discussed later in this report. 2.57 Points are awarded for different 2.6 Tier 2 requirements and the overall pass mark is currently set at 2.53 Tier 2 is for skilled migrants only. 70. Table 2.8 summarises A successful applicant must have the requirements and the an offer of employment from a corresponding points allocated. sponsor employer, be coming to fill a job at National Qualification 2.58 Aspects of Tier 2 pertinent to this Framework level 3 (or equivalent) review are discussed in more or above, and be paid at least the detail below. ‘appropriate rate’ that would be paid to a skilled resident worker Sponsorship doing similar work. Points are awarded for different requirements 2.59 Applicants for Tier 2 must have and the overall pass mark is both a sponsor and a valid currently set at 70. Certificate of Sponsorship before applying. The sponsor is a UK- 2.54 The MAC last reviewed based organisation that wishes to Tier 2, at the request of the employ the applicant in the UK. To former Government, in MAC, sponsor applicants, an employer 2009c. We made a series of must become licensed and accept recommendations in terms certain responsibilities to help with of how the route should be immigration control. Before the amended. Many, but not all, of applicant can apply for leave to those recommendations were enter, the sponsor must assign a accepted by the Government. Certificate of Sponsorship, without Those recommendations that which an immigrant worker’s were accepted are reflected in the application would be refused. policy discussion below. 2.60 Where a salary is taken into 2.55 Tier 2 has five routes. Two of account in the allocation of points, these, for sportspeople and it is required that the salary for the ministers of religion, are not job be at the appropriate rate for covered by our suggested limit that occupation which is intended and are not discussed in detail to circumvent attempts to use the PBS to undercut UK jobs.
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Table 2.8: Points and requirements under Tier 2 of the Points Based System
Section Routes: Requirements: Requirements: Qualifications Prospective (or equivalents) Earnings (£)
A (50 points Offer of job in shortage 50 No qualifications 0 Below £20,000 0 needed) occupation
Offer of job that 35 GCE A-level £20,000 - 10 passes Resident Labour 5 £23,999 Market Test
Intra-Company Transfer 25 Bachelors or 10 £24,000 - 15 Masters £27,999
Switching from a Post- 30 PhD 15 £28,000 - 20 Study category £31,999
£32,000 or above 25
B Maintenance requirement (mandatory) 10
C Competence in English (mandatory) 10
Notes: Prospective earnings are before tax, and can be adjusted periodically to reflect inflation and/or labour market requirements. Allowances will be taken into consideration in calculation of salary. This table only includes the points and requirements for certain routes. Source: UK Border Agency, 2010
Shortage occupations the shortage occupation list. The current Government has not yet 2.61 Successful applicants entering responded to the recommended by the shortage occupation route changes set out in MAC (2010a). gain 50 points which, along with the 20 points from the mandatory Resident Labour Market Test requirements, allow applicants to obtain the pass mark of 70 2.63 For the Resident Labour Market points. The shortage occupation Test (RLMT), employers are list applies to the whole of the UK, required to advertise the relevant and Scotland has its own list of vacancy through Jobcentre Plus, additional shortage occupations. and as agreed in a sector code of practice (for example in a trade 2.62 Since 2008, the MAC has been magazine), for at least four weeks responsible for recommending at a level of earnings deemed the shortage occupation list to the reasonable by the UK Border Government. We have carried out Agency for that job. When issuing one full review of the lists in MAC a certificate of sponsorship, the (2008a) and three partial reviews sponsor must either confirm that in MAC (2009b) (2009d) and the test has been conducted, or (2010a). The former Government that it does not apply. Thirty points accepted virtually all of our are obtained for coming via this recommendations in terms of route, with the other 20 points in
42 part A of Table 2.8 needing to be Trade agreements and obtained through a combination intra-company transfers of prospective earnings in the job and qualifications. 2.67 The UK is a party to the World Trade Organisation’s (WTO) Intra-company transfers General Agreement on Trade in Services (GATS). The GATS 2.64 Intra-company transfers are used was created to extend to the by employees of multi-national service sector the system for companies with at least 12 merchandise trade set out in the months company experience to General Agreement on Tariffs and be transferred to a skilled job Trade, but with some differences in a UK-based branch of the to reflect the different nature of organisation. Twenty-five points services trade. The GATS entered are obtained for coming via into force in January 1995. this route, which need to be supplemented by points for 2.68 Under the GATS, the UK is earnings and qualifications. committed to allowing the Under this route, the English temporary presence of intra- requirement becomes mandatory company transferees where: they after three years. are managers or specialists (both categories defined in fairly narrow 2.65 Under the previous work permit terms); and are transferred to the arrangements the sponsor UK by a company established had to confirm that sponsored in the territory of another WTO employees had company specific member; and are transferred here knowledge and experience that in the context of the provision of was specifically required for the a service through a commercial post on offer and which could presence in the UK. The UK is not be provided by a resident committed to doing this where the worker. Similar requirements are worker has been employed by the in place in other countries, for sending business for at least one example in Ireland. Under the year. It is also committed to do PBS, employers are not required it without applying an economic to confirm that their sponsored needs test, such as the RLMT. employees have company specific knowledge and experience that is 2.69 The UK’s existing provisions required for the post on offer and under the intra-company transfer which could not be provided by a route give effect to its GATS resident worker, unlike under the commitments. The admission of work permit system. However, intra-company transferees to the the requirement for 12 months UK under the GATS is not limited previous employment with the in terms of numbers. company is intended to be a proxy for this. 2.70 The existing GATS does not specify any commitments in 2.66 Following a recommendation respect of length of stay for intra- made in our report on Tier 2 last company transferees although year (MAC 2009c), this route no such a commitment may be longer provides a direct route to considered implicit within the settlement in the UK. GATS, since the commitment to
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admit intra-company transferees Mercosur countries4, the Gulf Co- would be meaningless if their operation Council5, the Euromed permitted length of stay was countries6, and some of the reduced below a certain point. ASEAN countries.7
2.71 In 2003, European Union 2.73 In information provided to us for (EU) member states reached this review, the Department for agreement on a revised offer in Business, Innovation and Skills WTO negotiations in respect of its told us that commitments on GATS commitments. This revised intra-company transferees such offer included a commitment to as those embodied within GATS admit intra-company transferees are an integral part of the UK’s for up to 3 years. While this offer commitments on trade in services. has not been translated into an They told us that limiting the agreement at the WTO level, UK’s ability to take commitments it has been used as the basis in this area by including intra- for all other subsequent, similar company transfers within a limit trade negotiations at the bilateral could negatively affect the EU’s level (i.e. conducted by the EU ability to conclude new trade deals with other countries or blocs of potentially reducing the benefits countries) including commitments for the UK from these agreements, on intra-company transfers. or potentially causing outline deals Some of those negotiations have to unwind. concluded – in particular the EU-CARIFORUM2 Economic Extensions under Tier 2 Partnership Agreement and the EU-Korea Free Trade Agreement. 2.74 Migrants making successful Negotiations have also finished applications to live and work in the on the EU-Andean Countries Free UK under Tier 2 are initially given Trade Agreement (with Peru and permission for stay for up to three Colombia) and the EU-Central years, depending on the period America FTA (with a group of six requested by their sponsor. They Central American states3). can then apply for an extension of up to two years at the end of that 2.72 In addition, the EU is currently period. engaged in services negotiations with other countries. Negotiations 2.75 If a migrant has previous are ongoing with partners permission to stay as a such as India, Canada, Mexico work permit holder, they can (reviewing the existing Free apply under the transitional Trade Agreement), Ukraine, the arrangements for permission to
2 Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Dominican Republic, Grenada, Guyana, Haiti, Jamaica, St. Lucia, St. Kitts and Nevis, St Vincent and the Grenadines, Suriname, Trinidad and Tobago. 3 Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama. 4 Argentina, Brazil, Paraguay and Uruguay. 5 Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. 6 Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, the Palestinian Authority, Syria and Tunisia. 7 Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
44 stay for a time that takes them to not exceed 20 hours per week, five years in the UK in an eligible falling outside of normal working category. For example, if they hours only, in their additional have been here for two-and-a- employment. half years with permission as a work permit holder or under the 2.81 PBS migrants are not generally transitional arrangements, they immediately entitled to access can apply for a further two-and- public funds, such as income- a-half years’ permission to stay. related benefits including income based jobseekers allowance, 2.76 Migrants may apply for settlement housing benefit and council tax once they have been in the UK in benefit. Where migrants have paid an eligible category for five years. National Insurance contributions If they do not apply for settlement, they will qualify for contributory they must make a new application benefits, including contribution- under the PBS. based jobseeker’s allowance and incapacity benefit (now replaced 2.77 Tier 2 migrants who apply to by contributory Employment extend their stay and who have Support Allowance). Contributory a Certificate of Sponsorship to benefits are not classed as continue working in the same job public funds. for the same employer, will score 50 points. Allowances
2.78 The English language requirement 2.82 We considered allowances in our will be met, without the migrant review of Tier 2 (MAC, 2009c). having to send further evidence, We also considered separately if they were given permission to the issue of London weighting stay in the past under Tier 2 and (MAC, 2010c) but this latter report have already provided evidence did not recommend a change to that they meet the English the status quo. The Government language requirement. has not announced any proposed changes to the allowances 2.79 The maintenance requirement will system and therefore, for ease of be met without the migrant having reference, we repeat our earlier to provide further evidence, if they material on allowances here. have permission to stay in the UK under Tier 2 at the time of making 2.83 Allowances are included in the their extension application. calculation for total salary under the Tier 2 shortage occupation Supplementary work and benefits and RLMT routes when that allowance would be paid to the 2.80 All Tier 2 migrants are able to equivalent domestic worker. For undertake supplementary work, example, London weighting would without the need for the RLMT be included, while transport from or additional sponsorship. Any home country to the UK would not. such work must be in the same Other benefits, such as overtime, profession, and at the same bonus or incentive pay, travel and professional level, as their main subsistence are not included. employment. The migrant must
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2.84 Allowances included under UK Border Agency guidance the intra-company transfer for sponsors, accommodation route are more complex. Some allowances up to 40 per cent of allowances count towards the the gross salary will be taken into salary calculation that would account for short-term transfers of not be included under the other 12 months or less. In the example routes, such as daily payments to above, this means that up to cover the additional cost of living £8,000 (40 per cent of £20,000) whilst in the UK, but not including will be taken into account. expenses to cover travel between the home country and the UK. Dependants In many cases, the immigrant remains on their overseas salary 2.87 The same rules governing the for the duration of their stay in the dependants of Tier 1 migrants UK with the balance to the UK also apply to Tier 2 migrants, as appropriate going rate made up discussed in section 2.5. through cost of living allowances. There is no limit set on these 2.7 Other routes of migration allowances, with the exception of those payable in regard to the cost 2.88 There are other routes for of accommodation. migrants both within and outside the PBS, some of which can 2.85 In the case of allowances potentially impact on net Long provided solely for the purpose Term International Migration of accommodation, only those (LTIM), measured from the up to 30 per cent of the total International Passenger Survey gross salary package are taken (IPS) conducted by the Office for into account for the purposes of National Statistics. awarding points and assessing whether the salary achieves 2.89 Tier 5 is the PBS route for youth the appropriate going rate. This mobility and temporary workers. applies whether such allowances This route is for people allowed to are made available in cash or work in the UK for a limited period in kind. For example, where an of time to satisfy primarily non- applicant’s prospective salary economic objectives. Switching plus (accommodation and into another route of the PBS is other) allowances is £20,000, not allowed for most persons who the maximum accommodation are in the UK under a Tier 5 route allowance that will be taken (there is a concession for football into account is 30 per cent of players switching from Tier 5 into £20,000, which is £6,000. If the Tier 2). accommodation allowance is £6,000 or less, the UK Border 2.90 Successful applicants under Agency will take all of it into this tier must have a job offer account. If it is more than that, from a licensed sponsor, a UK Border Agency will only take valid Certificate of Sponsorship £6,000 into account. and pass the points-based assessment. There are a number 2.86 Due to the higher costs of short- of different routes under this tier term accommodation, in revised for temporary workers including
46 those coming here to work in a as the representative of overseas creative and sporting, charity or newspapers, news agencies religious context. Additionally, and broadcasting organisations. some persons are admitted Dependants may not accompany under a government authorised persons under this category and exchange scheme as well as have to apply in their own right. under international agreements. The Youth Mobility Scheme allows 2.93 The business visitor visa allows for young people from participating a visa national (nationals of countries to come and experience countries whose citizens require a life in the UK. The countries in the visa every time they come to the scheme are Australia, Canada, UK, unless they are settled here) Japan, New Zealand and Monaco. to enter the UK for a period of up to six months as a business visitor. 2.91 The types of employment Non-visa nationals (nationals of covered by Tier 5 include persons countries whose citizens do not coming to the UK to work for up require a visa every time they to 12 months as internationally come to the UK) do not require established sports people a business visitor visa to come and suitably qualified sports to the UK as a business visitor. coaches, entertainers or creative Academic visitors can stay for a artists, employees of overseas maximum of twelve months using governments and international this visa, but they must obtain a organisations and private servants business visitor visa regardless of in diplomatic households. Some their nationality if they wish to do of these can extend their stay for this. Permissible activities include: up to 24 months, namely: creative workers, religious workers, • attending meetings or persons on a government conferences; authorised exchange scheme, and persons on a Youth Mobility • arranging deals, negotiating Scheme. Workers under the or signing trade agreements international agreement category or contracts; may be able to stay for longer if they are applying as a private • undertaking fact finding servant in a diplomatic household missions provided the or as an employee of an overseas information is of benefit to a government or international branch abroad only, checking organisation. These people can details or goods; and apply to extend their stay for a maximum of 12 months at a time, • conducting site visits and up to a total of six years. promotional activities.
2.92 Permit-free employment covers 2.94 Persons using business visitor some types of work which do visas to come to the UK may not not require either a work permit switch into a route under the PBS or a Certificate of Sponsorship while they are here. Dependants under the PBS, such as work may not accompany persons as the sole representative of an under his category and have to overseas company in the UK or apply in their own right.
47 Limits on Migration
visitor for six months unless they 2.95 In our report on Tier 2 (MAC, are coming for marriage or as 2009c) we reported that we were a prospective student. Special told on several occasions that visitors are not allowed to work those using business visitor visas and may not switch into a Points would sometimes work, in breach Based System route. Dependants of the injunction that they do not may not accompany persons do so. under this category and have to apply in their own right. 2.96 Persons can come to the UK on a special visitor visa if they are 2.8 Policy and consultation coming here: on limits
• as child visitor; Policy on limits
• for private medical treatment; 2.100 The Coalition’s Programme for Government, published on 20 May • for marriage; 2010, confirmed the Government’s intention to introduce an annual • as a parent of a child at school; limit on the number of non–EU economic migrants admitted into • as a student visitor; the UK to live and work.
• as a prospective student; or 2.101 The Government’s consultation document on immigration limits, • as a visitor in transit. discussed below, stated that “Limits on non-EU economic 2.97 Special visitors can come to the migration: a consultation” stated United Kingdom for up to six that “it is the Government’s aim months unless they are a parent to reduce levels of net migration of a child at school, in which case back to the levels of the 1990s – they can stay for up to 12 months; tens of thousands, not hundreds or they are a visitor in transit, in of thousands – over the lifetime of which case they can stay for this Parliament...We recognise the 48 hours. importance to the UK economy of attracting the brightest and the 2.98 All visitors for marriage and best from around the world who prospective students need can make a real difference to permission to come to the UK, and the country’s economic growth. parents of children at school need But we should not be bringing in permission to come if they are migrants we do not need, and we visiting for more than six months. should be taking action across Persons only need permission to government and with the Devolved come as a child visitor, for private Administrations to upskill British medical treatment, as a student workers and get them into jobs visitor or as a visitor in transit if and sectors which have been they are a visa national. too reliant on migrant labour” (UK Border Agency, 2010a). The 2.99 Non-visa nationals do not need Government recognises that there permission to come as a special is a careful balance to be struck
48 and is consulting with business 3. Do respondents believe that and other interested sectors where a quarterly quota is before taking final decisions on filled applications that have not the implementation mechanisms yet been considered should for these limits and the level at be rolled over to the following which they should be set. release or not?
2.102 On 20 July 2010 the Minister 4. Should we consider raising of State for Immigration gave the minimum criteria for evidence about the immigration qualification under Tier 1 of the cap before the House of points–based system? Commons Home Affairs Committee. In his evidence he 5. Should we provide for additional stated the Government’s intention points to be scored for: to review both the family route and Tier 4 of the PBS. The Minister • higher level English said “We are looking at every language ability; route as you would expect… We are looking at the student and • skilled dependants; educational route which just in terms of sheer numbers is the • UK experience; biggest single route within the points-based system. We are • shortage skills; looking also at family reunification and rights of settlement...” • health insurance?
Government consultation on limits for Are there any other factors that Tiers 1 and 2 should be recognised through the points system? 2.103 The Government’s consultation document (UK Border Agency, 6. Do respondents agree that 2010a) was published on 28 June Tier 1 (Investors) and Tier 1 2010. The questions on which the (Entrepreneurs) should not be Government sought views were: included within the annual limit?
1. Do respondents agree 7. How do respondents believe that operating a pool for that the UK could make itself highly skilled migrants on more attractive to investors and thebasis described above entrepreneurs who have the will be the fairest and most most to offer in terms of driving effective approach? economic growth?
2. Do respondents agree that 8. Do respondents agree that operating a first come first the Intra–Company Transfer served system for skilled route should be included within migrants available to annual limits? individual sponsor employers will be the fairest and most 9. Do respondents agree that effective approach? dependants should be accounted towards the limit?
49 Limits on Migration
10. Do respondents believe that level of a limit and which asked the Shortage Occupation the following questions: and Resident Labour Market Test routes should be 1. What factors should the MAC mergedin this way? What take into account, in order to would be the advantages and inform its recommendations disadvantages of doing so? for Tiers 1 and 2 in 2011/12, Over what timescale might when assessing the impacts this change be implemented? of migration on the economy; What consideration should the provision and use of public be given to advertising services; and wider society? requirements? 2. How should the MAC measure 11. Do respondents believe that or assess these impacts? there is merit in extending sponsor responsibilities in 3. How should the MAC trade these ways? off, prioritise, and balance the economic, public service and 12. Do respondents believe that social impacts of migration? there is merit in raising the English language requirement 4. To what extent and how for Tier 2? If so to what level? quickly can alternatives to employing Tier 1 and Tier 2 13. If a supply of migrant workers migrants, including training is no longer readily available, and up-skilling of UK resident what action will you take to workers, reduce reliance on train and source labour from such migration? What can the domestic market? Government and other bodies do to facilitate this? 2.104 Some of the questions above overlap with the issues that need 5. What trends do you expect to be covered in this report. to see over the lifetime of We offer our advice freely, in this Parliament in non-PBS accordance with our view and the migration, including of British evidence we examined, but with and European Economic Area recognition that the Government (EEA) citizens? Will limits on will want to consider the results of non-EEA migration affect this? its own consultation before making Please provide reasons. a decision regarding acceptance of our suggestions. Particularly 6. The stock of main (non- closely linked to this report are dependant) migrant questions 4, 5, 8, 9, 10 and 13. workers under Tiers 1 and 2 is determined by (i) new 2.9 MAC consultation on levels migration from outside the of limits UK and (ii) extensions and switching between routes 2.105 We published a consultation by migrants within the UK. If document on 30 June 2010 MAC migration is to be reduced, do (2010b) which set out what we you most favour achieving this were thought were the key issues via cuts in (i) or (ii)? to be considered in setting the
50 7. To what extent should • What precise objective for net reductions in flows through migration, and PBS migration, Tiers 1 and 2 be met would be consistent with the through reduced migration Government’s aim to reduce of dependants? Should net migration to the tens of dependant numbers be thousands over the lifetime of reduced by proportionately this Parliament? more than those of main migrants? • What trajectory, for Tier 1 and Tier 2 migration over time, 8. What would be the likely is most desirable in order to impact on your organisation, achieve the objective? sector or local area of reducing (from 2010) the number of 2.10 International comparisons main migrants through the Tier 1 general route in 2011/12? 2.108 This section briefly sets out how limits on migration are used by 9. What would be the impact other countries, with a focus on your organisation, sector on Australia, the US, Canada, or local area of reducing the New Zealand, Singapore and number of main migrants Switzerland. It discusses the through the Tier 2 shortage, stated objectives and coverage Resident Labour Market Test, of their limits. Some of the routes and intra-company transfer discussed were covered in more routes? detail in MAC (2009c) and MAC (2009e). 10. The Government’s objective is to lower net migration overall. Australia If you are proposing small or zero reductions in migration 2.109 Australia’s migration system is through a particular tier or broadly comprised of permanent route, through which Tier 1 and and temporary components. 2 routes do you think migration Permanent components include should be reduced instead? the Skill Stream, which is designed to target migrants who 2.106 We report further on our consultation have skills, proven entrepreneurial and the evidence we received in capability or outstanding Chapter 4 of this report. abilities that will contribute to the Australian economy, and the 2.107 We stated in our consultation Family Stream, which enables document that we needed to the migration of immediate family consider the following questions, members of Australian citizens. discussed in more detail in Dependants of those entering Chapter 5; to answer the question through these streams are posed by the Government: counted as entering through that same stream. • What criteria should be taken into account when 2.110 The Skill Stream is composed of recommending a limit for Tiers three categories. The General 1 and 2, and how should those Skilled Migration category, criteria be balanced? similar to the UK’s Tier 1, allows
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individuals that are not sponsored 2.113 The original planning level for by an employer to obtain a visa 2008-09 was 190,000. In March if they gain the sufficient number 2009, in response to the changing of points for characteristics, such economic conditions, the level as age, English language and was revised to 172,000, with all recent experience. The Employer of the reduction coming from the Sponsored category, similar to Skilled Stream. The planning level the UK’s Tier 2, allows Australian for 2009-10 is set at 168,700, with employers to recruit foreign 64 per cent allocated to the workers to fill skilled vacancies in Skilled Stream. their business. The Business Skills Migration category allows suitably United States qualified business persons into Australia. 2.114 Approximately 140,000 immigrant visas per annum are available for 2.111 Until recently, additional points permanent workers with the right were available if the individual’s combination of skills, education nominated occupation (i.e. and/or work experience. Although their current occupation or an the US has no equivalent scheme occupation that the individual has to the UK’s Tier 1 General route, engaged in for several years) was there are similar schemes such on the Migration Occupations as the EB-1 route, which does not in Demand List (MODL), which require a job offer and is for those identified skilled occupations who possess extraordinary ability, in national skill shortage. The or are outstanding professors MODL has since been revoked and researchers or multinational constituting a shift in emphasis managers or executives. from the supply side (i.e. individual-led) to the demand 2.115 There are a number of routes side (i.e. employer-led) as it that are similar to the UK’s Tier makes the General Skilled 2, in the sense that a job offer is Migration route more difficult required. The EB-2 route is for to enter through, and therefore professionals holding advanced makes the Employer Sponsored degrees, or for persons with route relatively more attractive. exceptional ability in the arts, sciences or business. EB-3 is for 2.112 The Government sets the size professionals, skilled workers and and composition of the permanent other workers who must perform components by setting planning work for which qualified workers levels. The levels are set for are not available in the US. The each category of route and were EB-2 and EB-3 routes require originally considered targets to be certification that the requirements aimed for, although in December of the routes have been met. 2008 the Government stated that The H-1B route is for temporary these levels should be considered workers who wish to perform as ceilings which should not be services in a speciality occupation, exceeded. They are set annually for which a bachelor’s or higher and may be changed at any point. degree is normally required. The prospective employer must attest that they will pay the worker the
52 prevailing wages and that other visas are available for those with a employees will not be adversely job offer or those that wish to enter affected (US Department of Labor, the country to find a job. There is 2009). This route is subject to an an intermediate category for those annual limit of 65,000 visas. Each that cannot gain sufficient points of these routes requires a job to be awarded a skilled offer. The L-1A and L-1B routes migrant visa are for intra-company transferees. These routes are not subject to an 2.120 The Long Term Business Policy annual limit. route is for those wishing to establish a business in New 2.116 Family-related immigrants (other Zealand. Visas are granted initially than immediate family of US for 9 months, with a further 27 citizens which are not limited) months granted after submitted are assigned a limit of 226,000 evidence demonstrating that the per annum. Applicants for limited business has been established. routes are selected by lottery if there is a surplus of applications. 2.121 The overall target planning level in New Zealand is 45,000 per Canada annum, which again is considered a target to be met. Sixty per cent 2.117 Similar to Australia, Canada’s of the overall level is allocated to immigration program comprises the skilled/business routes; 30 per three elements, each of cent to the family routes; and 10 which is assigned an annual per cent to the humanitarian route. target planning level, which is considered to be a target to be Singapore met: economic, for which 156,600 places are allocated; family, for 2.122 In contrast to the three countries which 71,000 places are allocated; above, Singapore imposes sector- and humanitarian, for which specific ‘dependency ceilings’ for 37,400 places are allocated. some visa types which are not to be exceeded and which specify 2.118 In response to an accumulated the maximum quota of work backlog of applications, Canada visas available to a business has made changes to the relevant or organisation. legislation allowing a limit on new applications. 2.123 In Singapore, visas are allocated using a pricing mechanism: New Zealand businesses and organisations that obtain foreign worker visas pay 2.119 The skilled migrant route is for a monthly ‘foreign worker levy’ to those that gain sufficient points maintain the visa. These levies are for age, skills, experience and flexible and reflect the migrant’s other factors which activate a two skill level, and they increase with year residency visa which can be the share of migrants in extended indefinitely. The number the company. of points required can be adjusted by the Government. Temporary
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Switzerland • the relative role of in-country and out-of-country migration 2.124 European Union (EU) and through Tiers 1 and 2 in European Free Trade Association reducing overall net migration to (EFTA) citizens are subject to the UK; a limit of 15,000 workers per annum. Non-EU/EFTA citizens • the role of dependants in are subject to a limit of 4,000 per influencing net migration annum, half of which is allocated and the implications for their on a regional level, half on the inclusion or exclusion from limits federal level. Some sectors, such on Tiers 1 and 2; as public health, teaching and agriculture, are exempt from the • whether or not some or all quota system. intra-company transfers should be included in the limit for Tier 2.11 Implications 2, and the role of international trade agreements in influencing 2.125 Of all the ways by which migrants that decision; can come to the UK, this report looks in depth at only two: Tier 1 • whether the RLMT is sufficiently and Tier 2. Additionally, this report rigorous in order to prevent looks at only some of the routes employers from bringing in under these tiers: namely, Tier migrant labour when UK 1 General and Tier 2 shortage workers are available, and occupation, Resident Labour whether it can be more so; and Market Test and intra-company transfer routes. • whether the function and design of the shortage occupation route 2.126 There is a range of factors needs to change in the context that need to be considered of limits on migration. when placing limits on Tiers 1 and 2, including:
• the scope for reductions in lows through other PBS and non - PBS routes, including of students and family members;
• whether or not the current points tables for Tier 1 General and Tier 2 remain appropriate in the context of immigration limits, including in relation to each other;
54 Chapter 3 Data context
3.1 Introduction modest positive economic growth in the fourth quarter of 2009 which 3.1 This chapter provides the data has continued into 2010. The UK context to our analysis of limits on economy grew by 1.7 per cent Tiers 1 and 2 of the Points Based between the second quarter of System (PBS). First, it provides 2009 and second quarter of 2010. background on the state of the The growth between the first and UK economy and labour market. second quarter of 2010 was 1.2 Then, it presents the latest per cent. available data on the volume of international migration to and from 3.3 The recent trend of UK GDP the UK, both in terms of the stock growth reflects the state of the of resident migrants and flows global economy, which in 2008 into and out of the UK. Next, we and 2009 was in severe recession examine data for Tiers 1 and 2 following a financial crisis and loss and consider how these migration of confidence in financial markets. routes relate to estimates of The International Monetary Fund net migration. We look at the (IMF) (2010) estimates that world characteristics of migrants in the output declined by 0.6 per cent in UK and their role in the UK labour 2009, its first annual decline since market, and focus particularly on 1946. However, world output is Tiers 1 and 2, where data allow. projected to recover in 2010 with Last, we examine the volume of growth of 4.6 and 4.3 per cent migration in other countries and projected for 2010 and 2011, as make comparisons with the UK. shown in Table 3.1.
3.2 The UK economy In terms of GDP growth, the UK was one of the countries worst 3.2 From 1992 to 2007 the UK hit by the recession in the G7, experienced a sustained period of contracting in 2009 by 4.9 per cent growth in Gross Domestic Product 3.4 compared to an average of 3.2 per (GDP), averaging 2.8 per cent cent for all advanced economies. per annum. This contrasts with The UK economy is projected by the six consecutive quarters of the IMF to grow by 1.2 per cent negative growth from the second in 2010. quarter of 2008. Over this period, UK GDP contracted by 6.5 per 3.5 Short and medium-term forecasts cent (Office for National Statistics are subject to uncertainty and (ONS), 2010a). As presented are continually revised. The in Figure 3.1, the UK showed independent Office for Budget
55 Limits on Migration
Figure 3.1: One quarter and four quarter growth of real Gross Domestic Product, UK, 1974 Q2 to 2010 Q2 (provisional)
8%
6%
4%
2%
0%
Percentage growth -2%
-4% Growth on previous quarter Growth on one year ago -6% 1974 Q2 1977 Q2 1980 Q2 1983 Q2 1986 Q2 1989 Q2 1992 Q2 1995 Q2 1998 Q2 2001 Q2 2004 Q2 2007 Q2 2010 Q2
Notes: Seasonally adjusted, chained volume measure, constant 2005 prices. The 2010 Q2 figure is provisional. Source: Office for National Statistics (2010a)
Table 3.1: International Gross Domestic Product growth projections
Per cent annual growth
2009* 2010** 2011** World -0.6 4.6 4.3 Advanced economies1 -3.2 2.6 2.4 European Union -4.1 1.0 1.3 United Kingdom -4.9 1.2 2.1 United States -2.4 3.3 2.9 Japan -5.2 2.4 1.8 G7 countries France -2.5 1.4 1.6 Germany -4.9 1.4 1.6 Canada -2.5 3.6 2.8 Italy -5.0 0.9 1.1
Notes: *Outturn. **Forecast. (1) There are 33 countries in the advanced economies group which are listed in Table B in the source document. Source: International Monetary Fund (2010)
56 Responsibility (OBR) (2010) June was above the provisional forecasts that UK GDP will grow figure for the European Union by 1.3 per cent in 2010, followed (EU). The UK rate of 3.2 per cent by 2.6 per cent in 2011 and 2.6 in June compared to 1.9 per cent per cent in 2012. A selection of for the EU as a whole (Office for forecasts from leading institutions National Statistics, 2010j). The suggests that the UK economy is relationship between migration forecast to grow by 1.5 per cent and inflation is discussed in in 2010 and 2.0 per cent in 2011 Chapter 7. (HM Treasury, 2010). 3.3 The UK labour market 3.6 As set out in the June 2010 Budget, the Coalition Government 3.8 The labour market is showing intends to reduce the budget signs of recovery in the latest data deficit that escalated following the for 2010. Employment growth recession of 2008 and 2009 as and unemployment reductions an urgent priority. Public sector typically lag an upturn in GDP by net borrowing and public sector approximately a year. Historically, net debt as a percentage of GDP GDP growth in excess of 2 per have risen since 2007/2008. In the cent per annum has been needed financial year 2009/2010, public before unemployment has begun sector net borrowing was 11 per to decline substantially. cent of GDP, and public sector net debt was 54.0 per cent which 3.9 Figure 3.2 shows that the UK compares to 2.4 per cent and 36.5 working-age8 employment rate per cent respectively for 2007/8 was 70.5 per cent in the three (HM Treasury Public Finances months to May 2010. This Databank, 2010). Migration can compares with 70.9 per cent in also be a factor affecting the the same period in 2009 and 72.9 public finances, both through the per cent in 2008. The employment tax revenues it generates and the rate in the three months to services migrants consume. The March 2010 was 70.3 per cent, net fiscal impact of migration is its lowest level since 1997. The discussed in Chapter 7. employment rate in this recession has remained above its low of the 3.7 Consumer Price Index (CPI) last recession. annual inflation, the Bank of England’s target measure, was 3.1 3.10 Figure 3.3 shows that the per cent in July and August, down unemployment rate (as defined from 3.2 per cent in June. Retail by the International Labour Price Index (RPI) annual inflation Organisation (ILO)), reached was 4.7 per cent in August, a recent high of 8.0 per cent down from 4.8 per cent in July. measured by the Labour Force As an internationally comparable Survey (LFS) in the three months measure of inflation, the CPI to February 2010 and decreased shows that the UK inflation rate in slightly to 7.8 per cent in the three
8 The Office for National Statistics recently revised the definition of ‘working age’ to men and women aged 16 to 64 inclusive. The figures presented here use this new definition.
57 Limits on Migration
Figure 3.2: UK working age employment rate, Apr 1974 to May 2010
74%
72%
70%
68%
66%
64%
62% 16 and over employment rate Employment rate 60% 1996 Apr 1996 Apr 1998 Apr 2000 Apr 2002 Apr 2004 Apr 2006 Apr 2008 Apr 2010 1974 Apr 1974 Apr 1976 Apr 1978 Apr 1980 Apr 1982 Apr 1984 Apr 1986 Apr 1988 Apr 1990 Apr 1992 Apr 1994 three months to
Notes: Seasonally adjusted. The employment rates are those calculated in the three months to the date shown. The employment rate is calculated from the Labour Force Survey (LFS) and is given by the number of working-age individuals, defined as both men and women aged 16 to 64, who did at least one hour’s paid work in the week prior to their LFS interview, or who have a job that they are temporarily away from, as a proportion of the working age population. Source: Office for National Statistics (2010b)
months to May 2010. Similarly, highest rate reached during the the claimant count rate, which recent recession was 8.0 per captures Job Seekers Allowance cent in the three months to claimants, reached 5.0 per cent February 2010. towards the end of 2009, before falling slightly to 4.5 per cent in the 3.12 OBR (2010) forecasts that the ILO three months to July 2010. unemployment rate will increase to 8.4 per cent by the end of 2010, 3.11 The recent downturn has not been then decrease to 7.4 per cent in as severe as previous recessions 2011 and continue falling until in terms of employment loss, even 2014. The claimant count rate though it has been as severe started to fall earlier, at the onset in terms of GDP. In the 1980s of the recovery, and is expected to recession the unemployment rate continue falling until 2014. peaked at 11.9 per cent, and in the 1990s recession unemployment 3.13 Figure 3.4 shows that, according peaked at 10.6 per cent. The to the ONS Vacancy Survey, there
58 Figure 3.3: UK unemployment rate, Apr 1974 to May 2010 UK claimant count rate, Apr 1974 to Jul 2010
14%
12%
10%
8%
6%
4%
2% Unemployment rate
Unemployment / Claimant Count rate Claimant count rate 0% 2010 Apr 2010 2008 Apr 2008 2006 Apr 2006 2004 Apr 2004 2002 Apr 2002 2000 Apr 2000 1998 Apr 1998 1996 Apr 1996 1994 Apr 1994 1992 Apr 1992 1990 Apr 1990 1988 Apr 1988 1986 Apr 1986 1984 Apr 1984 1982 Apr 1982 1980 Apr 1980 1974 Apr 1974 Apr 1976 Apr 1978
Note: Seasonally adjusted. The unemployment rates are those calculated in the three months to the date shown. The claimant count consists of all people between the ages of 18 and State Pension age claiming Jobseeker’s Allowance at Jobcentre Plus local offices. They must declare that they are out of work, capable of, available for and actively seeking work during the week in which their claim is made. The claimant count rate is the number of claimants expressed as a percentage of the sum of claimants and workforce jobs (mid-year estimates are used).The definition of unemployment is internationally agreed and recommended by the International Labour Organisation. Individuals are defined as unemployed if they are without a job, want a job, have actively sought work in the last four weeks and are available to start work in the next two weeks; or are out of work, have found a job and are waiting to start it in the next two weeks. The unemployment rate is calculated from the LFS and is given by the proportion of the economically active population (those who are in employment or unemployment) who are unemployed. Source: Office for National Statistics (2010b)
were 481,000 job vacancies in the 3.14 As shown in Figure 3.4, there three months to July 2010. This is were 152,000 redundancies in an increase from the recent low the three months to May 2010, as of 429,000 the year before, but a measured by the LFS. This is a slight fall from 490,000 in the three significant decrease from the peak months to June 2010. This upturn of 310,000 in the three months in the recent trend is indicative of to March 2009. Redundancies a tentative recovery in the typically peak in the midst of labour market. a recession. Usually firms’
59 Limits on Migration
Figure 3.4: Total vacancies, Mar-Jun 2001 to Apr-Jul 2010 Total redundancies, Mar-Jun 2001 to Feb-May 2010
800
700
600
500
400
300
200
100 Vacancies
Number of vacancies / reduncies (000s) Redundancies 0 2001 Jun 2002 Jun 2003 Jun 2004 Jun 2005 Jun 2006 Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2001 Dec 2002 Dec 2003 Dec 2004 Dec 2005 Dec 2006 Dec 2007 Dec 2008 Dec 2009 Dec three months to
Notes: Seasonally adjusted. Total redundancies are estimated from the LFS and describe the number of people who had been made redundant or had taken voluntary redundancy in the month of the survey or in the two calendar months prior to this. Total vacancies are estimated from the monthly Vacancy Survey, which asks employers how many vacancies they have in total for which they are actively seeking recruits from outside their organisation, for example, by advertising or interviewing. The figures for both total vacancies and redundancies refer to the three-month period to the date shown. Source: Office for National Statistics (2010b)
initial response to an economic 3.15 Changes in earnings are an downturn is to cease hiring important indicator of labour workers. Then, if the downturn market pressure. Figure 3.5 continues, the number of shows the deterioration in overall redundancies increases. The fact year-on-year earnings growth, that the number of redundancies excluding bonuses, since the is now falling indicates that the end of 2008. Earnings growth, worst of the labour market shock including bonuses, fell to zero in may be over. the three months to March 2009 and grew substantially in March and April 2010.
60 Figure 3.5: Average earnings growth, Great Britain, Jun-Aug 1997 to Mar-Jun 2010
6
5
4
3
2 (three month average) 1 Including bonuses per cent change year on Excluding bonuses
0 2009 Aug 2009 2008 Aug 2008 2007 Aug 2007 2006 Aug 2006 2005 Aug 2005 2004 Aug 2004 2003 Aug 2003 2002 Aug 2002 2001 Aug 2001 2000 Aug 2000 1999 Aug 1999 1998 Aug 1998 1997 Aug 1997
three months to
Notes: Seasonally adjusted. Average earnings are calculated by dividing the total amount paid by the total number of employees paid. The growth rate is equal to average earnings over a three-month period against the same three-month period a year ago. The figures presented are for Great Britain. Source: Office for National Statistics (2010b)
3.16 Next we consider labour market in July 2009 for all occupations information split by occupation. at 1-digit SOC level, apart from In July 2010 the claimant count managers and senior officials and was lower than in July 2009 professional occupations. Here, for all occupations at the most total vacancies are limited to those aggregated (1-digit) Standard recorded at Jobcentre Plus and Occupational Classification therefore represent only a portion (SOC) level, apart from sales and of total vacancies in the UK. customer service occupations and personal service occupations, as 3.17 The number of vacancies relative shown in Figure 3.6. Less skilled to unemployment (the V/U ratio) is occupations generally have higher an additional measure of the state numbers of claimants in absolute of the labour market, also shown terms. In July 2010 the number in Figure 3.6. The V/U ratio in July of vacancies was higher than 2010 had increased compared to a year earlier for all 1-digit
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Figure 3.6: Jobcentre vacancies, claimant count and vacancies per claimant by occupation, Great Britain, July 2008, July 2009 and July 2010
Vacancies (000s) Claimant count (000s) Claimant count (000s) Vacancies (000s) 2009 0 10 20 30 40 50 0 100 200 300 400 500 2010
Managers and senior officials
Professional occupations
Associate professional and technical occupations
Administrative and secretarial occupations
Skilled trades occupations
Personal service occupations
Sales and customer service occupations
Process, plant and machine operatives
Elementary occupations
V/U Ratio
July 2008 July 2009 July 2010 Managers and senior officials 0.64 0.15 0.17 Professional occupations 0.41 0.17 0.21 Associate professional and technical occupations 1.33 0.35 0.55 Administrative and secretarial occupations 0.22 0.07 0.09 Skilled trades occupations 0.38 0.07 0.15 Personal service occupations 0.98 0.50 0.55 Sales and customer service occupations 0.33 0.14 0.17 Process, plant and machine operatives 0.49 0.10 0.33 Elementary occupations 0.25 0.08 0.12
Notes: Seasonally adjusted. Total vacancies are estimated from the monthly Vacancy Survey, which asks employers how many vacancies they have in total for which they are actively seeking recruits from outside their organisation, for example, by advertising or interviewing. The claimant count consists of all people between the ages of 18 and State Pension age claiming Jobseeker’s Allowance at Jobcentre Plus local offices. They must declare that they are out of work, capable of, available for and actively seeking work during the week in which their claim is made. The claimant count rate is the number of claimants expressed as a percentage of the sum of claimants and workforce jobs (mid-year estimates are used). Source: Nomis (2010)
62 occupations, indicating that the limited to measuring only migrant demand for employees has risen inflows, not outflows. In the relative to the supply. However, remainder of this chapter we refer the V/U ratio still remains lower to people migrating into the UK as than it was in July 2008. ‘inflows’, and those emigrating as ‘outflows’. Further details of each 3.4 Overview of migration data source are provided in data sources Box 3.1.
3.18 This section summarises the 3.21 Immigration policy only relates data sources available on to migration from outside the migration to and from the UK European Economic Area (EEA), and the key issues associated but published data from the IPS is with each of them. Broadly, there generally only available for non- are two types of data on migrant EU migration (as well as for British stocks and flows: survey-based and EU migration). Since flows to and administrative. and from Iceland, Liechtenstein, Norway and Switzerland9 are very 3.19 Survey-based sources, such small in terms of migration stocks as the International Passenger and flows, we use IPS non-EU Survey (IPS), Labour Force migration data as a proxy for Survey (LFS) and Annual flows from non-EEA countries. In Population Survey (APS), provide practice, non-EEA migration is a a number of the official national subset of total non-EU migration statistics relating to migration. and is likely to be only a very tiny These sources tend to define fraction smaller. migrants by length of stay and / or country of birth and nationality. 3.5 Net migration and They all allow analysis of population growth migration by UK, EU and non- EU nationals. However, it is not 3.22 The precise question asked by possible to identify migration the Home Secretary for the MAC through Tiers 1 and 2 of the PBS. to report on, stated in Chapter 1, referred to the Government’s aim 3.20 Administrative data, such as the of “reducing net migration to an Control of Immigration Statistics, annual level of tens of thousands National Insurance Number by the end of this Parliament”. allocations, and UK Border On 20 July 2010, the Minister of Agency management information, State for Immigration confirmed are derived from systems and to the House of Commons Home databases used by public bodies Affairs Select Committee that the to administer controls and Government’s objective to reduce services. Most administrative net migration will be measured data sources define migrants by by the IPS.10 As described in Box immigration status or nationality. 3.1, LTIM figures are based on These data allow Tier 1 and 2 the results of the IPS with certain migrants to be identified, but are adjustments made to account
9 Switzerland is not a member of the EEA but is often treated as such for the purposes of immigration policy. 10 www.publications.parliament.uk/pa/cm201011/cmselect/cmhaff/uc361-i/uc36101.htm
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Box 3.1: Data sources on migration to and from the UK
International Passenger Survey (IPS) is a survey of passengers arriving in, and departing from, the UK. Migrants can be identified according to their country of birth, nationality, intended purpose of visit, and length of stay. Approximately one in every 500 passengers travelling through UK ports is surveyed, but the migrant sample (i.e. those intending to change their usual place of residence for a year or more) is only a fraction of this. In 2008 3,216 immigrants and 1,901 emigrants were surveyed. The low sample size means that the confidence intervals around IPS estimates are significant (shown in Annex B).
Long Term International Migration (LTIM) is defined as those persons intending to change their place of residence for a year or more, which matches the UN definition of a migrant.The figures for LTIM are based on the results from the IPS with certain adjustments made to account for flows to and from the Irish Republic, asylum seekers, and migrant and visitor switchers. Results for the IPS component are available quarterly.
Labour Force Survey (LFS) is a quarterly survey of around 60,000 households. The LFS provides estimates of the stock of foreign-born individuals in the UK and their labour market status. Immigrants can be identified according to their country of birth, nationality and length of stay in the UK, but not by their immigration status. Results are available quarterly.
Annual Population Survey (APS) is an annual household survey largely based on the LFS. The APS includes additional regional samples that make it more appropriate for regional and local analysis, as well as more accurate population estimates. Results are available quarterly.
Control of Immigration statistics (COI) include the number of entry clearance visas granted by category to non-EEA nationals, the number of extensions of leave to remain in the UK, grants of settlement and citizenship and estimates of passengers admitted to the UK. It is now possible to distinguish between those granted leave under different tiers of the PBS and between main applicants and their dependants. Entry clearance visas can be used to proxy inflows of migrants, although not all individuals who are issued visas will actually come to the UK. Since immigrants may extend or change their visa more than once, in-country data on extensions are not useful proxies for flows into or out of the UK.
Management Information data (MI) are data from the PBS and the predecessor arrangements collected by the UK Border Agency but not routinely published. Some of these data have been made available to the MAC to support the analysis for this report. It is important to note that these data are neither National Statistics nor quality-assured to National Statistics standards, and are, therefore, presented for research purposes only. These data allow further examination of applications granted through Tiers 1 and 2, including details of Certificates of Sponsorship issued to employers to sponsor applicants through Tier 2.
National Insurance Number allocations (NINo) describe the volume of citizens of different nationalities gaining a National Insurance number, which is required for legal employment, to pay tax and to claim some welfare benefits. These data may be used as a proxy for inflows of some types of immigrants, both from within and outside the EEA, to the UK. Figures are published quarterly by the Department for Work and Pensions.
64 for flows to and from the Irish (the IPS component) and the Republic, asylum seekers, and adjustments made to account migrant and visitor switchers. for flows to and from the Irish Republic, asylum seekers, and 3.23 This section begins by examining migrant and visitor switchers estimates of migration inflows, (the non-IPS component). outflows and net flows measured by LTIM. Then, we consider an 3.27 The increase in net migration alternative approach to estimating between 1997 and 2004 was net migration calculated by looking largely due to an increase in at the change in the UK stock of non-EU net migration. EU net migrants over time, from the APS migration to the UK increased and LFS, and compare these between 2004 and 2008 following estimates. Finally, we consider the expansion of the EU in how net migration is likely to 2004. There was also significant affect UK population growth. British net emigration between 2002 and 2008. However, a Migration flows major contributor to the increase in overall net migration in the 3.24 Since the end of the recession of provisional 2009 figures relative the early 1990s inflows of long- to 2008 was a reduction in term migrants (defined as those British outflows. intending to change their place of residence for one year or more) have exceeded outflows, resulting in positive net migration to the UK, shown in Figure 3.7.
3.25 The provisional LTIM estimate for 2009 indicates that net migration was 196,000, an increase from 163,000 in 2008. In 2009 567,000 long-term migrants came to the UK and 371,000 left. Although net migration increased in 2009, both inflows and outflows decreased relative to 2008. The increase in net migration was driven by a relatively larger fall in outflows. These figures include British, EU and non-EU nationals.
3.26 Figure 3.7 also shows the breakdown of the provisional LTIM net migration estimates into their constituent components, namely net migration of British, EU and non-EU nationals
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Figure 3.7: Flows of long-term migrants to and from the UK and net long-term migration by citizenship, 1991 to 2009 (provisional)
Inflows, outflows and balance of long-term migrants to and from the UK, 1991 – 2009 (provisional) 700 Net Inflow 600 Outflow
500
400
300
Flows (000s) 200
100
0
-100 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Net long-term migration by citizenship, 1991 – 2009 (provisional)
400 Net British Net EU Net non-EU 300 Net non-IPS Total net migration
200
100 Flows (000s) 0
-100
-200 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Notes: Long-term migrants are defined in the International Passenger Survey as those individuals who intend to change their place of residence for a year or more. This definition includes all nationalities, including British nationals. This figure shows published figures for the calendar years 1991 to 2008 and provisional estimates for 2009. EU includes EU15, A8, Bulgaria, Romania, Malta and Cyprus. 2009 LTIM figures are provisional – non-IPS components are based on provisional TIML figures minus provisional IPS figures. Source: International Passenger Survey, 1991-2009, published in Office for National Statistics (2010c)
66 3.28 The IPS components of the LTIM he or she first came to the UK. For estimate can be broken down example, students will come to the further to examine the ‘reason for UK for the reason of formal study, migration’, shown in Figure 3.8. In but once they graduate may leave 2009, the largest inflows of long- the UK for work-related reasons, term migrants were the 163,000 and be counted in the work- students who came to the UK from related outflow. outside the EU. 55,000 long-term migrants came to the UK from 3.29 The IPS does not record the initial outside the EU for work-related reason for coming to the UK in reasons, either with a definite job the outflow data. Instead, the IPS or looking for work, compared collects information on the ‘usual to 79,000 non-EU nationals occupation prior to migration’. This who left the UK for work-related provides a better indication of the reasons. However, it is important initial reason for coming to the UK to recognise that this does not than the outflow data presented mean that net migration of non-EU in Figure 3.9. The latest data work-related migrants to the UK available on ‘usual occupation was negative. This is because the prior to migration’ in the IPS is reason a migrant leaves the UK is for 2008. In 2008 an estimated likely to differ from the reason why 52,000 non-EU nationals left the
Figure 3.8: Inflows and outflows of long-term migrants by reason for migration, 2009 (provisional)
250 Formal Study
200
Definite 150 Job 163 Accompany 100 40 Looking for or join work
15 No reason 50 56 54 Other 30 38 9 23 17 22 Flows (000s) 0 -28 -42 -25 -28 -50 -32 -40 -100 -39 Inflow British Inflow EU Inflow non-EU
-150 Outflow British Outflow EU Outflow non-EU
Notes: The figures describe the inflows and outflows of long-term migrants intending to change their place of residence for a year or more. Figures provided are in thousands. Source: International Passenger Survey, 2009, published in Office for National Statistics (2010c)
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Figure 3.9: Inflows and outflows of long-term migrants by usual occupation prior to migration, 2008
250 Prof. / Managerial 200
Manual / Students 150 Clerical 101 40 100 94 Other students 46 50 72 Children 26 40 45 14 0 18
Flows (000s) -46 -79 -34 -50
-82 -100 -33
-35 -17 -150 Inflow British Inflow EU Inflow non-EU Outflow British Outflow EU Outflow non-EU -200
Notes: The figures describe the inflows and outflows of long-term migrants intending to change their place of residence for a year or more. Figures provided are in thousands. Source: International Passenger Survey, 2008, published in Office for National Statistics (2010c)
UK who were formerly employed 3.30 Figure 3.10 examines non-EU in the UK, and 34,000 left inflows by reason for migration who were previously studying. estimated by the IPS in more However, it is still very likely that detail. Non-EU work-related some migrants will have a different migrant inflows rose from 26,000 ‘usual occupation’ when leaving in 1994 to 114,000 in 2004, the UK compared to their original before falling to 55,000 in 2009. reason for first coming. Again, one The numbers coming for family example would be a migrant who reasons (the ‘accompany / join’ initially comes to the UK to study, IPS category) rose from 33,000 but who then graduates and starts in 1994 to 74,000 in 2004, before working before leaving the UK. falling to 54,000 in 2009. Non-EU This may explain the particularly student inflows rose from 30,000 low non-EU outflow figures to 110,000 between 1994 and for those who were previously 2004. However, in contrast to the studying relative to the volume of work and family routes, student inflows of non-EU students. We inflows continued to rise from discuss this issue in more detail in 2004, reaching 163,000 in 2009. Annex B.
68 Figure 3.10: Inflows of non-EU long-term migrants by reason for migration measured by the International Passenger Survey (IPS), 1991 to 2009
180 Non-EU Work-related 160 non-EU Looking for work 140 non-EU Definite job non-EU Formal study 120 non-EU Accompany / join 100 non-EU Other 80 non-EU No reason 60
IPS Non-EU Inflows (000s) 40
20
0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Notes: The figures describe inflows of non-EU long-term migrants intending to change their place of residence for a year or more. Figures for 2009 are provisional. The non-EU ‘work-related’ category is the sum of the non-EU ‘definite job’ and ‘looking for work’ categories. Source: International Passenger Survey, 1991-2009, published in Office for National Statistics (2010c)
Alternative estimate of net migration equates to around 12 per cent of the UK population. Similarly, 3.31 The stock of migrants resident in the stock of non-EEA born has the UK can be estimated each increased from 2.5 million in the quarter from the LFS and each first quarter of 2009 to 4.7 million year by the APS. Figure 3.11 in the first quarter of 2010, 8 per shows the proportion of the UK cent of the UK population. population that are non-UK and non-EEA born from the first quarter 3.32 The latest annual data from the of 1994 to the second quarter of APS for 2009 confirms the LFS 2010, measured by the LFS. The estimates, and similarly shows stock of non-UK born measured that the stock of non-UK born was in the LFS has increased from 3.8 6.9 million (13 per cent of the UK million in the first quarter of 1994 population) and non-EEA born to 7.0 million in the second quarter 4.7 million (9 per cent of the of 2010. The most recent figure UK population).11
11 The figures for the stock of non-UK born and non-EEA born differ slightly between the LFS and APS. This is likely to be a result of the differences in methodology employed by each survey.
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Figure 3.11: Proportion of the UK population born outside the UK and outside the European Economic Area (EEA), 1994 Q1 to 2010 Q2
14% non-UK
12% non-EEA
10%
8%
6%
4%
Proportion of the population 2%
0% 1994 Q1 1995 Q1 1996 Q1 1997 Q1 1998 Q1 1999 Q1 2000 Q1 2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1
Year ending
Notes: Estimates are based on the number of foreign-born individuals of all ages in the quarterly Labour Force Survey as a proportion of the total population. Source: MAC analysis of the Labour Force Survey, 1994 Q1 to 2010 Q2
3.33 The APS and LFS can also be average over the four quarters in used to estimate net migration each year. by examining the change in the stock of the migrant population 3.34 Using the LFS measure, net over time. This should represent migration of non-British and non- the difference between inflows EEA nationals has been volatile and outflows of migrants to the over time. Net migration of non- UK. Figure 3.12 examines the British nationals has broadly change in stock of non-British and increased since the mid-1990s non-EEA nationals over time and and peaked in 2007. Net migration compares this with LTIM and IPS of non-EEA nationals was broadly estimates of net migration. We positive between 2000 and 2008. define migrants in the APS and However, in 2009, net migration LFS by nationality, rather than by of non-EEA nationals estimated country of birth, in order to best by the LFS was negative. The compare with the LTIM estimates, trend in the APS measure of net which also define migrants by migration has been similar to nationality. The annual LFS that measured by the LFS since estimates are calculated as the 2004 (data are only available from
70 Figure 3.12: Comparison of net migration estimates from the Labour Force Survey, Annual Population Survey and International Passenger Survey, 1995 to 2009 Labour Force Survey, Annual Population Survey and International Passenger Survey Estimates of Net non-EU/non-EEA Migration Labour Force Survey, Annual Population Survey and 300 International Passenger Survey Estimates of Net non-EU/non-EEA Migration
250 LFS, non-EEA nationals, all ages 200 APS, non-EEA net migration, 150 all ages
LTIM, non-EU migration (000s) 100 net migration Change in stock / net
50 IPS, non-EU net migration 0
-50 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Year
Labour Force Survey, Annual Population Survey and 500 International Passenger Survey Estimates of Net non-British Migration
400 LFS, non-EEA nationals, all ages 300 APS, non-EEA net migration, all ages 200 LTIM, non-EU net migration 100
IPS, non-EU net migration 0 Change in stock / net migration (000s)
-100 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Year
Notes: Labour Force Survey (LFS) and Annual Population Survey (APS) estimates are calculated by examining the change in the average annual estimate of the stock of foreign nationals using the quarterly LFS. LFS estimates from 2006 Q3 onwards use the latest 2009 population weights. Long Term International Migration (LTIM) estimates are not available by nationality for 2009. However, the provisional International Passenger Survey (IPS) components of the LTIM estimates are available broken down by nationality; these figures are provisional. The IPS estimates do not contain any adjustments made for migration flows to and from the Irish Republic, asylum seekers, or migrant and visitor switchers. Source: MAC analysis of the Labour Force Survey 1994 to 2009; MAC analysis of the Annual Population Survey, 2004 to 2009, published in Office for National Statistics (2010d); International Passenger Survey, 1995 to 2009, published in Office for National Statistics (2010c)
71 Limits on Migration
2004) for both non-British and reasons why the IPS is producing non-EEA nationals. In 2009, net different estimates to the APS migration of non-EEA nationals and LFS. These are discussed in estimated by the APS also more detail in the ONS report on decreased from the previous year, Estimating International Migration although it remained positive. (Office for National Statistics, 2009a), and include: 3.35 The IPS estimates that net migration to the UK by non-EU • The IPS defines migrants as nationals in the most recent people either coming to the provisional data for 2009 was UK or leaving the UK for more 184,000. Over the same period than a year. The APS and LFS the APS estimates that net estimates include temporary migration from non-EEA nationals migrants coming to the UK for was 53,000 and the LFS estimates less than a year.12 -23,000. However, this is not the first period where these series • The APS and LFS do not sample have produced very different international students living results, as shown in Figure 3.12. in communal establishments, The quarterly LFS data (calculated which includes halls of as change on one year ago) also residence, unless at least one show considerable volatility, with parent is resident in a private net non-EEA migration (by the household in the UK. Students above measure) varying between make up the most significant 66,000 in the first quarter of 2009 proportion of non-EU inflows, in and -93,000 in the third quarter both the IPS and the proportion of 2009, for instance. Latest of non-visitor visas issued, and quarterly LFS data show modest therefore are likely to cause a positive net migration in the first significant disparity between the two quarters of 2010. IPS and APS / LFS. The 2001 census identified that 14 per Comparing estimates of net migration cent of all recent international migrants (defined as those 3.36 The available data sources that living outside the UK the year can be used to estimate the before) were resident in halls of scale of net migration to the UK, residence or other communal namely the IPS, the APS and establishments (Office for the LFS, suggest different trends National Statistics, 2009a). in net migration to the UK over time. The IPS is a sample of net • The APS and LFS are also migration flows, whereas the APS likely to under-represent asylum and LFS are samples of the stock seekers living in the UK. They of migrants which can be used to will be included in the survey estimate the implied net migration if living in a private residence, flows. There are a number of although they may be reluctant
12 The APS and LFS define migrants by nationality (or country of birth) and, until January 2008, only included those who had been in the UK for at least six months. This restriction was removed in January 2008 and the ONS estimates that this has not made any difference to the figures produced (Office for National Statistics, 2009a).
72 to participate, but will not be to 13 per cent of the population, included if living in a communal is still relatively small, meaning establishment. The IPS may that the sampling error could capture a few asylum flows in the be quite considerable. This is main sample, but adjustments improved in the APS, which are made by the LTIM component uses quarterly LFS estimates to capture these flows. and local area sample boosts to produce an annual estimate. • As a survey, the IPS relies heavily on the self-reporting of • There may also be ‘non- people’s true intentions. For response’ issues that differ example, someone coming to across both surveys. For the UK may initially intend to example, the APS / LFS come to the UK for less than a weighting system does not year but end up staying longer take into account differences and vice versa. Similarly, those between migrant and non- leaving the UK may wish to migrant response rates. return within a year but never actually do so. The ONS makes • Finally, births and deaths in the adjustments in the final LTIM foreign national population will figures produced to account for be included in the net migration these changes in behaviour but estimates generated from the may not capture their full extent. APS and LFS. This does not affect LTIM net migration, which • There is significant sampling error covers flows of people to and in the IPS due to the relatively from the UK. small sample size. In 2008, the main IPS sample contained over 3.37 Net migration can also be 230,000 interviews, of which estimated from the UK population 5,117 were migrants. In Annex census by examining the B we estimate that the 95 per change in the composition of cent confidence bands around the population. The census is the 2009 LTIM estimate of net conducted every decade and migration are of the order of +/- informs the population weights 38,000. This means that the in the LFS. The last census was true estimate of LTIM net conducted in 2001. The next one migration is likely to lie between will be conducted in 2011. 158,000 and 234,000 with a 95 per cent probability. 3.38 A key finding from the 2001 census was that the UK had 800,000 • Similarly, the LFS is also a fewer young males than had been sample survey and will contain estimated from birth, deaths and sampling error. The sample size LTIM net migration. The most for the APS and LFS is larger significant factor identified by than for the IPS. The proportion the ONS was how it measured of migrants in the population, emigration from the UK.13 The IPS although standing at around 12 captures travellers’ intentions at
13 Implications of the 2001 Census Results, ONS, http://www.statistics.gov.uk/census2001/implications.asp
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the time of departure, which are The principal projection produced prone to change once people are by the ONS assumes long-term abroad, particularly among young annual net migration to the UK males, perhaps due to the fact that of 180,000. This comprises a they have fewer ties at home. The net outflow of approximately ONS estimates that between 1991 120,000 British citizens, a net and 2001, net migration measured inflow of approximately 280,000 by LTIM was overestimated by non-British citizens, and an 346,000.14 The ONS has since adjustment to the IPS data (that updated its methodology for the takes into account migrant and IPS and revised past estimates visitor switchers, asylum seekers of LTIM net migration, but there and flows to and from the Irish is no guarantee that other Republic) that results in a further imperfections in the methodology net inflow of approximately 25,000 have not developed. individuals.16 In its evidence to the Cross-Whitehall Migration 3.39 Comparing net migration Analysts Group the ONS said estimates with the results that, according to this principal from the census will be key to projection, the UK population understanding the true extent would increase from an estimated of migration to and from the 61.8 million in mid-2009 to 72.3 UK between 2001 and 2011. It million in 2035. will also help illuminate the key differences between the LTIM, 3.42 The ONS has also produced APS and LFS measures, as well variant population projections as their respective reliability. The for the UK (Office for National provisional results for the 2011 Statistics, 2010e). These include census are likely to be population projections that published in 2013. assume the same future levels of fertility and mortality as the Net migration and population growth ONS’ principal projection but make varying assumptions about 3.40 The ONS produces UK population future levels of net migration. projections based on assumptions The effects of these variants on about future levels of fertility, the UK population are illustrated mortality and net migration. in Figure 3.13. By 2035 the The assumed level of future population would rise to 69.5 net migration is produced by million with annual net migration projecting forward IPS time- of 100,000, and 64.7 million if series data.15 annual net migration were zero. With annual net migration of 3.41 The ONS population projections 50,000, which is the mid-point of comprise estimates for British the Government’s desired range and non-British net migration. for overall net migration in the tens
14 Methodology for Revised International Migration Estimates 1992-2001, http://www.statistics.gov.uk/ downloads/theme_population/Methodology%20for_Revised_International_Migration_Estimates.doc 15 For full details of how the population projections were produced, please see http://www.statistics.gov.uk/ downloads/theme_population/pp2no27.pdf 16 These figures are rounded to the nearest 5,000.
74 Figure 3.13: UK population projections between 2010 and 2035 according to various assumptions of the annual level of net migration
74 net migration assumptions 180,000 72 120,000 100,000 80,000 70 60,000 50,000 40,000 68 20,000 zero net migration 66
64
UK population projection (millions) 62
60 2010 2015 2020 2025 2030 2035
Year
Note: The Office for National Statistics population projections are produced using long-term assumptions for annual net migration from mid-2014 onwards. They allow for annual changes in the level of net migration between 2008 and 2014. Source: Office for National Statistics (2010e)
of thousands, the UK population who were granted leave to enter is projected to rise to 67.8 million or remain under these routes. At by 2035. Therefore, with annual the end of this section we also net migration of 50,000, the UK briefly present the latest data on population is projected to rise by other Points Based System (PBS) 4.5 million fewer people between migration, including Tier 5 and 2009 and 2035, than under the permit-free employment and Tier ONS’s principal projection. 4 student migration. We present available data on the role of Tier 3.6 Tier 1 and Tier 2 context 1 and 2 migrants in the labour market in section 3.7. 3.43 This section presents the latest data available relating to Tiers 1 3.44 The UK Border Agency does and 2. We use published Control not currently publish the points of Immigration statistics to scored by Tier 1 or Tier 2 examine the composition of flows applicants. As recommended in through the different routes within our reviews of Tier 1 and Tier Tiers 1 and 2. Where data allow, 2 in 2009 (MAC (2009e), MAC we also present information on the (2009c)) we strongly urge the main characteristics of migrants UK Border Agency to put robust
75 Limits on Migration
recording procedures in place Routes to be able to report on the points scored by individuals 3.45 Figure 3.14 provides an overview applying through these routes. of the share of total entry We recognise the efforts being clearance visas issued for out- made by the UK Border Agency of-country applicants under Tiers to improve the collection and 1 and 2. This figure does not reporting of these data. include inflows of asylum seekers Without complete data it is and refugees. In 2009 Tier 1 more difficult to examine the and its predecessor route, the skills and characteristics of Highly Skilled Migrant Programme migrants coming through these (HSMP), made up only 4 per cent routes in order to inform any of total visas issued. Tier 2 and policy recommendations. its predecessor, the work permit
Figure 3.14: Out-of-country entry clearance visas for main applicants for Tiers 1, 2, 4, 5, family and settlement, 2009
Tier 5 and permit free employment 13%
Tier 4 (and Family and students) settlement 64% 11%
Tier 1 (and the HSMP) 4% Tier 2 (and work permits) 8%
Notes: Tier 1 includes the remaining visas issued under the Highly Skilled Migrant Programme (HSMP), which closed in 2008. This figure does not include any visas for the predecessor routes to the Tier 1 Post-Study Work Route, which include the International Graduate Scheme (IGS) and Science and Engineering Graduate Scheme (SEGS). Tier 2 includes the remaining visas issued under the work permit system, which also closed in 2008. Tier 4 includes visas issued under the predecessor student route, but does not include student visitors. Tier 5 and permit-free employment includes working holiday makers. Family includes spouses, civil partners and fiancés. Source: MAC analysis of the Home Office Control of Immigration statistics (2010)
76 route, comprised only 8 per cent of visas issued. Tier 4 students made up by far the largest share of entry clearance visas issued with 64 per cent of the total.
3.46 Figure 3.15 provides a breakdown, by route, of the total number of out-of-country entry clearance visas issued through Tiers 1 and 2 and their predecessor routes in 2009. The data show that 18,780 visas for Tier 1 and the HSMP were issued in 2009, compared to 36,380 for Tier 2 and work permits. Tier 1 General made up the largest component of Tier 1 with 13,930 visas, 74 per cent of the total. The Tier 2 intra-company transfer route made up the largest component of Tier 2 with 22,030 visas, 60 per cent of the total.
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Figure 3.15: Quarterly out-of-country entry clearance visas issued for main applicants for Tiers 1 and 2, 2007 Q1 to 2010 Q2
Tier 1 and predecessor routes
9,000 30 Jun, T1 8,000 worldwide launch
7,000
6,000
5,000
4,000 Tier 1 - Post Study
3,000 Tier 1 - Entrepreneurs Entry Clearance Visas issued Entry Clearance Visas Tier 1 - Investors 2,000 Tier 1 - General 1,000 Pre-PBS - HSMP 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2007 2008 2009 2010
Tier 2 and predecessor routes
20,000 27 Nov, T2 18,000 worldwide launch
16,000
14,000
12,000 Tier 2 - Elite Sports people 10,000 Tier 2 - Ministers of 8,000 Religion
Tier 2 - Intra 6,000 Company Transfers Entry Clearance Visas issued Entry Clearance Visas 4,000 Tier 2 - General (RLMT and Shortage)
2,000 Pre-PBS - Work permit holders 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2007 2008 2009 2010
Notes: Tier 1 was launched in-country on 29 February 2008 and out-of-country for India only on 1 April 2008. The worldwide launch was on 30 June 2008. The Highly Skilled Migrant Program (HSMP) was the predecessor route to Tier 1 General. Data are not presented for the predecessor routes to the Tier 1 Post- Study Work Route, which include the International Graduate Scheme (IGS) and Science and Engineering Graduate Scheme (SEGS). Further information on these routes can be found in MAC (2009c). Tier 2 was launched on 27 November 2008. The work permit system was the predecessor to Tier 2. Tier 2 General includes the Resident Labour Market Test (RLMT) and shortage routes. Operational procedures before and after the introduction of the Points Based System (PBS) were different, which may potentially distort any ‘before-and-after’ comparisons. In particular, migrants would previously have had to apply first under the HSMP or for a work permit and then for a visa, whereas in the PBS these processes take place at the same time. Source: MAC analysis of Home Office Control of Immigration statistics (2010)
78 Out-of-country and in-country applications for main applicants through Tiers 1 and 2 in 2009. As 3.47 While EEA nationals are subject shown, 78 per cent of Tier 1 (and to no restrictions regarding the its predecessor route) grants were length of time they are allowed in-country compared to 43 per to reside in the UK, non-EEA cent for Tier 2 (and its predecessor nationals are limited by the length route). The vast majority of Tier 1 of the visa issued to them. Under Post-Study Work Route (PSWR) some visa categories it is possible grants were in-country, as this for individuals to apply in-country route is typically made up of to extend their leave to remain or graduates who previously studied switch to another visa category. in the UK with a Tier 4 or Table 3.2 shows the number of out- student visa. of-country and in-country granted
Table 3.2: Granted main applications for Tiers 1 and 2 and their predecessor routes, 2009
Percentage Out-of-country In-country in-country HSMP 335 31,485 69 Tier 1 - General 13,930 Tier 1 - Investors 155 235 46 Tier 1 - Entrepreneurs 120 Tier 1 – Post-Study 4,245 34,180 89 Total Tier 1 and HSMP 18,780 65,900 78 Work permit holders 5,160 7,285 59 Tier 2 - General (RLMT and Shortage) 8,555 12,900 60 Tier 2 - Intra-company transfers 22,030 6,625 23 Tier 2 - Ministers of religion 370 610 49 Tier 2 - Elite sports people 265 Total Tier 2 and Work Permits 36,380 27,420 43 Grand Total 55,165 93,320 63
Notes: The figures for in-country are grants of leave to remain in the UK, including extensions and those switching visa categories. The Highly Skilled Migrant Program (HSMP) was the predecessor route to Tier 1 General. Data are not presented for the predecessor routes to the Tier 1 Post-Study Work Route, which include the International Graduate Scheme (IGS) and Science and Engineering Graduate Scheme (SEGS). Further information on these routes can be found in MAC (2009c). Tier 2 was launched in 2008. The work permit system was the predecessor to Tier 2. Tier 2 General includes the Resident Labour Market Test (RLMT) and shortage routes. There are also additional pre-PBS routes for out-of-country and in-country applicants which are not included in this table, such as other employment (leading to settlement), and ministers of religion / missionary, which made up a small number of flows in 2009. Source: Home Office Control of Immigration statistics (2010)
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Dependants Tier 1 were accompanied by approximately 8 dependants. This 3.48 Table 3.3 presents the number ratio was 10 to 4 for in-country of out-of-country and in-country migrants. In the same year every dependants accompanying main 10 main out-of-country applicants applicants through Tiers 1 and 2 through Tier 2 were accompanied and their predecessor routes. In by, on average, approximately 7 2009, on average, every 10 main dependants. This ratio was 10 to out-of-country applicants through 8 for in-country migrants. These
Table 3.3: Granted dependant applications for Tiers 1 and 2 and their predecessor routes, 2009
Out-of-country In-country
Ratio of Ratio of dependants dependants to main to main Dependants applicants Dependants applicants
HSMP 1,680 0.8 22,405 0.7 Tier 1 - General 10,385 Tier 1 - Investors 280 1.8 365 1.6 Tier 1 - Entrepreneurs 180 1.5 Tier 1 – Post-Study 2,480 0.6 5,515 0.2 Total Tier 1 and HSMP 15,105 0.8 28,285 0.4 Work permit holders 11,485 2.2 (1) 7,150 1.0 Tier 2 - General (RLMT 9,285 0.7 and Shortage) Tier 2 - Intra-company transfers 5,715 0.9 15,505 0.5 Tier 2 - Ministers of religion 530 0.9 Tier 2 - Elite sports people Total Tier 2 and Work Permits 26,990 0.7 22,680 0.8
Notes: In-country grants are grants of leave to remain in the UK, including extensions and those switching visa categories. The Highly Skilled Migrant Program (HSMP) was the predecessor route to Tier 1 General. Data are not presented for the predecessor routes to the Tier 1 Post-Study Work Route, which include the International Graduate Scheme (IGS) and Science and Engineering Graduate Scheme (SEGS). Further information on these routes can be found in MAC (2009c). Tier 2 was launched in 2008. The work permit system was the predecessor to Tier 2. Tier 2 General includes the Resident Labour Market Test (RLMT) and shortage routes. There are also additional pre-PBS routes for out-of-country and in-country applicants which are not included in this table, such as other employment (leading to settlement), and ministers of religion / missionary, which made up a small number of flows in 2009. (1) The work permit scheme ended in 2009. Dependants are likely to lag behind main applicants and since there were more dependants in 2009 than there were main applicants for this route, the ratio is high. Source: Home Office Control of Immigration statistics (2010)
80 simple ratios do not account for Age and sex the fact that many dependants may be following previous cohorts 3.50 Figure 3.16 shows the distribution of main applicants. For example, of ages for granted main a dependant may have entered applicants and adult and child the UK in 2009 because of their dependants for Tiers 1 and 2. relationship to a main applicant The median age for a Tier 1 main who entered the UK in 2007. migrant was 28 (including those on the PSWR) compared to 30 Settlement for a Tier 2 migrant. The median age for adult dependants was 29 3.49 After a certain length of time for Tier 1 (again including those migrants may be eligible to apply on the PSWR) and 31 for Tier 2. for settlement or indefinite leave 62 per cent of child dependants to remain in the UK. Table 3.4 of Tier 1 and 2 migrants were shows the number of grants of aged five or under. To enable settlement for main applicants comparison, Figure 3.5 also and dependants for employment- presents the proportion of the related routes. In 2009 there were UK population by age, estimated 34,275 grants of settlement to using the LFS. The median age in main applicants for employment- the UK population is 38, therefore, related routes and 46,910 grants the average Tier 1 and Tier 2 of settlement for employment- main applicant is younger than related dependants. the average person in the UK population.
Table 3.4: Grants of employment-related settlement, 2007 to 2009
2007 (1) 2008 2009 Main applicants 17,705 27,430 34,275 Dependants 19,495 33,340 46,910
Notes: (1) In April 2006 the qualifying period for settlement in all employment-related categories changed from four to five years, thus delaying grants of settlement that would otherwise have occurred earlier. This is likely to have led to lower grants of settlement in 2007. Source: Home Office Control of Immigration statistics (2010)
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Figure 3.16: Age breakdown of granted Tier 1 and 2 main migrants and their dependants, 2009 Q1 to 2010 Q1
7% Tier 1 main applicants
6% Tier 1 child dependants Tier 1 adult dependants 5% UK population
4%
3% Percentage of total 2%
1%
0% 0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69
Age 7%
6% Tier 2 main applicants
Tier 2 child dependants 5% Tier 2 adult dependants
4% UK Population
3% Percentage of total 2%
1%
0% 0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 Age
Notes: The chart shows the distribution of ages for granted main applicants and adult and child dependants. The percentages are calculated as the proportion of the total for each tier. For example, the proportion of Tier 1 adult dependants by age is the proportion of the total of granted main applicants, child and adult dependants for Tier 1. The proportion of the UK population by age is calculated as the proportion of the total UK population. Source: UK Border Agency Management Information, 2009 Q1 to 2010 Q1; MAC analysis of the Labour Force Survey 2009 Q3 to 2010 Q2
82 Table 3.5: Percentage of Tier 1 and 2 main applicants and dependants by sex, 2009 Q1 to 2010 Q1
Tier 1 (per cent) Tier 2 (per cent)
Main Dependants Main Dependants Male (adults) 68 10 70 11 Female (adults) 32 47 30 41 Children - 44 - 48 Total 100 100 100 100
Note: Children are unable to apply as main applicants through Tiers 1 and 2. Source: UK Border Agency Management Information, 2009 Q1 to 2010 Q1
3.51 Table 3.5 presents a breakdown of granted applications for Tiers main applicants and dependants 1 and 2. 41 per cent of Tier 1 by sex. For both Tiers 1 and General, 68 per cent of Tier 2 around 70 per cent of main 2 intra-company transfer and applicants and 10 per cent of 24 per cent of Tier 2 General dependants were male. 44 per granted applications were for cent of Tier 1 dependants and Indian nationals. Migrants from 48 per cent of Tier 2 dependants China, Pakistan and the US were children. are also strongly represented across Tiers 1 and 2. Nigerian Nationality nationals make up a significant proportion of approved 3.52 Table 3.6 shows the top 10 applications for Tier 1 General nationalities admitted under each and the PSWR. Russian route within Tier 1 and Tier 2. and Chinese nationals are Indian nationals make up by far particularly prevalent in the the largest proportion of total Tier 1 Investor route.
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Table 3.6: Top 10 migrant nationalities of approved applications through Tiers 1 and 2, 2009 Q1 to 2010 Q1
Top nationalities for Tier 1 approvals (per cent of total)
Tier 1 General Post-Study Work Route Investor Entrepreneur India (41) India (31) Russia (38) United States (18) Pakistan (13) China (16) China (12) India (12) Nigeria (9) Pakistan (15) United States (7) Pakistan (12) Australia (6) Nigeria (10) Kazakhstan (5) China (8) China (4) Bangladesh (4) Pakistan (4) Australia (8) United States (4) Sri Lanka (3) India (3) Nigeria (4) Sri Lanka (3) United States (3) Iraq (3) Russia (4) New Zealand (2) Ghana (1) Australia (3) Tanzania (3) South Africa (2) Iran (1) Azerbaijan (3) Israel (3) Bangladesh (2) Russia (1) Egypt (2) Japan (3)
Top nationalities for Tier 2 approvals (per cent of total)
Intra-company General (1) Other (2) Dependants (3) transfer India (68) India (24) United States (27) India (45) United States (13) United States (9) India (16) United States (13) Japan (5) China (8) Nigeria (7) Japan (5) Australia (2) Philippines (6) Australia (7) Philippines (4) Canada (2) Australia (6) Canada (6) Pakistan (3) China (1) South Africa (5) South Africa (5) China (3) South Africa (1) Pakistan (5) Pakistan (3) Australia (2) Russia (1) Canada (3) Ghana (3) Nigeria (2) Brazil (1) Nigeria (3) Brazil (2) Zimbabwe (2) Pakistan (<1) Zimbabwe (3) New Zealand (2) South Africa (2)
Notes: (1) Tier 2 General includes migrants through the Resident Labour Market Test and shortage routes. (2) Tier 2 Other includes migrants from the ministers of religion and elite sportspeople routes. (3) Tier 2 Dependants includes dependants of main migrants through all Tier 2 routes. In the data available it is not possible to separate Tier 2 dependants by route. The figures for Tier 1 include both main applicants and their dependants. Source: UK Border Agency Management Information, 2009 Q1 to 2010 Q1
84 Other Points Based System (PBS) UK to work. Tier 5 and permit- migration free employment, described in Chapter 2, make up a significant 3.53 As identified in the LTIM estimates proportion of work-related visas, of net migration, students make up also shown in Table 3.7. Tier 5 the largest component of non-EU and permit-free employment are inflows. Similarly, student visas, temporary routes and cannot lead (now Tier 4 of the PBS), make up to settlement, although applicants the largest number of non-visitor, under some routes within Tier 5 out-of-country entry clearance can extend their leave to remain visas issued. Table 3.7 presents in the UK (Chapter 2 provides a the number of visas issued under more detailed description of these Tier 4 and its predecessor routes routes). Individuals are not eligible for both main applicants and their to switch from Tier 5 or permit- dependants. In 2009 273,000 free employment to other visa student visas (excluding student categories once in the UK. In visitors) were issued to main 2009 Tier 5 and permit-free applicants and 30,000 to student employment made up 51 per dependants. cent of work-related visas issued to non-EEA nationals (49 per 3.54 Tier 1 and Tier 2 are not the only cent were Tiers 1 and 2 and their routes through which non-EEA predecessor routes). nationals are able to come to the
Table 3.7: Out-of-country entry clearance visas for Tier 4 and students, Tier 5 and permit-free employment, 2007 to 2009
2007 2008 2009
Tier 4 & students Main applicants 223,545 208,800 273,435 Dependants 19,295 24,200 30,170 Tier 5 Main applicants * 380 31,105 Dependants * * 755 Permit-free Main applicants 51,150 44,295 21,395 employment Dependants 21,740 20,660 7,015
Note: Tier 4 and students does not include figures relating to student visitors. (*) Tier 5 of the Points Based System was launched in 2008. The figures presented in this table do not include migrants entering the UK through the ‘working holidaymakers’ route, which was closed in 2008 and replaced by Tier 5. Source: Home Office Control of Immigration statistics (2010)
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Temporary and permanent migration that still have valid leave to remain after five years. The dataset is not 3.55 Outflows measured by the IPS only a rich source of information comprise people who were either to understand migrant lengths of born in the UK or who have stay, but also to understand the previously migrated to the UK. extent to which migrants switch The composition of inflows will between different migration routes. therefore affect future outflows. The data are unable to capture Since outflows make up an whether or not an individual has important component of net actually left the UK, but are a migration estimates, it is important reasonable proxy for migrants’ to understand the extent to which duration of stay in the UK. flows through Tiers 1 and 2 are Nonetheless, there will be cases temporary or permanent. where migrants overstay their legal entitlement in the UK and 3.56 The latest research on the length others where they leave before of time migrants stay in the UK is their entitlement expires. This the UK Border Agency research study examines the entry cohort of report on The Migrant Journey migrants in 2004; the behaviour of (UK Border Agency, 2010b). This migrants coming to the UK in later analysis tracks migrants through years may be different. UK Border Agency administration databases, linking data on entry 3.57 Table 3.8 presents the estimates clearance visas issued to enter from UK Border Agency (2010b) the UK with subsequent grants of of the proportion of migrants leave to remain and settlement. who entered the UK with a valid The analysis uses data for the visa in 2004 and who still had cohort of migrants that entered in valid leave to remain, or had 2004 and analyses the proportion been granted settlement in 2009.
Table 3.8: Estimates of the percentage of migrants who entered the UK in 2004 and who still had valid leave to remain in 2009 Category entering the UK in 2004 Percentage of migrants in 2004 cohort with valid leave to remain in the UK in 2009 Work (citz) 40 Work (non-citz) 11 Study 21 Family 63
Notes: Work (citz) refers to work-related visas issued in 2004 that could lead to citizenship, in other words the predecessor routes to Tiers 1 and 2. Work (non-citz) refers to work-related visas in 2004 that could not lead to citizenship, in other words routes equivalent to Tier 5 and permit-free employment routes. Study refers to the predecessor route to Tier 4. Family refers to family reunion visas. Source: UK Border Agency (2010b).
86 There were several changes to • understanding the relationship visa categories over this time, so between past inflows and the authors group the types of current outflows (or current visa into broad categories. Work inflows and future outflows). (citz) refers to work-related visas that can lead to settlement and 3.60 Regarding the first issue, British citizenship, including Tiers unfortunately neither the IPS nor 1 and 2. Work (non-citz) refers the LFS record migrant status or to work-related visas that cannot the visa category through which lead to settlement or citizenship, a migrant has entered the UK. including Tier 5 and permit-free Therefore, it is not possible to employment. As shown, 40 per identify exactly how Tier 1 and cent of those initially entering Tier 2 migrants feature in those under the work (citz) category still estimates of net migration. had valid leave to remain after five years. 3.61 As presented earlier in this section, in 2009 55,000 main Tiers 1 and 2 and net migration out-of-country visas were issued for Tiers 1 and 2 (and 3.58 The objective of reducing net their predecessor routes) and migration to the tens of thousands 58,000 were issued for Tier 5 over the course of this Parliament, and permit-free employment (and set out in the question asked to their predecessor routes). Work- us by the Home Secretary, refers related visas through these routes, to LTIM estimates of net migration therefore, total approximately and will thus be measured by this 113,000. Most migrants coming metric. However, the lever that the to the UK with these visas are Government can use to control likely to be recorded in the non-EU inflows relevant to this review is work-related inflows by the IPS. the number of Tier 1 and 2 visas However, in 2009 non-EU work- and grants of extensions of leave related inflows were 55,000. to remain. 3.62 The definition of a migrant in 3.59 An important question for this the IPS is someone moving review is the extent to which between countries for a year or changes in the number of visas more. The IPS is also a sample issued for Tiers 1 and 2 relate to survey of travellers coming to estimates of net migration. There and going from the UK, and as are two key issues that need to such is susceptible to a degree be addressed when tackling this of sampling error (presented question. Both are discussed in Annex B). Furthermore, not in further detail in Annex B and everyone with a valid visa will Chapter 6, but we introduce them eventually come to the UK. here. They are: Therefore, there will always be a degree of discrepancy between • reconciling different measures the number of visas issued and of work-related inflows; and the inflows measured by the IPS.
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3.63 Regarding the second issue, any 3.66 The LFS does not record migrant policy that seeks to change the status or the type of visa issued. level of inflows under Tiers 1 and However, a new question is 2 in one period is then likely to currently being trialled by the ONS affect outflows in the longer term. which asks respondents their The impact on outflows from any main reason for coming to the change in inflows will be lagged, UK. This question is experimental and the length of that lag will and was first introduced into the depend on how long migrants LFS in the first quarter of 2010. stay in the UK. Any change in the Consequently, the sample size level of inflows in one period is when examining responses for likely to lead to a less than one- non-EEA migrants is small. The for-one change in the level of net sample size is also too small to migration in the longer term. examine responses by year of We explore this issue further entry to the UK, meaning that in Annex B. results will relate to migrants who have entered the UK through a 3.7 Migrants and the labour variety of visa routes in different market years. As shown in Table 3.10, provisional estimates suggest 3.64 In this section we describe the that the employment rate of those role of migrants in the UK labour who initially came for employment market. We compare the labour reasons was 83 per cent in 2010. market outcomes of the stock of The figure for migrant dependants migrants with the labour market was 59 per cent. outcomes of non-migrants in the UK, with a particular focus on 3.67 To enter the UK through Tier 2, an Tiers 1 and 2 where data allow. individual needs an employer to Unless otherwise stated, the main sponsor their visa. Therefore, it is source of data used is the LFS, reasonable to assume that close and migrants are defined to 100 per cent of Tier 2 migrants by country of birth rather will be employed. Tier 1, on the than nationality. other hand, allows individuals to enter the UK without a job offer. Employment 3.68 Data from the UK Border Agency 3.65 The employment rate for non-UK PBS Evaluation Survey (UK born individuals in the second Border Agency, 2009b) indicate quarter of 2010 was 67 per cent, that over 90 per cent of Tier compared to 71 per cent for British 1 General migrants surveyed nationals. There is considerable were employed. Of those, as variation by country of birth. As shown in Figure 3.17, nearly 90 shown in Table 3.9, employment per cent were employed in the rates for those born in Australia more highly-skilled occupations: and New Zealand were 80 per managers and senior officials; cent, compared to 46 per cent professional occupations; and for those born in Pakistan technical occupations. For the and Bangladesh. Tier 1 PSWR, the picture is quite different. Around 50 per cent of those in employment were in the
88 Table 3.9: Employment rates and employment levels by country of birth, 2010 Q2 Employment rate Employment level Change on Number Change on Percentage year (000s) year (000s) Total 70.3 -0.4 28,933 101 UK-born 70.9 -0.5 25,080 -15 Non-UK born 66.5 0.5 3,846 114 EU14 countries 70.0 -1.8 680 10 A8 countries 82.9 1.4 560 38 US 68.3 -1.2 106 16 Africa (excluding South Africa) 60.9 2.4 560 10 South Africa 78.7 -2.1 148 -4 Australia & New Zealand 80.3 -4.2 130 3 India 73.2 7.6 398 61 Pakistan & Bangladesh 46.4 -1.5 233 -30
Notes: Employment rates are given for the working age population (defined as males and females aged 16 to 64). Employment levels are given for those aged 16 and over. Data are not seasonally adjusted. EU14 refers to all members of the EU prior to 2004 except the UK. The employment level figures are rounded to the nearest thousand. Source: Office for National Statistics (2010f)
Table 3.10: Employment rates of non-EEA born individuals by main reason for coming to the UK, 2010 Q1 and Q2 Employment rate Reason for coming to UK Sample size (per cent) As a spouse / dependant of UK citizen 906 59 Employment 897 83 Get married / form civil partnership 403 * Other 589 65 Seeking asylum 366 * Spouse / dependant of someone coming to UK 829 59 Study 810 58 Visitor 137 *
Note: The ‘WHYUK10’ variable is an experimental variable included in the first two quarters of the Labour Force Survey for 2010. The question asks, “What was your main reason for coming to the UK?” The sample size is too small at present to break these data down by year of entry, therefore respondents will have entered the UK in different years and through different visa routes. The LFS is a panel survey that follows individuals over five quarters, therefore some individuals will be sampled twice in the pooled Q1 and Q2 sample. Employment rates are given for working-age population (defined as females aged 16 to 59 and males aged 16 to 64). (*) Figures are withheld where the sample falls below 500 people. Source: MAC analysis of the Labour Force Survey, 2010 Q1 and Q2
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top three occupational groups, a 3.69 UK Border Agency Management slightly greater proportion than the Information data on Certificates UK labour force as a whole. But of Sponsorship (CoS) for Tier 2, a significant number were found set out in Figure 3.18, show that to be in less skilled occupations. those migrants coming to the UK Data collection for this study was through the Tier 2 intra-company carried out between February and transfer route tend to be employed April 2009. The data comprised in more skilled occupations. In 1,564 observations and the the year to June 2010, 58 per response rate was approximately cent of intra-company transferees 39 per cent. Data were weighted were science and technology to adjust the sample design and professionals. Flows through the response bias. Resident Labour Market Test
Figure 3.17: Distribution of Tier 1 migrants in employment by 1-digit SOC occupation, Feb to Apr 2009
Percentage of route / Percentage of workforce 0 10 20 30 40 50 60
Managers and senior officials
Professional occupations
Associate professional and technical occupations Administrative and secretarial occupations
Skilled trades occupations
Personal service occupations Tier 1 general Sales and customer service occupations Tier 1 post study work route Process, plant and machine operatives Occupation as a proportion of UK Elementary occupations workforce
Notes: Only those in employment are included. Entrepreneur and Investor routes are excluded due to the very small numbers represented in the sample. Source: MAC analysis of UK Border Agency (2009b), also published in MAC (2009d); MAC analysis of the Labour Force Survey 2009 Q2
90 Figure 3.18: Distribution of Tier 2 jobs by 2-digit SOC occupation, Jul 2009 to Jun 2010
Tier 2 CoS used
0 5,000 10,000 15,000 20,000 25,000
11 Corporate Managers 12 Managers And Proprietors In Agriculture And Services 21 Science And Technology Professionals 22 Health Professionals 23 Teaching And Research Professionals 24 Business And Public Service Professionals 31 Science And Technology Associate Professionals 32 Health And Social Welfare Associate Professionals 33 Protective Service Occupations 34 Culture, Media And Sports Occupations 35 Business And Public Service Associate Professionals 41 Administrative Occupations 42 Secretarial And Related Occupations 51 Skilled Agricultural Trades 52 Skilled Metal And Electrical Trades 53 Skilled Construction And Building Trades 54 Textiles, Printing And Other Skilled Trades 61 Caring Personal Service Occupations Intra-company transfers 62 Leisure And Other Personal Service Occupations 71 Sales Occupations Resident Labour Market Test 72 Customer Service Occupations 81 Process, Plant And Machine Operatives Shortage Occupation 82 Transport And Mobile Machine Drivers And Operatives Occuaptional share of full-time 91 Elementary Trades, Plant And Storage Related Occupations employment in the UK workforce 92 Elementary Administration And Service Occupations 9999 Not stated
0 0.02 0.04 0.06 0.08 0.1 0.12 0.14 0.16 0.18 Proportion of UK workforce
Note: Occupational distribution of Tier 2 immigrants is derived from UK Border Agency management information on the number of Certificates of Sponsorship used in the year to June 2010.The figures describe used Certificates of Sponsorship, where a migrant application that corresponds to the certificate has been submitted but not necessarily approved. The occupational share of full-time employment in the UK workforce is estimated from the Labour Force Survey. Source: UK Border Agency management information, July 2009 to June 2010; MAC analysis of the Labour Force Survey 2010 Q2
(RLMT) route were more mixed. 3.70 Table 3.11 shows the top 10 Tier 2 The largest flows were teaching jobs (by 4-digit SOC occupation) and research professionals, in terms of the number of CoSs and health and social welfare used as a proportion of UK full- associate professionals. In time sector specific employment in contrast, the shortage occupation the year to June 2010. Scientific route is used more heavily by research occupations had the migrants working in textiles, highest proportion of Tier 2 jobs printing and other skilled trades as a proportion of UK full-time (this category includes chefs employment, which suggests and cooks), and caring personal that these occupations are most service occupations. dependent on Tier 2 migrants. The
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4-digit SOC occupation with the number of Tier 2 migrants in second highest proportion of Tier the year to June 2010. IT and 2 migrants in its workforce was IT software professionals accounted and software professionals, which for 27 per cent of total CoSs also used the largest absolute used and 48 per cent of the intra-
Table 3.11: Top 10 Tier 2 jobs by 4-digit SOC occupation, Jul 2009 to Jun 2010
Top 10 Occupations, by Tier 2 jobs as percentage of Total Tier 2 jobs Tier 2 jobs as UK full-time employment in that occupation percentage of UK full-time employment
2321 Researchers, scientific 1,476 11.4 2132 IT, software professionals 16,839 5.7 2329 Researchers n.e.c. 1,002 2.9 2444 Clergy 701 2.3 1112 Directors / chief executives of major organisations 1,105 2.1 3534 Finance and investment analysts / advisers 1,920 1.7 2211 Medical practitioners e.g. doctors and surgeons 2,434 1.7 3537 Financial and accounting technicians 359 1.6 3214 Medical radiographers 270 1.5 2423 Consultants, actuaries, economists, statisticians 1,744 1.5
Top 10 Occupations, by total Tier 2 jobs Total Tier 2 Tier 2 jobs as jobs percentage of UK full-time employment
2132 IT, software professionals 16,839 5.7 3211 Nurses 3,689 1.1 2211 Medical practitioners e.g. doctors and surgeons 2,434 1.7 5434 Chefs, cooks 2,412 1.3 1136 Managers, information and communication technology 2,020 0.8 3534 Finance and investment analysts / advisers 1,920 1.7 6115 Care assistants and home carers 1,844 0.5 2423 Consultants, actuaries, economists, statisticians 1,744 1.5 1132 Managers, marketing and sales 1,589 0.3 2321 Researchers, scientific 1,476 11.4
Notes: Total Tier 2 jobs are calculated as the sum of used Certificates of Sponsorship for Tier 2 between July 2009 and June 2010, which includes the Resident Labour Market Test (RLMT), shortage and intra- company transfer routes. The Tier 2 jobs as a percentage of UK full-time employment is calculated by dividing the number of total Tier 2 jobs by the level of UK occupation specific full-time employment by 4-digit Standard Occupational Classification. Source: UK Border Agency management information; MAC analysis of UK Border Agency management information and the Labour Force Survey, July 2009 to June 2010
92 company transfer route. Nurses, communication. Furthermore, medical practitioners, chefs these five sectors accounted for and cooks also made up large a disproportionately high share numbers of all Tier 2 CoSs issued. of total non-EU employment: 60 per cent of all non-EU workers 3.71 Universities UK, Guild HE and were employed in these sectors, Universities & Colleges Employers compared to 39 per cent of all Association (UCEA) provided us employed UK nationals. with information from the Higher Education Statistics Agency 3.74 Migrants were also found to (HESA) on the number of non- comprise an above-average EU staff working at UK Higher proportion of the total workforce Education Institutions (HEIs) in in the four sectors with the highest the academic year 2008/2009. GVA: 10.2 per cent of all workers Their data show that the majority in the hotels and restaurants of non-EU nationals at UK HEIs sector were non-EU migrants, are academic staff (67 per cent). as well as 6.3 per cent of all The academic subject areas with migrants employed in health the highest number of non-EU and social work. nationals were: clinical medicine, social studies, and business Education and management studies. The academic subject areas with 3.75 Compared to UK-born individuals, the highest number of non-EU a greater proportion of non-EEA nationals as a proportion of born individuals are qualified to academic staff were: engineering degree level or above, as shown (various types), mathematics, in Figure 3.19. However, as chemistry and physics. discussed in Manacorda et al. (2006), it is not always easy to 3.72 In its response to our consultation, translate foreign qualifications to the Department for Business UK equivalents. This is highlighted Innovation and Skills (BIS) in Figure 3.18, which shows a provided us with estimates of the larger proportion of foreign-born contribution of non-EU migrants individuals reporting having to sectoral growth between 2005 ‘other’ qualifications. As an and 2008. BIS produced these alternative, Figure 3.19 presents estimates by comparing sectoral the proportion of migrants by the Gross Value-Added (GVA) from age that they were last in full- the national accounts with LFS time education. As shown, 45 per employment data that show cent of non-EEA born individuals the nationality of all individuals finished full-time education after employed within each sector. the age of 21, compared to 23 per cent of UK-born individuals. 3.73 BIS found that five sectors The proportion of individuals in accounted for almost 50 per cent full-time education after the age of total GVA in 2008: financial of 21 can be used as a proxy for intermediation; real estate, renting the proportion enrolled in higher and business activities; hotels education. These data will also and restaurants; health and social reflect migrants in the UK who work; and transport storage and may have entered before the PBS
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and predecessor schemes were However, due to the points in operation. systems in place for each route, it is reasonable to assume that 3.76 As highlighted earlier in this Tier 1 migrants will hold at least a chapter, the UK Border Agency bachelor’s degree (or equivalent does not currently publish the qualification), and Tier 2 migrants points scored for Tier 1 and Tier 2 will either hold at least a National migrants. Therefore, it is difficult Vocational Qualification (NVQ) to ascertain the qualifications held level 3 qualification, or be skilled by Tier 1 and Tier 2 migrants. to that level.
Figure 3.19: Proportion of the UK-born and non-UK born population by highest qualification held and the proportion of the population by age last in education, 2009 Q3 to 2010 Q2
Proportion of the population by highest qualification held
100% 90%
80% Other qualifications 70% PhD 60% Masters 50% 40% Bachelors
30% NQF level 3+/A-Level 20% No qualifications 10% 0% UK EEA non-EEA
Proportion of the UK, EEA and non-EEA born population by age that they were last in full-time education (per cent)
Age 16 – 17 18 – 20 21 and over UK-born 55 22 23 EEA-born 21 38 41 non-EEA born 25 30 45
Notes: Only those in employment are included. Entrepreneur and Investor routes are excluded due to the very small numbers represented in the sample. Source: MAC analysis of UK Border Agency (2009b), also published in MAC (2009d); MAC analysis of the Labour Force Survey 2009 Q2
94 Earnings born migrants earn more than both EEA-born migrants and the 3.77 The Annual Survey of Hours UK-born population. The median and Earnings (ASHE) is the earnings for UK-born individuals usual measure of earnings for were £24,000, for EEA-born employees in the UK workforce. In £20,000 and for non-EEA born 2009, the mean gross annual pay £25,000. A greater proportion of for all employees was £26,470 EEA-born migrants had salaries and the median was £26,582. For at the lower end of the salary full-time employees, mean gross distribution (given by the spike in annual pay was £31,916 and the the distribution around £20,000) median was £25,816. Since the than the UK and EEA born groups. ASHE does not record country of At the top end of the distribution, birth or nationality, we use the LFS non-EEA migrants also earn to examine earnings by country more than both EEA-born and of birth. Figure 3.20 presents the the UK-born population. The 75th distribution of full-time earnings percentile earnings for UK-born for UK, EEA and non-EEA born individuals were £34,000, for individuals in the UK in the year to EEA-born £31,000 and for 2010 Q2. On average, non-EEA non-EEA born £36,000.
Figure 3.20: Distribution of full-time earnings of UK, EEA and non-EEA born individuals, 2009 Q3 to 2010 Q2
6.0E-05
UK born 5.0E-05
EEA born 4.0E-05 non-EEA born 3.0E-05
Kernal Density 2.0E-05
1.0E-05
0.0E+00 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 Annual salary (£ 000s)
Notes: The sample contains employees and self-employed individuals in all occupations. The kernel density estimator is used. This technique uses a weighting function to estimate the density function of a random variable to generate a weighted histogram. It allows a more visual comparison of the shape of the two distributions and is truncated at £150,000 for presentation purposes. Source: MAC analysis of the Labour Force Survey, 2009 Q3 to 2010 Q2
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3.78 There is currently no information recorded on Tier 2 CoSs for the available on the earnings of intra-company transfer, RLMT recently arrived Tier 1 migrants and shortage routes. As shown, in the UK. In MAC (2009d) we 50 per cent of intra-company referred to information on the transfer route migrants earn over points scored under the Highly £40,000 per annum, 50 per cent Skilled Migrant Programme of RLMT route migrants earn over (HSMP) and at extension stage £29,000 and 50 per of shortage in 2007. However, these data are occupation route migrants earn now out-of-date, and the selection over £23,000. Mean earnings mechanism for highly-skilled under Tier 2 are £56,830. migrants has changed significantly since 2007. 3.80 Table 3.12 analyses the distribution of salaries for Tier 3.79 Information on entry salaries 2 migrants in more detail and is available for Tier 2 from UK presents the median salaries by Border Agency Management 2-digit SOC occupation and Information CoS data. Figure 3.21 Tier 2 route. shows the distribution of earnings
Figure 3.21: Distribution of entry salaries recorded on Tier 2 Certificates of Sponsorship used by route, 2009
120 Intra-company transfers Resident Labour Market Test 100 Shortage Occupation UK gross pay for full-time employees
80
60
Annual pay (000s) 40
20
0 10 20 30 40 50 60 70 80 90 Percentile
Notes: Tier 2 annual salaries are calculated as the salary for the given period plus allowances. These data are collected on Tier 2 Certificates of Sponsorship. UK gross pay for full-time employees is taken from the Annual Survey of Hours and Earnings. Source: UK Border Agency management information, July 2009 to June 2010; Office for National Statistics (2009b)
96 Table 3.12: Median salary for Tier 2 jobs by 2-digit SOC occupation and Tier 2 route, July 2009 to June 2010
2-digit SOC occupation Intra- Resident Shortage company Labour occupation transfer Market Test route route route (£, 000s) (£, 000s) (£, 000s) 11 Corporate managers 72 37 30 12 Managers and proprietors in agriculture and services 47 23 - 21 Science and technology professionals 37 34 32 22 Health professionals - 43 39 23 Teaching and research professionals 41 31 27 24 Business and public service professionals 57 29 31 31 Science and technology associate professionals 31 27 27 32 Health and social welfare associate professionals 28 24 25 33 Protective service occupations - - - 34 Culture, media and sports occupations 44 30 50 35 Business and public service associate professionals 53 38 - 41 Administrative occupations 35 24 - 42 Secretarial and related occupations 46 24 - 51 Skilled agricultural trades - 21 - 52 Skilled metal and electrical trades 34 25 25 53 Skilled construction and building trades 24 29 - 54 Textiles, printing and other skilled trades 24 20 18 61 Caring personal service occupations - 15 15 62 Leisure and other personal service occupations - 22 - 71 Sales occupations 26 24 - 72 Customer service occupations 22 - - 81 Process, plant and machine operatives 40 22 - 82 Transport and mobile machine drivers and operatives 57 - - 91 Elementary trades, plant and storage-related occupations - - 14 92 Elementary administration and service occupations 24 20 - 9999 Not stated 34 20 -
Notes: The median annual salaries for each Tier 2 route are calculated from salaries recorded by Certificates of Sponsorship (CoS). Figures are rounded to the nearest thousand. (-)No CoSs were issued for these occupations. Only salary data for occupations which contain 4-digit occupations or job-titles on the shortage occupation list are shown: a small number of CoSs were misallocated in error. Source: UK Border Agency management information, July 2009 to June 2010
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Regions proportions have increased from 30 per cent and 23 per cent 3.81 London has a higher share of respectively in 2004. the population of individuals born outside the UK than any 3.82 Table 3.13 also shows that other country or region of the London exhibited the fastest rates UK, reflecting an historic bias of change in terms of increases in patterns of migration towards in the proportion of the population London. The latest data available that are EEA and non-EEA born. for October 2008 to September The East of England had the 2009, given in Table 3.13, show second highest rate of change that 34 per cent of London’s in terms of EEA migrants, and population was born outside the West Midlands for non- the UK and 25 per cent was EEA migrants. born outside the EEA. These
Table 3.13: Stocks of non-UK born migrants by regions of the UK, 2004 and 2009
Migrant share of Migrant share of Difference in migrant population in 2004 population in 2009 share of population in (per cent) (per cent) 2004 to 2009 (percentage points)
EEA non-EEA EEA non-EEA EEA non-EEA United Kingdom 2.5 6.3 3.6 7.8 1.1 1.4
Scotland 1.4 2.7 2.6 3.7 1.2 1.0 Wales 1.3 2.1 1.9 3.0 0.5 0.9 Northern Ireland 2.8 1.5 3.6 2.2 0.8 0.7
England (total) 2.7 7.1 3.8 8.6 1.1 1.5 of which… North East 1.0 2.4 1.4 3.5 0.4 1.1 North West 1.5 3.6 2.2 5.1 0.7 1.6 Yorkshire & the Humber 1.5 4.4 2.5 5.4 1.0 0.9 East Midlands 1.7 4.5 2.9 5.6 1.1 1.1 West Midlands 1.7 5.9 2.8 7.8 1.1 1.9 East 2.4 4.8 3.7 6.0 1.2 1.2 London 7.1 22.6 8.7 25.1 1.7 2.6 South East 2.8 5.6 3.7 7.1 0.9 1.8 South West 2.1 2.9 3.0 3.3 0.9 0.4
Notes: In this figure EEA and non-EEA migrants are defined by country of birth. The migrant share refers to the proportion of the total population that are non-UK born. Source: Annual Population Survey, Jan to Dec 2004, Jan 2009 to Dec 2009, published in Office for National Statistics (2010d)
98 3.83 Similarly, the magnitudes of cent in 1998 to 28 per cent in inflows and outflows of long- 2008, although the total stock term migrants (defined as those of migrants in London has entering or leaving the UK for a increased over the same period. year or more) to and from London The IPS records reasons for are greater than for any other migration, including work-related country or region of the UK, shown reasons. However, estimates at in Table 3.14. Approximately 28 the regional level are subject to per cent of LTIM inflows in 2008 substantial margins of error. were destined for London, while 26 per cent of the outflows were 3.84 It is not possible to determine from London. London’s share accurately where Tier 1 or Tier 2 of the UK migration inflow has migrants live in the UK. However, declined from a peak of 45 per Tier 2 immigrants are tied to a
Table 3.14: Flows of long-term migrants to and from countries and regions of the UK, 2008
Long Term International Migration (LTIM) (000s)
Inflow Outflow Balance United Kingdom 590 -427 163
Scotland 44 -25 20 Wales 16 -16 1 Northern Ireland 18 -10 8
England (total) 512 -377 135 of which… North East 23 -7 16 North West 45 -41 4 Yorkshire & the Humber 53 -20 32 East Midlands 23 -22 1 West Midlands 37 -25 12 East 54 -38 16 London 163 -113 50 South East 84 -71 13 South West 31 -41 -10
Notes: The first three columns report Long Term International Migration, which is based on the International Passenger Survey plus adjustments for asylum, changes of intentions and movements to and from the Republic of Ireland. Source: Estimates of Long Term International Migration 2008, published in Office for National Statistics (2010c)
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sponsoring employer and the 3.9 Implications location of this employer is known. Between November 2008 and 3.86 The main themes that have March 2010 45 per cent of Tier emerged from our examination 2 visas were issued for London of the data are summarised here. employers. More specifically, First of all, there are tentative 50 per cent of intra-company signs of an upturn in the UK transferees worked for London economy and labour market, employers, as well as 42 per cent although the prospects for of migrants coming to the UK via growth in the remainder of 2010 the RLMT route and 32 per cent and 2011, in the UK and other of migrants entering the UK via countries, are subject to the shortage occupation route. We some uncertainty. are not currently able to examine disaggregated Tier 2 data for other 3.87 The Government’s intention is regions of the UK. Tier 1 migrants that its objective to reduce net do not need to be sponsored migration will be measured by the by an employer and there are International Passenger Survey currently no data that reliably (IPS). Net Long Term International record their place of work. Migration (LTIM), based on the IPS, was 196,000 in 2009. By the 3.8 International comparisons same measure, net migration of non-EU nationals in 2009 was 3.85 It is difficult to compare 184,000. These are provisional international data on flows estimates. Substantial reductions, and stocks of migrants across of at least 96,000 net flows, will be countries. Each country will have required in forthcoming years to different systems and processes meet the objective of annual net in place to record migrant flows migration in the tens of thousands. and each will have different definitions to distinguish between 3.88 Non-EU work-related migrant permanent and temporary inflows rose from 26,000 in 1994, migrants. In its report on the to114,000 in 2004, before falling International Migration Outlook to 55,000 in 2009. The numbers the Organisation for Economic coming for family reasons rose Co-operation and Development from 33,000 in 1994 to 74,000 (OECD) publishes data on both in 2004, before falling to 54,000 migrant stocks and inflows, as in 2009. Non-EU student inflows a proportion of the population rose, from 30,000 to 110,000, that are foreign-born, as shown between 1994 and 2004. But, in in Figure 3.22. Of the countries contrast to the work and family sampled, the UK had the routes, student inflows continued thirteenth largest inflows as a to rise between 2004 and 2009, to proportion of the population and reach 163,000. was ranked twelfth in terms of the proportion of the population that 3.89 The LFS and the APS provide were foreign-born. other alternative potential measures of net migration of non-UK nationals, using a different
100 Figure 3.22: Inflows and stock of foreign-born migrants as a proportion of the population in OECD countries, 2008
Inflows of foreign born as a proportion of population 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%
Luxembourg Australia Switzerland Canada Ireland Spain Norway Austria New Zealand United States Sweden Inflows of foreign-born Czech Republic (as proportion of United Kingdom population) Netherlands Finland Stock of foreign-born (as proportion of Portugal population) Slovak Republic France
0% 5% 10% 15% 20% 25% 30% 35% 40% Stock of foreign-born as proportion of population
Notes: These figures are taken from the individual contributions of national correspondents appointed by the Organisation for Economic Co-operation and Development (OECD) Secretariat with the approval of the authorities of member countries. These data have not been standardised and are therefore not fully comparable at an international level. Because of the great variety of sources used and differences between countries’ criteria for registering population or conditions for granting residence permits, measurements may differ. Several countries have been omitted where data for 2008 are unavailable. Source: MAC analysis of data from Organisation for Economic Co-operation and Development (OECD, 2010)
methodology. Net migration may each define migrants differently be calculated from the change in and the LFS does not sample numbers of non-UK and non-EEA foreign students living in nationals in the UK population communal establishments. between two years. In 2009, the APS estimates that net migration 3.91 Visa data are not directly of non-EEA nationals was 53,000, comparable with the IPS data. considerably below the IPS non- Twice as many out-of-country EU estimate of 184,000. visas were issued to Tier 2 migrants than to Tier 1 migrants 3.90 There are a number of important in 2009. Intra-company transfers differences between the LTIM were the largest route of Tier 2 and LFS measures of net and Tier 1 General was the largest migration. Most notably, they route of Tier 1.
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3.92 In 2009, approximately 50,000 3.94 Tier 2 migrants are highly likely to out-of-country visas were issued be employed in the UK and are to main migrants through Tier 1 generally highly paid and highly and 2 routes within scope for this qualified. Data for Tier 1 General report. This figure breaks down as in particular is partial in its nature. follows: 3.95 According to data published in • 13,900 under the Tier 1 the International Migration General route; Outlook 2010 (OECD, 2010), the UK ranked thirteenth in terms • 300 under the Highly Skilled of the proportion of foreign-born Migrant Programme (Tier 1 inflows relative to the population, predecessor); and twelfth in terms of the proportion of the population that • 22,000 under the intra-company are foreign-born, of the OECD transfer route; countries sampled.
• 8,600 under the RLMT and shortage occupation routes combined; and
• 5,200 under work permit route (Tier 2 predecessor).
3.93 In-country extensions, which include people switching between visa categories, make up a substantial proportion of visas issued for both Tier 1 and Tier 2. Dependants of Tier 1 and Tier 2 migrants are also substantial in number. In the same year, 42,000 out-of-country visas were issued to dependants of Tier 1 and 2 migrants. Both the main migrant and dependant numbers above exclude in-country visas issued to Tier 1 and 2 migrants.
102 Chapter 4 What we did
4.1 Introduction directly to over 500 corporate partners and links to our 4.1 This chapter sets out the work consultation were included we did in order to develop our in various UK Border Agency conclusions about the levels of circulations, including a letter to the first annual limits for Tier 1 all Tier 2 sponsors (some 17,000 and Tier 2 of the Points Based individual employers). System (PBS) required to meet the Government’s objective of 4.4 Our consultation asked various reducing net migration to the questions in order to help structure ‘tens of thousands’ by the end the evidence in a way that would of this Parliament. We base our be most useful to us when forming conclusions on a combination our suggestions. The questions of evidence from corporate we asked are set out in Chapter 2 partners and analysis of data and of this report and were organised academic evidence. around our analytical framework – criteria, objective and trajectory 4.2 Below we outline the consultation – which we discuss in more detail process we undertook. We in Chapter 5. provide details of the meetings we held and the events we attended 4.5 We received over 400 written with key corporate partners. responses to our consultation. We also explain what we did to A list of all respondents and other access other relevant sources organisations or groups we liaised of evidence. We identify the key with, with the exception of those themes that emerged from the who asked not to be identified, is evidence we received, including a in Annex A to this report. brief account of those that are not of direct relevance to this report. Meetings and events We then summarise the main strands of our analysis of the data 4.6 As part of our consultation we and academic evidence. organised and attended an extensive range of meetings and 4.2 How we consulted events to engage directly with as wide a variety of corporate Consultation partners as possible.
4.3 We published a consultation 4.7 We hosted two large events in document on 30 June 2010. We London at which approximately sent details of our consultation 90 corporate partners were
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present. In addition we met • the Department for Business, with a number of partners Innovation and Skills on the individually. We also spoke at role migrants play in supporting over 40 events and meetings business and promoting arranged by others around the investment in the UK, how UK including Deloitte, Skills for skills policy can be most Care, PricewaterhouseCoopers effectively linked to migration UK, Skills for Health, Visalogic, policy, and the role of migrants the Greater London Authority, in the Higher Education the Law Society, Equality South workforce; and West and many of the Regional Migration Partnerships around • the Department for Work and the UK. These events enabled Pensions on migrants’ use of us to consult directly with the welfare system. around 1,000 representatives of different organisations. 4.9 We contacted the Devolved Administrations to seek their 4.8 We consulted with government views with a particular focus on departments to inform our review. the impacts of migration and on For example: up-skilling, which is a devolved matter. We attended meetings in: • the Department for Education on the role migrants play as • Scotland, where we met with both consumers of education corporate partners as part of and children and family social their regular meetings with the services, and providers of UK Border Agency; these services as members of the workforce; • Wales, at a forum event for corporate partners; and • HM Treasury on the contribution of migrants to the UK economy; • Northern Ireland, where we also held a forum for • the Department of Health on corporate partners. the role migrants play as both consumers and providers of 4.10 The MAC has its own Stakeholder healthcare and social services; Panel, whom we consult on aspects of our work that are • the Department for Transport of direct interest to corporate on the impact of migrants on partners. The Panel comprises the use of public transport representatives from the Trades and congestion; Union Congress (TUC), the Confederation of British Industry • the Department for Communities (CBI), the British Chambers of and Local Government on Commerce (BCC) and NHS the role migrants play as the Employers. We convened a consumers of local services, and special meeting of the Panel to in the provision of those services; discuss our approach to this work and share our emerging findings. We also held bilateral meetings
104 with the BCC, the TUC, the CBI 4.14 Six Partnership events were and health sector representatives. arranged and attended by over 80 corporate partners from: 4.11 We wrote to representatives of a local government; the police; number of foreign governments, the housing sector; employers; drawing their attention to our employer representative consultation, and received organisations; Job Centre Plus; responses from many. We also the higher education sector; and met with representatives from the voluntary sector. Embassies including those of Australia, Canada, Japan, New 4.15 During the course of meetings Zealand, Singapore and Thailand. and corporate partner events we attended we spoke to, and heard 4.12 We were mindful, throughout the evidence from, local authorities process, of the Government’s around the UK. In addition, some request that we take account submitted written evidence to of the public service and social our consultation. This helped impacts of migration in forming our us to understand some of the conclusions. We took particular public service and social impacts. care to ensure that relevant In addition, we held a seminar partners with an interest or with leading economists and expertise in those issues had the academics at the London School opportunity to contribute to our of Economics to discuss theory review, and went to significant and evidence on public service lengths to gather information, and social impacts. evidence and opinions. 4.3 Consultation evidence 4.13 Key to this was the help the received Regional Migration Partnerships provided in both facilitating 4.16 Given the amount of evidence events around the country and in we received, and the range of distributing our consultation at a contributors, it is perhaps not local and regional level, particularly surprising that a variety of views amongst those with an interest in were put to us. Throughout this social and public service impacts. report we refer to evidence we The Partnerships are formed by received. However, below we collaboration among relevant briefly highlight several themes organisations representative of that were particularly prominent in the statutory, voluntary and private the oral and written evidence we sectors. Their function is to provide received. The views expressed a regional (national for Scotland, in this section do not necessarily Northern Ireland and Wales), multi- represent the views of the MAC. sector, multi-agency partnership and to facilitate and promote 4.17 We were clear throughout this effective contact, co-ordination and process that it was not the role partnership among key partners of the MAC to advise on whether including local authorities, police limiting economic migration services, health and education. in order to reduce overall net migration to the tens of thousands
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was the right policy. Our task was 4.20 Some specific concerns to take that objective, and advise expressed in terms of on appropriate limits for Tier 1 and restrictions on migration Tier 2 of the PBS. included the following:
4.18 Nonetheless, for understandable • Some corporate partners argued reasons, many of those we that restrictions on migration consulted did not draw a clear could restrict businesses’ ability distinction between the policy to be competitive and could of migration limits in itself and stunt economic recovery by the potential impacts of a more being harmful to UK employers. restrictive migration policy on businesses’ ability to attract the number and type of migrant “AFB and BBA Members are workers that they believe currently at a critical point in the they need. economic cycle. They need to recruit quickly to key posts to maintain the 4.19 Although we did not ask in our competitiveness of their UK consultation whether a policy based operations.” centred on restricting migration was a good thing, it was clear Joint response from the Association of from the evidence we received Foreign Banks and the British Bankers’ that many partners objected to Association to MAC consultation restrictions or limits on non-EEA economic immigration. Many “A cap on non-EU economic migration also had reservations about the would have an adverse effect and manner in which limits might would act as a barrier to economic be implemented. growth and competitiveness.”
“We are strongly opposed to the Federation of Small Businesses Government’s current proposals to response to MAC consultation cap migration through Tiers One and Two of the points-based system by implementing a permanent limit.” “The annual limit is too blunt an instrument to address the complex Federation of Small Businesses needs of an economy growing its way response to MAC consultation out of a recession. What Scotland needs is an immigration system based on economic need, not on ideology.” “As well as seeing the proposed cap as being detrimental to the economy Scottish Government response to the TUC also sees it as being MAC consultation detrimental to the very social cohesion of our diverse society.”
Trades Union Congress response to MAC consultation
106 • It was pointed out that • It was suggested that a lack any further restriction of migrants could hurt large on businesses’ ability to projects, such as Crossrail, move people could result because there is not, for in lower trade and investment example, sufficient ongoing into the UK. It was argued demand for the UK to train and that firms were more likely maintain 200 resident tunnelling to move the work abroad engineers. Equally, it was than hire less qualified argued that large projects could resident workers. use up allowances, leaving no space for small businesses.
“Skill shortages are already • Some corporate partners spoke emerging in the oil and gas industry of non-EEA workers being in Aberdeen and if it is not possible employed in priority areas in to recruit in the North East these terms of the UK’s economic jobs will be permanently lost to growth prospects, such as overseas locations.” engineering, technology, and renewable energy. Orion Consultancy Services Ltd response to MAC consultation “We would argue that the international flow of highly qualified and skilled “If AFB and BBA members are unable scientists and technologists is to expand as they need to within the necessary for the proper advancement UK because of immigration controls, of science and for the development they will instead expand overseas. In of a knowledge based economy addition to the roles which will not be that depends on that advancement created in the UK, this will also have of knowledge and the UK’s full an impact on essential knowledge participation in the global enterprise of transfer to the UK workforce.” scientific research and discovery.”
Joint response from the Association of The Beatson Institute for Foreign Banks and the British Bankers’ Cancer Research response to Association to MAC consultation MAC consultation
• Some businesses expressed • Corporate partners argued the view that uncertainty about that the small numbers of being able to recruit workers migrants who enter the UK via with the right skills may cause the shortage occupation route them to look at outsourcing greatly improve the flexibility of abroad as a way to provide the UK labour market, and so some certainty around their restrictions on that route would needs and growth plans. be damaging.
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4.21 Some concerns were expressed • Partners felt that reducing net more directly in relation to the migration by limiting work- policy of migration limits itself, related migration routes would or its coverage, while other affect some regions and partners expressed satisfaction occupations more than others, with the broad concept of limits: which could create the need for regional shortage lists for • Some told us that the use local shortages. of 2009 figures as a starting point was not helpful because • We were told that intra-company it was not a ‘normal’ year. It transferees should not be was argued that both the 2010 considered as ‘normal’ migrants interim limit and the illustrative as most have no intention of 2008 figures used in our staying in the UK permanently, consultation paper refer to and should therefore be exempt times of recession. Firms were from a limit. encountering problems due to the fact that their allowance for the interim limit was based on a “It needs to be emphasized that highly unusual recession year Japanese companies’ employees and when they were not recruiting. Japanese doctors will usually stay in the UK for 3 to 5 years on personnel • There was concern that limits rotation and that they have no intention on economic migration would to stay permanently in this country. send the signal that the UK was It would be misleading and wrong to not ‘open for business’. categorize them as ‘migrants’.”
Embassy of Japan response to “Business has no ideological objection MAC consultation to a cap – but protecting global mobility is essential to retaining the UK’s reputation as an attractive place “We believe … that it is critical to the in which and from which to invest and UK’s attractiveness as a place in and do business.” from which to invest and do business that ICTs of less than 3 years duration Confederation of British Industry are excluded from the limits in Tier response to MAC consultation 1 and 2. We believe it is essential to distinguish between migration leading to settlement and genuine temporary • It was suggested that Tiers knowledge and skills transfer which 1 and 2 were not the main is so important to businesses with a focus of public concern about global footprint.” migration, and hence a limit on Tier 1 and Tier 2 would not ease Confederation of British Industry these concerns. response to MAC consultation
108 • Some corporate partners to have dependants they said that they sent as many wish to bring with them, and transferees overseas as they may place employers in the received and, therefore, their invidious position of having to contribution to net migration was discriminate against their older either nil or negligible. and married employees.
• Some individuals who 4.22 Many partners believe that responded to our consultation the policy underpinning the approved of limits on non-EEA introduction of limits was a economic migration. In many critical consideration. Some of cases this appeared to be as the themes raised were of most a result of real or perceived, relevance to the Government current or predicted, negative consultation running parallel public service and social to ours, but many also had impacts. implications for our consideration of levels of limits on Tier 1 • Arguments were made that and Tier 2: dependants should be limited because they do not contribute • Partners recognised that, as much in economic terms in a scenario where there is as main migrants. However, more demand for non-EEA counter arguments were also migration than places available, put to us that dependants often judgements will need to be play important roles working in made regarding the relative some sectors (e.g. social care) value of applications to make and that main migrants would sure the benefit of non-EEA not come if they could not bring migration is maximised. their dependants. • Some corporate partners reported that interim limits on “It is not realistic to support an Tier 2 were biting to a much international assignment for a greater extent than those on duration of 2-3 years and not permit Tier 1. There was also concern the employee to be accompanied by that interim allocations had immediate dependants.” been based on usage during a recession, resulting in a nil PepsiCo UK & Ireland response to allocation for some. MAC consultation • Concern was also frequently expressed about the ability to • It was argued that a limit on obtain in-country extensions for dependants may discriminate existing key personnel in the against certain types of months and years to come. people, such as older migrants or married migrants, who are relatively more likely
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“Restrictions on extensions would “BCC does not support the suggestion remove the ability of migrants to plan that sponsors should have to give for the medium to long term (e.g. buy a their non-EU migrant workers health house without worrying they will have to insurance.” leave the country in a couple of years), and would make the UK and sponsored British Chambers of Commerce UK jobs less attractive.” response to MAC consultation
Sybersolve Solutions Limited response to MAC consultation 4.23 Up-skilling was a strong theme in the responses received. The evidence received from the UK • Corporate partners felt that the Commission for Employment proposed pool system in relation and Skills is discussed in detail to Tier 1 added an element of in Chapter 9 of this report. Some unpredictability for the purposes views expressed by other partners of business planning and, as included the following: such, was undesirable. • A number of employers argued • It was argued that combining that, given the current economic the Tier 2 Resident Labour uncertainty, the trajectory of Market Test (RLMT) and the levels of the limits should shortage occupation routes be less steep to begin with. would be complicated and had They suggested that this would the potential to tie the system allow time for the up-skilling up with speculative applications of resident workers. We were from employers for inclusion on also told that up-skilling was the shortage occupation list. underway in certain sectors but that more time is needed. • Corporate partners argued that most health insurance cover does not cover consultation with “To be able to recruit alternatives to a GP, so this measure is not Tier 1 and Tier 2 general from the UK likely to significantly reduce any workforce would take some years as burden on primary care. either there is generally a shortage of the skills and experience we are • As discussed elsewhere in this looking for here in the UK or we report, concern was expressed are looking to develop global talent in relation to intra-company by hiring non-UK nationals into our transferees displacing resident businesses headquartered in the UK.” workers in the IT industry. It was argued that policies needed to Shell response to MAC consultation be put in place to prevent this displacement from occurring.
110 • It was put to us that it takes Government and the education a considerable length of time sector needed to do more to train skilled workers and to increase the take-up of that employers may respond vocational courses, perhaps to restrictions on hiring skilled through incentives to study non-EEA workers by recruiting technical subjects. similarly skilled EEA-domiciled workers (resulting in no 4.24 We also encountered a range of reduction to net migration). views on the public service and social impacts of immigration, • Corporate partners pointed and how these should be out that, although in time there balanced against the would be scope to up-skill economic impacts: resident workers to some skilled jobs, there would always remain • It was put to us that skilled a proportion of very skilled migrants’ net contribution to the non-EEA workers who will be public finances is positive, with required (for example, corporate partners arguing that a production engineer from most Tier 1 and Tier 2 migrants Japan to work in a car factory pay far in excess of the average in the UK). tax and use fewer services.
• Many of those we met, and who “Alternatives cannot be found. responded to our consultation, Generally speaking, Tier 2 Japanese suggested that we should give immigrants from Japanese companies higher priority to economic are responsible for adjustment and impacts over public service and liaison between offices in the UK social impacts. This was mainly and Japan. They need considerable derived from the assumption knowledge and experience of the that public service and social Japanese head office’s policies and impacts were minimal, and decisions, as well as communication certainly much smaller than the ability in Japanese and English.” economic impacts.
Nissin Travel Service (UK) Ltd response to MAC consultation “Due to their nature as highly skilled and skilled workers Tier 1 and 2 migrants are unlikely to have a major • Nevertheless, partners impact on public services and social acknowledged that employers integration. Migrants using Tier 1 and had a role to play in up-skilling 2 are likely to contribute far more to the UK workforce through, the economy and UK society through for example, the Sector their teaching, research and knowledge Skills Councils, but that the exchange than they take out through use of public services.”
University of Plymouth evidence to MAC consultation
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• Some evidence suggested “The FSB is of the view that the that diverse communities impact of skilled and highly skilled needed to be served by diverse workers will be negligible on public workforces, particularly when services as these migrants will be in delivering front line services an excellent position to seek work (e.g. health and social care). and generate wealth for the country as a whole. This will lead to a positive • It was said that delays in impact on wider society via business recovery and growth might growth and future job creation.” prolong unemployment amongst the resident Federation of Small Businesses population, resulting in negative response to MAC consultation impacts in terms of tensions between the migrant and resident communities. • We heard that in some public service areas non-EEA migrants • We received evidence that Tier play a key role in providing 1 and Tier 2 migrants’ use of services (e.g. in health and the welfare state is relatively social care). insignificant. It was argued that benefit tourism to the UK is a myth, and access to benefits for “Skilled migrants contribute to the non-EEA migrants is severely provision of public services; in our limited: non-EEA migrants are case the provision of health care in only entitled to contributory the Acute and Neurological benefits; they are not entitled to Rehabilitation areas.” any income-related benefits.
Ramsay Health Care UK response • We were told that Tier 1 and to MAC consultation Tier 2 migrants were unlikely to commit crime, but may well be more likely to be the victims • We were told that, generally, of crime. Some also thought Tier 1 and Tier 2 migrants are that migrants were less likely to young, healthy and law abiding report crime. and therefore place minimal demands on services. Education “Reportedly, hate crime against tier 1 was perhaps the only exception, and 2 migrants is more prevalent than where the impact was thought crime committed by these migrants.” to be larger because of dependants (e.g. pressure on East of England Strategic places and schools needing to Migration Partnership response cater for more diverse to MAC consultation language requirements).
112 • We were also told that migrants Literature reviews play an important role in making communities more culturally rich. 4.27 We carried out a literature review for each of the economic, public • We heard about apparent service and social impacts that misconceptions surrounding we identified. The findings from migration which can result in these literature reviews, and their social tensions. implications for our conclusions, are presented in Chapters 7 • We heard that migrants and 8. were playing a large part in rejuvenating some inner-city 4.28 The main body of our assessment housing. They were moving comprises a review of the existing into accommodation which academic literature and evidence had previously lain empty gathered from corporate partners and this in turn was allowing and experts. We were also shops and schools to stay open informed by the findings of the and providing the remaining House of Lords Select Committee resident population with on Economic Affairs, which important local services. reported on the economic impact of immigration in 2008 (House of • More negative impacts of Lords, 2008). migration were reported where new migrant communities were 4.29 To investigate how the various developing in areas which had costs and benefits of immigration not previously received much can be considered within migration. Areas which have an economic framework we seen migrants arrive for many commissioned a research project years had adapted well, we to Professor Christian Dustmann were told. and Dr. Tommaso Frattini of E Policy Limited (Dustmann and 4.25 The evidence we received on Frattini, 2010). We publish their the economic, public service and report alongside this one and draw social impacts of migration is set on it in Chapters 7 and 8. out in more detail in Chapters 7 and 8. The evidence relevant 4.30 There is already a body to Tier 1 and Tier 2 of the PBS, of literature examining the and the policy of annual limits on economic impacts of immigration. those tiers, is discussed further in Consequently, we experienced Chapters 6 and 9. greater success in finding empirical studies that test the 4.4 Analytical work programme impacts of migration suggested by economic theory. However, there 4.26 To complement the evidence is comparatively little substantive we received we also carried evidence on the social and public out reviews of the academic service impacts of migration. literature and our own in-house data analysis.
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Data analysis
4.31 We undertook a thorough review, and analysis, of available data on migration in order to understand the complex relationship between flows through Tier 1 and Tier 2 of the Points Based System, and Long Term International Migration (LTIM) as measured by the International Passenger Survey (IPS). Chapters 6 and 9, and Annex B to this report, provide details of this work. They also set out the risks, difficulties and uncertainties associated with making such calculations.
114 Chapter 5 Analytical framework
5.1 Introduction This analysis would also have to take account of the externalities 5.1 This chapter discusses the use of migration. Limiting migration in of analytical frameworks to set a this way would in theory make it limit on migration. We begin by possible for the UK to maximise reviewing some of the structures the benefit from migration that could, in theory, be adopted because only those migrants who before outlining the analytical make a positive net contribution, framework that we use in this and no others, are admitted. report to answer the question we were asked by the Government. 5.4 A cost-benefit framework cannot be adopted in practice because, 5.2 Frameworks for analysing as we make clear in Chapters limits on migration 7 and 8, it is not possible to accurately quantify, or even 5.2 In this report it is not our task to identify, all of the relevant consider what the optimal level of costs and benefits of migration. net or gross migration to the UK Consequently, migrants cannot should be. Nonetheless, in this be selected purely on the section we briefly consider five basis of an entirely accurate potential frameworks for analysing and complete assessment of that issue. their net contribution to the UK. Additionally, there are 5.3 The first potential approach is to difficult conceptual issues to adopt a cost-benefit framework consider, such as the treatment to determine the optimal annual of dependants in the analysis, level of migration. According including children born to migrant to this approach, all impacts of parents in the UK, and the migration, including the social and appropriate time horizons and public impacts, would be assigned discount factors to use. Also, an economic value. Migrants as with all of the approaches would then be ranked according to discussed in this section, it is their potential total net contribution not possible to use this type of and permitted entry to the UK up analysis to influence flows of to the point where the marginal British and European Economic migrant – that is, the next Area (EEA) nationals, over additional migrant to enter the UK which the Government has no – makes a zero net contribution. direct control.
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5.5 A second, simpler approach 5.8 For example, consider the year is to assess the net fiscal 1994, when total net Long Term impact of migration. This International Migration (LTIM) approach attempts to compare was 77,000. This compares to a what migrants contribute to the provisional estimate of 196,000 public finances, in terms of tax for 2009. As discussed in Chapter receipts, with what they take 3, the International Passenger out, in terms of consumption of Survey (IPS) components of LTIM public services. Similar to the estimates can be broken down to cost-benefit framework outlined examine the ‘reason for migration’. above, migrants could in principle A comparison of IPS data for 1994 be admitted entry to the UK up and 2009 (provisional data) for to the point where the marginal migrants of all nationalities migrant makes a zero net fiscal shows that: contribution, thus maximising the fiscal benefit of migration. Studies • For those individuals with a that adopt this approach are definite job offer or looking for discussed in more detail work, the gross inflow to the UK in Chapter 7. was 94,000 in 1994, compared to a provisional estimate of 5.6 A third approach is to consider 182,000 in 2009; and the impact of migration on overall population levels. As • In 1994 the gross inflow of we discussed in Chapter 3, the persons coming to the UK Office for National Statistics for formal study was 47,000, (ONS) produces UK population compared to a provisional projections based on various estimate of 211,000 for the assumptions of the level of net calendar year 2009. migration to the UK. These population projections could be 5.9 Work-related inflows almost used to set a limit on annual doubled between 1994 and net migration at a level that is 2009, while student inflows were designed to achieve, or avoid, approximately 4.5 times larger in specified population targets, 2009 than in 1994. Therefore, to assuming this was an objective of return to a situation analogous to migration policy. 1994 would potentially imply a cut in both work-related and student 5.7 A fourth approach is to compare immigration, with a substantial the current level of net rebalancing of the number of migration in the UK to that individuals coming to the UK for of previous years. Such an formal study against work-related approach would identify a period immigration. where net migration was at a level that is consistent with the current 5.10 Finally, a fifth approach is to Government’s objective. This examine the migrant proportion period could then be examined of the labour force in countries to see what proportion of gross comparable to the UK. For immigration or net migration example, if migrants made up a comprised work-related migration. smaller proportion of the labour force in other similarly developed
116 countries, that might lead to the • which criteria should be taken crude conclusion that the UK into account when considering economy could be successful with limits to Tiers 1 and 2? a smaller migrant workforce too. In terms of policy, however, it may be • what precise objective for more relevant and practical to look overall net migration, and PBS at annual gross or net migrant migration, would be consistent flow as a share of the working age with the Government’s aim to population or the total population. reduce net migration to the tens In either case, the UK could aim of thousands by the end of this to align its migrant share of the Parliament? workforce more closely with that of other countries over time. • what trajectory, for Tier 1 and International data of this nature, Tier 2 migration over time, discussed in Chapter 3, suggest is most desirable in order to that, as a proportion of the achieve the objective? population, the UK’s migrant stock and migrant inflow is currently Criteria relatively low compared to other OECD countries. 5.13 The Government asked that we take into account the economic, 5.11 Each of the approaches set social and public service impacts out above may help inform our of migration in considering the first thinking when we consider the annual limits on Tier 1 and Tier 2 economic, social and public in 2011/12. There is no universal service impacts of migration in definition of such impacts. In the context of limits on Tiers 1 principle, any impact that affects and 2. However, we are acting the distribution of resources, within the boundaries of an or that can be quantified and existing Government objective for monetised, could arguably be net migration, and our approach considered an economic impact. needs to reflect that. The analytical framework that we have 5.14 We attempt a crude categorisation used as the basis for this report is of impacts into economic, public discussed in the following section. service, and social in this report. However, our main focus has been 5.3 Our framework on identifying what we consider to be the largest and farthest- 5.12 Our commission is to consider reaching impacts of migration and, how limits on Tiers 1 and 2 can in particular, of migration through contribute towards achieving Tiers 1 and 2. net migration in the ‘tens of thousands’, with reference to the 5.15 To construct the list of impacts that economic, public service and we focus on, we complemented social impacts of migration. We our own thinking with discussions identified three broad issues we with migration experts and believe we need to address in policymakers, an assessment of order to answer that question, the existing academic literature, which we discuss in more and consideration of the evidence detail below: we received from corporate
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partners. The same factors on the provision of services by were mentioned and discussed public libraries. We were told that repeatedly. Therefore, we are migrants make disproportionately satisfied that we have considered high use of such facilities and that, the most relevant impacts of in some cases, migrant demand migration in producing this report, has made it more difficult for UK given the time and evidence citizens to access library services. available to us. We consider: However, we were also told that use by migrants of public libraries • economic impacts to include has led to more diverse services those on GDP, GDP per head, being offered, which can then be inflation and the public finances. enjoyed by all local residents. These effects will manifest themselves, in part, through the 5.18 Having compiled a list of labour market, so employment, economic, social and public unemployment and earnings are service impacts, it would then also relevant; be desirable to use a consistent and all-encompassing analytical • public service impacts to be framework to analyse them. As on both the supply of public we discussed earlier, there are services (through the part that numerous challenges involved in migrants play in the provision of constructing such a framework. these services) and the demand In practice, our assessment of for them (through migrant use of the impacts needs to be part such services); and quantitative and part qualitative, and based on sound logic. • social impacts to include consideration of diverse 5.19 Over the course of our factors such as congestion, consultation several corporate crime, the housing market partners told us that the economic and social cohesion. impacts of migration should be considered over the social and 5.16 Whatever precise categorisation public service impacts. This was is used, there are numerous argued on the basis that the fiscal complex inter-linkages between support necessary to strengthen various economic, public service public finances could only be and social impacts of migration: achieved by establishing a secure for example, an immigrant’s economic base and nurturing impact on social cohesion may, in economic growth. However, other turn, depend on his or her impact corporate partners were keen on other areas such as education, to emphasise the importance of housing and healthcare. migrants in the provision of UK public services. They argued that 5.17 Nor can our list of migration the size of migrants’ contribution impacts be complete. To provide to sectors such as social care is one specific example of how not fully reflected in economic nuanced and widespread the indicators such as earnings, and impacts of migration can be, more thus migration policy decisions than one corporate partner told should not be based purely on us that migration has an impact economic considerations.
118 5.20 In this report we do not assign consideration is based on a any weights to the economic, combined assessment of the social and public service impacts available evidence and the likely of migration. Instead, we consider or known characteristics of these impacts individually, as well such migrants. as alongside one another, in our overall assessment of the various Objective costs and benefits of migration. Of course, it is possible that the 5.22 The objective of reducing overall relative magnitudes of these net migration to the tens of impacts may vary, in which case thousands by the end of this it would be necessary to give Parliament, interpreted literally, the largest impacts the greatest means reducing overall net consideration when determining migration, as reported in LTIM the limits on Tiers 1 and 2. data, from the provisional ONS estimate of 196,000 in 2009 to a level below 100,000 and above “CBI members believe that the zero by May 2015. potential impact on the economy of restrictions in Tiers 1 and 2 outweigh 5.23 The Minister of State for the public service and social impacts Immigration has stated that of migration through these tiers. The limits to Tier 1 and Tier 2 will committee has previously noted the not be the only means by which net fiscal contribution migrants in this objective is to be achieved, these categories make to the UK. As although the contribution of these we approach what is likely to be a migration routes in 2011/12 is the slow and fragile recovery, the potential requested focus of this report. In economic cost, particularly in terms of answering the question we have employment growth, of restrictions in been set we had to consider two these tiers must be paramount.” key questions in terms of the Government’s broader objective The Confederation of British Industry for net migration: response to MAC consultation. • First, what does the target range of tens of thousands imply in 5.21 Our consideration of the economic terms of the precise objective impacts of migration is set out for net migration? in more detail in Chapter 7. We discuss the social and public • Second, what proportion of the service impacts in Chapter 8. required total reduction in net Our assessment of each impact migration should come from begins with a discussion of the reduced flows throughTiers theory, followed by the evidence. 1 and 2? In our assessment of each impact we first consider the effects of 5.24 We need to make an assumption migration more generally, before on the first issue in order to focussing on Tier 1 and Tier 2 address the second one, which is migrants. There is little specific central to our remit. We believe evidence on the impacts of that a reasonable approach for Tier 1 and 2 migrants, so our this report is to assume that the
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policy for non-EEA migrants 5.28 As important as the precise needs to be set such that the trajectory, or level of visa Government can be as confident reductions in 2011/12, is the policy as possible, if not certain, that that is put in place to underpin overall net migration will be within those reductions in order to the tens of thousands range by ensure that the UK continues to the end of this Parliament. bring in those migrants it most needs. This critical issue is a key 5.25 To determine the required limits to focus of Chapter 9, where we Tier 1 and Tier 2 in achieving the consider policy design issues Government’s objective it is also and make a series of policy necessary to make assumptions suggestions to support the about the future levels of migration required limits to Tiers 1 and 2. of British and EU nationals. We consider this issue in more detail, 5.4 Implications alongside further analysis of the Government’s objective for net 5.29 The advice we have been asked migration, in Chapter 6. to provide is not in relation to whether limits on overall net Trajectory migration represent the right policy, but on how limits to Tiers 5.26 In terms of trajectory, we could 1 and 2 should contribute to this apply relatively large reductions objective. In doing so, we need to (low limits) to Tier 1 and Tier 2 consider the criteria to be used in migration in 2011/12. Alternatively, developing migration policy, the we could apply smaller reductions objective of the policy, and the (higher limits) to Tier 1 and Tier trajectory by which we progress 2 in that year if we believe that to where the objective implies this would be most beneficial, net migration needs to be. Our or least detrimental, to the UK approach in the remainder of this economy. The final option is to report is as follows: apply limits on Tier 1 and Tier 2 in 2011/12 that are proportionate to • In Chapter 6 we consider the reductions in subsequent years, potential implications of the so that the overall reductions to Government’s objective of Tier 1 and Tier 2 migration follow a reducing overall net migration linear trajectory over the course of for the limits on Tiers 1 and 2. this Parliament. • In Chapter 7 we consider the 5.27 In considering trajectory we take evidence on some of the main into account the evidence we economic impacts of migration received from corporate partners in general, and its applicability on the potential to upskill the to Tiers 1 and 2 in particular. resident workforce in order to adapt to a reduction in Tier 1 and • In Chapter 8 we do likewise in Tier 2 migration. Our consideration terms of some of the main public of such issues is discussed in service and social impacts. more detail in Chapter 9.
120 • In Chapter 9 we consider the coverage of the limits for Tiers 1 and 2 and set out the limits that we believe are required to meet the Government’s objective. We also examine what amendments could be made to the design of Tiers 1 and 2 in order to ensure the best possible outcomes for employers while working towards this objective, with reference to the economic, public service and social impacts of migration.
5.30 Finally, in Chapter 10 we summarise the conclusions of this report and set out the potential ways in which policy decisions and improvements to the evidence base would help to better inform the setting of limits to Tiers 1 and 2 in future years.
121 Chapter 6 Objective
6.1 Introduction 6.4 Advice contained in this report is also limited to Tiers 1 and 2. We 6.1 This chapter discusses the have not been asked to consider implications for Tiers 1 and 2 of the student, family or other work- the Government’s objective of related routes. Nevertheless, the reducing overall net migration to Government’s objective for net the ‘tens of thousands’ by the end migration cannot be met through of this Parliament. We consider a limit on Tiers 1 and 2 alone. the implications for Tiers 1 and Figures presented in this chapter 2 combined. The implications show that these routes represent for each tier individually, and only a fraction of flows. Therefore, for routes within those tiers, are even closing Tiers 1 and 2 will considered in Chapter 9. not reduce net migration to the tens of thousands. As a result, we 6.2 There are four parts to this need to make some assumptions chapter. First, we examine the about the contribution that Tiers 1 objective for net migration itself. and 2 must make to reducing net Then we discuss migration that is migration and, therefore, the flows not within the scope of a limit on through other routes. Tiers 1 and 2, including migration of British and EU nationals, and 6.2 Defining the objective for migration for the purposes of net migration asylum. Third, the implications of the Government’s objective for 6.5 The Government’s objective is potential flows through Tiers 1 and that net migration will be reduced 2 are analysed. The last section to the tens of thousands by the summarises the implications of the end of the current Parliament. analysis in this chapter. This objective could, in principle, imply net migration of any level 6.3 When this report was above zero but below 100,000. In commissioned by the Home this section we consider how net Secretary, it was explicitly migration is measured and what requested that we provide our precisely tens of thousands could advice with reference to the or should mean in practice. Government’s objective of reducing overall net migration 6.6 Net Long Term International to the tens of thousands. In this Migration (LTIM) in 2009 was report, we therefore take that 196,000. Arithmetic dictates that objective as given. net LTIM needs to decrease by
122 between 96,000 and 196,000 which is commonly expressed from current levels by the end as a confidence interval. For of this Parliament to achieve net example, we estimate in Annex migration in the tens of thousands. B that there is a 95 per cent For planning purposes, we probability that the true IPS assume the end of this Parliament figure for net migration in 2009 to fall in spring 2015 prior to the will approximately lie within presumed General Election in +/- 37,000 of the estimate May 2015. produced. In other words, if the IPS were conducted 6.7 The calculations in this chapter 100 times in 2009, the are based on the assumption that resulting LTIM estimates of there will be limits on Tiers 1 and net migration would fall 2 in each of the four years from between 159,000 and 233,000 2011/12 to 2014/15, covering a in 95 out of 100 times. period running from April 2011 to March 2015. We have chosen this • Second, even for the flows that period because it corresponds as the Government can control, it is closely as possible to the lifetime not straightforward to estimate of this Parliament. However, lags the impact of policy changes in the reporting of LTIM mean that, on net migration. Various according to current reporting assumptions need to be made schedules, the latest estimates in order to calculate how a available in May 2015 will relate to reduction in visas issued under the year ending June 2014. the Points Based System will affect the numbers recorded as 6.8 We assume that the Government entering or leaving the UK in chose to express its objective the IPS. Further details about in terms of a range rather than how we calculate the impact of a precise number, at least in reductions to Tier 1 and 2 flows part, because of the uncertainty on net migration are given in involved in predicting the future Annex B. path of net migration. Uncertainty will also increase when • Third, there is inherent considering levels of migration uncertainty involved in further away in time, in the way assessing what may happen in that long-term weather forecasts the future. Assumptions about are less precise than short-term future flows and how policy ones, or the way the ranges may affect these will generally around the Bank of England’s be based on historic data. inflation forecasts become wider However, the past may not the further ahead into the future necessarily be a good guide to they look. There are a number of the future because, for example, sources of uncertainty: migrants and employers may change their behaviour in • First, because the International response to policy changes. Passenger Survey (IPS) is a sample survey, the resulting 6.9 A major additional source of estimates of net migration uncertainty is that the Government have a certain margin of error has no direct control, through
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migration policy, over some achieving net migration in the components of net migration, tens of thousands is to aim for such as British and EU migration. the middle of that range. For These flows may change, and the purposes of the calculations will have consequent impacts on in this chapter, we assume a net migration, regardless of what precise objective for net migration immigration policy is adopted. One of 50,000 in 2014/15. This suggestion made at a number of assumption does not constitute our consultation events is that the a judgement about what the Government should consider only Government’s precise objective is, non-EU migration for its objective, nor what it should be. We consider in order to remove some of the in later chapters what would be uncertainty around flows it cannot the implications of a different directly control. assumed objective.
6.10 Nonetheless, the terms of 6.3 Accounting for flows reference for this work, and the outside the scope of a limit discussion and calculations in this report, assume the objective 6.14 Estimates of LTIM are comprised relates to overall net migration of of British, EU and non-EU flows all nationalities. measured by the IPS (the IPS component) and adjustments that 6.11 The implication of the above is are made to take into account that whatever policy is adopted, visitor and migrant switching, flows we cannot be certain that net to and from the Irish Republic migration will be in the tens of and asylum seekers (the non-IPS thousands by the end of this component). In terms of migration Parliament. We provide further policy, the Government has less detail on how the potential error control over the British, EU and might be quantified in Annex B. non-IPS components. Thus, any reduction in overall net migration 6.12 Although there are good reasons can only be achieved by reducing for the Government to prefer net non-EU migration, which is to use a target range, for the measured in the IPS. To calculate purposes of calculating specific the reduction in non-EU migration required limits for Tiers 1 and that must be made for the 2 it is necessary to work with Government to meet its objective, an assumed precise objective we must make some assumptions for overall net migration. One regarding trends in British, EU and option for determining a precise non-IPS net migration over the objective for net migration is to lifetime of this Parliament, despite aim for a level that maximises the difficulties and uncertainties the probability of measured associated with doing so. net migration in 2014/15 being between zero and 100,000. 6.15 In addition, the first annual limit on Tier 1 and 2 migration will apply 6.13 Given the scale of uncertainty, to 2011/12. The latest provisional and assuming that the upside LTIM estimates of net migration and downside risks are equally available are for 2009. Therefore, balanced, the best chance of to calculate the scale of reductions
124 required in non-EU migration we British, EU and non-IPS also need to make an assumption net migration over the lifetime on what the baseline level of overall of this Parliament. net migration will be in 2010/11. Predicting future migration flows 6.16 This section first provides further discussion of the difficulties in 6.17 Table 6.1 shows the 2009 levels forecasting or predicting future for the various flows we discuss in British, EU and other net migration this section. In order to isolate the flows. We then outline the key flows over which the Government assumptions we make for both has more direct control, the table the 2010/11 baseline of overall net first distinguishes between the IPS migration and the likely trends in and non-IPS components of LTIM,
Table 6.1: Estimates of Long Term International Migration by nationality and reason for migration, 2009
Under 2009 LTIM / IPS (thousands) government control? Inflow Outflow Net Long Term International Migration (LTIM) - 567 -371 196
Non-IPS components (1) No (2) 39 -34 5 IPS components 528 -337 191 British No 91 -127 -36 EU No (3) 145 -102 43 non-EU Yes 292 -109 184 work Yes 55 * (4) * (4) formal study Yes 163 Accompany / join (family) Yes 54 other / no reason (5) 20
Note: (1) These are MAC calculations based on the provisional estimates of total Long Term International Migration and estimates by nationality from the International Passenger Survey (IPS). The finalised figures that are to be published in November 2010 may differ slightly. (2) The non-IPS components refer to flows in the Long Term International Migration estimates that are not derived from the IPS. These include adjustments made by the Office for National Statistics for asylum seekers, over which the Government has a small amount of discretion, migrant switchers, visitor switchers, and flows to and from the Irish Republic, over which the Government has less direct control.As discussed in Chapter 3, migrant switchers are defined as those that intended to enter or leave the UK for more than one year, but who actually entered or left for less than one year. Visitor switchers are defined as those that intended to enter or leave the UK for less than one year, but who actually entered or left for more than one year. (3) The Government currently has in place transitional arrangements for citizens of Bulgaria and Romania. (4) Reason for migration is not shown for Outflows or Net migration, as these figures do not relate to what a migrant has been doing while in the UK. (5)There is no information relating to the reason why migrants in the ‘other’ and ‘no reason’ categories came to the UK or what type of visa they are likely to have held. Source: MAC analysis of International Passenger Survey, 2009, published in Office for National Statistics (2010c)
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and then disaggregates the IPS balanced out, resulting in no clear components by nationality and upward or downward trend. At reason for migration. times of greater EU net inflows, these have been balanced by 6.18 There are no official forecasts greater net outflows of British of net migration. The Office nationals. Similarly, when EU net for National Statistics makes inflows have been smaller, net assumptions about future levels outflows of British nationals have of net migration in order to inform also been smaller. population projections. However, although these are based on 6.21 There is a possibility, however, expert opinion and analysis, they that British and EU flows will not are only assumptions. Some continue to balance each other researchers, for example Mitchell out in the future. Net British and Pain (2003) and Hatton outflows in 2009 were less than (2005), have attempted to identify half the magnitude of those economic factors which drive recorded in 2008, illustrating the net migration, such as relative volatility of that variable. There labour market conditions in the are also a number of upside and source and destination countries. downside risks that could mean In theory, if it were possible to that British and EU net migration forecast the drivers of migration may vary significantly in the accurately, and if those drivers future, including: had a stable and predictable relationship to migration flows, • the lifting of transitional it would be possible to use the arrangements in place in other drivers to forecast migration. European countries, designed In practice, neither of these to regulate access to the labour conditions fully holds. market for nationals of the countries (the A8) that acceded 6.19 In Annex B we estimate, based on to the EU in 2004, could mean historic data, that there is a 95 per that fewer A8 nationals choose cent probability that net British, to come to the UK; EU and non-IPS net migration will be between -37,000 and 61,000 • comparative economic in 2014. To put these figures into conditions between other context, between 1991 and 2009, countries and the UK may the maximum level of British, EU change, resulting in greater and non-IPS net migration was inflows and lower outflows or 65,000 and the minimum was vice versa; -24,000. The range of uncertainty is illustrated in Figure 6.1 and • future accession of countries to discussed in more detail in the EU or lifting of transitional Annex B. arrangements for Bulgaria and Romania may increase EU 6.20 Both net British outflows and inflows; and net EU inflows have increased in magnitude in recent years • in the event that employers are (although not consistently). But, prevented from recruiting non- in combination, they have broadly EU nationals, they may seek to
126 Figure 6.1: Probability distribution around the assumption that future British, EU and non-IPS net migration will stay constant over time
80
60 95%
40 75%
50% 20 25%
25% 0 50%
-20 75% Net migration of British, EU
and Non-IPS components (000s) 95% -40
-60 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Note: The chart shows the probability distribution, or confidence intervals, around the assumption that net migration from British, EU and non-IPS will stay constant going forward. The probability distribution is calculated assuming a normal distribution of errors, with mean 12,000 and the assumed standard error listed in Annex B. The standard errors were calculated from the distribution of errors that result if actual historical net migration figures are compared with the assumption that net migration would have stayed constant t+h periods ahead. Source: MAC analysis of estimates of Long Term International Migration (LTIM) 1991-2009 (provisional), published in Office for National Statistics (2010c)
recruit British or EU nationals and international events. The who are currently living at home magnitude of switching between or abroad, which may either migrant and visitor categories (i.e. decrease outflows or increase the adjustments the Office for inflows and effectively displace National Statistics (ONS) make any effect of a limit on Tier 1 for those that originally intend to and 2 migration. enter or leave as a migrant, but actually only stay long enough to 6.22 There is also no clear trend for be counted as a visitor, and vice the non-IPS components of LTIM. versa) is also difficult to predict. Asylum flows are very difficult Any further changes to the LTIM to predict accurately. Between methodology used by the ONS 1998 and 2003 asylum flows will also affect the way these flows were particularly large owing themselves are measured. to a mixture of policy changes
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Assumptions about future inflows of work-related and family migration flows migration have fallen over the last five years. Furthermore, we do not 6.23 In the absence of any reliable model the impact of interim limits method for forecasting migration on net work-related migration in flows, we must make assumptions 2010/11, although we expect such about what levels might be impacts to be small. expected over the lifetime of this Parliament, while recognising the 6.26 Inflows of those coming for potential risks associated with formal study have grown almost such assumptions. exponentially. If student inflows continue to rise, the calculations 6.24 Our basic working assumption set out in this chapter, and is that net flows of the British, subsequent policy suggestions EU and non-IPS components, in this report, may not make over which the Government has sufficient contribution towards less control, will remain constant the objective of net migration in from 2009 levels until 2010/11 the tens of thousands. However, and, further, until the end of this in the absence of any further Parliament. This assumption is information, we assume for our partially informed by analysis of baseline that flows from outside recent trends. the EU will remain constant at their level in 2009. 6.25 Net migration for non-EU flows that the Government can control 6.27 In summary, on the basis of the will largely depend on Government above discussion, we work with policy. In 2009, net migration of the assumptions that: non-EU nationals recorded in the IPS was 184,000. Our central • the baseline for net migration estimate for 2010/11 holds that in 2010/11 is equal to the level figure constant at its 2009 level. of overall net migration in However, it may not necessarily 2009 (assumption (a) in Table be the case that flows outside the 6.2); and limit on Tiers 1 and 2 will remain constant in the absence of policy • net migration of the British, EU change. As set out in Chapter 3, and non-IPS components of
Table 6.2: Calculating the reduction in net non-EU migration required to meet the Government’s objective of ‘tens of thousands’
(a) Assumed net Long Term International Migration (LTIM) in 2010/11 196,000 (b) Assumed precise objective for LTIM in 2014/15 50,000 (c) Assumed change in net British and other EU migration between 2010/11 & 2014/15 0 (d) Required reduction in non-EU net LTIM over four years between 2010/11 & 2014/15 (a-b-c) 146,000 (e) Reduction in non-EU net LTIM each year (d / 4) 36,500 Source: MAC analysis
128 LTIM will remain constant over might make towards reducing net the lifetime of this Parliament non-EU migration, taking account (assumption (c) in Table 6.2). of the contribution other routes may make. The Government has 6.28 Therefore, the Government would not yet stated what contributions need to reduce net non-EU work, the different immigration routes family and student migration should make towards meeting the by 146,000 over a period of objective, and it is not within the approximately four years. This remit of this report to carry out a calculation is outlined in Table 6.2. formal assessment of the value of This implies an average reduction migration through the student and of 36,500 in net non-EU migration family routes (‘formal study’ and in each year over that period. Net ‘accompany / join’ respectively in migration of non-EU nationals was Table 6.1). 184,000 in 2009, and therefore assuming this level stays constant 6.32 In the absence of a formal in 2010/11, these reductions are comparison of the costs and equivalent to around 20 per cent of benefits of migration through that baseline figure in each year. different routes, a potential starting point for considering what 6.4 Estimating the implications share of a reduction in overall net for Tiers 1 and 2 migration each may provide, is to look at their share in net migration 6.29 In this section we discuss the to date. contribution that Tiers 1 and 2 might make towards achieving 6.33 Ideally, we would base the assumed objective of net contributions on relative shares migration of 50,000. Calculations of net migration flows that the in this section are based on the different routes represent. But required reduction in non-EU attempting to estimate shares of migration we calculated in Table net migration is difficult because, 6.2 (above) of 36,500 per year. although the IPS inflow data can be disaggregated into work- 6.30 It is clear from Table 6.1 that related, study, and accompany shutting down non-EU work- / join categories, there is no related migration (which includes equivalent data that allow IPS Tier 1 and 2 migration) will not outflows to be disaggregated bring net migration down to the by specific reason for previous tens of thousands. In 2009, net immigration. We have attempted migration was 196,000. In the to circumvent this problem by same year non-EU work-related calculating different routes’ inflows were 55,000. All other contributions to future outflows things being equal, reducing non- on the basis of past inflows and EU work-related inflows to zero migrants’ lengths of stay in the would only bring net migration UK. Using this approach, we down to 141,000. found that the proportion of each category to total non-EU net 6.31 It is therefore necessary to assess migration was broadly similar to the contribution that Tiers 1 and 2 the proportion of total non-EU
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inflows. However, the calculation Table 6.3. It is important to stress was problematic because it that these figures are based on was not possible to reconcile a number of assumptions and successfully the resulting we calculate the percentages by estimates for outflows with actual excluding migration for ‘other’ or IPS outflows for all migration ‘no’ reason from the total. Further routes. This analysis is described detail on how we convert specific in more detail in Annex B. migration routes into IPS flows is provided in Annex B. 6.34 We, therefore, look at the contribution that work-related and 6.35 Based on the above, it is possible Tier 1 and 2 migration make to to consider options, albeit crude inflows, relative to other routes, ones that do not take into account rather than to net migration. Such the relative costs and benefits of a comparison is set out in each route, in terms of what share
Table 6.3: Non-EU International Passenger Survey inflows by reason for migration and assumed contributions of Tier 1 and 2 migrants and dependants, 2009 Percentage of inflow IPS and estimated (excluding other / no inflows (000s) (1) reason) (2) Total 292 100
Work-related 55 20 …of which Tiers 1 and 2 28 10 …of which other work-related (3) 28 10
Study 163 60
Accompany / join 54 20 …of which dependants of Tier 1 and 2 migrants 17 6 …of which dependants of other work-related routes (3) 3 1
Other / no reason (not included in percentage column) 20 -
Note: (1) Actual IPS inflows for 2009 are shown in bold. The figures that are not in bold are calculated using the proportion of visas that are likely to match that IPS category. The visas that we allocate to each IPS category are listed in Annex B. (2) Proportions of inflows accounted for by Tier 1 and 2 migrants and dependants are calculated by apportioning IPS inflows according to the same proportion as visas in each IPS category in 2009. For example, in 2009 approximately 50 per cent of work-related out-of-country visas were Tier 1 and 2 and, therefore, we assume that 50 per cent of IPS work-related inflows were Tier 1 and 2 migrants. (3) Other work-related includes Tier 5 and permit-free employment. Source: MAC analysis of the International Passenger Survey, 2009, published in Office for National Statistics (2010c); Home Office Control of Immigration statistics (2010)
130 of the total reduction in non-EU • Option B: We adopt a migration may be allocated to proportionate approach, Tiers 1 and 2. allowing the Tier 1 and 2 main applicants to make a combined 6.36 We identify two options, both of contribution in proportion to which assume that total work- their actual share of IPS inflows. related migration should contribute This implies a contribution of 10 to the necessary reduction in net per cent, but would additionally non-EU migration in proportion require that Tier 5 and permit- to its share of inflows, i.e. 20 per free employment also make cent. This implies that, in order a 10 per cent contribution for the Government to meet its to reducing net migration objective, student and family in proportion to their share routes need to contribute the of inflows. The 10 per cent remaining 80 per cent of the represents the share that Tiers 1 required reduction. This implies and 2 inflows account for in IPS that student and family net inflows, shown in Table 6.3. migration would need to reduce by 116,800 by the end of this 6.37 Table 6.4 sets out the implications Parliament, which is equivalent to of these options in terms of the 29,200 per year (over four years). reduction required per year. The two options differ in terms of the contribution that the other 6.38 Additionally, both options are work-related routes (Tier 5 and likely to lead to a reduction in the permit-free employment) would volume of dependants. A simple need to make. The options are: assumption is that dependant flows would reduce in proportion • Option A: Tier 1 and 2 main to reductions in main applicants. applicants make a combined Because dependant flows are contribution on behalf of all linked to those of main applicants, work-related migration. This we consider whether or not implies a contribution that dependants should be included amounts to 20 per cent of the within the limit in Chapter 9. reduction in non-EU migration.
Table 6.4: Options for required net Long Term International Migration reductions per year, 2011/12 to 2014/15
Percentage of Net non-EU LTIM total reduction Total reduction required net non- EU migration per year 36,500 100 Option A: reduction required from Tiers 1 and 2 per year 7,300 20 Option B: reduction required from Tiers 1 and 2 per year 3,650 10
Note: LTIM refers to Long Term International Migration. Required reductions are based on calculation of a reduction in net non-EU migration from 196,000 to 50,000 over four years. Source: MAC analysis
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6.39 The calculations set out above 6.42 A limit on Tiers 1 and 2 cannot relate to IPS net migration, and do deliver the objective on its own not make any assumptions about because those routes represent whether they are achieved via only a small fraction of overall reductions in inflows or increases flows. Therefore, the second in outflows. We have also made question we asked was what calculations in terms of reductions contribution Tiers 1 and 2 should required per year. We discuss the make towards achieving the policy options for achieving these objective. Answering this question reductions, and the trajectory requires assumptions to be those policy options might follow, made regarding the potential in Chapter 9. contributions of other migration routes towards achieving the 6.5 Implications overall objective for net migration. This is not something the 6.40 This chapter set out to answer Government has asked us to two key questions in order to consider. We, therefore, assume inform the calculation of a limit that the contribution that Tiers 1 for Tiers 1 and 2 that contributes and 2 should make towards this towards net migration of tens of objective is either in proportion thousands. First we asked what to the work-related share of non- precise objective for migration is EU IPS inflows, or the estimated consistent with the Government’s corresponding share of Tier 1 objective. We believe that the and 2 main applicants. policy impacts and levels of migration through routes the 6.43 The resulting reductions in Tier 1 Government has less control of and 2 migration, as measured by are so uncertain that it is plausible the IPS, from assumed levels in that net migration could exceed 2010/11 are as follows: the upper or lower bounds of the tens of thousands range whatever • If the limit contributes to the policy is adopted. Nonetheless, total reduction in proportion the chances of reaching tens of to the share that work-related thousands should be maximised migration accounts for in IPS by aiming for net migration of inflows (bearing in mind that 50,000. other routes also contribute to work-related inflows), this 6.41 Based on the above, and making yields a reduction in IPS a number of assumptions about net migration of 7,300 main the magnitudes of other migration applicants per year. flows in the future, we calculate that net non-EU migration • If the limit should contribute recorded in the IPS would need to only in proportion to the fall by 146,000 between 2010/11 contribution that Tiers 1 and 2014/15 for the Government and 2 make towards inflows, this to have the best chance of being yields a net migration reduction able to demonstrate that it has of 3,650 main applicants per met its objective by the end of year: half the magnitude of the this Parliament. above approach.
132 6.44 The uncertainty around future • whether it is appropriate to British, EU and non-IPS net assume a linear trajectory for migration means that the objective Tier 1 and 2 migration (i.e. for net migration in the tens of whether visas issued should fall thousands is, in a sense, a by the same amount each year, moving target over time. as assumed above); and Therefore, it is important to emphasise that these calculations • given that the IPS defines relate only to reductions in migrants as those coming to 2011/12. These calculations would or leaving the UK for one year need to be revisited in following or more, how to translate years in light of any changes these reductions into limits to the level and composition of on visas issued. overall net migration. 6.47 The above issues are discussed 6.45 The assumptions made in this in Chapter 9. In the next two chapter, and resulting calculations, chapters we discuss the are summarised in Annex C. economic, social and public service impacts of migration, 6.46 There are a number of issues that with particular reference to Tiers need to be considered further in 1 and 2. order to arrive at a numerical limit for Tiers 1 and 2. These include:
• whether reductions should be met via reductions to inflows (i.e. visas issued) or via increases to outflows (i.e. restricting extensions and switching between routes);
• whether a specific limit for dependants of Tier 1 and 2 migrants is required, or whether it should be assumed that dependants will reduce ap proximately in line with
main applicants;
• which routes under Tiers 1 and 2 should be included within the limits on those tiers, in order to contribute to the reductions set out above;
133 Chapter 7 Economic impacts
7.1 Introduction 7.3 Our discussion of each impact begins by examining the theory. 7.1 The rationale for Tiers 1 and 2 of We then examine the empirical the Points Based System (PBS), evidence available to assess the as stated when it was put in place presence and magnitude of any by the former Government (Home impacts. Each section concludes Office, 2005d and 2006), was to with discussion of the potential fill skills gaps, to attract highly implications for Tiers 1 and 2, productive and highly skilled given the heterogeneity of skills workers, to attract investment and characteristics of migrants and to increase productivity and coming to the UK through flexibility in the labour market. these routes. The selection mechanisms that constitute Tiers 1 and 2 were 7.4 All things being equal, Tier 1 and designed to better identify and 2 migration clearly has a positive attract migrants who have the impact on GDP through its affect most to contribute to the UK. on the size of the UK workforce. Therefore, the economic impacts In a straightforward static analysis, of Tier 1 and 2 migrants are likely Tier 1 and 2 migration makes a to be different from those of other small but positive contribution to migrants on average. GDP per head. Such effects will accumulate over time and become 7.2 In this chapter we review the more significant. Furthermore, the theory and evidence on four key impact on GDP per head will also economic impacts: be influenced by dynamic factors such as the impact of migration • economic growth and Gross on productivity, trade, investment Domestic Product (GDP) and skill development of per capita; resident workers.
• prices and inflation; 7.5 The above effects will not be evenly distributed. A reduction • the labour market; and in migration through Tiers 1 and 2 will have significant effects on • the Government’s budget (also the micro-economy, in terms of known as the net fiscal impact). the impacts on individual sectors and occupations, particularly those that make heavy use
134 of skilled migrant workers, or 7.2 Economic growth and GDP which rely on them to attract and per capita support trade and investment. However, the economy will adjust Theory to some extent. Employers will have stronger incentives to train 7.7 Migration can have an impact resident workers or there may on the rate of growth of the be capital deepening. There may economy, as measured by the also be expansion in sectors and growth in GDP. The House of occupations that are less reliant Lords Select Committee on on migrant workers. Skills policy Economic Affairs report on the can also play a critical role in economic impact of immigration mitigating any adverse effects of (House of Lords, 2008) argued: reduced Tier 1 and 2 migration. “GDP – which measures the total output created by immigrants and 7.6 As set out earlier in this report, we pre-existing residents in the UK commissioned Professor Christian – is an irrelevant and misleading Dustmann and Dr. Tommaso measure for the economic impacts Frattini of E Policy Limited to of immigration on the resident investigate the economic cost- population. The total size of the benefit analysis of migration economy is not an indicator of (Dustmann and Frattini, 2010). prosperity or of residents’ This chapter draws on that living standards.” report and on the contributions made to our consultation by 7.8 The House of Lords report the Cross-Whitehall Migration suggested that GDP per capita Analysts Group chaired by the is a more appropriate measure Home Office with HM Treasury, than GDP as it takes into account the Department for Work and the growth in both GDP and Pensions, the Department population as a result of migration. for Business, Innovation and However, GDP per capita can Skills, the Department of increase as a result of migration Health, the Department for through a simple ‘averaging Education, the Office of National effect’: if a new migrant has a Statistics, the Department for higher income than the average International Development, the of the population as a whole, GDP Foreign and Commonwealth per capita could increase without Office, Communities and Local affecting the average income of Government, and the Cabinet the rest of the population. The Office representatives. However, report recommends that, “Rather all views expressed are our own, than referring to total GDP…, unless otherwise indicated. the Government should focus on the per capita income… of the resident population.”
7.9 We agree with the sentiment of the report discussed above. However, we recognise that the availability of data and evidence required to assess the impact of
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migration on the GDP per capita of of scale. Migration can affect the resident population is limited. the level of productivity in the economy through several 7.10 To assess the impact of migration mechanisms. on GDP per capita, it is important to consider its key determinants. 7.12 Migration may generate benefits There are a large number of from specialisation through theories and models in the increasing the range of skills academic literature that examine available in the economy. This is this issue. Here we discuss an extension of the arguments some of the main issues that that traditionally support the gains have emerged: from trade in goods and services. Increased specialisation of labour • Does migration boost will mean workers specialise productivity through in the production of goods and complementing existing services in which they have a residents’ skills and capital, comparative advantage. This and through increasing the would increase the efficiency, and overall skills available and thus productivity, of migrant as providing spillover benefits to well as non-migrant workers. the economy? 7.13 Migration may also generate • Does migration boost trade and ‘spillover’ benefits, such as inward investment? improved process and product innovation and through increased • Does migration boost other research and development. As components of trend economic discussed in the joint Home growth relative to the change in Office and Department for population size? Work and Pensions submission to the House of Lords Select 7.11 Regarding the first question, Committee on Economic Affairs productivity is a measure of (Home Office and Department how well an economy can convert for Work and Pensions, 2007), available inputs into outputs. It migration, particularly highly- can be measured by either skilled migration, can increase examining the output per unit of both process and product input, for example, output per innovation for firms through worker or output per hour contact with people from different worked, or by measuring output backgrounds and experiences. per unit of aggregate input, Drinkwater et al. (2007) theorise known as Total Factor Productivity that skilled migration can increase (TFP). TFP measures how the incentives to engage in more effectively capital and labour are skill-intensive research and used together in the economy development activity, thereby and depends upon a range of increasing long-term growth. other effects, such as skills, technology, organisation, 7.14 The impact of migration on competition and economies productivity, in the form of output
136 per worker, will also depend on businesses based overseas, may the amount of capital available in require migrants in connection the economy. The more capital with the supply of those services available per worker, the more to clients in the UK. For example, productive each worker will be. If global consultancy firms who the economy adapts to migration provide services to UK clients may by accumulating capital, there need employees to be based in may be positive, dynamic effects the UK to deliver those services. arising from migration which may The alternative may be for these in the longer run dwarf any initial services to be delivered offshore. static effects on GDP and GDP The advantage of the former is per capita from having fewer that it encourages investment migrants employed in the UK. by overseas firms, boosting growth in the economy and 7.15 Migration may also have negative increasing tax revenues. implications for productivity. It may reduce the incentives for 7.18 Businesses based overseas that employers and governments want to establish or maintain to upskill and provide training a branch in the UK may wish to the resident workforce. This to transfer staff with necessary effectively reduces the ability of company-specific skills to the UK the resident workforce to compete branch. The extent to which they for skilled jobs. This effect may are able do so will be a material be amplified if resident workers factor in their decision to establish are discouraged from competing and maintain their investment in in the labour market and opt out the UK. of investing in training and further education and take low 7.19 Migrants may expand trade skilled employment. in goods and services across countries, both through their 7.16 Regarding the second question, own innovation and through the migration can play an important innovation of the business and role in influencing levels of trade personal networks they generate and investment. Facilitating (Neumark and Mazzolari, 2009). trade and investment with other countries can, in some cases, 7.20 Migrants may have a greater increase labour demand, create tendency than the resident employment opportunities for population to set up new resident workers and increase the businesses. Migration may also capital and range of services and lead to an increase in levels of technology available. This in turn enterprise among the resident can make resident workers more population if particular business productive and boost economic opportunities are created that growth and GDP per capita. would not have existed otherwise. For example, migration can 7.17 Trade in services, in other alleviate shortages of skilled words cross-border movements workers that may prevent of personnel employed by entrepreneurs and investors
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from expanding or starting new the population component of trend businesses in the UK. growth may have no effect on GDP per capita. 7.21 Certain types of migration, including low-skill migration, may 7.25 As discussed previously, also reduce the incentive to invest migration can have an impact in capital intensive production on productivity through methods. If it is cheaper to employ complementing and increasing low-skilled migrants to do labour the range of skills available in the intensive manual tasks than it economy and through potential is to invest in new production spillover effects. Migration can methods, migration may restrain also increase productivity and development in new technologies employment opportunities by and inhibit the productivity of the encouraging inward investment. workforce in those sectors. If the net impacts of migration on GDP, including these factors, are 7.22 Regarding the third question, the relatively greater than the impact impact of migration on GDP per of their addition to the population, capita through other components GDP per capita will increase. of trend economic growth will depend on the size of the impact 7.26 It is possible that increased on GDP relative to the change in competition with migrant workers population size. may induce an increase in individual labour supply for non- 7.23 An economy’s rate of trend growth migrants, thus increasing the represents the long-term growth average number of hours worked. potential of total GDP. The stylised model of trend growth used by the 7.27 The impact on the employment Office for Budget Responsibility rate will depend on the level of (OBR) and HM Treasury is based displacement of non-migrant on the accounting identity that workers that occurs as a result of the potential rate of growth is migration. This will largely depend determined by four underlying on the extent to which migrant components, each of which can and non-migrant workers are be affected by migration: complements or substitutes, which we discuss later in this chapter as • the size of the population aged part of the labour market impact 16 and over; of immigration. The employment rate taken together with the first • productivity; component, the size of the UK population aged 16 and over, • average hours worked per broadly gives the employment person employed; and level. Therefore, if a migrant gains employment without displacing • the employment rate. a resident worker, holding the other factors of economic growth 7.24 Migration increases the size of the constant, this will lead to a one for population aged 16 and over and, one increase in the employment holding all else equal, will raise level in the economy, thus leading the rate of trend growth. However, to economic growth. However,
138 taking the other extreme, if an Evidence additional migrant displaces one UK worker, then there will be no 7.30 Evidence on the impact of change in the employment level migration on GDP per capita is as a result and no impact on limited. We considered the three economic growth. questions raised above: the impact of migration on productivity, 7.28 The long-term, dynamic effects of inward investment and overall changes in net migration are likely trend economic growth relative to to be substantially larger than the change in population size. the short-term effects we have discussed above. The economic 7.31 There is broad US and European literature on ‘endogenous’ growth, evidence to show that migration, such as Aghion and Howitt particularly high-skill migration, (1997), indicates an important does increase productivity role for human capital spillovers through the mechanisms and scale effects in promoting described above. Using data productivity and (per capita) from the US, Peri (2010) showed GDP growth. These effects are that in the long run migration likely to compound over time, has improved productivity, so that a positive productivity employment and income, but spillover which is small initially it involved adjustments. In the accumulates into a large one. short run, when the economy is Therefore, the positive impact of growing, new migration creates skilled migration on productivity jobs in sufficient numbers to growth should increase over time. leave non-migrant employment This literature suggests that highly unaffected. However, during educated or high-skill migration downturns migration was found should bolster GDP per capita to have a small negative impact growth to a potentially significant on non-migrant employment. The degree over time. However, study finds that the long-term although the mechanism is widely productivity and income gains understood, it is difficult to identify become significant after 7 to these ‘virtuous circle’ growth 10 years. mechanisms empirically. 7.32 Huber et al. (2010) analysed the 7.29 In summary, there are a number of impact of high-skilled migration potential ways in which migration using data from European can have an impact on the level countries. The authors found a of GDP per capita. Next we positive impact on productivity discuss the available empirical and that the impact of high-skilled evidence in relation to the impacts migration is complementary to the discussed above. The academic industries within which they work. literature describes a variety of further and more complicated 7.33 Hunt and Gauthier-Loiselle (2008) mechanisms. However, there is examined the impact of migration often little evidence on how such on innovation by examining mechanisms work in practice. migrants’ propensity to patent in the US. They found that every 1 per cent increase in migrant
139 Limits on Migration
college graduates leads to a 6 per cent increase in patents per capita “Imposing a cap on ICTs would in the US. damage our ability to provide and deliver IT and technology projects 7.34 There is no equivalent academic – efficiencies, transformation, literature available which uses competitive advantage – that UK data from the UK. However, it may organizations demand of us. We be possible to infer the impact would need to seek to re-deploy of migration on productivity by some functions – regional ‘HQ’ examining the impact on wages. functions, such as HR, legal and In a perfectly competitive labour finance – outside of the UK, but the market, pay should reflect the impact would not just be on our own marginal productivity of labour business but also on our customers. in that occupation. The more The extent of the damage would productive workers are, the higher depend on the severity of any cap.” wages will be. We discuss this further in Section 7.4. Tata Consultancy Services response to MAC consultation 7.35 As part of our consultation, we received evidence from Tata Consultancy Services (TCS) which 7.36 The Wellcome Trust told us explained that intra-company that science is a key driver of transfers are an essential part of Britain’s economic prosperity and its business model. They told us competitiveness. They also told that introducing a limit on Tier 1 us that in 2007/08 11 per cent of and 2 migration would prevent UK all university academic staff and organisations from accessing and 12 per cent of biological sciences benefiting from global IT skills. staff were non-EU nationals. They said that if the UK wants its world- class universities and scientific institutions to remain globally competitive, it is absolutely crucial that these institutions continue to have access to the best global talent and expertise.
140 7.38 Regardless of whether a “In recent years there has been a systematic relationship between concerted effort by Government, migration and up-skilling of private sector and charitable resident workers can be observed organisations to encourage promising in historical data, up-skilling students to take up careers in remains a potentially important Science, Technology, Education way in which the UK economy and Mathematics (STEM) subjects. may adapt in response to reduced While the Wellcome Trust strongly availability of skilled and highly- supports these efforts, we see them skilled migrant workers. We as complementary to the need to received evidence from The attract talented international scientists Chartered Institute for Personnel to work in the UK. If the UK wishes to and Development (CIPD) that, in sustain its world-class reputation for the absence of a skilled migrant scientific research, we need the best worker to fill a role, the majority people, not just an adequate number of employers indicated that they of people.” would look harder within their own workforce or within the UK Wellcome Trust response to MAC workforce to fill the role. They said consultation that the result of this would be a less experienced and/or skilled worker filling the role. They said 7.37 Evidence on whether high-skilled that timescales for up-skilling migration discourages up-skilling would vary across occupations of the non-migrant workforce and that this would take longer for is limited and inconclusive due more skilled occupations. to difficulties in establishing the direction of causality. Baker and Wooden (1992) examined “Some employers, such as those the experience of Australia and who recruit for lower-skilled shortage found that skilled migration was occupations such as chefs, said correlated with reduced in-house that it would be relatively easy to training, although not external or train and up-skill resident workers, on-the-job training. The authors provided that a reasonable timeframe suggested that this is likely to be of a couple of years were given. because high-skilled migrants are Others, such as those employers over-represented in low-training that have difficulty filling more highly industries, rather than because skilled occupations in finance, IT, high-skilled migration limits engineering, doctor and nursing training provision. On the other vacancies, suggest that training and hand, Belletini and Ceroni (2002) up-skilling is a far lengthier task. They adopted a theoretical framework will require several years before they to show that the presence of are in a position not to rely on non- highly-skilled migrants may act as EEA migrant workers.” a direct incentive for investment in human capital accumulation. Chartered Institute for Personnel and Development response to MAC consultation
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7.39 The South West Forum for 7.41 HM Treasury told us that the Migrant Workers and the South potential economic benefits of West Regional Employment and trade agreements to the UK are Skills Board argued that evidence large. For example, the current supplied to them by Equality EU-Korea Free Trade Agreement Southwest suggests that there (FTA) could produce a £500m are considerable challenges annual benefit to the UK, with around training and up-skilling UK similar benefits expected from resident workers as an alternative the India and Canada FTA to employing migrants. We were negotiations due to be completed told that more work could be next year. done by employers but that the timescales in which this work 7.42 HM Treasury also told us that would come to fruition are likely commitments on intra-company to be long and would require transferees such as those more funding and support from embodied within the General government. This view was Agreement on Trade in Services also presented by Sumitomo (GATS) are an integral part of Mitsui Banking Corporation the UK’s trade commitments. Europe Limited. Limiting the UK’s ability to make commitments in this area by including intra-company transfers “In general, training and up-skilling within a limit could negatively to the level of practical use may affect the EU’s ability to conclude take a long time. The change should new trade deals, potentially be made gradually. Immediate reducing the benefits for the UK reduction may cause a severe from these agreements or causing impact on business.” outline deals to unwind.
Sumitomo Mitsui Banking 7.43 In their response to our Corporation Europe Limited consultation, the Department for response to MAC consultation Business, Innovation and Skills (BIS) told us that the value of the UK’s trade in goods and services 7.40 Identifying the likely effects of and foreign direct investment that migration on trade and investment may be potentially sensitive to is difficult as it is hard to identify migration is large, as presented the counterfactual: what would in Boxes 7.1 and 7.2. have happened in the absence of migration. Some respondents to our consultation put forward the case that the potential costs of any limit on Tiers 1 and 2 with regards to inward investment would be substantial.
142 Box 7.1: The impact of migration on trade
“… it is not possible to identify the amount of trade that is potentially sensitive to migration. A few studies have been conducted which suggest that, as expected, there may be positive links. A study of recent immigration to Spain estimated that at province level, a 1% increase in immigration was associated with an increase in trade with the country of origin of the migrants of 0.05%. An older study for the UK, found that a 1% increase in immigration to the UK was associated with a 0.16% increase in trade, although immigrants from commonwealth countries had a lesser effect on trade than those from other countries.
“The following provides some guidance to the potential order of magnitude of UK trade that might be affected by migration. The starting point is the total value of the UK’s trade in goods and services with non-EU countries. In 2009 in £ billions, this was:
Total value of the UK’s trade in goods and services with non-EU countries, 2009 (£bn)
Total Services Exports 198.3 95.1 Imports 202.4 54.5
“Although the value of trade in 2009 was depressed by the economic crisis, these still provide a fair guide to the overall level of UK trade.
“Within these totals, certain goods and services are more sensitive to migration than others. Whilst trade in any good or service could be sensitive to network effects or contract negotiations, cross- border movement of people tends to be most critical for services than goods and particularly for those services which depend on personal delivery. These include professional and technical advice and consultancy, education and training, computer and information services and intra-company services.
“Due to data limitations is it is not possible to identify the level of trade in these services precisely. Nor, where some data is available, is it often possible to distinguish between trade with the EU and the rest of the world. However as the following shows, UK trade in these services is substantial, running into billions of pounds.”
UK’s trade in migration sensitive service sectors, 2009 (£bn)
Credit/export Debit/import
With all countries
Travel related education services 3.8 0.2 With non-EU countries
Computer & information services 3.8 2.0 Other business services 25.4 14.8
Source: Department for Business, Innovation and Skills response to MAC consultation
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Box 7.2: The impact of migration on inward investment
“In 2009-10, UKTI [UK Trade and Investment] played a role in securing 759 investment projects (mainly greenfield or expansion of greenfield projects) into the UK, nearly half of the total (1,619) investment projects recorded. Firms and organisations have indicated that they would be significantly less likely to make such investments in the UK if there were tighter limits on migration… “It is much harder to assess whether tighter restrictions on migration would affect acquisitions or mergers. The following data shows the value of the total stock of inward FDI in the UK from non-EU countries and in some of the service sectors that might be more sensitive to migration.
Stock of Inward FDI in the UK at the end of 2008 (£bn)
Total stock 342.0 Of which …
real estate & business services 25.9
other services 20.2
“Whilst a sizable stock has accumulated over the years, how much of this investment might be sensitive to tighter migration restrictions is unclear. Also the great majority of this investment (over 80%) comes from other OECD countries, with the US alone contributing over half of the non-EU’s investment in the UK.”
Source: Department for Business, Innovation and Skills response to MAC consultation
7.44 UK Trade & Investment (UKTI) told us that the stock of inward “Migration policy is of critical foreign direct investment into the importance to the success of the UK was US$1,125 billion in 2009. UK (and UKTI) in attracting inward They told us that the UK attracted investment – both new investors more inward investment projects and in trying to sustain and grow the than any other country in Europe significant stock of inward investors in 2009, with 25 per cent of all already in the UK. The FT’s [Financial service projects, 36 per cent of all Times’] FDI Benchmark resource software projects, 27 per cent of (used by UKTI) consistently shows all financial service sector projects that for many knowledge economy and 16 per cent market share sectors the availability and quality of all European jobs related to of labour is a key investment inward investment. They also told location factor – and within that the us that, according to the European attractiveness of a location to its Investment Monitor, the UK international staff.” attracted 54 per cent of all Indian inward investment projects placed UK Trade & Investment response to in Europe in 2009. MAC consultation
144 7.45 The Embassy of Japan told us have to reduce their business that Japanese companies have activities if the necessary number made a vital contribution to the of Japanese intra-company UK economy through the creation transferees were not allowed to of wealth and job opportunities. work in the UK. We were also told They said that the vast majority that 90 per cent of the companies of these companies’ employees that responded thought a limit entered the UK through the Tier would have a “negative” impact 2 intra-company transfer route. on their future investment in the They expressed concerns that UK and about half of them thought limiting the entry of Japanese a limit would have a “severely employees through the intra- negative” impact. 81 per cent of company transfer route, in companies that responded said particular, would negatively affect that they expected to consider the not only Japanese companies’ benefits of moving outside the UK operations in the UK but also if a limit on Tier 1 and 2 migration job opportunities and the wider were introduced. economy in the UK as a result of the possible withdrawal of those companies from this country. “The Embassy of Japan believes that capping the Tier 2 (ICT) would 7.46 Further, the Embassy of Japan effectively force Japanese stated that in August 2010 they companies operating in the UK to conducted a survey of Japanese reduce their future investment and companies and clinics operating to withdraw from this country. This in the UK. They received 81 will result in a huge number of job responses: 91 per cent of cuts for British workers employed companies that responded in these companies.” thought that a cut in the number of jobs for British workers would be Embassy of Japan response to likely if Japanese companies were MAC consultation not allowed to smoothly transfer employees to the UK because of a limit on Tier 1 and 2 migration. They said that this was because Japanese companies would
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“The CIPD is also concerned about “In common with the wider business the possibility of jobs being offshored community, RBC has concerns that if employers cannot access the skills a hard quota on Tier 1 (General) and they need in the UK. Qualitative Tier 2 will have substantial adverse interviews with our members… effects on long term economic suggest that those organisations with growth. In particular, a limit could global operations, particularly in IT irrevocably damage the UK’s and finance, may offshore jobs via current reputation as a key their existing ‘offshore facilities’. With international business hub as global this in mind, many employers said companies look to relocate from that intra-company transfers (ICTs) an increasingly hostile business were vital to the success of their environment. Many sectors, in global operations. Of the very small particular the banking sector, see this minority of employers who would be measure as a “last straw” and are tempted to offshore jobs, many currently making impact assessments would be particularly attracted to with a view to moving parts of their countries such as India if the labour business offshore. A hard cap supply from outside the EU was cut will particularly hit the graduate off or reduced.” training programmes of many large organisations, including RBC.” Chartered Institute for Personnel and Development Royal Bank of Canada response to response to MAC consultation MAC consultation
“The contribution that Tier 1 and Tier “The ability to attract high levels of 2 migrants can make in terms of inward investment to the UK and inward investment is an aspect that is establish London in particular as an often overlooked. For example, PwC international hub for global business, needs experienced Chinese and Arab has been central to the UK’s relative nationals operating within the UK firm economic prosperity over the last to ensure that it can give confidence decade. As the UK emerges from to clients looking to invest in the UK. recession, ensuring limits on the Inbound immigration of people of the economic tiers are implemented in right calibre from countries with high a way that does not jeopardise this inbound investment potential can reputation will be vital to securing therefore be very beneficial for the the recovery. We are encouraged by UK economy.” the government’s recognition of the importance of the UK being seen as PricewaterhouseCoopers response to “open for business”; this perception MAC consultation must not be undermined by the cap.”
Confederation of British Industry response to MAC consultation
146 “It is important to recognise that “If the ability of migrants to enter the global mobility policies imply a the UK under Tier 2 is significantly degree of interdependence between reduced, AFB and BBA members will countries in the number and timing create jobs overseas, that otherwise of international assignments, which would have been created in the UK. fluctuates as business needs change. As a result, the teams supporting Employers sense a serious risk that those roles will also be an adverse immigration climate in located overseas.” the UK will damage the country’s reputation as a global business hub Joint response from the Association and spill over to other countries of Foreign Banks and British Bankers’ where British staff are assigned. This Association to MAC consultation could cause a double rebound for the UK economy, reducing interest in inward investment from overseas “Some businesses have been clear companies and reducing prospects and said that the inclusion of ICTs in for British staff to work abroad.“ the cap will reduce the number of jobs their company bases in the UK, and Permits Foundation response to may have affected their decision to MAC consultation set up here in the first place.”
British Chambers of Commerce 7.47 A range of organisations response to MAC consultation emphasised the importance of Tier 2 to their decision to invest in the UK. Fluor Limited told us that if “The result of any restrictions on the Tier 2 routes were subject to intra-company transfers would be that severe limits and the UK labour projects would have to be relocated market became more rigid, its to our head office in the Netherlands work could easily be diverted to or our operations in the USA, which offices in other countries with would be taking investment and more flexible labour mobility rules. business outside of the UK.”
7.48 We also received joint evidence Shell response to MAC consultation from the Association of Foreign Banks and British Bankers’ Association that if Tier 2 migration 7.49 In terms of the regional impact on was significantly reduced, banks a company’s investment decision, would consider relocating parts of the Greater London Authority told their business to other countries us that international migration where migration rules will allow has always been an engine them to employ the staff they need of London’s economic growth when they need them.
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and productivity, and that any by Riley and Weale (2006). reduction in Tier 1 and 2 migration They estimated that migration would pose a risk to London’s accounted for 0.9 percentage attractiveness to business and points, or 17 per cent of growth, of people. the total growth in GDP of 5.3 per cent between 2003 and 2005.
7.51 Although migration may exert a “The proposals [for limits on positive impact on the size of the Tiers 1 and 2] would therefore economy, the effects on GDP have a significant negative and per capita are less clear. In Box disproportionate impact on London. 7.3 we present estimates by In short, they will put the economic HM Treasury, provided to us in recovery at risk by creating skill gaps response to our consultation, of and placing London at a competitive the potential relationship between disadvantage in the global Tier 1 and 2 migration and trend competition for talent and inward GDP growth, and Tier 1 and 2 investment. A limit in Tier 1 and Tier migration and GDP per capita 2 migration would have a negative growth, taking into account: economic impact on London without significantly reducing net migration.” • the effect of such migration on the size of the population; and Greater London Authority response to MAC consultation • the effect of the characteristics associated with Tier 1 and 2 migrants. 7.50 Several studies have attempted to estimate the impact of migration 7.52 For each scenario HM Treasury on total trend economic growth. estimate the one year impact of The most widely reported estimate a reduction in annual net Tier 1 of the impact of migration on and 2 migration of 50,000. The economic growth is derived from 50,000 figure was chosen simply HM Treasury analysis of trend for illustrative purposes. Such a growth reported in Home Office reduction in migration implies a and Department for Work and reduction of the UK population of Pensions (2007). Between the 50,000, compared to the baseline period 2001 Q3 and mid-2006 scenario of no change in net migration increased the working migration. Because the estimates age population by 0.5 per cent are for one year only, it does not per annum, contributing 15 to 20 matter whether the assumed per cent of total output growth reduction in annual net migration over the period, equivalent to is temporary or permanent. approximately £6 billion of output Further below, when we present in 2006. A similar result, over our own calculations, we discuss a different period, was derived the longer-term effects under the assumption of a permanent reduction in annual net migration.
148 Box 7.3: HM Treasury estimates of the one year impacts of a reduction in annual net Tier 1 and 2 migration of 50,000 on one year GDP growth and GDP per capita growth
A reduction in annual net Tier 1 and 2 migration (henceforth ‘net migration’) of 50,000 implies a reduction in the UK population in the following year of 50,000, compared to the baseline scenario of no change in net migration. In the calculations below it is assumed that such a reduction in population is entirely composed of those aged 16 and over.
It is important to note that the scenarios below assume that a reduction in net migration corresponds to a one-to-one change in overall net migration flows, with levels of emigration and net migration of other routes held constant. This also assumes no displacement into other routes. The estimates presented here should therefore be interpreted as indicative and, as such, could vary significantly depending on the underlying assumptions and approach used. The most direct way in which such a change in net migration will affect the UK’s GDP growth rate and the growth in GDP per capita is through changing the rate of population growth. In addition, all else being equal, if migrants display higher (or lower) employment rates than the population as a whole then this could increase (or reduce) the impact of a given reduction in net migration on GDP growth and GDP per capita growth. Similarly, all else being equal, if migrants are more (or less) productive than the population as a whole then this could increase (or reduce) the impact of a given reduction in net migration on GDP growth and GDP per capita growth.
Below we present HM Treasury’s estimated one year impacts of a reduction in annual net migration of 50,000 on GDP growth and on GDP per capita growth. In each case, we present:
first, the estimated population effect;
second, the effect if we take into account the difference in the employment rates between Tier 1 and 2 migrants and the UK population as a whole; and
third, the effect if we take into account the difference in productivity between Tier 1 and 2 migrants and the UK population as a whole.
Impact on GDP growth
HM Treasury estimated that a reduction in annual net migration of 50,000 could reduce one year GDP growth by 0.1 percentage points purely through its effect on the rate of population growth alone.
To develop this estimate, HM Treasury calculated that the average employment rate of Tier 1 and 2 migrants and their dependants would be 79 per cent, based on the assumption that all main applicants and no dependants would be employed, compared to 58 per cent for the UK as a whole. Under this assumption, the estimated impact on GDP growth could be around one-third larger than the estimates based on the population growth effect alone.
To further develop this estimate, HM Treasury examined the possible productivity differential between Tier 1 and 2 migrants and the population as a whole. Recent analysis by the Migration Advisory Committee (MAC, 2009c) suggests that the median annual earnings of Tier 2 migrants were around £35,000 between November 2008 and May 2009 while data produced in the Annual Survey of Hours and Earnings indicated median earnings of £21,320 for the UK population as a whole. It is not possible to estimate the earnings of Tier 1 migrants from the available data, and so it is assumed that the earnings of Tier 2 migrants are representative of Tier 1 migrants. Under the assumption that earnings are a reasonable proxy for productivity, the estimated impact on GDP growth could be around two- thirds higher than the estimates of the population growth effect alone.
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Box 7.3: HM Treasury estimates of the one year impacts of a reduction in annual net Tier 1 and 2 migration of 50,000 on one year GDP growth and GDP per capita growth continued
Impact on GDP growth
HM Treasury estimated that a reduction in annual net migration of 50,000 could reduce one year GDP growth by 0.1 percentage points purely through its effect on the rate of population growth alone.
To develop this estimate, HM Treasury calculated that the average employment rate of Tier 1 and 2 migrants and their dependants would be 79 per cent, based on the assumption that all main applicants and no dependants would be employed, compared to 58 per cent for the UK as a whole. Under this assumption, the estimated impact on GDP growth could be around one-third larger than the estimates based on the population growth effect alone.
To further develop this estimate, HM Treasury examined the possible productivity differential between Tier 1 and 2 migrants and the population as a whole. Recent analysis by the Migration Advisory Committee (MAC, 2009c) suggests that the median annual earnings of Tier 2 migrants were around £35,000 between November 2008 and May 2009 while data produced in the Annual Survey of Hours and Earnings indicated median earnings of £21,320 for the UK population as a whole. It is not possible to estimate the earnings of Tier 1 migrants from the available data, and so it is assumed that the earnings of Tier 2 migrants are representative of Tier 1 migrants. Under the assumption that earnings are a reasonable proxy for productivity, the estimated impact on GDP growth could be around two- thirds higher than the estimates of the population growth effect alone.
Impact on GDP per capita growth
Using the same approach as above, HM Treasury estimated that a reduction in annual net migration of 50,000 could result in a negligible one year reduction in GDP per capita growth purely through its effect on the rate of population growth, assuming that all such migrants were at least age 16. If net migration of those under the age of 16 were to move proportionately with net migration of those aged 16 and over, the implied one year impact on GDP per capita growth per annum would be zero.
In the same way as for the estimates for GDP growth, based on the employment rate differential between Tier 1 and 2 migrants and the UK population as a whole, the impact on GDP per capita growth could be larger than the population effect alone, with an estimated reduction of approximately 0.06 percentage points.
Again, as above, based on the earnings differential between Tier 2 and UK median earnings and under the assumption that earnings are a reasonable proxy for productivity, the estimated impact on GDP per capita growth could be larger, with an estimated reduction of approximately 0.09 percentage points.
The estimates presented here are for one year effects only. They do not account for differences between Tier 1 and Tier 2 earnings, or the possibility that those who are prevented from entering the UK may be among those who observe productivity levels significantly differently from the Tier 2 average. They also do not account for any dynamic or wider spillover effects from migration.
Source: HM Treasury
150 7.53 For the purposes of comparison the population of 10,000 results, with the HM Treasury estimates, all other things equal, in GDP below we provide our own simple being 0.015 per cent lower in the estimates of the one year impact following year. This equates to a of a reduction in annual net Tier -0.015 percentage point change 1 and 2 migration (henceforth in GDP growth compared to the ‘net migration’) of 10,000 on baseline scenario of no change to GDP growth and GDP per capita net migration. growth. We use a similar approach to HM Treasury, but different 7.55 In terms of employment, from assumptions. We have based data presented in Chapter 3 we our calculations on a reduction in estimate that 90 per cent of Tier annual net migration of 10,000, 1 migrants are employed. We rather than the 50,000 used in also assume that approximately Box 7.3, because 10,000 is closer 100 per cent of Tier 2 migrants in magnitude to the required will be in employment. In reductions in net work-related addition, Labour Force Survey migration we set out in this report. (LFS) estimates, based on the Our calculations are summarised main reason for coming to the in Table 7.1. We need to make UK, suggest that 60 per cent of assumptions about the working working age dependants are likely age population, employment rates, to be employed. Therefore, our and productivity, summarised in weighted estimate of the overall turn below. Tier 1 and 2 employment rate, including only adult dependants, 7.54 We assume that a reduction in is 81 per cent. The employment net migration of 10,000 implies rate of the UK population aged a reduction in the working age 16 and over in September 2010 population aged 16 and over was 59 per cent (ONS, 2010h). of 7,300 (based on the relative In terms of employment rates, volumes of Tier 1 and 2 main the ratio between of Tier 1 and 2 applicants, dependant partners migrants and their dependants and dependant spouses), relative aged 16 and over compared to the to the baseline scenario of no UK population aged 16 and over, change in net migration, and a yields an ‘employment effect’ UK working age population of of 1.37. 49 million (Office for National Statistics, 2010g). This 7.56 We assume that earnings are a assumption is based on the reasonable proxy for productivity. relative volumes of Tier 1 and The mean Tier 2 earnings in the 2 main applicants, dependant year to June 2010 were £56,830, partners and dependant children, excluding elite sportspeople and assuming that all dependant ministers of religion (derived children are under the age of 16: from the same data as presented only a very small proportion of in Chapter 3). There are no dependant children are above data available to allow reliable that age. Dividing 7,300 by 49 estimation of the average earnings million yields the ‘population of Tier 1 migrants. Given that effect’ set out in Table 7.1 of 0.015 the salary thresholds for Tier 1 per cent. That is, a reduction in are higher, it is plausible that
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the average earnings of Tier 1 can be expected to be of a similar migrants will be greater than those magnitude, but not identical. of Tier 2 migrants. Tier 1 and 2 dependants aged 16 and over are 7.58 Second, we calculate the impact likely to earn less than the Tier 2 of a reduction in annual net average. For simplicity, we assume migration of 10,000 on GDP per these two effects balance each capita growth, by calculating other out. This could be either GDP per head both before and an under-estimate or, perhaps after the reduction in annual net more likely, an over-estimate of migration, and examining the the actual average earnings of change. We estimate that the this group. But it provides a broad one year impact of a reduction order of magnitude to inform our in net migration of 10,000 on calculations. In comparison, gross GDP per capita growth would be annual mean earnings for all UK -0.027 percentage points. That employees aged 16 and over from is, a reduction in net migration of the 2009 Annual Survey of Hours 10,000 results in GDP per capita and Earnings was £26,470 (Office being 0.027 per cent lower in the for National Statistics, 2009b). following year. The difference between our figure for earnings and that used by 7.59 Table 7.1 also presents the above HM Treasury in Box 7.3 arises estimates in monetary terms. because we are using the mean According to our estimates, rather than the median. The ratio compared to the base year of of £56,830 to £26,470 yields a 2009, after one year total GDP ‘productivity effect’ of 2.15 in would be £559 million lower and Table 7.1. GDP per capita would be £6 lower (both in constant 2006 prices) 7.57 Bringing together the as a result of a reduction in net population, employment migration of 10,000, compared and productivity effects, we to the baseline scenario of no estimate that the one year change in net migration. impact of a reduction in net migration of 10,000 results in 7.60 HM Treasury told us in its total GDP being 0.043 per cent response to our consultation that lower in the following year. The their estimated one year impacts one year impact of a reduction in are broadly linear with respect to net migration of 10,000 on GDP the magnitude of the reduction in growth between years 0 and 1 net migration. That is, the impacts would also be -0.043 percentage on GDP growth and GDP per points. These two results are capita growth resulting from a equivalent due to assumptions reduction in annual net migration made in Table 7.1 (notably of 20,000 are approximately that in the base case GDP and double that of a reduction in population remain constant annual net migration of 10,000. If between years 0 and 1). In reality, we assume that this result also the percentage difference in the holds for our estimates then the level of GDP between years 0 figures presented in Table 7.1 are and 1, and the percentage point broadly in line with those provided reduction in the GDP growth rate, by HM Treasury presented in
152 Table 7.1: Illustrative estimates of the one-year impact of a reduction in net migration of 10,000 on GDP and GDP per capita
Variable Calculation Notes and assumptions
A Level of GDP, year 0 £1,295,159m Gross Domestic Product: chained volume measures, constant 2006 prices (Office for National Statistics, 2010i)
B Population effect 0.015% % impact of 10,000 migrants on working age population (7,258 / 49,468,000)
C Employment effect 137% % employment rates of Tier 1 and 2 migrants compared to UK born (81% / 59%)
215% % mean earnings of Tier 1 and 2 migrants D Productivity effect compared to UK born (£56,830 / £26,470)
E Level of GDP, year 1 £1,294,600m A - [A x (B x C x D)]
Change GDP year -0.043% (E- A) / A 0 to year 1 -£559m E - A
F Population level, year 0 60.932m Estimate of the total UK population from the 2009 APS (ONS, 2010d)
G GDP per head, year 0 £21,256 A / F
H Population level, year 1 60.922m F - 10,000
I GDP per head, year 1 £21,250 E / H
Change GDP per head, -0.027% (I - G) / G years 0 to 1 -£6 I - G
Notes: The basis for the above calculations is described in the text of the report. They are illustrative calculations only. For the purposes of simplicity, except for the effects of lower net migration, population and GDP are held constant at their year 0 levels. Therefore, the 10,000 reduction in net migration between years 0 and 1 means that the UK population is shown as 10,000 lower in year 1 than year 0. The year 0 baselines for GDP and population use 2009 figures. Source: MAC calculations
Box 7.3. The differences assumptions regarding the between our estimates and those employment rate and productivity provided by HM Treasury arise (proxied by earnings) of Tier 1 and for a number of reasons. First, 2 migrants and their dependants, our estimates are based on the and the UK population as a whole. assumption that the reduction in net migration comprises of 7.61 To estimate the longer-term both adults and children, while impact, we assume that the those presented in Box 7.3 are reduction in net migration based on the assumption that all is permanent. Under this migrants are at least 16 years of assumption, the level of net age. Second, we make different migration is assumed to be 10,000
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lower in each year than it would invest in training. Some of these have been otherwise. Therefore, issues are discussed below. compared to the baseline scenario of no change to net migration, the Implications for Tier 1 and Tier 2 UK population would be 10,000 lower in the first year and 20,000 7.63 All things being equal, Tier 1 and in the second year, and so on 2 migration clearly has a positive into future years. We assume that impact on GDP through its affect on the estimated one year impacts the size of the UK workforce. In a presented above accumulate in straightforward static analysis Tier an approximately linear way over 1 and 2 migration makes a small time, at least over the medium but positive contribution to GDP term. This means that after two per head, based on the earnings years the impacts are twice and employment probabilities of as large, after three years the such migrants. If such migration impacts are three times as large, is permanently reduced to a lower and so on. Therefore, according to annual level, the small static effects our one year estimates, compared will accumulate over time and to the base year of 2009, after become more significant. five years total GDP would be 0.22 per cent (or £2.8bn in 2006 7.64 This simple accumulation of static prices) lower than in the baseline effects may underestimate the true scenario. GDP per capita would impacts on GDP per head of a be 0.13 per cent (or £28 in 2006 reduction in Tier 1 and 2 migration. prices) lower. The impact on GDP per head will also be influenced by dynamic 7.62 The estimates presented above factors such as the impact of are subject to a number of migration on productivity, trade, caveats. First, we have made investment and skill development a number of assumptions of resident workers. regarding the employment rate and productivity of Tier 1 and 2 7.65 The above effects will not be migrants and their dependants. evenly distributed. A reduction Altering these assumptions in migration through Tiers 1 and will necessarily alter the final 2 will have significant effects estimates. Second, such migration on the micro-economy, in terms may have an impact on the of the impacts on individual earnings and employment of the sectors and occupations. For rest of the population (discussed instance, as shown in Chapter in more detail in section 7.4), 3, the occupation ‘IT, software which we have assumed to professionals’ accounts for 27 per remain the same. Third, such cent of total Tier 2 Certificates migration may generate positive of Sponsorship issued, and 48 spillover effects; for example, per cent of those issued under by promoting innovation or the intra-company transfer route. stimulating competition. Fourth, The implications for such an such migration may conversely occupation, and related sectors, generate negative spillover will be more substantial than for effects; for example, by reducing those occupations that make less the incentives for employers to use of Tier 1 and 2 migrants.
154 7.66 The economy will adjust to some also change demand patterns extent in response to a reduced even if demand remains constant supply of migrants. Employers (e.g. through different tastes of will have stronger incentives to migrants compared to the rest of train UK workers or there may the population) and this will also be capital deepening. There may have potential price effects. also be expansion in sectors and occupations that are less reliant 7.69 Migrants’ effects on aggregate on migrant workers. Furthermore, supply and aggregate demand there are actions that the will depend on the characteristics Government can take, in order to and behaviour of the migrant mitigate any adverse economic cohort. For example, if migrants consequences. It can work in are, on average, more productive partnership with employers to and earn more than the UK- ensure that skill acquisition and born population, then they may training provision is targeted in have a larger impact on both UK the right manner, and it an ensure aggregate demand and aggregate that the policy underpinning limits supply. Similarly, if migrants tend on migration is designed in order not to spend as large a proportion to select those workers that the of their income as the average economy needs the most. We UK-born individual, perhaps return to these themes in because of a relative preference Chapter 9. for saving or because they send some of their income to their 7.3 Inflation home country as remittances, then migration will have a smaller Theory impact on aggregate demand than otherwise. 7.67 Like any increase in population, positive net migration affects 7.70 The NAIRU (Non-Accelerating both the aggregate demand for, Inflation Rate of Unemployment) and aggregate supply of, UK is some level of unemployment goods and services because at which inflation will remain migrants are both consumers stable. A reduction in the NAIRU and producers of these goods means that stable inflation can and services during their time be achieved at a lower rate of in the UK. unemployment in the long run. If migration makes the labour 7.68 The overall impact of migration market more flexible, this can on UK inflation is ambiguous. As lower the NAIRU which means additional consumers in the UK that the economy can experience economy, migrants increase the lower unemployment with the demand for goods and services. same rate of inflation. However, as additional labour is added to the UK workforce, 7.71 Migration may also have a migrants also increase the distributional effect on prices. supply potential. It is the balance For example, in an economy between demand and supply that consisting of two goods, migration determines the impact on the may reduce the cost of producing rate of inflation. Migration could one good without affecting the
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cost of production of the other. 7.74 In addition, Blanchflower et al. In this case, the overall price (2007) find that it is likely that level may be reduced, but the recent migration to the UK has effect may not be uniform across increased aggregate supply all goods. by more than it has increased aggregate demand and overall Evidence recent migration, mainly driven by migration from the eight 7.72 Frattini (2008) notes that the central and eastern European literature studying the impacts countries that acceded to the of migration on prices in the European Union in 2004 (the UK is very limited. He finds that “A8”), to the UK has reduced migration reduced the average inflationary pressures in the price growth of non-traded goods UK. The authors also note that and services in the UK between the extent to which migration 1995 and 2006, but the effect increases aggregate supply was not large. He estimates that depends on the economic the price of the average service characteristics of the migrant was reduced by 0.07 per cent cohort relative to the non-migrant per year. Frattini (2008) suggests workforce: the more the migrants’ that the negative effect on the productivity increases relative price of the average service is to the non-migrant workforce, from the increased supply of the more the migrant cohort migrants in low-paid jobs, such raises the supply potential of as in restaurants, bars, takeaway the UK economy. food, washing and dry-cleaning and hairdressing. Implications for Tier 1 and Tier 2
7.73 Blanchflower and Shadforth 7.75 The effects of Tier 1 and 2 (2009) cite evidence that migration on inflation are probably migration may lower the small due to their relatively small NAIRU either through filling share of the UK economy and skill shortages or by tempering labour market. Whether the effects wage demands, as employers of reduced Tier 1 and 2 migration and workers become aware that on inflation will be positive, there is more competition for neutral or negative will depend jobs and that existing workers on the relative balance between can be replaced more easily aggregate demand and aggregate than before. In addition, the supply. The balance between such Organisation for Economic Co- effects may be specific to time operation and Development and place and, given their likely (2006) states that “international small magnitude, they should not as well as UK evidence be a major consideration in setting suggests that immigration can limits for Tiers 1 and 2 of the PBS. serve to make the labour market as a whole more fluid and wages less sensitive to demand fluctuations”. This allows lower unemployment to be achieved without increased inflation.
156 7.4 Labour market wages to adjust downwards to reach a new equilibrium. Theory The downward adjustment in wages offered means that total 7.76 Migration, particularly economic employment of migrants and non- migration such as that through migrant workers would increase, Tiers 1 and 2, will increase the as long as both accept the lower supply of labour in the economy. wages. The employment of non- This in turn can impact on three migrant workers may decrease factors, discussed in turn below: depending on the degree to which non-migrant workers will • prevailing average wages and accept new wages or become the wage distribution; unemployed or inactive.
• employment of already-resident 7.79 The simple model set out above migrants and non-migrant does not account for the fact that workers; and demand in the product market (at a given set of prices) will • the industrial and occupational also be affected by migration, structure of the labour market. which partly arises because migrants themselves will consume 7.77 As discussed above with regards goods and services. This is an to economic growth, there are a incarnation of the classic ‘lump of number of theories and models labour’ fallacy, where consumer which can be used to analyse demand, and thus the number of the labour market impacts of jobs, in the economy is regarded migration. In the simple unrealistic as fixed and so independent of the textbook model migrants are size of the population. assumed to possess the same skills and attributes as non- 7.80 In the second case, under the migrants and are therefore perfect assumption that migrants are substitutes for non-migrants in complements with non-migrants the labour market. On the other and capital, migration does not hand, migrants and non-migrants affect competition in the labour can be assumed to be adept at market. Instead, all workers will different tasks or specialise in experience increased productivity, different sectors and occupations, which we would expect to be with each specialising in the tasks reflected in increased wages they perform best. In this case, and total employment for both migrants are complements with migrants and non-migrants. non-migrants and capital in the labour market. 7.81 In general, we would expect more skilled occupations to be more 7.78 In the first case, under the differentiated, requiring a wider assumptions that migrants range of skills and characteristics, and non-migrants are perfect so skilled migrant workers substitutes and migration does employed in these jobs are more not affect demand for labour, likely to be complements to non- migration increases competition migrant workers and the capital in the labour market and causes stock. For lower-skilled jobs,
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which require more basic tasks, surplus by selecting migrants we would expect a greater level of whose skills create the greatest substitution between migrant and complementarities to the skills and non-migrant workers. capital of existing residents.
7.82 The occupational or industrial 7.85 Impacts may also vary in structure of the labour market the short and long term. In may be affected if capital is the short run, there may be reorganised in the economy, downward pressure on wages or if the pattern of investment in sectors where migrants are and production utilised by firms substitutes for non-migrants. In changes, in response to migration. the long run, the benefits from These changes will be driven skill complementarities, the by the labour market effects of ‘immigration surplus’ and the migration if they make certain potential increase in demand products or services more or from migrants are likely to less profitable. For example, increase employment and, at Borjas (2010) suggests that low least on average, wages. skilled migration may expand the production of certain low-skill 7.86 The time it takes for capital to products or services, but also free- respond to changes in migration up existing workers to produce may conceivably be longer during higher-skill products. These a recession, when there are dynamic changes are likely to take greater constraints on capital. place in the longer term as the This would potentially make the economy adjusts. lump of labour fallacy less of a fallacy during a recession. In 7.83 Last, migration may generate addition, migrant and non-migrant what is known as the ‘migration employment rates may be affected surplus’. In the simple model to different extents by recession. described earlier in this section, if migration drives down the Evidence prevailing wage this will increase the profits of capital owners as 7.87 To estimate the impact of the wage bill decreases. This migration on the labour market will affect the distribution of the it is important to identify and economic benefits of migration. In compare the impacts from this basic model, the surplus will migration with what would have accrue to capital owners. happened without migration (the counterfactual). There are a 7.84 While the concept of an number of difficulties in trying to immigration surplus can assist in do this, such as disentangling the understanding the distributional directions of causality and taking effects of migration, it is a into account the movements of static concept. In the long run, non-migrant workers in response the amount of capital in the to migration. This has led to a economy or in particular sectors number of different approaches may adjust to the presence of and techniques being used in the migration. Migration policy can academic literature. help maximise the immigration
158 7.88 The available empirical evidence working age population reduces finds, on average, little impact of the average wage by around 0.3 migration on overall wages, but per cent, although this estimate is variation in the effects of migration only weakly significant. According across the wage distribution. to this estimate, with a full time Where migration is found to median wage of £12 per hour and reduce wages, this impact may an increase in the migrant share be partially offset by an increase of 1 percentage point, the average in in-work benefits, such that the wage would reduce by 3.6 pence reduction in income is not as large per hour: approximately £1.40 as the reduction in wages. over a forty hour working week.
7.89 Dustmann et al. (2005) use 7.92 These studies do not allow for UK LFS data, exploiting the the possibility that migrants and geographical correlation native-born workers may be between migrant labour inflows imperfect substitutes. Manacorda and changes in labour market et al. (2006) explicitly allow for this outcomes to test the impact of possibility and find that the main migration on average wages. impact of increased migration When controlling for the potential in the UK is on outcomes for self-selection of migrants migrants who are already in into areas experiencing more the UK. This is because new economic success, they find no migrants are closer substitutes statistically significant effect of for existing migrants, on average, migration on non-migrant wages. than for native-born workers. A 10 percentage point rise in the 7.90 In a later study, Dustmann et al. migrant share (if the new migrants (2008) found that, between 1997 had the same age and skill and 2005, an inflow of immigrants profile as those migrants already of the size of 1 per cent of the here) is predicted to reduce the resident population corresponded average wages of the UK’s stock to an increase in average wages of migrants by 1.9 per cent. of 0.2 to 0.3 per cent. The Dustmann et al. (2008) find that study estimated that migration recent migrants may compete contributed about 3.5 to 4.5 per lower down the distribution of cent of the observed average real occupations than their skills wage growth of 3 per cent per would suggest, termed annum over the period; that is, “occupational downgrading”. migration corresponded to real wage growth of approximately 0.1 7.93 A number of papers examine per cent per annum. the impact of migration on the wage distribution. Lemos and 7.91 In contrast, Reed and Latorre Portes (2008) study the impact (2009) find a negative effect of of migration from the new EU migration on average wages member states on the labour between 2000 and 2007. Using market outcomes of non-migrant a similar approach to Dustmann workers and overseas-born et al. (2008), they find that a 1 nationals who are UK residents. percentage point increase in They do not find any statistically the share of migrants in the UK significant impact on wages,
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“either on average or at any point towards the lower end of the wage on the wage distribution”. distribution could partially explain reduced wages for those in less 7.94 Dustmann et al. (2008), well-paid jobs. however, do find significant and varying effects across the 7.97 Nickell and Salaheen (2008) wage distribution; in particular, a find that a 10 percentage point negative impact of migration on increase in the migrant share of low-paid non-migrant workers. the workforce in an occupation An inflow of immigrants of the reduces average wages by 0.4 size of 1 per cent of the native per cent. However, the effect is population led to a decrease of larger for particular occupational 0.6 per cent in wages for those groups, especially the unskilled at the 5th percentile and smaller and semi-skilled service sector. In decreases at the 10th and 15th this sector, a 1 percentage point percentiles. However, there is a increase in the migrant share positive effect on wages further up is predicted to reduce average the wage distribution, with similar wages by 0.5 per cent. immigration causing a 0.7 per cent increase in the median wage and 7.98 To interpret the scale of these a 0.5 per cent increase at the results, we can consider a 90th percentile. sector such as care homes. With average earnings for care 7.95 The negative impact on wages for assistants of roughly £8 per hour the lowest 15 per cent of earners (Office for National Statistics, will have a particular effect on 2009b), if the migrant share of the migrants already in the UK, as care home workforce increased by this is where many are 5 percentage points, the evidence concentrated. This corresponds discussed above would suggest with the finding of Manacordaet al. that wages would fall, to the (2006) discussed above. As nearest penny, by 21p per hour: an illustration, consider someone approximately £8.30 over a forty at the 5th percentile earning hour week. These estimates are roughly £6 per hour. An increase therefore very similar in magnitude in migration of 1 percentage to those by Dustmann et point would reduce wages by al. (2008). around 3.6 pence per hour: approximately £1.40 over a forty 7.99 Substitutability of migrant and hour working week. non-migrant labour can be most visible at local level and can be 7.96 One possible reason for this effect felt by individuals who experience across the wage distribution is greater competition for jobs. less substitution between non- However, the complementarities migrant and migrant labour in between migrant and non-migrant higher-skilled jobs nearer the labour across different factors of top of the wage distribution. This production, with the higher wages implies that high-skilled migration and employment that this can is likely to increase wages of bring, are more subtle. Because UK-born workers at the top of the they involve changes that occur distribution. Greater substitutability between industries, occupations
160 and even geographical areas, share of immigrants in the labour rather than within them, these force is estimated to have raised positive effects are very difficult to unemployment of domestic measure empirically. workers temporarily over a period of approximately five to ten years. 7.100 In summary, the literature The extent and duration of this suggests small impacts of impact was found to depend on migration on average wages but a country’s policies, in particular notable effects across the wage anti-competitive product market distribution. The studies discussed legislation, employment protection above do not agree on the legislation, and the generosity direction of the impact of migration of unemployment benefits, on average wages, although this all of which increased the may be explained by the different negative impact. time periods that were analysed in each. In contrast, the studies 7.103 Academic studies which do broadly agree that migration inevitably average out the effects is more likely to increase wages of immigration cannot provide at the top of the distribution, and the whole story of the effect of reduce wages at the bottom of migration on employment. As the distribution. Consequently, discussed in Migration Advisory migration may have caused the Committee (2009c), there is pay distribution to become more anecdotal evidence that migration unequal than it otherwise would may displace non-migrant workers have been. However, the studies in some circumstances. For outlined above deal with all example, there is some evidence migration, and not just Tier 1 and that IT workers may be displaced 2 migration. by those entering through the intra-company transfer route. 7.101 Regarding the impact of However, such effects are of a migration on employment, partial equilibrium nature. It is the empirical literature is more possible, but not proven, that if UK limited. Dustmann et al. (2005) companies improve their efficiency find that an increase in migration by out-sourcing their IT work to amounting to 1 per cent of the foreign companies using migrant non-migrant population has no workers, this may allow those statistically significant impact companies to be more competitive on the employment rate of the in foreign markets. It may also UK-born population. Similarly, mean that some UK companies Lemos and Portes (2008) find no keep jobs within the UK that they statistically significant impact of A8 would otherwise move offshore. migration on the employment of As such, some displacement of non-migrant workers. UK IT workers is not inconsistent with positive net job creation in the 7.102 Jean and Jimenez (2007) UK as a whole. examined the impact of migration on the unemployment of domestic 7.104 As noted above, capital may take workers across OECD countries longer to adjust to changes in and found no significant long- migration during a recession. This term impact. An increase in the question has not been directly
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addressed empirically using UK on this is limited. Lewis (2004) data. Using US data, Peri (2010) explores whether a large and finds that migration may have a unexpected inflow of less-skilled small negative impact on non- migrant labour to Miami increased migrant employment and income the production of goods made per worker, lasting for one to two using unskilled labour, and finds years. In addition, Peri (2010) that the relative output of different finds that during a recession, manufacturing industries was investment does not respond as not significantly affected by the quickly to migration as during an increase in unskilled labour. expansion. This may be because firms have unused capital during 7.107 The adaptation of technology a downturn and may hence within industries may also be be unwilling to expand their affected by migration. The productive capacity, or to adopt interaction between capital and the technologies which would best labour will vary across sectors, take advantage of an increase in implying that migration may migrant workers. affect technological adaptation to different extents across 7.105 Migrant employment rates industries. Lewis (2004) examined may be affected by recession whether the influx of unskilled disproportionately to those of labour to Miami caused slower non-migrants. Dustmann et al. adaptation of technology which (2006) provided some empirical is complementary with skilled support for this hypothesis, finding labour. The author finds that that that the migrant employment computer usage at work was rates in the UK and Germany vary lower following the unexpected more than those of non-migrants increase in migration, implying through the economic cycle. that abundance of unskilled labour There is some evidence that this may be accommodated by using may not be the case for the latest less skill-intensive production. recession. Wadsworth (2010) In his evidence to the House records that unemployment rates of Lords Select Committee on for migrants and the UK-born Economic Affairs (House of have risen together and by similar Lords, 2008), Professor Christian amounts, and suggests that this Dustmann pointed out that “there might be in part because migrants is evidence that technology are now, on average, more skilled adjusts to the availability of labour than in the past and hence may be in particular parts of the skill less vulnerable to a downturn. distribution”. He gave the example of the wine industry in Australia 7.106 Evidence on industrial and and California, “which is highly occupational structure is fairly labour intensive in California and limited. The mix of industries in highly mechanised in Australia, an economy can be affected by the reason being that it is very migration. For example, casual easy to get unskilled workers in observation suggests that there California but not in Australia”. are more ethnic restaurants than there would be with lower non- EU migration. However, evidence
162 Implications for Tier 1 and Tier 2 7.111 Any negative impacts are likely to be felt by individuals at the local 7.108 While empirical evidence has level in certain parts of the labour found limited impacts of migration market. The positive impacts on on average wages, there appear wages and employment in the to be significant effects across macroeconomy will be at the the wage distribution. Tier 1 national level and in aggregate and 2 migrants are likely to terms, which are more subtle and work in skilled and highly-skilled difficult to identify. employment. Accordingly, any additional labour supply will 7.5 Net fiscal impacts be at the higher end of the skills distribution. 7.112 Migrants, to varying degrees, pay taxes, claim benefits and consume 7.109 Skilled workers are more likely government-provided services, to be complements to capital. such as health and education, for If firms have difficulty filling the entire time they are resident vacancies then a rise in Tier 1 and in the UK. Through participation in 2 migrants is likely to have little these activities they have a direct effect on wages and employment impact on the expenditure and of UK-born workers. The closer revenue of the UK Government. substitutes Tier 1 and 2 migrants are to skilled native-born workers Theory the more downward pressure on wages and employment there will 7.113 The net fiscal impacts of be. Since the degree of imperfect migrants will depend on their substitution appears to rise with characteristics, including age, skill, Tier 1 and 2 migrants are employment and earnings, and less likely to place downward eligibility for and take-up of public pressure on wages than other services and transfer payments. migrants who are competing with They will also depend on the low-skilled workers for whom they nature of the welfare state and tax are closer substitutes. and transfer system.
7.110 Tier 1 and 2 migrants are unlikely 7.114 If migrants pay more in taxes to reduce the employment of than they consume in benefits resident workers in the aggregate. and state services then they are In the long-term, empirical net fiscal contributors. If migrants evidence suggests that they are consume more in benefits and likely to increase total employment state services than they contribute levels as capital adapts. However, through taxes, then they impose a there is a tension between net fiscal cost on the state. these long-term benefits to the economy, and the short-term 7.115 Migrants are typically relatively negative effects which may young, hence increasing the create individual losers as the working-age population and economy adapts. widening the potential tax-base. Additional tax revenue from employment and consumption can be used to finance government
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spending. In addition, the 7.118 Analyses of the net fiscal proportion of older people in contribution of migrant groups can the UK population is rising, and be classified either as static or additional tax revenue from dynamic. Static analyses estimate migrants can be used to finance the net fiscal contribution of a pensions and welfare services for migrant group for a given year, the elderly. Rowthorn (2008) says while dynamic analyses estimate that “Provided the immigrants the lifetime net present value of and their descendants can obtain the fiscal contribution of a employment without displacing migrant group. local workers, their impact on the age structure is likely to benefit 7.119 Static analyses are backward- government finances.” looking and as such require no assumptions to be made 7.116 Gott and Johnston (2002) state regarding the future behaviour that “Economic activity – of the migrant group. They do primarily employment and not take into account the impact earnings – is a key driver of an that the migrant group may have individual’s direct fiscal impact, in future years. For example, if determining the amount they pay the migrant group is young and in taxes and receive in benefits. in employment, their current net Not surprisingly, those who fiscal contribution is likely to be are economically active, and positive, while in future years especially those who are high they may have children that earners, are likely to be making require publicly-funded education a net fiscal contribution, by and they may retire and draw paying more in taxes and national a state pension, hence their insurance contributions than they future net fiscal contribution consume in publicly provided may be negative. However, services and benefits.” given the strong assumptions that must be made to conduct 7.117 In the long run, this positive impact a dynamic analysis, most of from a given cohort of migrants the available evidence comprises will fade as they age, and some static analysis. leave. Those who remain may require state education for their 7.120 In a static analysis the net dependants, eventually draw a fiscal contribution of a given state pension, and become more group will be partly dependent likely to use the National Health on the budgetary position of Service. Their dependants will the Government. Where a reach working age and will then surplus is being run, a positive contribute tax revenue. According net fiscal contribution is more to Rowthorn (2008), “To sustain likely, while a negative net a permanent rejuvenation contribution is more likely while through immigration requires a a deficit is being run. Therefore, continuing flow of new arrivals, it is also worth considering the and if they and their children relative ratio of revenues to remain in the country the expenditure between the groups cumulative impact on population being compared. will become very large.”
164 Evidence 7.123 The above analysis implies that A8 migrants have been positive net 7.121 Various studies have been contributors to the public finances. undertaken to assess the net Dustmann et al. (2009) finds fiscal contributions of economic that although A8 migrants earn migrants. These studies have relatively low wages, their higher generally examined contributions participation and employment over a single year and have rates more than offset this. In concluded that working migrants addition, their low receipts of either make a positive net fiscal government expenditures are impact or at least a more positive particularly important in making impact than non-migrants. them net fiscal contributors.
7.122 Most recently, Dustmann et al. 7.124 Gott and Johnston (2002) (2009) adopts a static analysis estimate the net fiscal contribution approach to estimate the net fiscal of the foreign-born population contribution of the A8 migrants of the UK in 1999/2000. They to the UK for each fiscal year find that migrants in the UK from 2005/06 to 2008/09. The contributed £31.2bn in taxes and estimated net fiscal contribution is consumed £28.8bn in benefits and positive for the A8 migrant group, in state services: a ratio of 1.08. Due comparison to a negative net to a surplus in the public accounts contribution for the non-migrant in 1999/2000, the UK-born group, for each fiscal year. These population was also estimated to results are robust to the choice pay more in taxes than received from a range of assumptions in benefits and state services, but regarding the allocation of revenues their net contribution was lower and expenditures between the than that of migrants. migrant and non-migrant groups. The results under the central assumptions are given in Table 7.2.
Table 7.2: Ratio of revenue to expenditure for A8 migrants and non-migrants
Ratio of revenues to expenditures
Fiscal Year A8 Non-migrants 2005-2006 1.39 0.88 2006-2007 1.60 0.89 2007-2008 1.35 0.88 2008-2009 1.37 0.80
Note: Dustmann et al. (2009) estimated the total government receipts and expenditures attributed to A8 migrants and to non-migrants in each year. The table above shows the estimated revenues divided by total expenditures for each group. A ratio of 1 would imply that estimated revenues were equal to total expenditures. Total allocation of receipts and expenditures were calculated based on a range of assumptions listed in Dustmann et al. (2009). Source: Dustmann et al. (2009)
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7.125 Sriskandarajah et al. (2005) 7.129 The above analysis is mainly adopts a similar approach to static, and does not include the estimate the net fiscal contribution effect of any children born in of all migrants in the UK for the future on the Government’s each fiscal year from 1999/00 to expenditure and revenue. Children 2003/04. The estimated net fiscal of compulsory schooling age may contribution of the migrant group require state education, but will is positive for the first three years, also generate future earnings, before becoming negative in and hence a future stream of tax 2002/03 and 2003/04. However, revenue. They will also consume the ratio of revenue to expenditure additional services as adults. of the migrant group exceeds that Accordingly, any analysis of the of the UK-born group in each year. net fiscal impact of migration will necessarily be partial. Implications for Tier 1 and Tier 2 7.130 In response to our consultation 7.126 There are no studies that assess HM Treasury estimated that a the fiscal contribution of Tier 1 and reduction in annual net Tier 1 2 migrants specifically. Therefore, and 2 migration of 10,000 could inferences must be drawn from increase net borrowing by around the available evidence and the £150 million in the first year if data available on the relevant spending is assumed to remain characteristics of Tier 1 and 2 unchanged. This illustrative migrants presented in Chapter 3. estimate is based on assuming that 10,000 lower annual net 7.127 Dustmann et al. (2009) and Tier 1 and 2 migration reduces Sriskandarajah et al. (2005) show economic growth by around 0.02 that, on average, migration is percentage points, as discussed likely to make a positive net fiscal in Box 7.3. The estimated impact contribution. Tier 1 and 2 migrants, is calculated using the cyclical due to their high employment adjustment coefficients17 and is rate and earnings, are even more expected to rise over time. This likely to be net fiscal contributors. estimate is based on changes to Within this group, those who earn the tax revenue generated from more and those who bring no lower growth and does not include dependants, or dependants who any changes in government are employed and high-earning, spending that may occur in are likely to be the highest net fiscal response to the change in the contributors, at least in the short run. size of the population, which may reduce the size of this impact on 7.128 Tier 1 and 2 migrants enter the UK net borrowing. as adults, allowing the UK to save on the cost of educating them to a 7.131 As the median earnings of Tier high standard. From their age profile, 1 and 2 migrants are likely to be discussed in Chapter 3, we can infer higher than the UK median, the that their take-up of health services above calculation could potentially is likely to be low in the short term. underestimate the impact of
17 Cyclical adjustment coefficients are published in ‘Public finances and the cycle’, Treasury Economic Working Paper No.5, Nov 2008.
166 reducing Tier 1 and 2 migration occupations, particularly those on tax receipts. Furthermore, if that make heavy use of skilled Tier 1 and 2 migrants are likely migrant workers, or which rely to have a relatively high on them to attract and support employment rate, HM Treasury trade and investment. However, notes that their claims on the the economy will adjust to some benefit system are likely to be extent. Employers will have smaller than the UK average. stronger incentives to train UK workers or there may be capital 7.132 Overall, based on the evidence deepening. There may also above, Tier 1 and 2 migrants are be expansion in sectors and highly likely on average to make occupations that are less reliant a positive net fiscal contribution. on migrant workers. Skills policy However, Tier 1 and 2 migrants can also play a critical role in will age and, if they remain in mitigating any adverse effects of the UK permanently, will make reduced Tier 1 and 2 migration. a greater call on state services that are increasingly consumed 7.135 Any impact of Tier 1 and 2 with age, such as pensions and migration on inflation is likely to healthcare. Temporary migration be very modest. This factor should is more likely to have a positive not be a major consideration in effect on government finances setting limits for Tiers 1 and 2. than migration leading to settlement. 7.136 Migration has significant impacts across the wage distribution in 7.6 Conclusions the labour market. Given that Tier 1 and 2 migrants are likely to 7.133 All things being equal, Tier 1 and work in skilled and highly-skilled 2 migration clearly has a positive employment, any additional impact on GDP through its effect labour supply will be at the higher on the size of the UK workforce. In end of the skills distribution. a straightforward static analysis, Evidence suggests that Tier 1 and Tier 1 and 2 migration makes a 2 migrants are more likely to be small but positive contribution to complements to resident workers GDP per head. Such effects will and capital, and are hence less accumulate over time and become likely to place downward pressure more significant. Furthermore, the on wages than those competing impact on GDP per head will also with less skilled workers. be influenced by dynamic factors such as the impact of migration 7.137 Tier 1 and 2 migration is unlikely on productivity, trade, investment to reduce the employment of and skill development of resident workers in the aggregate, resident workers. with any negative effects being felt by individuals at the local 7.134 The above effects will not be level in certain parts of the labour evenly distributed. A reduction in market. Consequently, we would migration through Tiers 1 and 2 expect that if limits on Tiers 1 and will have significant effects on the 2 generated any positive effects micro-economy, in terms of the on employment, these would be impacts on individual sectors and felt by individuals rather than the
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economy as a whole, particularly in the short term.
7.138 Based on the available, indirect, evidence Tier 1 and 2 migrants are highly likely on average to make a positive net fiscal contribution. If these migrants remain in the UK, they will age and make a greater call on state services such as pensions and healthcare over time. Migration which does not lead to settlement is more likely to have a positive effect on government finances.
7.139 Analysis of economic, labour market and net fiscal impacts does not capture all of the possible costs and benefits of migration. Public service and social impacts are discussed in the following chapter.
168 Chapter 8 Public service and social impacts
8.1 Introduction by drawing on as wide a range of evidence about such migrants as 8.1 This chapter looks at the public we can. service and social impacts of Tier 1 and Tier 2 migration, as defined 8.5 As set out earlier in this report, we within the context of this report. commissioned Professor Christian We focus in turn on the theory Dustmann and Dr. Tommaso around the public service and Frattini of E Policy Limited to social impacts, the available data investigate the economic cost- on these, and the evidence we benefit analysis of immigration received in response to (Dustmann and Frattini, 2010). our consultation. We draw on the findings of that study in this chapter. We also 8.2 First, we look at the public consider a range of other relevant service impacts, which we define literature, as well as the evidence as the effects on both delivery and we received from our corporate consumption of public services, partners and the contributions with migrants identified as both made to our consultation by consumers and providers of such the Cross-Whitehall Migration services. We consider the delivery Analysts Group. and consumption aspects in turn. We look in detail at health and 8.2 Provision of health social care services, social work services services and education services. Theory 8.3 Second, we consider the social impacts of Tier 1 and 2 migration 8.6 As employees in the health sector, with a detailed look at the impact migrants have the potential to on housing, crime and justice, bring scarce skills to the UK congestion, and social cohesion that improve the quality and and integration. scope of health care and help alleviate national and regional 8.4 It is not possible to construct a skills shortages in the UK labour consistent and comprehensive market. The extent to which new approach to assessing the public migrants are required to provide service and social impacts of Tier these services depends partly on 1 and 2 migration. Therefore, we the availability of appropriate skills have estimated the likely impacts within the domestic labour force. of migration through Tiers 1 and 2
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8.7 The employment of migrants may 8.10 Points Based System (PBS) also affect the wages of health management information data workers and, consequently, the provide the number of Tier 2 cost at which health services can migrants coming to the UK to work be provided. A reduction in the in health sector occupations. The supply of labour (due to limits on share of migrants in the health migrant workers, for instance) sector can also be estimated may result in an increase in the using data from the Labour Force overall cost of the provision of Survey (LFS). These data can these services. This is because also be disaggregated employers might be forced to by occupation. offer higher wages to try to fill shortages from within the Evidence domestic labour force. Therefore, migrant workers effectively 8.11 As discussed by Bach in Ruhs subsidise public services, although and Anderson (2010), LFS the resultant wages, lower than analysis suggests that almost they might otherwise be, might one third of medical practitioners deter some in the existing UK and approximately one fifth of labour force from working in health nurses, dental practitioners and sector occupations. pharmacists working in the UK were born outside the EEA. Using 8.8 Domestic workers may fill at UK General Medical Council least some of the shortages in (GMC) registration data, Bach nursing if pay was increased: found that 11 per cent of all “Research shows that the wages medical practitioners working in of nurses have been too low the UK qualified in India, alongside to attract sufficient numbers of a significant proportion of workers locally trained applicants to the from South Africa (three per cent) profession.” (Ruhs and and Nigeria (1.4 per cent). Anderson, 2010). 8.12 Evidence provided by the Data Department of Health (DH) indicated that, as of September 8.9 The number of non-European 2009, 24 per cent of medical Economic Area (EEA) migrants professionals working full-time working in the health sector can be at consultant level and 33 per estimated using National Health cent of medical professionals Service (NHS) Electronic Staff working full-time in the registrar Record (ESR) data, which can be group (doctors that are below disaggregated to allow analysis at consultant grade) graduated from the occupational level. The Centre medical schools outside the EEA. for Workforce Intelligence (CfWI) Although some of these graduates told us that ESR data are currently may be UK and EEA citizens not robust enough to investigate who studied abroad, it is likely proportional reliance on non-EEA that a large proportion of these staff at a regional level, although medical professionals are non- such analysis may be possible EEA migrants. following further validation checks on these data.
170 8.13 DH and the CfWI told us that the dependence on non-EEA migrant “The shortage of higher skilled workers varies across different medical and care staff are of health sector occupations: a large particular concern for the North East. proportion of staff employed in The fear is that the proposal for Tier 2 paediatric neurology (25 per cent), migrants on a ‘first come, first served paediatric cardiology (18 per cent) basis’ with limited visas available and chemical pathology (13 per would make it difficult to respond to cent) required a work permit, for demand to those positions at times of instance. The proportion is much greatest need.” lower in some other occupations, such as diagnostic radiography North East Strategic therapy (three per cent) and Migration Partnership response orthoptic therapy (one per cent). to MAC consultation
8.14 We were told by DH that NHS ESR data suggested that there labour, plays an important role in was also significant regional filling shortages within the health variation in the dependence on sector. However, efforts within non-EEA migrants, particularly in the health sector to improve the smaller occupations. DH said that training of medical professionals these data provided indicative are gradually increasing the information only and would need domestic supply of skilled labour, to undergo further robustness and decreasing the dependency checks before this regional of the NHS on recruiting skilled variation could be fully analysed. workers from outside the EEA. The CfWI told us that this regional variation is also supported by 8.17 We have recommended anecdotal evidence. progressively fewer health related occupations for the shortage 8.15 According to DH, the NHS occupation lists with each review has historically relied on the of the health sector. Nevertheless, recruitment of migrant workers to there remain areas where fill vacancies in specific regions shortages persist: for example, and specialisms, and also to in theatre nursing. Shortages rapidly expand the workforce also persist in occupations in areas that would normally where demand is rising, such depend on long lead times to train as radiography and certain sufficient numbers of the existing consultant specialities, as well as UK workforce. DH told us that in occupations where it is difficult the UK is moving towards greater to adjust training requirements in self-sufficiency in terms of NHS order to increase worker numbers workforce supply, although this will quickly. We have also noted not be achievable in the short term particular issues of shortage in or in all occupations and regions. areas where round-the-clock cover is required for non-consultant 8.16 Our reviews of the shortage (non-training) staff: for example, in occupation lists for the UK and the area of emergency care. Scotland showed that migrant labour, and particularly non-EEA
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8.20 We were told that non-EEA “There remain significant parts of the immigrants also play an important country and significant services e.g. part in the provision of services mental health services, specialist within the independent healthcare nursing skills and social care services sector. The Scottish Government in London where an inability to recruit Health Workforce Directorate told the right skills will lead to gaps and us that international recruitment pressures on local services.” has been essential in ensuring NHS Scotland meets its delivery Department of Health response to targets and provides high quality MAC consultation services. DH told us that the UK was unlikely to be able to achieve total self-sufficiency in skilled 8.18 During our consultation, Skills clinical staff. for Health facilitated an event attended by corporate partners from the health sector. At this “Immigration has played an event a number of partners made important role in staffing the NHS; the point that training and up- however, workforce planning and DH skilling of staff in this sector was investment in education and training a lengthy process and, therefore, have been aimed at achieving greater migrant labour would be needed self-sufficiency. This investment has for some time to come. resulted in greater self-sufficiency but the very size of the NHS, the global mobility of healthcare professionals “It is possible for the health sector and the need for highly trained to reduce its overall dependence on professional and skilled clinical staff level 1 and 2 migrants. However, means that it is unlikely to be able to to train and develop a health care achieve total self-sufficiency.” professional can take years – and for those in consultant roles, Department of Health response to sometimes decades.” MAC consultation Skills for Health response to MAC consultation 8.21 We were told during the Skills for Health event that, without the 8.19 Other barriers to filling shortages ability to fill shortages using non- in the health sector may exist. EEA labour, waiting times to see Attendees at the Skills for Health consultants and for operations event cited high attrition rates might lengthen. The General during training. We were also Healthcare Group told us that told that a number of health non-availability of non-EEA labour workers were leaving the UK might affect their ability to operate to work overseas. at full capacity.
172 8.22 The social care sector is also born (Skills for Care, 2010). reliant on non-EEA labour to fill This analysis did not cover all senior care worker shortages. social care occupations because We received evidence from Skills “the LFS does not lend itself to for Care & Development that a defining social care very well.” number of employers would not Furthermore, the report did not be able to continue to provide distinguish between the relative care services safely and legally number of non-UK born workers without the continued recruitment who were EEA and non-EEA of migrant workers. Furthermore, migrants. The report found that, according to Skills for Care & in 2008, 19 per cent of workers in Development, employers said that the occupations considered were such pressure on the social care born outside the UK. This was an sector may place further demands increase on the corresponding on NHS hospitals, as the closure proportion in previous years (16 of care homes may mean that per cent in 2007 and 17 per cent vulnerable patients need to stay in in 2006). hospital for longer. 8.24 In Ruhs and Anderson (2010) Moriarty finds that there has “Social care continues also to be been a considerable increase in reliant on migration and this is the proportion of the social care particularly the case in senior skilled workforce that are migrants, care workers and children’s social and that most of these migrant workers who are recognised as workers come from outside the shortage occupations. Restricted EEA. Moriarty argues that this migration in these areas will make growing share of migrants in the the current situation worse, with workforce should be viewed in the commensurate risks to the quality and context of increasing demand for safety of service provision.” social care workers. In turn, this increasing demand, the author Department of Health response to argues, is a result of demographic MAC consultation change, a tightening of regulation in the sector, and policies aimed at changing public expectations of “The local hospital would be at the scope of social care. breaking point with all of the wards filled with elderly patients with non- 8.25 The Scottish Social Services acute needs.” Council (SSSC) told us that an independent study of Scottish Brooklands Nursing Home response care homes in 2007 found that to MAC consultation seven per cent of the workforce was employed on work permits. We were told that most non-EEA 8.23 A recent report by Skills for employees are employed under Care used the LFS to examine Tier 2 of the PBS. The SSSC said the proportion of the workforce that a reduction in the number of in selected social care-related migrant workers available through occupations that were non-UK Tier 2 would limit the ability of
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many employers to recruit staff Implications for Tier 1 and Tier 2 and, ultimately, to deliver services. Skills for Care & Development 8.28 According to the available said that such a detrimental result evidence, Tier 1 and, in particular, would most likely fall on the most Tier 2 migrants make a significant vulnerable members of society. contribution to the provision of health services in the UK, both 8.26 Skills for Care & Development told in NHS hospitals and residential us that, beyond merely allowing care homes. They help to improve employers to fill labour shortages, the speed, quality and scope of migrant workers are valued in healthcare treatment available their own right by employers. We to all UK residents. Furthermore, were told that many non-EEA we were told that Tier 1 and 2 care workers are better qualified migrants help to improve the than their UK counterparts. quality of life of some of the most Skills for Care & Development vulnerable members of society. argued that it would be important Their employment also lowers the to continue to have access to cost at which these services can international labour markets to be provided. maintain the flow of new ideas that are introduced by international 8.29 The benefits derived from Tier 1 workers, regardless of whether and Tier 2 migrants employed in there are skill shortages. They the UK health sector will not be said that EEA workers are not distributed evenly across the UK. always a perfect substitute for Anecdotal evidence and indicative non-EEA workers because their data provided by DH and CfWI English language skills are often suggest that migrant workers fill poorer, which may result in a lower skills shortages in those areas of quality of service experienced by the UK that experience particular users of social care. difficulties in recruiting skilled workers from the UK and EEA 8.27 We were also told by Skills labour markets, such as London. for Care & Development that initiatives are currently being 8.30 Evidence suggests that ongoing implemented within the social training initiatives to upskill the care sector that should reduce resident workforce are helping that sector’s dependence on to reduce the health sector’s migrant workers in the long term. dependence on non-EEA migrants However, because of the time in future. Despite these initiatives, required for these initiatives to some health sector occupations, have a significant impact, as well and some areas of the UK, will as the rapid growth in demand remain dependent on non-EEA for care services, access to migrants, at least in the short to migrant workers will continue medium term. to be necessary to fill labour shortages in this sector in the short to medium term, particularly in certain geographical locations.
174 impact on the demand for health “The IHAS considers that any limits services will depend very much on on the non-EEA migration to the the duration of their stay in healthcare sector will in the short to the UK. medium term have a catastrophic effect on the provision of healthcare 8.33 Their demand for health in the UK and suggests that services will also vary by restriction to migration must not country, region and locality be implemented until the UK has within the UK, depending on the appropriate places to train UK staff in characteristics of the migrants the skills that are needed for them to in those areas. Furthermore, fill the vacancies.” the concentration of migrants in certain regions of the UK means Independent Healthcare that the resources of some Advisory Services response to NHS Trusts may be put under MAC consultation considerably greater strain than others. As it is difficult to forecast migrants’ movements within the 8.3 Consumption of health UK, or the number of children services they will have, it is not possible to allocate resources centrally Theory across local areas in a way that accurately accounts for migrant 8.31 In common with the resident movements and concentrations. population, migrants will use health services at various points 8.34 While many of the principal during their lives. We would determinants of healthcare expect that, as with existing UK demand are independent of an residents, migrants’ demand for individual’s status as a migrant, healthcare will be associated it is possible that migrants might with factors such as age, income, have specific impacts on the earnings and educational demand for health services that attainment. are not observed in the treatment of the UK-born population. 8.32 As discussed in Chapter 3, For example, translation and migrants are, on average, interpreting services may be relatively young when they first required for patients who cannot arrive in the UK. We would expect communicate effectively in many migrants to be relatively English, and such services will light users of healthcare services, be disproportionately used compared to the overall UK- by migrants. born population, in the short run. However, we would expect 8.35 Possessing good English their demand for health services language skills may increase to increase over time due to migrants’ use of health services the increased use of health as it increases their knowledge services that comes with ageing. of, and confidence in using, Consequently, migrants’ overall such services. The consequent
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improved levels in migrants’ Evidence general health may improve their ability to work and 8.39 A key determinant of migrants’ their productivity. use of health services is their legal right to access them. According to Data current regulations, any employed or self-employed person living 8.36 There is limited potential to in the UK, and whose principal measure directly and accurately place of business is in the UK, is migrants’ use of health services fully exempt from NHS charges. because migration status is This exemption also applies neither routinely nor consistently to the individual’s spouse, civil recorded when such services partner and children (aged under are provided. 16, or aged under 19 if in further education) if they are also living 8.37 UK Border Agency management in the UK permanently. This information data provide evidence exemption is conditional upon the on the number of economic individual being in employment migrants entering the UK each at the time of treatment: if a year, as well as information on the migrant is in the UK on a work characteristics of these migrants visa but unemployed at the time that may provide an indication of treatment, he or she will be of their likely demand for health charged, provided he or she services, at least in the short to does not qualify for any other medium term. form of exemption18.
8.38 The duration of migrants’ stay in 8.40 There is relatively little research the UK will be one determinant of that focuses specifically on the their impact on health services. health impact of work-related UK Border Agency management migrants. Consequently, it is information data do not record necessary for us to examine the individual migrants’ durations of broader literature on the use of stay in the UK, so it is not possible health services by migrants as a to use these data to anticipate whole, and subsequently make their impact on the demand for informed inferences using the health services in the longer term. known characteristics of Tier 1 However, as discussed in Chapter and Tier 2 migrants. 3, UK Border Agency (2010b) estimated the proportion of Tier 1 8.41 At a meeting of the Migration and Tier 2 migrants that still have Impacts Forum (MIF) in June 2009 valid leave to remain in the UK Dr Hussey, Regional Director of five years after entry. Public Health at NHS North West, said that having good quality housing, a reasonable income and good English language skills, and being integrated into
18 Full details of NHS entitlement for migrants can be found on the Department of Health website at: http://www.dh.gov.uk/en/Healthcare/Entitlementsandcharges/OverseasVisitors/Browsable/DH_074373
176 society, were significant factors in less use of health services than determining a migrant’s continued UK-born individuals. However, well-being during their time in migration could have a significant the UK. Furthermore, Dr Hussey impact on the demand for some said that economic migrants have specific health services: “the a different age profile to the UK Audit Commission suggests that population as a whole, tending to demand for health services is be younger. lower among migrants than local communities, because they are 8.42 In their evidence to the House generally young and healthy. The of Lords Select Committee on IPPR stated that the majority Economic Affairs (House of Lords, of A8 migrants tended to place 2008) Liam Byrne MP and the less of a burden on healthcare Local Government Association and adult social care than (LGA) argued that, because new the local population, though it migrants tend to be relatively acknowledged that these younger young and healthy, they have a groups of migrants tended to be limited impact on health service relatively greater users of specific costs in the UK. This point was services, such as sexual health also put to us during the course and maternity services.” (House of of many of our consultation Commons, 2008). meetings, and particularly those we held with the various Regional 8.44 Furthermore, evidence presented Migration Partnerships. in House of Commons (2008) suggests that migration may place specific pressures on the demand “Research shows that, in majority for health services in specific migrants arriving and settling in areas of the UK. The West Norfolk the region are young, fit, and less Partnership stated that “maternity dependent on local services than services were under pressure the host population, more likely from the increase in the young to be working and contributing migrant population.” The West to the local, regional and national Norfolk Partnership also reported economy through national that “Accident and Emergency insurance contributions.” services were seeing an increased demand from migrants without North East Strategic documentation, who are able to Migration Partnership response access treatment that they would to MAC consultation be unable to obtain through GP services.” (House of Commons, 2008) 8.43 A House of Commons report on Community Cohesion and 8.45 Older people are Migration (House of Commons, disproportionately greater users 2008) discussed evidence from of health services: according to the Audit Commission and Robinson (2002), 16 per cent of the Institute for Public Policy the general UK population was Research (IPPR) arguing that, found to be aged 65 or over, on average, migrants make yet these individuals occupied
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approximately two-thirds of all 8.47 Rolfe and Metcalf (2009) suggest hospital beds. Furthermore, this that, at least in the short term, older subset of the UK population migrants in Scotland tend to accounted for more than a make relatively little use of health quarter of all NHS expenditure services. The authors argue that, on drugs and 45 per cent of all particularly in the early years of prescriptions. As we discussed in their stay in the UK, at least some Chapter 3, Tier 1 and 2 migrants migrants living in Scotland may are relatively young compared prefer to use health services on to the UK-born population as return visits to their home country a whole. UK Border Agency rather than accessing services management information data in Scotland. To the extent that show that, in the 12 months to this is true, this would imply that the end of March 2010, all Tier temporary migrants have relatively 1 and Tier 2 migrants and their little impact on the demand for UK dependants who entered the UK health services. However, whilst it were aged under 65. is plausible that this may be true for EEA immigrants, it is likely that, 8.46 In its pre-Budget forecast (Office if only for geographical reasons, for Budget Responsibility, non-EEA immigrants will make 2010) the Office for Budget relatively larger use of UK health Responsibility considered the services during their initial years impact of an ageing demographic in the UK. Moreover, if migrants on fiscal sustainability. Assuming decide to settle permanently current policies remain and raise a family in the UK, the unchanged, this report found authors acknowledge that it is that, as a proportion of Gross likely that migrants will cease Domestic Product (GDP), health to use health services in their spending will increase from eight home country and instead exhibit per cent in 2009/2010 to 9.3 per increased demand for health cent in 2029/2030 (an increase of services in Scotland. 1.3 percentage points). Over the same 20-year period, spending on 8.48 During our consultation some, long-term care is set to increase typically larger, employers, by 0.5 percentage points of GDP. such as Deutsche Bank and “Stylised age profiles illustrate how Morgan Stanley, told us that they separate items of revenue and provide private health insurance spending are distributed over a for their migrant employees. representative individual’s lifetime. Consequently, we would expect If all such items are summed over migrant workers employed by a lifetime, it is apparent that large these firms to make less use of spending items (such as health publicly-funded health services in and pensions) occur outside the UK than other migrants. working years. An increasingly old demographic structure therefore can have implications for fiscal sustainability.” (Office for Budget Responsibility, 2010).
178 groups will place an increased “Morgan Stanley provides private burden on translation services healthcare insurance to all of its in the health sector. The authors employees and assignees, and the report that, in some cases, firm pays for private schooling for patients’ family members may the children of senior international be able to provide an adequate assignees, therefore having limited translation service. Alternatively, impact on public services.” patients may be able to speak to a medical professional who speaks Morgan Stanley response to their mother tongue. MAC consultation 8.52 Gill et al. (2007) estimated the average hourly cost of providing 8.49 One of the most significant trained interpreters for patients differences between the cost of who do not speak English at £26 providing healthcare for migrants to £30. Gill et al. (2009) argue and the UK-born population that this may be an underestimate identified in the available evidence as it fails to take account of is the cost of providing English the distribution of the migrant language services to patients who population across the UK: many do not speak English as their first migrants are concentrated language. This is also something in areas of the UK with the we were told during the course of highest labour costs, such as our consultation. London and the South East. The evidence suggests that the cost 8.50 Of course, not all migrant patients of translation services varies require English language support considerably across UK regions, services, and not all patients not least because of regional who do require these services variation in migrant populations. are migrants. We would expect For example, data collected that migrant demand forms a from regional health authorities disproportionate share of the total in 1997/1998 suggests that the cost of providing these services. annual total cost of translation However, because Tier 1 and 2 services was less than £21,000 migrants must satisfy an English in North West Anglia, but more language requirement we would than £350,000 in Birmingham expect them to make relatively (Gill et al., 2007). It is likely that little use of these services at least some of this variation can compared to the average migrant be explained by differences in the in the UK. quality of data in different parts of the UK. 8.51 Gill et al. (2009) found that a migrant’s demand for English Implications for Tier 1 and Tier 2 language services is higher if the patient is a woman, and increases 8.53 Tier 1 and Tier 2 migrants are with the age of the migrant. As relatively young, educated and women and older people report highly paid compared to the higher consultation rates with population as a whole. As such, medical professionals, these
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given the evidence discussed concentration. Because Tier 1 and above, on arrival in the UK they 2 migrants and their dependants are likely to be relatively healthy are relatively young when they compared to the UK population arrive in the UK we would expect as a whole. Evidence suggests them to make relatively little use that some Tier 1 and 2 migrants, of health services compared to particularly those who work for the overall UK-born population, at large, multinational firms, least in the short term. This was receive private health insurance something on which we found for themselves and their general agreement amongst those dependants as part of their respondents who expressed an overall benefits package. opinion on this.
“In members’ experience many Tier “[…] the dependants of Tier 1 and 2 1 and Tier 2 migrants have private migrants tend to be skilled, of working healthcare for themselves and age and have little impact on NHS their dependants, often as part of services”. a benefits package offered to the migrant along with their job” North West Regional Strategic Migration Partnership response to Immigration Law Practitioners’ MAC consultation Association response to MAC consultation 8.56 In the longer term, in the same way as the UK-born population, 8.54 The dependants of Tier 1 and Tier 1 and Tier 2 migrants Tier 2 migrants can enter the UK who make their stay in the UK without having to meet education permanent impose an increasing and earnings criteria, so we do burden on UK health services not know how their education and as they grow older in the UK. earnings compare to the resident Therefore, their lifetime impact on population. However, we do know the demand for health services will that the spouses of Tier 1 and depend on their length of stay in Tier 2 migrants are also relatively the UK. As discussed in Chapter young compared to the resident 3, the available evidence suggests population as a whole. that around 40 per cent of Tier 1 and 2 migrants stay in the UK 8.55 As with any population group, for at least five years (UK Border Tier 1 and Tier 2 migrants and Agency, 2010b). their dependants will inevitably make some use of publicly- funded health services in the UK. Any pressure they place on health services will vary geographically, reflecting the sub-national variation in their
180 8.4 Provision of social 8.60 The Department for Education services (DfE) told us that there has been a growing demand for children Theory and families’ social workers, with 40 per cent more social workers 8.57 Migrant workers employed as employed in September 2009 social workers improve the quality compared to 10 years previously. and scope of social work services We were told that much of this available in the UK. They fill both increase in demand is attributed, short-term and persistent labour at least in part, to the increased market shortages that are evident complexity of child protection in some regions of the UK. On cases as well as the effect of the other hand, as in other public several high-profile cases in the service occupations, access media. Furthermore, the DfE told to migrant labour may reduce us that the rise in unemployment incentives to train and recruit from since the onset of the recent the local workforce. recession has led to further increases in the need for social Data services. The Association of Directors of Children’s Services 8.58 The General Social Care Council (ADCS) told us that a survey of (GSCC) holds data on the local authorities in England in number of registered children and April 2010 showed a significant families’ social care workers in increase in demand for a range of England that come from outside safeguarding services. the EEA. UK Border Agency management information data 8.61 In its evidence to us the DfE told provide information on the annual us that employers often find it very inflow of Tier 2 migrants working hard to recruit and retain social as children and families’ social workers. Local Authorities (LAs) workers, disaggregated by region. cited a lack of suitably qualified and suitably experienced applicants Evidence as the main reason for recruitment difficulties. The DfE told us that 8.59 There are a number of social vacancy rates varied considerably services that are provided by by region: in 2008 the vacancy local authorities. However, the rate was five per cent in the East vast majority of the evidence Midlands and the North East, we received discussed the compared to 14 per cent in London employment of migrants as and 22 per cent in the East of children and families’ social England. The ADCS told us that a workers. We concluded in a survey in April 2010 showed a high previous review of the shortage level of vacancy rates amongst the occupation list that there was a children’s social care workforce (11 shortage of these social workers per cent). They said they would in the UK (Migration Advisory expect this to increase should Committee, 2009b). immigration limits be introduced. However, we are not sure whether some of these vacancies are being filled by agency workers.
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8.62 The high dependence on agency the South West. This evidence staff in the children and families’ suggests that some LAs with large social work occupation was shortages of social workers are highlighted in our discussions more dependent on the ability to with corporate partners and in recruit workers from outside the the written evidence we received. EEA than others. Agency workers were often perceived as a short-term solution 8.65 At a meeting of representatives to managing vacancies. We of the social work occupation were told that agency staff were we were told that there is a expensive to employ and the general unwillingness among the quality of their work was variable. domestic supply of social workers to relocate to London. Potential 8.63 In a previous review of shortages reasons for this include the higher in social work occupations cost of living in London, which is (Migration Advisory Committee, not fully compensated by higher 2009b) we highlighted the need earnings there, as well as the fact for social work employers to that social work in London is often persuade agency workers to take perceived to be more demanding up permanent positions in order than in other areas of the UK. to reduce vacancy rates. We concluded that, for a period of 8.66 At the same meeting we were time, it was sensible to continue told that non-EEA workers were to allow employers to recruit mostly recruited from Australia, social workers in children and India, New Zealand, South family services from outside the Africa and the United States. We EEA. We noted the encouraging were told that these non-EEA efforts being made to improve workers were preferred to EEA recruitment and retention and migrants because they had better expected that the need to recruit English language skills and had from outside the EEA would not qualifications and training that continue beyond the time it took were more easily recognisable for those being recruited to gain and more suited to social work knowledge and experience of in the UK. Language skills were the job. considered to be of particular importance, with the ability to 8.64 The DfE told us that, of communicate effectively with approximately 80,000 social children and families fundamental workers registered in England, to the delivery of high-quality around six per cent (5,180) social work. are non-EEA migrants. These individuals are often concentrated 8.67 The DfE told us that non-EEA in certain regions of the UK: UK workers tend to be more highly Border Agency data show that 260 qualified (often to masters’ Certificates of Sponsorship (CoSs) degree level) than their British were issued for social workers counterparts. They are also more in London and the South East likely to work full-time and tend to in the year to December 2009, be younger than the compared to only four CoSs in domestic workforce. Scotland and three in Wales and
182 8.68 Indeed, the age of the domestic workforce was cited as a problem “If the social worker workforce, for employers in social work which is already under considerable occupations. According to Hussein pressure from vacancy rates and et al. (2010) the average age of a substantial workloads, loses its supply UK-qualified social worker is 47. of overseas trained social workers, it Furthermore, Social Work Task could put at risk the reforms to social Force (2010) found that over a work practice and child safeguarding third of social workers were aged that the Government is looking to 50 or over, and hence the need to the Social Work Reform Board and replace the existing labour force is Munro Review to help achieve.” a growing concern for employers. Department for Education response 8.69 We were told that there is only to MAC consultation limited potential to increase the domestic supply of social workers in the short term due Implications for Tier 1 and Tier 2 to the time needed to educate and train them. Furthermore, the 8.71 We do not have any data on current requirement to undertake the number of Tier 1 migrants extensive practical training employed as social workers in order to qualify as a social in the UK. When we met with worker, and the limited number representatives of the social work of providers of this on-the-job occupation we were told that, due training, mean that increasing to the high earnings requirement the number of university places for Tier 1, the number of such will not eradicate the shortage of migrants employed as social social workers in the short term. workers is likely to be very small. We were told that it would take several years for the impact of the 8.72 Evidence suggests that, in the training and recruitment initiatives face of increasing demand, Tier recommended in Social Work Task 2 migrants make a contribution to Force (2009) to be felt. the provision of social work in the UK. Despite efforts to increase 8.70 The DfE told us that, although the supply of domestic labour, they are working to tackle the many areas of the UK apparently domestic shortage as quickly as still exhibit a dependency on Tier possible, the time it takes to train 2 migrants. Evidence suggests new social workers means that that some areas of London and it will be necessary, at least in the East of England are most the short term, to use non-EEA dependent on social workers workers to maintain levels of from outside the EEA to fill social work provision. labour shortages. The DfE told us that shortages of children and families’ social workers can be a contributing factor in child deaths.
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social services will depend on “High national vacancy and turnover the number of migrants that bring rates contribute to poor delivery of young families with them to the services and therefore increase the UK, or that are likely to start young risk of poor outcomes for vulnerable families in the future. children and their families. In the most serious cases, the absence 8.76 Due to regional disparity in the of workers has been cited as a distribution of migrants, it is likely contributing factor in the serious injury that the pressure placed on local or death of children and young people authorities as a result of positive known to social services.” net migration will vary across the UK. It follows that areas with a Department for Education response larger concentration of net migrant to MAC consultation inflows will experience much greater pressures on the demand for social services. 8.73 As an alternative to expensive agency staff, at least in the short Data term, Tier 2 workers help to reduce pressures on the cost of social 8.77 UK Border Agency management service provision. The extent to information provides data on the which migrant workers from outside age profile of Tier 1 and Tier 2 the EEA are required in the longer migrants and their dependants. term will depend on whether existing shortages can be filled from the Evidence resident or wider EEA workforce. 8.78 During a meeting between the 8.5 Consumption of social House of Commons Communities services Local Government Committee and local stakeholders in Theory Peterborough in 2008 one stated impact of migration was 8.74 The demand for social services the perceived increase in the should, all other things being number of children in care: “Over equal, increase broadly in line one third of care proceedings with increases in population size. dealt with migrant children. Increases in population size Often these cases have a high caused by positive net migration level of complexity necessitating should, therefore, result in additional resource, for example, increased need for social services. travelling to other countries to complete a child’s assessment.” 8.75 There are a number of social (House of Commons, 2008). services that are provided by local authorities. The rise in demand 8.79 According to evidence from arising from positive net migration the DfE, factors related to will depend on the characteristics unemployment, such as low of migrants that are associated income, increased stress, family with each particular social service. friction and hardship, can lead to For example, the increase in the more families demanding support demand for children and families’ from social services.
184 8.80 The DfE was unable to provide distribution of Tier 1 and Tier 2 any evidence on whether the cost migrants. In the longer term, it will of providing social work services depend on Tier 1 and 2 migrants’ to migrants differs from the cost duration of stay in the UK. of providing equivalent social services to UK-born individuals. 8.84 The available evidence suggests that individuals who are employed 8.81 At a meeting we held with on high incomes are less likely representatives from the social to require support from social work sector we were told that services, including those relating some migrants, both recent to children and families’ social arrivals to the UK and those work. As discussed in Chapter 3, who have been in the UK for relative to the UK-born population, a considerable period of time, Tier 1 and 2 migrants are more may require language support likely to be employed and to or translation services when receive higher earnings, which receiving social work services would suggest that these migrants if their first language is not are comparatively low users of all English. While this may require social services. the relevant LA to incur greater costs to provide such additional 8.6 Provision of education support, we were told that in some services cases such language services can be provided by migrant social Theory workers who speak the same foreign language as the person 8.85 Migrants can be employed receiving social work services. in the education sector as teachers, teaching assistants, Implications for Tier 1 and Tier 2 university lecturers and university researchers. Their scarce skills 8.82 We did not receive any evidence may improve the education specifically on the demand by Tier of students in UK education 1 and Tier 2 migrants for social institutions, increasing the work services. A number of social attractiveness of UK higher services relate to health and well- education to domestic and being and so the implications for international students and Tiers 1 and 2 overlap with the improving the quality of academic discussion presented in research. Furthermore, migrants section 8.3. may play a role in alleviating national and local shortages 8.83 The demand for children and of particular types of teachers, families’ social work services enhancing the quality of from Tier 1 and 2 migrants is educational provision. potentially significant, given that these migrants tend to bring 8.86 As with health services, the young children with them, as employment of migrants also discussed in Chapter 3. This helps to reduce the cost of potential demand will vary across providing some education the different areas of the UK services, which benefits taxpayers according to the geographical and the consumers of these
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services. Migrant workers help to the South East, while a further relieve any pressure to boost pay 19 per cent were for posts in in the education sector, which may the Midlands and the East of deter some UK-born individuals England. Considering secondary from working in education school teaching posts specifically, occupations. This, in turn, may almost 70 per cent of CoSs were inadvertently encourage an issued to teachers working in increasing dependence on migrant London and the South East. This labour to fill shortages within the regional disparity is also observed education sector. in the employment of non-EEA migrants as special educational 8.87 Due to regional differences needs (SEN) teachers, with in the demand for particular approximately 76 per cent of education services, as well all CoSs issued to teachers in as regional variation in labour London and the South East market characteristics, it is likely in 2009. that migrants’ contribution to the provision of education services 8.90 The DfE provided us with full- will not be evenly distributed time vacancy rate data for LA throughout the UK. maintained schools in England that showed that London, the East Data of England and the West Midlands had the highest vacancy rates 8.88 Registration data on the inflow of in 2009. Therefore, the available non-EEA migrants working in UK evidence suggests that many schools, disaggregated by UK non-EEA migrants are helping to region and subject specialism, fill teaching shortages in those are available from the General regions with the highest Teaching Council (GTC). UK vacancy rates. Border Agency management information data can provide 8.91 In their evidence to us the DfE told evidence of the number of us that the ability to recruit non visa approvals for migrants EEA-domiciled teachers provides working in the education sector, important flexibility to mitigate disaggregated by region. The the effects of the economic cycle School Workforce Census on teacher supply: as the UK provides data on regional vacancy economy recovers it is likely to rates in LA maintained schools become harder to attract people in England. into the teaching profession. We were told that overseas trained Evidence teachers (OTTs), defined as teachers who qualified outside the 8.89 Evidence provided by the DfE EU, also make a small but vital shows that approximately 2,200 contribution to filling vacancies Tier 2 CoSs were issued to non- in secondary maths and science EEA migrants working as school subjects, which are on the and college teachers in 2009. Of current UK shortage occupation these, approximately 64 per cent list. Evidence we received from were for posts in London and the NASUWT teachers’ union
186 concurred with this, arguing and management studies. As a that OTTs are essential to the proportion of all academic staff, continued effective functioning the subject areas most dependent of the education system, both on non-EU migrant workers were for some geographical locations mathematics, chemistry, physics, and some specific aspects of and various types of engineering. the curriculum. When we met with representatives from Universities UK and GuildHE 8.92 Recruiting OTTs reduces the we were told that the Higher overall cost of providing education Education Funding Council for services in the UK because, as England (HEFCE) recognises we were told by the DfE, it costs science, technology, engineering less to recruit an OTT than train and mathematics as strategically a UK resident worker. OTTs are important and vulnerable subjects. employed as unqualified teachers We were told that non-EEA and are paid, on average, staff, like non-EEA students, are less than qualified classroom vitally important to the viability of teachers until they are awarded continuing to provide courses in qualified teacher status (QTS). these subjects at UK HEIs. Consequently, whilst the total cost of recruiting a teacher 8.94 Universities UK, GuildHE and from the domestic workforce in the UCEA told us that England ranges from £21,500 to international academic and £45,900, depending on the type research staff increase the of training they have undertaken, attractiveness of the UK higher the average total cost of a new education sector to international OTT is just over £21,000. The DfE students, who provide an said that OTTs remain a cost- important stream of revenue effective way to fill the vacancies for UK HEIs. In a meeting with that remain despite large efforts to Universities UK and GuildHE train, recruit and retain teachers we were also told that non- from the domestic workforce. EEA migrants employed in UK universities tend to be younger 8.93 In their joint response to our and better qualified than their consultation Universities UK, UK-born counterparts, with a GuildHE and the Universities and relatively large proportion holding Colleges Employers Association a PhD qualification. (UCEA) told us that there were over 19,000 non-EU migrants 8.95 Regional variation in the working as academic staff at contribution that migrants make to UK higher education institutions the provision of education services (HEIs) in the academic year was also evidenced in the material 2008/09, comprising 11 per submitted to us by Universities cent of the total workforce. In UK. We were told that the regions absolute terms, the subjects that with the largest proportion of total employed the largest number academic staff that are non-EU of non EU-domiciled academic nationals are the East (15 per staff were clinical medicine, cent), Greater London (14 per social studies and business cent) and the South East (13 per
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cent). HEIs in Wales have, on average, the lowest proportion of “The ability to access a global academic staff that are non-EU workforce is of paramount importance nationals (eight per cent). from a Higher Education perspective. Universities compete to attract the 8.96 During our consultation we were brightest and best staff from a truly told that, if universities were international pool of candidates. It unable to fill shortages through is vital that universities are able to bringing in non-EEA labour, compete internationally and to ensure there would be a reduction in that researchers are attracted to bring the number of university places their grants/funding and research available for certain subjects, such teams to the UK. Limiting the ability as engineering. This would lead to for this to happen will inevitably make fewer graduates in these subjects the UK a far less attractive option for and fewer available skilled staff who are being solicited by other workers for those sectors which employing institutions.” rely on them. In certain sectors, for example engineering, where Royal Holloway, University of London some shortages already exist response to MAC consultation in the workforce (see Migration Advisory Committee, 2009d), this would exacerbate the problem. “As a world-class university with a Although outside of the scope of strong international reputation it is this review, we note that non-EEA essential that we sustain the high nationals also consume Higher quality of our research and teaching. Education services as students. Academic and research staff from overseas play a vital role in this, 8.97 We were also told that non-EEA both those who come to Oxford researchers played an important as employees and those who visit role in attracting high quality to pursue collaborative research research programmes, and the projects or to attend conferences funding that goes with them, to or give occasional lectures or short the UK. Without the necessary courses for our students. Without researchers UK universities such international academic mobility would lose out on some our ability to offer world-class research funding, potentially teaching and to engage in cutting- to foreign universities. edge research would be seriously compromised.”
University of Oxford response to MAC consultation
188 Implications for Tier 1 and Tier 2 from outside the EEA in the longer term. 8.98 Tier 1 and 2 migrants perform important roles in UK schools, 8.7 Consumption of filling skilled vacancies that cannot education services be filled from within the domestic and wider EEA labour market: the Theory current UK shortage occupation list includes secondary education 8.101 Like any increase in the UK teachers of maths and science school-age population, a net inflow and all special needs education of migrant children increases the teaching professionals in special demand for education services schools (Migration Advisory in the UK. It is not possible Committee, 2010a). Tier 1 and 2 to accurately determine the migrants are particularly important magnitude of this impact from the in those areas of the UK with the number of migrants who arrive highest vacancy rates, such as in the UK: it is likely that many the West Midlands, the East of migrants will start new families, England and London. The extent or add to existing ones, during to which Tier 1 and 2 migrants their stay. will be needed to fill teaching shortages in the longer term will 8.102 Migrants’ demand for publicly- depend on the capacity to upskill funded education services may the resident workforce. be negatively correlated to their incomes: migrants with higher 8.99 Tier 1 and 2 migrants employed earnings may choose to educate as lecturers and researchers their children privately. This would contribute to the attractiveness reduce their impact on publicly- of the UK’s higher education funded education services and institutions to both domestic and generate revenue for the UK international students. They also private education sector. However, strengthen the position of some it may also increase the cost universities as world-leading of private education in the UK, research institutions. In this depending on how the supply respect, migration through Tiers 1 of private schooling responds to and 2 may have a positive impact changes in demand. on the skills acquisition of the future UK workforce. 8.103 As with the impact on education provision, any observed increase 8.100 The presence of Tier 1 and Tier in education costs may not be 2 migrants in the education distributed evenly throughout workforce may help to relieve the UK. Migrant flows and any pressure to increase pay in concentrations will differ by LA, education occupations. This may as may migrant fertility rates and decrease the attractiveness of the ratio of adult migrants to jobs within the education sector child dependants. to workers already resident in the UK, thus potentially encouraging 8.104 The annual cost of educating continued dependency on workers the child of a migrant may be no
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different to the annual cost of require EAL support. Therefore, educating the child of a UK-born these data cannot be used to individual, particularly if the child estimate accurately the cost of has good English language skills, educating migrant children in no special educational needs and UK schools. enrols at the beginning of the school year. On the other hand, 8.107 Data on the number of children if the migrant child experiences receiving EAL support provide linguistic or cultural difficulties the best proxy for the additional that require specialist services, cost of educating migrant children such as one-to-one tuition or in UK schools. The DfE collects English as an Additional these data for schools in England Language (EAL) support, he only. EAL status is self-reported or she may be relatively more and is identified when English is expensive to educate than the not the main language spoken average non-migrant child. at home. Unfortunately, as Rolfe The same would be true were and Metcalf (2009) explain, such the school to incur additional data fail to identify migrants administrative costs because whose main language is English. migrant students were more likely They also include children who to enrol at times other than the were born in the UK but who do beginning of the school year. not speak English as their first language. For such children, 8.105 Potential benefits of funding speaking English as a second the education of migrants’ child language may not be a reliable dependants may include the indication of their level of English cultural and linguistic knowledge proficiency: many may be bilingual that they bring to the UK, which in English and the language they can be used to increase levels speak at home. of cultural tolerance and appreciation among Evidence future generations. 8.108 According to the latest enrolment Data statistics released by the Department for Education 8.106 It is not possible to calculate the (Department for Education, migrant population in UK schools 2010), approximately 16 per because enrolment data do not cent of pupils (518,000 pupils) record nationality or country of in maintained primary schools in birth. The LFS could be used to England in 2010 were known or estimate the number of migrant believed to have a first language children, and the number in other than English. In state funded schools, although accurate secondary schools, this figure measurement would depend on was 12 per cent (378,000 pupils). migrant children still living in their In both primary and secondary parental home, which may not schools the proportion of all pupils always be the case. Furthermore, who were known or believed to LFS data give no indication of the have a first language other than number of these migrants who English had increased by at least
190 0.5 percentage points compared be explained, at least in part, to 12 months previously. This by the population decline that represents an annual increase Scotland experienced until the of more than 40,000 pupils. mid-2000s, particularly among However, these data give no younger age groups. precise indication of the number of pupils that are migrants or the 8.112 In its evidence the DfE told us number of pupils that require that it produces national pupil EAL support. projections for state schools in England, which include 8.109 The DfE told us that a report by local authority maintained the Department for Communities nursery, primary, secondary, and Local Government (CLG) due special schools, pupil referral to be published shortly identifies units, city technology colleges pupils within the National Pupil and academies, based on Database (NPD) that it considers various assumed levels of net ‘most likely to be immigrants’. migration. These are based on These are defined as pupils who ONS population projections for entered school after the age England and relate to the impact of five and who do not speak of long-term migration only. The English as their first language. projections reflect those children The research finds that there are who have changed, or intend to 186,000 pupils in England who are change, their country of usual ‘most likely to be immigrants’. residence for one year or more and are attending a school 8.110 This CLG research also finds that in England. the geographical distribution of pupils who are ‘most likely to be 8.113 The ONS’ principal projection immigrants’ is uneven across the assumes annual levels of net UK. Compared to the national migration to England will gradually average there tend to be relatively decline from 179,000 in 2010 to more immigrants in London and 162,000 in 2014. This implies total relatively fewer in rural areas, positive all-age net migration of although the geographical approximately 850,000 over this distribution of immigrants to five year period. On the basis the UK since 2000, particularly of the ONS’ principal projection, Eastern European immigrants, is the DfE projects that the number less concentrated in specific areas of pupils aged 5 to 15 in state of the UK. schools in England will increase by approximately 113,000 8.111 Rolfe and Metcalf (2009) found between 2010 and 2014. that the proportion of pupils in publicly-funded schools in 8.114 Alternatively, if annual net Scotland who are migrants has migration were zero between 2010 been rising in recent years. In and 2014, the DfE projects that spite of these higher numbers they the state school population would find little evidence of increased still rise by approximately 100,000. overall demand for education Therefore, according to these services in Scotland, which could projections, DfE told us that, at a
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national level, large differences in 8.116 A study by the Association of net migration have only a small London Government estimated impact on pupil numbers, at least that a migrant child arriving in the in the medium term. We are middle of the school year costs an surprised by how small (13,000 extra £400 at primary level and pupils) the difference between the £800 at secondary level compared principal projection scenario and to children starting school at the the zero net migration scenario is beginning of the school year according to the DfE calculations, (House of Lords, 2008). In her particularly considering the PBS evidence to the House of Lords management information data Select Committee on Economic we presented in Chapter 3 on the Affairs Dr Dobson of University number of child dependants that College London said that enrolling migrants bring with them to pupils at non-standard times was the UK. time consuming, required the involvement of several members of staff and had a negative impact “At a national level, large differences in terms of diverting resources. in net migration have only small-scale Of course, there would be similar impacts on the numbers of children disruption if the children of UK- and young people, at least in the born parents were to enrol in medium term. […]. However, there schools at non-standard times. could be much more marked impacts at a more localised level, particularly 8.117 In their evidence to the same in areas which currently have Select Committee both Dr Dobson relatively high net migrant inflows.” and the Local Government Association (LGA) said that the Department for Education response impact of migration on schools to MAC consultation will vary according to the size of the school and the region in which it is located. They noted the 8.115 Turning to the potential additional problems that schools encounter cost of educating migrant pupils, in assessing the needs of migrant Edinburgh City Council estimated students, often due to a lack the annual cost of providing of records on their educational EAL support to 50 pupils to be history or the poor English ability approximately £33,000 (Rolfe and of migrant children and their Metcalf, 2009). This estimate is families. Dr Dobson also said that based on the cost of employing small schools find it more difficult an EAL teacher and may vary to provide the necessary support considerably depending on the for migrant pupils as their smaller regional and localised distribution budgets are less flexible than of EAL students. Consequently, those of larger schools. EAL support costs may represent a significant strain to some LAs’ 8.118 At a meeting of the MIF in budgets, whilst having a relatively January 2009 Janet Tomlinson, small impact on others. Director of Children, Young People and Families at Oxfordshire County Council, said that a
192 sudden and significant increase they enter mainstream education. in new pupils could force a school The centre costs £92,000 a year to employ additional teaching to run but, according to Slough staff if these additional pupils Borough Council, due to the need lead to maximum class size for additional staffing to cope with limits being exceeded. Tomlinson demand during peak periods it also noted the problems arising is currently insufficient to meet when assessing the educational the needs of the migrant child needs of migrant pupils due to population in the area (House of the absence of their educational Lords, 2008). records from their country of origin. Furthermore, she argued 8.121 Dr Dobson also told the Select that dedicated local assessment Committee that the high levels centres could help to counter of mobility of migrant families in these problems if sufficient the early part of their stay in the resources were available. UK caused specific problems for schools in areas with a 8.119 Recalling a meeting with local high concentration of migrants. stakeholders in Peterborough in Continuous inflows and outflows 2008, House of Commons (2008) of pupils throughout the school reported that “one participant year come at significant time, stated that a difficult consequence resource and financial cost to of unplanned inward migration these schools. is that it makes it difficult to plan for school numbers. The area 8.122 As well as outlining the costs had seen a number of planned schools face in providing school closures owing to the education to migrant pupils, projected decline in the number of House of Lords (2008) also children, and yet had in actuality discussed the benefits that these experienced an increase in pupils can bring to schools in the migrant children. The increase UK. In her evidence, Dr Dobson in the number of children whose noted the positive work ethic of first language was not English many migrant pupils and said was naturally a problem, although that the extra investment schools the Committee was assured that receive for their migrant pupils can a great deal of work had been raise the standard of education done to ensure that the resource received by all pupils in the devoted to helping such children school. Demand for school places was not being diverted from by migrant dependants can also the children of the help schools in rural areas: in its indigenous community.” evidence the National Farmers Union (NFU) suggested that 8.120 Slough Borough Council told the this boost to schools’ enrolment House of Lords Select Committee figures had contributed to the that it had set up a dedicated maintenance of some local village centre at one of its secondary schools, therefore benefiting the schools to provide support to, and local community as well as the assess the needs of, recently- staff employed in these schools. arrived migrant children before
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8.123 In our own consultation, we 8.125 A forthcoming report from the UK received a variety of qualitative Border Agency (2010e) finds that, evidence from corporate partners in a survey of Tier 2 sponsors around the impact of migrant and Tier 5 applicants, four per children on education services. cent of the 961 respondents In areas where immigration has pay the school fees of migrants’ become common, schools seem children. Although we do not know to have adapted well. There was a which firms responded to this suggestion that although schools’ survey, based on evidence we test results seem to fall when the received during our consultation proportion of migrant children we consider it likely that larger suddenly rises in a school, after employers are more likely to offer a period of adaptation, results such benefits to their employees. begin to rise again. We were also If this is true, and if large firms told that in some inner-city areas employ more migrants on the number of migrant children average, the proportion of migrant attending schools was keeping children educated privately may these schools open, which was of exceed four per cent. benefit to the UK-born population. 8.126 Finally, during our consultation many of our corporate partners “Our members also note that some of made the point that migrant the region’s schools are dependent children bring increased cultural on migrant children to remain open. diversity to schools. An Australian We are concerned that plans for a study (Carrington et al., 2007) also reduction in Tier 1 and 2 migration argued that having migrant pupils may put some schools’ futures in schools teaches Australian in doubt, and thereby undermine children to appreciate cultural advances in community cohesion.” differences, which lays the foundations for wider inter-cultural North West Regional Strategic understanding and tolerance in Migration Partnership response to future generations of Australians. MAC consultation Implications for Tier 1 and Tier 2
8.124 Written responses to our 8.127 Like any increase in population, consultation, as well as meetings the effect of inflows of Tier 1 and we held with corporate partners, Tier 2 migrants on the demand for such as Embassy of Japan, UK education services depends on suggest that some employers the resulting number of additional fund the private education of children, both now and in the future. the children of Tier 1 and Tier 2 UK Border Agency management migrants. This reduces the impact information data presented in that these migrants and their Chapter 3 show that in 2009 dependants have on publicly- around 15,000 visas were granted funded education services in to child dependants of migrants the UK. applying, both in-country and out- of-country, for Tier 1 General and its predecessor scheme, the Highly Skilled Migrant Programme. The
194 equivalent number of visas issued 8.131 Although it is likely that many to child dependants of migrants children of Tier 1 and 2 migrants applying for all Tier 2 routes19 and will attend publicly-funded their predecessor schemes was UK schools, the relatively approximately 24,000 in 2009. high incomes of Tier 1 and These figures refer to the number Tier 2 migrants suggest that, of visas granted, which, as we compared to UK-born parents, a discussed earlier in this report, disproportionately large number of does not necessarily correspond to Tier 1 and Tier 2 migrants might actual migrant flows. pay to educate their children privately. Additionally, we received 8.128 Considering the age profiles of evidence that some, particularly Tier 1 and Tier 2 child dependants large, employers pay for the presented in Chapter 3, it children of migrant workers to be seems likely that around half of educated privately as part of the these dependent children were worker’s overall benefits package. aged 5 to 16 and, therefore, of compulsory school age. This suggests that around half of the “In members’ experience significant children of Tier 1 and 2 migrants numbers of Tier 1 and Tier 2 migrants may be immediate consumers of opt for private schools in the UK for education services in the UK. their children.”
8.129 In addition to these existing Immigration Law Practitioners’ children, it is plausible that Tier Association response to 1 and Tier 2 migrants, who are MAC consultation typically young, might add to their existing families, or start new ones, after arriving in the UK. 8.132 The average annual cost of educating a child dependant of a 8.130 The longer-term impact of Tier 1 or Tier 2 migrant is likely to migration through Tiers 1 and 2 be at least as high as the average on the demand for education will annual cost of educating a child depend on their children’s duration of UK-born parents. If the migrant of stay in the UK. Some migrants, pupil requires additional support or particularly those who have entered EAL tuition, or if the migrant pupil the UK through the intra-company enrols at a non-standard time and transfer route of Tier 2, are likely to changes schools frequently during remain in the UK only temporarily, their time in the UK education thus it is unlikely their children system, this annual cost could will remain in publicly-funded be higher. UK schools in the long term. As discussed in Chapter 3, UK Border 8.133 On the other hand, the children Agency (2010b) suggests that of Tier 1 and Tier 2 migrants will around half of Tier 1 and 2 migrants generally have at least one parent stay in the UK for at least 5 years. who is in skilled, often well-paid
19 UK Border Agency management information data do not allow us to disaggregate the number of visas granted to child dependants of Tier 2 migrants by individual routes within Tier 2.
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employment, and who has a good formation rate of the inflow and level of educational attainment outflow groups is the same, then and strong English language positive net immigration will lead skills. To the extent that it is to an increase in the overall possible to make any inferences demand for housing in the same from the parent’s characteristics, way as an equivalent increase in we might expect the child’s own the population as a whole. English language skills and educational ability to be better, on 8.136 In addition, the household average, than the average migrant formation rate of a particular child. If such assumptions were migrant cohort is likely to vary to hold true, this would imply that over time. Large households the children of Tier 1 and Tier may fragment and form a greater 2 migrants, when compared to number of smaller households. other migrant children, demand For a given cohort of migrants, below-average levels of specialist in the long run this will increase migrant support services and overall demand, potentially EAL tuition. comprised of a fall in demand for larger accommodation and 8.134 Overall, as with any increase in a larger increase in demand for population, inflows of Tier 1 and 2 smaller accommodation. migrants increase the demand for publicly-funded education services 8.137 The housing market is broadly in the UK. Local authorities comprised of three sectors: in those areas of the UK with private rental, owner occupier the largest concentrations of and social housing. The sector Tier 1 and Tier 2 migrants will a migrant household chooses experience the largest increases to accommodate themselves in in demand. Compared to other will depend on factors such as migrant children we would expect income, access to credit markets, the children of Tier 1 and 2 expected duration of stay in the migrants to require relatively few UK, house prices, rents and educational support services. legal access to social housing. Furthermore, there is evidence The sector in which migrants are that some children of Tier 1 and 2 accommodated may also vary with migrants are educated privately. their length of stay in the UK.
8.8 Housing 8.138 Migration leading to an increase in the overall demand for housing Theory affects the owner occupier sector through higher house prices and 8.135 The relationship between a given the private rented sector through level of net immigration and a higher rents. The magnitude of the change in the overall demand impact on house prices and rents for housing depends on the will depend on the responsiveness household formation rates of the of supply to changes in demand. inflow and outflow migrant groups that comprise net immigration. For example, if the household
196 8.139 In addition, migration affects 8.141 The geographic variation in the social housing sector in a the impact of migration on the number of ways. In the short housing market will primarily be term, the demand for social driven by the geographic housing may increase as variation in migration flows. members of the resident However, a further effect may population that are eligible for exist if a given change in housing social housing are displaced demand has a different effect on from the private sector due to house prices and/or rents between higher rents and house prices, as geographic areas. discussed above. In the longer term, if certain conditions are 8.142 Estimating the impact of migration met, migrants could become on the housing market faces eligible for social housing and two major complications. First, so may directly contribute to an factors which cannot be accurately increase in demand themselves. measured, such as improved On the cost side, the unit cost amenities or expectations of future of social housing provision may economic growth, may influence rise as the social housing sector both migration flows and changes faces increased competition for in housing and rental prices. properties from the private Second, observed and expected rented sector. changes in house prices and rents may influence migration flows, 8.140 In this context, increases in the while at the same time migration quantity and unit cost of social flows may influence house prices housing provision resulting from and rents. One solution to these migration can unambiguously problems is to look for sources of be considered an economic variation in migration inflows which cost, although such migration are known to be independent of will also contribute to public house prices and rents, and to finances, so increasing the estimate the impact on changes in available resources for funding the housing market. social housing provision. It may not be appropriate to define an Data increase in house prices or rents resulting from migration as a 8.143 The LFS can be used to estimate cost in the same way. Instead, the household formation rate changes in house prices and of existing migrant groups in rents may instead be seen as a the UK. It can also be used to transfer between individuals (in estimate the proportion of these that the loss to one individual migrant households that are from an increase in prices will accommodated in each of the be offset by a gain to another). three broad housing sectors Therefore, current home owners outlined above. These estimates and landlords benefit from a rise in can then be applied to future house prices and rents. migration scenarios to generate projections of changes in demand by housing sector. UK Border
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Agency management information population, the projected increase data can be used to estimate in the number of households as the duration of stay in the UK of a direct result of migration would specific migrant groups. be 41,000 per annum20 and hence contribute much less to the total 8.144 CLG generate projections of the growth in households over number of households in England the period. and its regions looking forward 25 years. These projections 8.146 The LFS shows that, apart from are compiled by making very high-income earners, the assumptions regarding five key household formation rate of components: population (national migrants upon arrival in the UK and sub-national), marital tends to be lower (i.e. they tend status composition, institutional to form larger households) than population and household that of the UK-born population. formation rates. Of these, net However, their household migration directly affects only formation rate converges towards the population component, while that of the resident population as the assumptions relating to the their duration of stay in the UK remaining four components are lengthens, to the point at which based on historic trends. The after 20 years the two rates most recent projections are based are equivalent (Holmans and on the 2006-based population Whitehead, 2006). Therefore, projections (ONS, 2008). duration of stay in the UK is a significant factor in determining Evidence the impact of migration on housing demand in the medium 8.145 The most recent CLG household to long term. projections show an increase of 252,000 households per annum in 8.147 Migrants’ eligibility for social England between 2006 and 2031. housing varies according to their The main driver of the growth in nationality. EEA nationals are households is population growth, eligible to apply for social housing part of which is attributable to depending on their employment migration. The projection is based status and employment history on long term net migration of in the UK, and whether they are 171,500 per annum which directly responsible for children under the contributes 99,000 households or age of 18 in education. Additional 39 per cent of household growth. restrictions apply to nationals of However, CLG told us that after A8 and A2 countries. Non-EEA adjusting for the effect of differing nationals are generally not eligible household formation rates and to apply for social housing until housing tenure patterns that tend they are granted indefinite leave to be shown by arriving migrant
20 CLG told us that this estimate is based on the tenureship patterns and headship rates of recently arrived migrants from the A8 countries, and is therefore likely to represent an underestimation of migrants’ contribution to household formation given this group’s high propensity to live in large household units and in shared accommodation in the private rented sector.
198 to remain, which normally requires 8.149 The figures presented in Table at least five years of residency in 8.1 are supported by the the UK. evidence we received during our consultation. We were told that 8.148 Analysis of the LFS shows that migrants tended to live in private migrants (both EEA and non- rented accommodation and that EEA), and particularly recent in some local areas this affected migrants, are more likely than the availability of some high value the UK-born population to be private rented accommodation, accommodated in the private but more commonly low value, rented sector, as shown in Table high density housing. 8.1. This result is preserved after controlling for age, qualifications, 8.150 We were also told that some of labour force status, marital the low value, high density private status, number of children and rented accommodation that region of residence (Centre for migrants occupy had associated Economic Performance, 2010). high levels of health and safety Recent migrants are also less risks, and there were reports of likely than the UK-born population higher incidences of fire service to be accommodated in the call-outs. social housing sector, but the propensities between the two 8.151 Turning to the impact on prices, groups converge over time. in evidence to the House of Lords However, after again controlling Select Committee on Economic for those characteristics listed Affairs (House of Lords, 2008), above, the rate of convergence is Professor Whitehead (London much slower (Centre for Economic School of Economics) said that Performance, 2010). it had been a “great surprise
Table 8.1: Tenure by country of birth and number of years since last arrival in UK
Per cent Tenure UK born EEA born non-EEA born less than 5 at least 5 less at least 5 years years than 5 years years Owner 71 11 60 21 59 occupier Private rent 12 79 24 66 19 Social 17 10 16 13 22 housing Total 100 100 100 100 100
Note: The Labour Force Survey records the year that the respondent last, rather than first, entered the UK. Source: Labour Force Survey 2009Q3 to 2010Q2
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[to find that] private rents have 2026, house prices would rise to not been rising to anything like approximately 9.1 times average the extent that we would have earnings (an increase of 30 per expected”, given the propensity for cent over the period), rather migrants to be accommodated in than to approximately 10.5 times the private rented sector. Instead, average earnings (an increase “private rents have fundamentally of 50 per cent over the period) stabilised in real terms” during under the current rate of house a period of relatively high net building, assuming net migration immigration “whilst of course of 190,000 per year. Therefore, house prices have been going compared to zero net migration, through the roof.” As the report in 2026 house prices would concludes, there are broadly be approximately 15 per cent two reasons for this: migrants higher than otherwise due to the have “crowded into existing assumed level of net immigration. properties and rented poor quality housing shunned by the local 8.154 Saiz (2003) analysed the short- population.” This explanation is run response of the housing supported by Communities and market to a large immigration Local Government (2008), which stock, comparing the change found that migrants “often live in rental prices in Miami to in overcrowded and poor-quality three metropolitan areas. The accommodation”. study found that rents in Miami increased by 8 to 11 per cent more 8.152 Between 2000 and 2006 house than those in the comparison prices rose from four times groups between 1979 and 1981 average earnings to seven times and that these impacts were average earnings: an increase of disproportionately felt by the 75 per cent. In his evidence to the lower-quality end of House of Lords Select Committee, the distribution. Professor Nickell (Nuffield College) said that, on the basis of 8.155 Saiz (2007) investigated the ‘back of an envelope’ calculations, short and long-term impact of had net migration been zero over immigration on rents and house the period, house prices would prices. The author shows that instead have risen to 6.5 times an immigration inflow equivalent average earnings: an increase to one per cent of the initial of 63 per cent. Therefore, the population of US cities is positive net migration experienced associated with a one per cent over the period is estimated to increase in rents and housing have led to house prices being values, where rents increase in around eight per cent higher the short run and house prices than they would have been with catch up over the longer term. zero net migration, accounting These findings are supported by a for around a tenth of the study carried out by Ottaviano and observed increase. Peri (2007) who also find a strong positive association between 8.153 Looking forward, Professor immigration and house prices of Nickell suggested that if net native individuals across the U.S. migration were zero from 2006 to
200 8.156 It was suggested to us during our people felt resentful that they consultation that, in some inner- were being penalised for not city areas where the resident having enough children to get population had moved out towards allocated a council house. There the suburbs and left large areas were very long waiting lists for of empty housing, migrants social housing, which increased were moving in and rejuvenating tensions. Referring to the issue of these areas. This was allowing the perception of migrants being local shops and schools to stay allocated council housing which open which was to the benefit of in fact was privately rented, he the resident population. Some argued that this sort of city councils also reported this explanation or ‘myth-busting’ provided them with much needed as no use when waiting lists funds via the council tax system. were rising so steeply.” (House of Commons, 2008) 8.157 Although not related to immigration specifically, the Implications for Tier 1 and Tier 2 2009-10 Citizenship Survey (Communities and Local 8.159 Analysis of the LFS presented Government, 2010) found that above suggests that, upon arrival 18 per cent of respondents felt in the UK, migrants tend to form that they would be treated worse relatively large households by council housing departments compared to the UK-born or housing associations than population. It is plausible that, people of other races, down from because of their relatively high 23 per cent in the previous year. earnings, Tier 1 and 2 migrants These figures were higher than may be more likely to form smaller those for any of the other public households compared to migrants service organisations that were as a whole. In absence of data on considered, comprising the police, Tier 1 and 2 migrants in particular, crown prosecution service, courts, the best estimate is that they may local schools, probation services, form smaller households than the prison services and local GPs. average migrant. This is because, on average, Tier 1 and 2 migrants 8.158 During a meeting between the have higher earnings than the House of Commons Communities average migrant. Furthermore, and Local Government Committee as we outlined in Chapter 3, each and representatives of residents’ Tier 1 or Tier 2 migrants brings, on associations in Barking and average, less than one dependant Dagenham in 2008 “a number to the UK. of participants voiced their concerns about the shortage 8.160 Further analysis of the LFS of affordable housing in the suggests that migrants tend to be borough and the pressures accommodated disproportionately of migration on housing. One in the private rented sector attendee … suggested that black compared to the UK-born and minority ethnic communities population, at least upon arrival families tended to be larger than in the UK. Tier 1 and 2 migrants, white families and therefore and in particular intra-company needed larger properties. White transferees, may intend to stay
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in the UK for a short period of sector as a result of increases in time and so may be more likely rents and house prices. to rent compared to other migrant groups. Again, in absence of 8.163 The level of flows through data on these migrants in Tiers 1 and 2 will not be the particular, the best estimate is only factor that determines the that they will tend to be impact of those migrants on the accommodated across housing UK housing market. Given the sectors broadly in the same way evidence presented above, their as other migrant groups. duration of stay in the UK is likely to determine their impact 8.161 The evidence discussed above in two ways. First, Tier 1 and 2 suggests that recent migration has migrants that stay longer are likely not had the impact on private rents to form smaller households, so that would have been expected, generating a larger impact on the given the tendency of such housing market overall. Second, migrants to be accommodated in they are increasingly likely with the private rented sector, although duration of stay to move from the this observation applies to overall private rented sector to the owner migration, rather than Tiers 1 occupier sector, so shifting their and 2 in particular. As discussed impact from rents to house prices. above, Tier 1 and 2 migrants may The available evidence, discussed form smaller households than the in Chapter 3, suggests that around average migrant. They may also 40 per cent of these migrants stay compete more for higher quality for at least 5 years. housing stock with UK residents than, for instance, migrants from 8.164 Overall, Tier 1 and 2 migrants eastern European accession are likely to have a small impact countries. In this case they may on the housing market. All other have a larger impact on private things equal, in the short term rents than the average migrant, they are likely to contribute to although the difference is likely to higher rents because of their be small. tendency to be accommodated in the private rented sector. This 8.162 Tier 1 and 2 migrants do not have will also contribute to higher access to social housing until house prices through the buy to they acquire indefinite leave to let market. In the longer-term the remain, which requires at least impact is likely to shift from the five years of residency in the UK. private rented sector to the owner It also seems likely that most of occupier sector. These effects these migrants would not require, will differ substantially across or qualify for, social housing once different geographical areas, in it became available to them, due correspondence with the fact to the selection mechanism of the the Tier 1 and 2 migrants do not PBS, in terms of favouring highly distribute themselves evenly across paid individuals. Such migrants the UK: in particular, London is may, nonetheless, have an indirect likely to be disproportionately impact on demand for social affected. In the very long term, the housing if the resident population dependants of these migrants may is displaced from the private form separate households and so
202 may further increase the overall 8.168 The Routine Activity Theory demand for housing. The impact of suggests that if a motivated Tier 1 and 2 on the social housing offender, a suitable target and an sector is likely to be negligible in absence of capable guardians both the short and long term. converge through routine activities then crime will occur. Therefore, 8.9 Crime and justice according to this theory, in contrast to the economic model Theory discussed above, crime depends on the opportunity available, 8.165 There are a number of theories rather than social causes. that attempt to explain criminal behaviour. The economic model 8.169 Positive net migration, leading to of crime participation was first an increase in population and an introduced by Becker (1968) increase in the potential number which defines crime as a rational of offenders, does not necessarily economic activity, committed if translate into an increase in the the expected net benefit from number of crimes committed. If illegal activity exceeds that of the offending rate of the outflow legal activity. Therefore, all else group is sufficiently high relative to being equal, an increase in the the inflow group, then positive net probability of being caught or immigration could lead to lower an increase in the punishment offending compared to a situation if caught will decrease the where there is no migration in probability of an individual either direction. According to the committing a crime. Being economic model discussed above, employed or more highly paid this could occur, for example, if will have the opposite effect. the employment rate of the outflow group is high relative to the 8.166 According to the Becker theory, inflow group. educational attainment is likely to reduce crime since education 8.170 In addition, as positive net increases the returns to legitimate immigration, all other things activities. However, as noted in equal, increases the size of Papadopoulos (2010), “in the the population, it does not opposite direction, since education automatically follow that a higher may also increase criminal skills level of crime in the population as (and thus returns to illegitimate a result of positive net immigration acts of mostly property crime) and equates to higher crime per head improve self-protection against of the population. It is therefore detention, the relationship is not plausible that an increased level as clear as expected.” of crime could exist alongside a reduced level of crime per head, 8.167 The Becker model is usually or vice versa. associated with property crime rather than violent crime because 8.171 Further, the impact of crime of the tangible benefits associated on society is dependent not with property crime participation, only on the volume but also on although Grogger (2000) extended the economic and social costs the model to violent crime. associated with the types of crime
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committed. Crime imposes costs to offend. Studies that show a on society in three ways: first, in significant relationship between anticipation of crime occurring particular characteristics and the (for example, expenditure on propensity to offend may help insurance); second, as an us to infer whether Tier 1 and immediate consequence of 2 migrants are likely to exhibit crime occurring (for example, the different propensities to offend emotional cost incurred by the compared to migrants or the UK victim); and, third, in response population overall. to crime (for example, the cost of police investigation and 8.174 The most comprehensive data subsequent incarceration of source of crime in England and the offender). Wales is police recorded crime.21 However, the data suffer from Data both under-reporting (where individuals do not report crimes to 8.172 For our purposes, two approaches the police) and under-recording to examining the relationship (where the police do not record between migration and crime crimes that are reported to them). that are relevant. In the first, the These effects may be especially impact of migration on the amount large for specific types of crime, of crime committed is directly in particular anti-social behaviour. estimated. This estimation can In addition, the data contain little be conducted at the aggregate information on the offenders level, where stocks and flows of themselves: for example, migrant groups are correlated immigration status, education and with aggregate crime rates, and income are not recorded and the at the individual level, where data on the offender’s nationality/ the offending behaviour of country of birth are unreliable. specific migrant groups is directly observed. Studies conducted 8.175 The Criminality Surveys, at the individual level are more comprised of the Prisoner informative because they allow Criminality Survey and Community direct estimation of the impact Penalties Criminality Survey, are of migration on crime. However, self-reported surveys that collect such studies require fine-grained detailed information about the micro-level data which record offending careers of sentenced the offending behaviour and offenders in 2000 and 2002 immigration status of individuals, respectively. These surveys also the availability of which is limited. individual characteristics such as age, gender, education, income, 8.173 A second approach examines the employment and ethnicity of the relationship between personal respondent, but do not record characteristics in the overall country of birth, nationality or (migrant and non-migrant) immigration status. population and the propensity
21 The other UK countries record crime according to different definitions and so such data are not comparable for those relating to England and Wales.
204 8.176 Generally, the availability in the UK: the wave of asylum of directly relevant data for seekers of the late 1990s and estimating the relationship early 2000s, and the post-2004 between migration and crime wave of workers from new EU is poor. It was suggested at the member states, the so-called workshop we held with leading A8 migrants. academics that efforts may usefully be made to improve 8.179 Consistent with the economic the quality of data in this area, model discussed above, the given public concerns about the authors show that property crime relationship between migration rates are significantly higher in and crime. areas where asylum seekers are located, while no effect is 8.177 To calculate the impact of the detected for A8 immigration. crime committed as a result The authors argued that this of migration, estimates of the finding can be explained by the economic and social cost, low labour market participation disaggregated by type of crime, rate of the asylum seekers wave are required. Home Office (2000 while, in contrast, the A8 migrants and 2005b) described one exhibit very high labour market potential approach to estimating participation rates. these costs using a range of techniques, such as revealed and 8.180 Butcher and Piehl (1998) stated preference, and drawing on correlated US crime and migration a range of data sources, such as data in 43 Metropolitan Statistical the British Crime Survey. Under Areas. Their results show a this approach, the average cost of positive cross-sectional correlation crime (in 2003 prices) per offence of crime rate with the stock of varies from £1.5m for homicide to migrants in a city, but there is no £510 for attempted vehicle theft. relationship between crime rates Sexual offences are estimated to and the stock of migrants in a cost £31,400, serious wounding city, or the flows of migrants into £21,400, robbery £7,300, burglary a city, once the characteristics of £3,300 and theft of a vehicle the city had been accounted for. £4,100. Overall, violent crime is The authors also used the 1980 more costly than property crime. wave of the National Longitudinal These estimates must be treated Survey of Youth, which contains with caution but highlight the fact direct questions about the that different types of crime have engagement in criminal activity. very different impacts on society. The results show that migrant youths aged 15 to 23 were Evidence significantly less likely to commit crime than their non- 8.178 A number of studies have migrant peers. attempted to estimate the relationship between migration 8.181 Other papers have focussed on and crime (the first approach European countries. Bianchi et al. discussed above). Bell et al. (2008) assessed the causal effect (2010) examined this relationship of migration on crime in the 95 for two different waves of migrants Italian provinces between 1990
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and 2003. The authors’ results nationals while a further five per show that migration increases only cent (3,300) were EEA (excluding the incidence of robberies, and UK) nationals. The most recent that, since robberies represent data available shows that the a small proportion of all criminal average cost per prison place in offences, the effect on the overall 2008/09 was £45,000, including crime rate is insignificant. prison related costs met by the National Offender Management 8.182 Alonso et al. (2008) found Service (Hansard,3.03.2010: C. that both migrants and natives 1251W). Therefore, according to contributed to the increase these estimates, foreign national in the rate of crime in Spain prisoners cost a total of £500m per between 1999 and 2006, but year to imprison, £350m of which that the contribution of migrants relates to non-EEA nationals. was higher. However, after controlling for demographic 8.185 Further studies have attempted to and socioeconomic factors, the estimate the relationship between contribution of the migrant group crime and factors such as gender, to the increase in the crime rate age, income and education (the was much lower. In addition, second approach discussed the results show that more above). Because of the problems recent migrants exhibit a lower associated with police recorded propensity to offend compared to data discussed above, such data the less-recently arrived group. can only provide evidence at an aggregated level. Machin and 8.183 Papadopoulos (2010) used the Meghir (2004) matched police 2003 Offending, Crime, and recorded data with aggregate Justice Survey (OCJS) (known as wage data to show that there the Crime and Justice Survey in was a negative relationship that year) to study the relationship between wages and crime in between crime and migration in England and Wales between 1975 England and Wales. Migrants are and 1996. A number of similar not directly identifiable in these approaches have tended to show data and therefore, in the paper, a positive relationship between they are defined as individuals unemployment and crime, who declare they have not lived summarised in Freeman (1999). all their life in the UK. The author’s Therefore, the unemployment rate results show that, after controlling and wages of the immigrant group for demographic characteristics, under consideration is likely to the probability of a migrant affect their impact on crime. committing either a property crime or violent crime is not significantly 8.186 Studies that investigate the different from that of a native. relationship between personal characteristics and crime at the 8.184 The June 2010 Foreign National individual level are generally Prisoners statistics (Ministry of conducted using self-reported Justice, 2010) show that nine survey data. Budd et al. (2005) per cent (7,800) of the prisoner analysed the Criminality Surveys population (for which nationality to examine the extent to which is recorded) were non-EEA socioeconomic characteristics
206 are associated with offending. these characteristics are The authors found that those not published. respondents that left full-time education before the age of 8.188 Lochner (1999) examined, at the 15 were most likely to report individual level, the relationship committing an offence. Although between education and self- no linear relationship between reported criminal behaviour in the the highest level of education USA in the 1980s and 90s. The achieved and offending was author’s results show that high found, those respondents that school graduation reduced the held A-levels (or equivalent) probability of men aged 18 and and above were least likely to over committing a range of crimes, report committing an offence. including property damage, The authors also found that shoplifting and selling drugs, those that were unemployed or compared to those that did not unable to work due to sickness or graduate. This finding is backed disability were more likely to report up by Lochner and Moretti (2004) committing an offence compared which found that each additional to those that were employed prior year of schooling significantly to being sentenced. However, as reduces the probability of arrest discussed above, these surveys and incarceration. are not representative of the population as a whole as they 8.189 During our consultation a familiar sample only those that have been theme emerged from anecdotal convicted of an offence. evidence heard that immigrants tended to be more the victims of 8.187 The 2003 OCJS found that, crime rather than the perpetrators. across most offence categories, It was also reported that males were more likely to offend immigrants were more unwilling than females. Overall, 13 per to report crime. cent of males had committed a core offence (defined as burglary, 8.190 During a meeting between the vehicle related theft, other theft House of Commons Communities (including shoplifting), criminal and Local Government Committee damage, robbery, assault and and local stakeholders in selling drugs) in the last year Peterborough in 2008 “the compared with seven per cent police representative stated that of females. It also found that the increased inward migration had peak rate of offending was among resulted in diversity in the types of 14 to 17 year-olds, followed by crimes committed, although these 12 to 13 year-olds and 18 to 19 crimes were by a small minority year-olds. Those aged between of the migrant community, in the 10 and 17 and between 18 and same way that every community 25 each accounted for about a has a small criminal element. The third of offences (Home Office, types of crimes that had increased 2005a). The OCJS also records were the growing of cannabis, the the qualifications and household trafficking of Eastern European income of respondents; however, women and girls, drink-driving and results describing how offending knife crime.” (House of behaviour varies according to Commons, 2008)
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Implications for Tier 1 and Tier 2 will also be lower than the UK- born population. As discussed in 8.191 The available evidence suggests Chapter 3, less than 10 per cent that men are more likely to offend of Tier 1 and 2 dependant children than women and, as discussed are at the peak offending ages for in Chapter 3, the majority of Tier children of 14 to 17. Therefore, 1 and 2 migrants are male. On we would not expect Tier 1 and 2 the other hand, less than 10 per dependant children to commit a cent of Tier 1 General migrants significant number of crimes in the and around 15 per cent of Tier short term. 2 migrants are between 18 to 25 years old, the peak offending 8.193 As shown in Home Office (2005b), ages for adults according to the the economic and social cost of 2003 OCJS. In addition, the crime varies significantly by crime theory and evidence discussed type. Therefore, the overall impact above suggests that education, of crime committed by Tier 1 and employment and income are 2 migrants and their dependants also significant determinants will be highly sensitive to the type of offending as they alter the of crime committed, as well as the relative payoff of partaking in total number of crimes committed, legal behaviour. The selection although there is no evidence mechanism of the PBS implies that suggests that Tier 1 and 2 that, at least in most cases, Tier migrants are more likely to commit 1 and Tier 2 migrants exhibit high more or less ‘costly’ crimes than levels of education, employment the UK-born population. rates and income relative to the UK-born population, and so we 8.194 Inevitably, as with any population might expect their offending rates group, Tier 1 and 2 migrants to be substantially lower than the and their dependants are likely UK-born population. to commit some crime. Overall, although the data in this area are 8.192 Little is known about the limited, it seems likely that the characteristics of PBS offending rate of these migrants dependants, although it is likely is likely to be lower than the UK- that Tier 1 and 2 partners are less born population because of their educated, less employed and age profile and the selection lower paid than principal migrants, mechanism of the PBS which as discussed in Chapter 3 and implies that, at least in most Migration Advisory Committee cases, principal migrants are (2009c). Around 18 per cent of relatively highly educated and Tier 1 partners and 11 per cent relatively highly paid. of Tier 2 partners fall into the 18 to 25 age band, but the majority 8.10 Congestion of these partners are female. Therefore, compared to principal Theory migrants, the propensity of Tier 1 and 2 partners to offend is 8.195 Borjas (1995) argued that positive ambiguous, although it seems net migration, like any increase likely that their offending rate in population size, could lead
208 to increased congestion when Data other factors of production remain fixed. While this may be true in 8.198 The Department for Transport the short term, in the longer term (DfT) estimate the impact of we might expect the capacity of a number of factors, such as the transport network to adjust population, employment and upwards, therefore at least location, on changes in use of partially offsetting the impact transport systems and associated on congestion. changes in congestion. Therefore, to estimate the impact of migration 8.196 Brueckner (2000) argued that on congestion, data on migrants the external cost of congestion that relate to these factors are represents a market failure. While required. The employment rate of vehicle commuters, for instance, Tier 1 migrants can be estimated take into account the private cost from survey data, as presented in of commuting, namely the cost Chapter 3, while the employment of vehicle usage and the time rate of Tier 2 migrants is, in the cost, they fail to take account the short term, expected to be close increased time cost that their use to 100 per cent, due to the design of the transport network imposes of Tier 2, although the same will on other commuters through the not be true for dependants. Data overall reduction in traffic speed. on the location of the workplace of As these congestion costs are Tier 2 migrants is also available, borne by others, there is no as discussed in Chapter 3. incentive for the individual to respond to this negative impact Evidence by reducing his or her use of the transport network. Consequently, 8.199 There is very limited evidence individuals underestimate the directly linking migration to total cost of their use of transport congestion. Coleman and networks and thus overuse these Rowthorn (2004) argued that networks from the point of view of “immigration is contributing to society as a whole. a rapid growth of population in southern England, and the 8.197 The extent to which migration has resulting congestion hampers an impact on congestion will vary production and is costly to considerably depending on where manage.” Therefore, the increased in the UK the migrant is located. congestion affects those using the For example, the impact of an transport networks directly and the extra thousand migrants moving to wider economy indirectly. a particular area of London, where transport networks are already 8.200 Other relevant academic literature congested, may be considerably views the effect of migration on larger than the impact of the congestion as directly resulting same migrants making use of the from increases in population and transport network in more sparsely economic activity. Migration will populated regions of the UK. therefore affect congestion to the extent that it affects the rate of population growth and the rate
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of economic activity. Specifically networks of certain urban areas considering the impact on the are initially more congested than transport networks in large those in the rest of the country cities, Brueckner (2000) wrote (Department for Transport, 2007), that excessive urban expansion in particular in London where 55 could generate traffic congestion, per cent of rail and underground leading to overly long travel in the morning peak commuting times. hours is in crowded conditions (Transport for London, 2009). 8.201 All else being equal, an increase Therefore, the impact of a given in population due to migration increase in demand on congestion will lead to an increase in the is much greater in such areas demand for transport. This than elsewhere (Department for relationship varies according to Transport, 2007). the characteristics of the additional population that Implications for Tier 1 and Tier 2 influence transport demand. In particular, the more the increase 8.203 Tier 1 and Tier 2 migrants, as in population leads to an increase additional UK residents, have in the level of employment, the an adverse impact on levels of greater the increase in transport congestion in the UK. Compared demand will be, as those that to the UK-born population they are employed tend to use tend to be young and employed transport networks more than and, as such, given the available those that are not (Department evidence, are more likely to for Transport, 2010; Association use transport networks than the of Train Operating Companies, average UK resident. 2009). The relationship between population growth and transport 8.204 In addition, in the case of Tier demand growth also varies 2 at least, compared to the UK across transport modes and population these migrants are across regions. disproportionately concentrated in London. As discussed above, 8.202 In turn, a given increase in the the higher level of congestion in demand for transport leads to London means that any given an increase in the congestion user of its transport network will of transport networks. This generate more congestion than relationship is estimated to be the same user would have in non-linear, in that a given increase most other parts of the country. in demand will lead to a larger Therefore, the impact of Tier 1 increase in congestion if the initial and 2 migrants on congestion is level of congestion is already likely to be higher than that of the relatively high (Department for average UK population. Transport, 2007). The relationship between increases in demand and increases in congestion also varies across transport modes and across regions. The transport
210 8.11 Social cohesion and from different backgrounds get integration on well together. It also notes two further potential indicators of Theory social cohesion as the percentage of people who have meaningful 8.205 The Commission on Integration interactions with people from and Cohesion (CIC) defined different backgrounds and an integrated and cohesive the percentage of people who community as one where “there feel that they belong to their is a clearly defined and widely neighbourhood. shared sense of the contribution of different individuals and different 8.207 According to Letki (2008) communities to a future vision the “key dimension” of social for a neighbourhood, city, region cohesion is social capital. Like or country” (Commission on social cohesion, social capital is Integration and Cohesion, 2007). difficult to define and therefore CIC developed this definition to measure. However, Putnam by saying that, in a cohesive (2007) defines it as “features of community, individuals from social life – networks, norms and different backgrounds should trust – that enable participants to have similar life opportunities and act together more effectively to access to services and treatment, pursue shared objectives”. and should trust local institutions to act fairly in the treatment of 8.208 It is clear from these definitions all individuals in the community. that social cohesion and social Furthermore, all individuals capital are complex concepts that should have a strong sense of can only be measured indirectly, their rights and responsibilities using a variety of indicators. in the community and recognise Forrest and Kearns (2001) said the contribution of both well- that the simplest observable established and newly-arrived measure of a socially cohesive members of the community. neighbourhood would be groups Finally, Commission on Integration of people living in a local area and Cohesion (2007) said that to promote or defend a common an integrated and cohesive local interest, such as volunteering community is one where there are for a local project or petitioning for strong and positive relationships an improvement in local services. between people from The authors also argue that an different backgrounds. ethnic majority in the community working together to impose their 8.206 Communities and Local rules and values on a minority Government’s Citizenship Survey would also be an example of 2009/10 (Communities and social cohesion. Therefore, Local Government, 2010) argues at the neighbourhood level, that the key indicator of social social cohesion is by no means cohesion is the proportion of an unambiguously good thing people who agree that their local (Forrest and Kearns, 2001). area is a place where people
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8.209 We would expect that individuals’ Data responses to survey questions, and hence measures of social 8.212 Surveys and questionnaires can cohesion, will depend on the be used to gather public opinions characteristics of both the on migration and social cohesion. respondents themselves and The Citizenship Survey provides the area in which they live: an data at a national level on the individual’s ability to integrate with proportion of the public who people from other backgrounds, agree that their local area is a as well as their own perceptions of place where people from different the extent to which they integrate, backgrounds get on well together. may depend on factors such as The Best Value Performance their education, their employment Indicators (BVPI) survey gathers and their past experience of living the same data for a different with people from different cultural sample of people in England and and ethnic backgrounds. disaggregates these perceptions of social cohesion for the various 8.210 The potential importance of this local authority areas of England. past experience also suggests These could then be compared that the perceived level of to the existing stock, or level of social cohesion in a particular inflow, of migrants in a particular area may naturally adjust over area using data sources such as time. While in the short run the LFS and PBS management the arrival of culturally and information. However, due to the ethnically different individuals complex nature of perceptions of may cause tensions in areas with social cohesion and their likely little or no past experience of dependency on factors such immigration, as residents become as the characteristics of the more accustomed to living in respondents and their specific a diverse community they may local area, direct comparisons become more resilient to further of these survey results across immigration ‘shocks’. regions and localities may not be particularly robust. 8.211 The impact of immigration on levels of social cohesion will also Evidence depend on the characteristics of the immigrant cohort. We would 8.213 Communities and Local expect immigrants’ ability to Government (2010) found that 85 speak English to be positively per cent of people thought that correlated with their integration their community was cohesive, into local communities in the agreeing that people from different UK. As Stevens (1999) states, backgrounds got on well together immigrants’ ability to speak the in their local area. This represents English language “is both the an increase in perceived levels of means and measure of their social community cohesion compared and economic integration”. to previous surveys conducted in 2009 (84 per cent), 2008 (82 per cent) and 2003 and 2005 (both 80 per cent). Communities and
212 Local Government (2010) found countries into communities that perceptions of cohesion were that previously had a generally higher among older age relatively low migrant stock. groups and among ethnic minority groups: Bangladeshi, Pakistani, 8.215 Migrants’ integration into Chinese, Black Caribbean and the UK is also tested by Indian people were more likely Manning and Roy (2010), than white people to think that who used data from the LFS their local area was cohesive. to investigate the extent and determinants of British identity among those living “Society as a whole benefits from in the UK. The paper found the integration of individuals from that immigrants tend not diverse communities, as these to think of themselves as migrants tend to come to the UK as British initially, but they are individuals to work basing themselves generally more likely to do in major commercial centres, and do so the longer they remain in integrate into the wider community, as the UK. This sense of British opposed to creating their own micro identity is much stronger communities.” among migrants’ children who are born in the UK. “Second FactSet Europe Limited response to generation immigrants are MAC consultation only slightly less likely to think of themselves as British than the white UK-born population 8.214 The results of the BVPI survey and it seems that the gap presented in Commission on narrows further with each Integration and Cohesion (2007) generation.” (Manning and support these findings: 79 per Roy, 2010). cent of people agreed or strongly agreed that people of different 8.216 Analysis undertaken by CLG backgrounds got on well together on the 2005 Citizenship in their local area. Disaggregating Survey (Laurence and Heath, these data by local authority 2008) found that, as well as areas, the BVPI survey found that their own characteristics, perceived rates of cohesion across the type of community an the UK (as measured above) individual lives in influences varied from 38 per cent to 90 per their perceptions of cohesion. cent, although it should be noted Living in an area with a that cohesion rates were at least diverse mix of residents 60 per cent in all but 10 of the was consistently shown to 387 English local authority areas. be a positive predictor of Many of the areas with the lowest cohesion, although having perceived rates of cohesion were an increasing percentage of in the North West and the East of in-migrants to the community England. In the case of the East who were born outside the of England this may be at least UK is a negative predictor partly explained by the recent of cohesion. In-migration large inflow of migrants from A8 to the community was also
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found to have a negative effect on that immigrants had made the cohesion if large proportions of the UK more open to new ideas in-migrants are non-white. and cultures (Commission on Integration and Cohesion, 2007). 8.217 Evidence suggests that perceived Despite these findings, a MORI levels of social cohesion are opinion poll commissioned by CIC affected by many factors that are in 2007 found that 18 per cent largely or wholly independent of of people surveyed considered migration. Laurence and Heath immigration to be the largest issue (2008) found that perceptions of facing the UK. The management social cohesion were negatively of immigration was also found affected by the level of deprivation to be a concern, with 68 per in a community, irrespective of cent of people agreeing with the the diversity of the community. statement that there were too Increasing levels of crime or many migrants in the UK. fear of crime were also found to be strong negative predictors of 8.220 The most recent public attitudes cohesion. Furthermore, individuals survey commissioned by the UK in society considered to be more Border Agency in September vulnerable, such as women or 2009 found that people generally individuals with disabilities or consider immigration to be a long-term illnesses were found to problem at a national level, have, on average, more negative but not in their local area (UK perceptions of cohesion. Border Agency, 2009a): 69 per cent of respondents thought 8.218 Commission on Integration and that immigration was a very big Cohesion (2007) argued that there or fairly big problem in Britain, is no single factor that determines whereas only 19 per cent of the perceived level of cohesion, respondents considered it to be as a community has a wide a very big or fairly big problem in variety of factors impacting upon their local area. it simultaneously. Consequently, the report argued that low levels 8.221 The 2007 MORI opinion poll of social cohesion were found also found that 56 per cent of in those areas that experienced UK adults believed that some several factors simultaneously, groups were given unfair priority such as a combination of poverty, access to public services such low employment opportunities, as housing, schools and health an influx of migrant workers from services: the groups most often abroad and high rates of crime. named spontaneously were Therefore, the report concluded asylum seekers, refugees and that “diversity can have a negative immigrants (Commission on impact on cohesion, but only in Integration and Cohesion, 2007). particular local circumstances”. A House of Commons report on Community Cohesion and 8.219 MORI opinion polls from Migration (House of Commons, 2005 and 2007 found that the 2008) argued that recent rapid majority of people thought that immigration has placed pressures multiculturalism had made the on public services that had UK a better place to live and not been addressed because
214 resource allocations were based public concern about migration, on flawed population data. House which can negatively affect of Commons (2008) argued that social cohesion. This was also a the increased competition for point regularly made during our access to limited public resources consultation in meetings facilitated as a result of immigration can by the various Regional have a negative effect on Migration Partnerships. community cohesion. 8.224 Although immigration may lead 8.222 As reported in the Financial Times to tensions in the short run, on 7 September 201022, a recent Commission on Integration poll conducted by Harris and the and Cohesion (2007) said that Financial Times found that the many communities have been majority of respondents thought able to adapt to immigration that immigration to the UK had an over time. Initial tensions are adverse effect on public services: followed by a period of increasing 63 per cent of respondents said acceptance and, particularly in that immigration levels had a the very diverse areas, positive detrimental impact on the NHS, support for increased diversity while 66 per cent said it made the in the community. Nevertheless, state education system worse. Commission on Integration and Cohesion (2007) acknowledged 8.223 As well as the pressures on public that some communities may services, House of Commons experience persistent tensions (2008) found that there were many as a result of immigration in the concerns about the changing longer term. The report also nature of communities and the acknowledged that these tensions pace of this change. Commission may be exacerbated during times on Integration and Cohesion of economic downturn. (2007) said that areas with little or no previous experience of 8.225 Furthermore, House of Commons ethnic diversity had experienced (2008) found that one of the particular problems with social main barriers to the integration cohesion as a result of recent of immigrants into their local immigration. These problems community in the UK, as well as were found in rural areas that one of the main concerns with are just starting to experience immigration expressed by existing immigration, mainly from Eastern UK residents, was their limited Europe. They were also found in ability to speak English. areas that are already ethnically diverse which are experiencing 8.226 During a meeting between the further immigration, such as inner House of Commons Communities cities. House of Commons (2008) and Local Government Committee said that the rapid pace of change and local stakeholders in Burnley experienced by communities in in 2008 “a discussion took these areas has led to increased place on the importance of the
22 Full article available at http://www.ft.com/cms/s/0/231ffb5e-b9fa-11df-8804-00144feabdc0.html
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English language in promoting on all four dimensions. Of the understanding and community neighbourhood level determinants, cohesion. Participants stated that neighbourhood status (comprising speaking English was important. measures of income, health, One participant explained that employment, education, skills not understanding English was a and training, housing and access particular issue for women who to services) has a negative have come to Burnley from Asia effect on all four dimensions. through arranged marriages … Racial diversity has a negative There were many ESOL classes effect on only one dimension of available in Burnley, but there had social capital, neighbourhood been occasional instances of low attitudes, although this effect take-up; availability was not the is strong. The paper finds an only issue to be tackled.” (House apparent paradox in that more of Commons, 2008) diverse neighbourhoods declare less trust in their neighbours 8.227 As discussed above, social capital and less satisfaction from living is seen by some experts as a key in their neighbourhood whilst component of social cohesion. not interacting less with their Letki (2008) examines the effects neighbours. The author proposes of a number of individual and that a potential explanation for this neighbourhood level factors, paradox is the effect of the media, including racial diversity, on social potentially through “framing or capital in Great Britain. The author priming of racial attitudes and uses a complex and multi-faceted inter-racial relations.” (Letki, 2008). measure of social capital derived from the 2001 Citizenship Survey. 8.229 Some literature has distinguished The indicators of social capital in between the short and long-term the data are used to generate four impacts of ethnic diversity on broad dimensions of social capital: social capital. Putnam (2007) attitudes and opinions about argued that, in the short run, neighbours and neighbourhood; “immigration and ethnic diversity informal sociability; formal challenge social solidarity and volunteering; and informal help. inhibit social capital”, while in the long run, “successful immigrant 8.228 The author’s results show that societies create new forms of the individual and neighbourhood social solidarity and dampen level determinants of the four the negative effects of diversity dimensions of social capital by constructing new, more vary. Of the individual level encompassing identities”. Not all determinants, age has a strong of the literature agrees with this effect on all four dimensions, distinction between the short and but the direction of the effects long-term impacts. On balance, differs: it has a positive impact Putnam (2007) argued that ethnic on perceived image of local diversity is an important community and enjoyment of living social asset. there, but has a negative impact on sociability. Education and social class have positive effects
216 Implications for Tier 1 and Tier 2 have relatively good English language skills and therefore 8.230 Because perceptions of social be relatively well equipped cohesion are, by definition, to integrate into their local subjective, it is not possible to community upon arrival in the assess the impact that Tier 1 and UK. We also know that migrants’ Tier 2 migrants have on levels use of public services, or at least of social cohesion in the various their perceived use of these regions and localities of the UK. services, has a negative impact Nevertheless, it may be possible on community cohesion. We to make some inferences on the expect Tier 1 and Tier 2 migrants likely impact based on their to be relatively low users of these known characteristics. services compared to migrants as a whole. Furthermore, we received 8.231 Evidence suggests that perceived a lot of evidence that highlighted levels of social cohesion vary their important contribution to the considerably across the different provision of health care, social regions and localities of the UK. care, social worker and education This is influenced by, among services in the UK. other things, the characteristics of the existing residents, past 8.233 For example, evidence that the experiences of immigration Department for Communities and and the rate of change to the Local Government presented to community that occurs as a result the Cross-Whitehall Migration of immigration. Whilst the location Analysts Group argued that of Tier 1 immigrants is unknown, “limiting immigration under Tiers UK Border Agency management 1 and 2 would mainly put a cap information data show that a on relatively skilled migrants, disproportionately large number of who tend to: have a high level of Tier 2 migrants work in or around English proficiency; be in work; London. It is likely, therefore, that and who are therefore likely to many of these migrants will also place limited – if any – pressure live in London. However, BVPI on public services. These survey data show that perceived migrants also tend to integrate levels of social cohesion also easily and are therefore unlikely to vary considerably across London generate tensions to communities boroughs. Consequently, we or undermine social cohesion.” cannot draw any firm conclusions for the relationship between 8.234 The ethnicity of migrants might the location of Tier 1 and Tier also influence their impact on 2 migrants and their impact on social cohesion. As discussed social cohesion. above, Laurence and Heath (2008) found that large numbers 8.232 Evidence suggests that poor of non-white immigrants may English language skills are a sometimes have a negative considerable barrier to migrants’ impact on perceptions of social integration into local communities. cohesion. To the extent that this Compared to migrants as a whole, is true, the immigration of Tier 1 Tier 1 and Tier 2 migrants should and 2 migrants might have a more
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negative impact on perceptions of This is not the same as saying social cohesion than some other that these impacts will not be migrant groups, such as work- significant: in the case of the related migrants from provision of children and families’ A8 countries. social work, for example, we were told that there could be severe 8.235 Overall, analysis of the impact of a impacts on the safety and well- particular migrant group on levels being of some vulnerable children. of social cohesion is a complex matter. It will be influenced by 8.238 In each case, at least part of the the characteristics of the migrant impact of Tier 1 and 2 migration group itself, but also by issues by can be attributed to the ‘population time and place, rates of change effect’; that is, as members of the and migrant concentrations. These UK population, they will inevitably effects will operate primarily at contribute to the demand the local level. Conclusions will for public services, generate also depend on the measure of congestion, commit crime and so social cohesion that is being used. on. In addition to the population The impact on social cohesion of effect, the impact of Tier 1 and 2 Tier 1 and Tier 2 migrants cannot migrants will be driven by the fact be satisfactorily analysed at the that they are not representative aggregate level. Particular surges of the UK population as a and concentrations would need whole in terms of their personal to be analysed on a case-by- characteristics. In the longer term, case basis. the impact will depend primarily on the migrant’s duration of stay 8.12 Conclusions in the UK.
8.236 Overall, it is not possible to fully 8.239 Below we summarise the likely and accurately estimate the public service and social impacts public service and social impacts of Tier 1 and 2 migration: of Tier 1 and 2 migration, either on an impact-by-impact basis • Public service provision: or collectively. Instead, we have In the short term, Tier 1 and relied on evidence which relates 2 migrants help alleviate skill migration more generally to the shortages in key public service impacts that we have considered occupations. For example, many and what we know about the of these migrants are employed characteristics of Tier 1 and as secondary school teachers 2 migrants. in maths and science, theatre nurses and children’s social 8.237 Nonetheless, it is possible to workers. Further, these migrants draw tentative conclusions help to relieve the pressure on about the impacts of Tiers 1 wages in certain public sector and 2 migration. The absolute services such as social care magnitude of each impact is likely and so help restrain the cost of to be small, reflecting the fact that providing these services. These these migrants make up a small effects will vary between public proportion of the UK population. services in correspondence
218 with the variation in the b. They are likely to consume concentration of employment relatively low levels of social of Tier 1 and 2 migrants across services in the short and occupations, as well as across long term, corresponding areas of the UK. In the longer to the fact that these term, the extent to which Tier migrants exhibit high rates of 1 and 2 migration alleviates employment and tend to be shortages and relieves pressure highly paid. on wages will depend on training and up-skilling of the c. They are likely to consume resident population. education services corresponding to the • Public service consumption: number and age of the Each of the impacts of Tier children they have. Upon 1 and 2 migration on public arrival, around half of service consumption will be their existing dependent at least partially, and possibly children are of compulsory more than completely, offset by school age. The longer- their net fiscal contribution, as term impact will depend on discussed in Chapter 7: whether these migrants have additional children a. They are likely to consume during their residency in relatively low levels of health UK. Their demand for services in the short term, publicly-funded education corresponding to the fact that will be partially offset by the these migrants tend to be fact that some children of young and healthy on arrival Tier 1 and 2 migrants are in the country. In addition, educated privately. the available evidence suggests that some Tier 1 • Housing: In the short term and 2 migrants, particularly Tier 1 and 2 migrants are likely those who work for large, to directly contribute to higher multinational firms, receive rents and indirectly to higher private health insurance house prices through the buy for themselves and their to let market. In the longer term dependants as part of their their impact is likely to shift from overall benefits package. In rents to house prices as they the longer term consumption tend to move from the private will increase as the migrants rented sector to the owner age, in the same way as for occupier sector. They may also, the population as a whole. mostly indirectly, contribute Some Tier 1 and 2 migrants to higher unit costs of, and receive private health demand for, social housing, insurance as part of their although this effect is likely to be benefits package from their very small. employer, thus reducing their demand for publicly-funded health services.
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• Crime: The total amount of 8.240 These impacts are likely to vary crime committed by Tier 1 and 2 across regions, mostly as a result migrants is likely to be small due of the geographical variation in to the section mechanism of the Tier 1 and 2 flows. In addition, PBS which implies that, at a certain area may experience least in most cases, such a greater or lesser impact than migrants exhibit a high another area from the same employment rate, are well paid flow of Tier 1 or 2 migrants. For and are highly educated. example, a given flow of such migrants to London is likely • Congestion: Tier 1 and 2 to have a greater impact on migrants, as members of the congestion than the same flow UK population, will contribute to would have on a less total congestion. They are likely congested area. to generate more congestion than the average UK-born 8.241 There are also likely to be individual, reflecting the fact distributional effects relating that they are more likely to be to each of these impacts. For employed and more likely to example, Tier 1 and 2 migration work in London. that contributes to higher rents will benefit landlords but harm • Social cohesion: It is not tenants. Some local areas will possible to estimate with any gain from having migrants provide degree of confidence the likely local services, while others will impact of Tier 1 and 2 migrants lose out when large surges or on social cohesion. On the concentrations of migrants moving one hand, such migrants may into areas where they have have a positive impact as they not previously lived, potentially are often employed in the creating social tensions. provision of public services and are likely to have good English language skills. On the other hand, locally concentrated surges in migration may have a negative impact on social cohesion, although the absence of comprehensive data on the location of Tier 1 and 2 migrants makes this difficult to estimate.
220 Chapter 9 Limits and policy options
9.1 Introduction 9.4 are provided in Box 9.1. Most of our recommendations 9.1 In order to avoid, or in order to were subsequently accepted mitigate, potentially significant by the former Government, adverse economic consequences, and are reflected in the it is essential that the UK has design of the system today. in place policies to attract the Our advice now is aimed at migrants who are most beneficial achieving the same ends to the economy and wider society as set out above. However, alongside limits on work-related if there is a binding limit migration. (i.e. one which cannot be exceeded) on work-related 9.2 We previously reviewed the migration from outside the design of Tier 1 and Tier 2 of European Economic Area the Points Based System (PBS) (EEA), any migrant to the in 2009 (MAC, 2009e and UK will displace another who 2009c), at the request of the would otherwise have been former Government, and made able to come. This means recommendations designed to that identifying and attracting help the system to: the migrants who have the most to contribute to the UK • better identify and attract is even more critical in the migrants who have the most to context of limits on work- contribute to the UK; related migration.
• deliver a more efficient, 9.5 The suggestions and transparent and objective options set out in this chapter application process; and focus on improving the selectivity of the present • improve compliance and reduce system. Additionally, we factor the scope for abuse. in consideration of the public service and social impacts 9.3 We have previously argued that it of migration to our thinking, is appropriate for Tiers 1 and 2 of alongside our continued the PBS to target skilled migrants, consideration of the and have explained why earnings economic impacts. and qualifications are valid measures of skill. Further details
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Box 9.1: Identifying migrants who have the most to contribute to the UK
Should the PBS target skilled migrants?
Ruhs (2008) argues that there is a general economic case for selecting predominantly skilled immigrants and admitting the low skilled only in exceptional cases for selected occupations or industries. The general preference for skilled immigrants is mainly due to three factors, each discussed in Chapter 7 of this report:
Skilled migrants are more likely to complement the skills and capital of existing residents;
The net fiscal impact is more likely to be positive in the case of skilled migrants; and
Potential long-term growth effects and spillover benefits are more likely to arise from skilled migration.
How do we identify skilled migrants?
As set out in MAC (2008a), earnings is generally likely to be a good indicator of skill because, theoretically, a rational employer would not pay an employee more than the value of what they produce. This will, in turn, be linked to skill. An employee would not accept less than they are worth, because they would be able to secure a higher wage with a different employer. Another reason for expecting earnings to be positively associated with skill is that the labour market should provide, on average, a compensating wage differential as a return to the investment in education and training.
Qualifications are likely to be a good indicator of skill because they represent both an effective signalling device and an investment in human capital. Individuals are prepared to forego current earnings in order to gain higher level qualifications due to the prospect of those qualifications leading to higher earnings (which, as explained above, are also associated with skill) later on.
In MAC (2008a) we explained that other possible indicators of a skilled occupation are on-the-job training or experience, which may result in the job or occupation being skilled, even in cases where many job holders do not have formal qualifications; and innate ability, which refers to those skills that cannot readily be taught or learnt. However, these factors are harder to measure than earnings and qualifications.
9.6 These considerations are economic activity which do not complicated by the fact that it require skilled labour, or investing is impossible to know now how in overseas facilities (‘off-shoring’) employers’ decisions will change and importing more goods and once limits are in place. For services. There are additional example, some might simply seek uncertainties arising from the to employ EEA workers in place absence of definitive evidence of non-EEA workers. In addition, about many of the impacts of net there are other ways in which new migration, discussed in Chapters limits might lead to changes in 7 and 8. The contents of this behaviour. One is more emphasis chapter, therefore, needs to be on training of domestically considered with these significant available workers, which would caveats about the uncertain be desirable, but others include impacts of limits on work-related switching into different kinds of migration borne in mind.
222 9.7 Sections 9.2 to 9.6 of this chapter 9.2 Coverage of limits on establish ranges for the required Tiers 1 and 2 levels of limits on Tiers 1 and 2 of the PBS as follows: 9.9 In order to set out required limits on Tiers 1 and 2, we need to be • First, the optimal coverage of explicit about the categories of the limits on Tiers 1 and 2 is migration to be included within considered in section 9.2. the limits. That is the focus of this section. • Next, in section 9.3, the issue of the desired trajectory for 9.10 In commissioning this work, the migration through Tiers 1 and 2 Government was partly, but not is discussed. wholly, prescriptive about what should be included with the limit • The above factors, in and what should be excluded. combination with the findings of The Post-Study Work Route, and Chapter 6, then allow us to set Entrepreneur and Investor routes out in section 9.4 what total limit under Tier 1 were excluded, as on Tier 1 and 2 visas is required were the ministers of religion and in 2011/12 in order to make sportspeople routes of Tier 2. reasonable progress towards Therefore our suggested limits do the Government’s objective for not apply to these routes. net migration. 9.11 We expect that the limits on • We then discuss, in 9.5, Tiers 1 and 2 will cover the Tier 1 the optimal split of that limit General, Tier 2 Resident Labour between Tiers 1 and 2. On the Market Test (RLMT) and Tier 2 basis of that, we are then able shortage occupation routes. The to set out in 9.6 required limits Government consultation asked for Tier 1 and Tier 2. whether the latter two routes should be combined, and that 9.8 Sections 9.7 to 9.13 consider how matter is discussed later in this the design of Tiers 1 and 2 may chapter. Our discussion of the be best amended to select those limits does cover all three of migrants likely to be of greatest these routes. benefit to the UK economy and labour market. The implications 9.12 The above leaves three main of the evidence in relation to issues requiring resolution in order the economy, public services for us to define the coverage of and wider society, discussed the proposed limits: in Chapters 7 and 8, and the potential impacts on different • Should the Tier 1 and 2 limits groups are also considered. apply to out-of-country migration only, or also cover in-country migrants switching from other routes or extending within a particular route?
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• Should dependants of main • Outflows can be boosted by migrants also be included within reducing average durations of the Tier 1 and 2 limits? The stay in the UK, by permitting Government consultation also fewer extensions of stay within raised this question. routes, or less switching in- country between routes. • Should intra-company transfers be included in the limit? The 9.15 We explained the potential Government consultation trade-off between in-country also asked this question, and and out-of-country migration in additionally raised the possibility our consultation document, and of exempting any intra-company in consultation meetings and transfer for a period of less than events. Some of our corporate 12 months. partners did not, however, think it appropriate to express a 9.13 The Government will make final preference in terms of in-country decisions on the three issues or out-of-country migrants. For above in due course. Nonetheless, example, the Royal College of in order to address the question of Nursing told us that it is unable to a numerical limit, it was necessary endorse or ‘favour’ a reduction in for us to form our own view, which migration via either of the we did based on evidence from stated options. corporate partners as well as our own thinking and analysis. The 9.16 Some employers felt that the three issues are discussed in impacts on their business of turn below. reducing in-country and out- of-country migrants would be In-country and out-of-country migration similarly damaging, and there was no reason to prefer one 9.14 Net non-EEA work-related over the other. KBR, a leading migration can be reduced either global engineering, construction by reducing inflows over time and services company serving or increasing outflows. Given the energy, petrochemicals, the aim to limit net migration to government services and civil a particular level, it follows that infrastructure industries, told us if outflows were boosted, the that if migration is to be reduced, required reduction to the inflow cuts to skilled Tier 1 and 2 would not need to be as large as migrants, either from outside of in a situation where outflows the UK or from within the UK, remained constant: will not be of any benefit. It said that both these migrants bring • Inflows can be reduced enormous talent and skills to the by limiting the number of UK, in turn benefiting businesses visas issued to potential and the economy as a whole as migrants outside the UK. well as passing valuable skills and Our suggested limit covers knowledge to resident workers. such out-of-country visas. In addition, Ernst & Young told us that they did not accept the premise that a reduction in either new migration or extensions is a
224 desirable outcome. We also heard from the Newcastle-upon- “Extensions are mostly approved Tyne Hospitals NHS Foundation and switching category is very easy, Trust that both the options thus, most migrants will make it to would cause problems for NHS 5 years and be able to apply for organisations and neither proposal ILR, at which point they are likely to would be preferable. move away from their current job and possibly out of the sector – thus, we have added one more person who “Skillset would favour neither has a permanent right to stay in the measure as the potential damage to UK AND created demand for one the sector caused by either could be more migrant chef to replace them. equally great. Companies would need It should be made much harder to to be able both to extend existing extend and switch, which would mean contracts and take on new migrant a lot more migrants going home after workers at different times in order to their 3 years and would affect the remain competitive.” appeal of working in the UK as an eventual place to settle.” Skilllset (Sector Skill Council for the creative industries) response e2e Linkers response to to MAC consultation MAC consultation
9.17 In terms of extensions of Tier 1 9.18 However, other employers argued and Tier 2 visas, some partner that allowing migrants to extend organisations expressed a beyond the current two year preference for access to short- (Tier 1 General) or three year term, temporary migrants, and (Tier 2) period of initial leave therefore favoured limits to was essential to their economic extensions. For example, the success. For example, when we Greater London Authority argued met major Japanese companies that restricting new migrants at the Embassy of Japan, we to allow for more leeway in were told that many of their the extension routes could put intra-company transferees businesses that currently have come for up to five years. The Tier 1 and 2 migrants within its companies argued that cutting workforce at an unfair advantage off this supply of labour at the to those who do not. three-year extension stage would require them to fundamentally change their business models and “There are already strict and could, in some cases, jeopardise stringent controls under the PBS future investment in the UK. for applications outside of the UK Other employers expressed for Tiers 1 and 2 therefore I believe similar concerns. that the reductions should be targeted on extensions and switching between routes.”
Fluor Limited response to MAC consultation
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clear-cut case for treating “Companies generally request a migrant switching between extensions for two reasons. Normally routes (and, often, between it is because the non-EU migrant employers) differently to is doing exceptional work and the out-of-country migrants. company wishes him to continue this position. This is good for the company 9.21 However, in some cases migrant and the economy. Sometimes a switchers remain with the same company requests an extension employer. Therefore, limiting because it has not been possible to switching would be problematic replace that migrant with a resident for employers in some cases. For worker. The removal of the ability example, we were told during our to request extensions will leave consultation that medical training skill gaps within a firm that were requires doctors to move between previously covered by invaluable routes and tiers within the PBS. migrant workers.” 9.22 Special arrangements could PriceWaterhouseCoopers response be put in place for particular to MAC consultation sectors or major employers, such as the NHS, but that would add complexity to the system. 9.19 The arguments for and against Therefore, we generally exclude limiting extensions are finely migrant switchers from our balanced. However, by definition, suggested limits. However, we successful extenders under Tiers return later on to the issue of 1 and 2 have UK labour market migrants on Tier 2 visas of fewer experience in a skilled or well- than 12 months switching paid job. Furthermore, limiting between routes. extensions adds complexity to the system. Finally, we are reluctant 9.23 The exclusion of extenders to suggest retrospective changes and switchers from our limits for migrants already in the UK does not mean that, in some and, if extensions are limited to circumstances, taking action to new migrants only, this will reduce reduce the frequency of extending the ability, in the short term, of and switching cannot make a limits on Tiers 1 and 2 to reduce sensible contribution to reducing net migration. This is because net migration in the longer run. changing the eligibility of new We make some suggestions as migrants to extend or switch will to how this could be done later in only have an impact on outflows this chapter. when their leave to remain expires in 2 to 3 years’ time. We therefore 9.24 In any case, to stay on course exclude extensions from the to achieve its objective the required limits we set out Government will have to take for 2011/12. progressively tough action on in- country migration over time. This 9.20 Fewer partners were concerned is because lower inflows will lead by the prospect of limiting to a reduction in outflows in future switching between routes. On years, compared to a situation the face of it, there is less of a where annual inflows remain
226 constant over time. Box 9.2 average non-EEA migrant explains this issue in more detail. durations in the UK could be reduced: policy on settlement 9.25 Actions on switching and is an additional possibility. We extending are not the only also return to this issue later in mechanisms through which this chapter.
Box 9.2: Longer-term impact on net migration of a reduction in inflows
A reduction in net migration can be achieved either by reducing inflows or by increasing outflows. If inflows are reduced, other things equal, we expect net migration to fall by the same amount in the first year. This is because the number coming to the UK is reduced, while the number leaving the UK is the same. However, some inflows lead to outflows in the future. Reducing inflows will therefore lead to a reduction in outflows in future years.
The magnitude and timing of this effect is crucially determined by migrants’ lengths of stay in the UK, and whether they eventually leave. UK Border Agency (2010b) data presented in Chapter 3 showed that, for work-related routes leading to citizenship, 40 per cent of those that entered in 2004 had valid leave to remain after 5 years. By implication, if no work-related migrants overstayed their visas, 60 per cent must have left.
We used such a calculation as the basis for a simple model to estimate migrant outflows, and hence net migration, based on inflows of migrants within particular immigration categories.Annex B provides more details. The chart below shows how reducing the work-related inflows by the amount set out under Option A in Chapter 6, each year for 4 years, will affect net migration: the longer-term impact of a year-on-year reduction in work-related inflows on net migration may be as little as 40 per cent of the impact in the first year.
Long term impact of reduction in work-related IPS inflows: Option A 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 0
-5
-10 TIM inflows / -15 Option A reduction in net -20 migration
net migration (000s) Option A reduction -25 Reduction in L Reduction in in inflows
-30
Note: We consider reductions of work related inflows of 7,300 for option A in each year from 2011/12 to 2014/15. The net migration reduction is generated by comparing the magnitude of these reductions with the option of keeping work related migration constant from 2009/10. Source: MAC analysis
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Dependants 9.28 We mentioned in Chapter 2 the need to take account of Article 8 9.26 Dependants who report that they of the European Convention on are coming to the UK for more Human Rights. Some partners than 12 months count towards questioned whether limiting net migration in the International dependants would be legal, or Passenger Survey (IPS). If moral. For example, the Royal dependants were included in the College of Nursing, the British limit, an additional dependant Chambers of Commerce, the coming to the UK would Joint Council for the Welfare effectively directly displace a of Immigrants, the Permits main migrant. Chapter 3 showed Foundation and MigrationWatch that dependants account for a UK each suggested that action to significant proportion of total reduce migration of dependants is migration under Tiers 1 and 2. potentially vulnerable to challenge It is valid, therefore, to consider under Article 8. whether dependants should be included in the limits for those tiers. “It is hard to see how measures of this kind could be compatible with the 9.27 We gathered a wide range of right to family life under Article 8 of evidence on dependants. Some the ECHR.” corporate partners felt that it was important that employers MigrationWatch UK response to have access to the best possible MAC consultation people, and that concerns over whether that person was bringing in dependants, and how many, “We also believe that there is a should not enter into the equation. fundamental right to respect for family Deutsche Bank told us that, and private life and to marry and when deciding which employees found a family without discrimination. are eligible to transfer between These rights are embodied in the countries, it does so purely on European Convention of Human the basis of that individual’s Rights and transposed into UK law skills and qualifications, not on through the Human Rights Act 1998. the number of dependants that We believe that any system or cap would accompany that person that restricts or discourages migrants’ to the UK. They told us that access on the basis of family status the immigration system should or encourages access to a migrant respect this business imperative with no dependants would be and should not place restrictions challenged legally.” on the number of dependents that Tiers 1 and 2 migrants may bring Permit Foundation response to to the UK. According to Permit MAC consultation Foundation, dependants should be excluded from any limit in order to ensure that employers can choose the best person for the job, irrespective of his or her family size or composition.
228 9.29 At a meeting facilitated by • The Government’s objective for Skills for Care we were told that net migration relates to the end dependants often work within the of this Parliament. This means care sector and therefore any there is time before then to reduction in dependants has the monitor any changes in the ratio potential to exacerbate shortages of main migrants to dependants. in that sector. 9.32 However, we are mindful that 9.30 In contrast, some partners the Government is consulting on believed that, because whether dependants should be dependants will potentially included in the limit. We therefore displace work-related migrants indicate in this report what we under a limits regime, there was a believe the numerical limits case for limiting their numbers. For including dependants would need to example, it is Doosan Babcock’s be in the event that the Government view that whilst the main migrants decides to include them. make an economic contribution to the UK, the dependants often do Intra-company transfers not and could be a burden on the UK economy or take low skilled 9.33 As shown in Chapter 3, the intra- jobs from the general company transfer route is by far UK population. the largest, in terms of out-of- country visas issued in 2009, of 9.31 We do not have the expertise to the Tier 1 and Tier 2 routes we provide a view on the legality of are considering. We also received limiting dependants. Nonetheless, a particularly large volume of we have decided to exclude evidence in relation to this route. dependants from our suggested Here we consider the specific limits for 2011/12, for two issue of whether intra-company economic reasons and a transfers should be included in practical one: the limit.
• The number of dependants 9.34 Many of our partners argued that, should fall broadly in line with even if there were to be limits the number of main migrants on certain types of work-related anyway, so the only effect of migration, intra-company transfers including them would be to alter should not be limited. It was put to the required numerical limit by a us that intra-company transferees fixed proportion. should not be regarded as migrants at all. • A higher than expected inflow of dependants would reduce 9.35 The argument for excluding intra- employer access to main company transfers had three migrants if the two groups were parts. The first was that intra- covered by the same limits: company transfers should not this would provide additional be limited because of the crucial uncertainty for employers at contribution they make to UK a time when they are already businesses and the economy. This adapting to substantial changes argument is discussed in more in migration policy. detail below.
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9.36 The second part was that 9.38 PricewaterhouseCoopers UK intra-company transfers are (PwC) said that intra-company overwhelmingly temporary in transfers should not be included their nature. Assuming that both in any limit as they cannot inflows and average durations be described as a burden on are stable over time, it follows public services. They told us that intra-company transfers that the argument that intra- should contribute in roughly equal company transfers “draw on the measure to both immigration to, UK’s public services” is hard to and emigration from, the UK. In support because intra-company other words, the route should transferees are generally highly not significantly contribute to paid and therefore contribute positive net migration. This point significantly to tax revenues. In was made, for example, by BAE addition, PwC informed us that Systems. They told us that intra- what they consider intra-company company transfers are not a transfers in the corresponding route to permanent residency category in the US (the L-1 visa) and citizenship, as they are for is not subject to a quota because temporary migration only. BAE the US Government recognises Systems said that, therefore, over the importance of their skills and the longer term the net impact of the expertise they transfer to the intra-company transferees on net expansion of their economy. migration is, by definition, zero.
9.37 The third part was closely related “ … Semta urges the MAC and to the second. Some companies the UKBA to recognize that short- and sectors, we were told, send term contract labour, where migrant as many, or more, UK people workers return to their countries of abroad as they bring into the UK origin after completion of a project (as as intra-company transferees. used in the Aerospace MRO sector) Therefore, those sectors and should be treated differently from companies do not see themselves ‘standard’ recruitment of overseas as contributing to positive net workers for permanent positions.” migration, and argued that they should be exempt. Morgan Semta response to MAC consultation Stanley told us that in the last 12 months it has transferred 104 people into the UK and 294 UK 9.39 Sony Europe Limited argued employees were transferred to its that including the intra-company offices overseas, representing a transfer route in the limit will net outflow of 190. It believes that have a huge negative impact it does not contribute to positive on both their business and the net migration into the UK and, UK economy. The National as such, it should not be subject Association of Software to restrictions on the number of and Services Companies skilled migrants it brings in. (NASSCOM), a trade body for the Indian IT sector and the Chamber of Commerce of the IT-BPO (Business Outsourcing Process) industries in India told
230 us that implementing a migration and their link to intra-company limit on intra-company transfers transfers, as discussed in would have a direct and indirect Chapter 2. Having given the damaging economic impact on matter careful consideration, we the UK economy. They said have nevertheless decided to that, in addition to the practical include intra-company transfers economic costs of using intra- in our calculation of the required company transfers, it would send limit for Tier 2. Although we a powerful signal that the UK have sympathy for the counter- was shifting its long-established arguments, our reasons for policy on trade firmly in the including intra-company transfers direction of protectionism. in the limit are as follows:
9.40 In contrast, the Association of • It is an inescapable fact that the Professional Staffing Companies intra-company transfer route is by (APSCo) told us they believe that far the largest component of Tier intra-company transfers should be 2. It accounted for 60 per cent of included in the limit. They believe the total Tier 2 inflow in 2009. It that the use of the intra-company is difficult to see how a limit on transfer route has restricted Tier 2 can make a substantial opportunities for UK-based IT contribution towards reducing net contractors. APSCo said that a migration unless intra-company reduction in the number of intra- transfers are included, especially company transferees would be given the possibly limited scope compensated by increased levels to boost outflows from other Tier of employment within the existing 2 routes over the short term. pool of resident IT professionals. Professional Contractors Group • Even if certain companies and (PCG) told us that for resident sectors are neutral or negative freelance workers in the IT sector, net contributors to work-related limits on the use of intra-company migration, emigration of workers transfers would have a positive from those companies and and significant impact on the sectors will anyway be counted labour market. We were also told in the overall net migration that the majority of intra-company figure. Substantial additional transferees in the IT sector are reductions in net migration undertaking work which requires are required in order to achieve skill sets that can be readily the Government’s aim of found in the UK from unemployed overall net migration in the IT professionals. ‘tens of thousands’.
9.41 We have listened to all the 9.42 If intra-company transfers were concerns expressed by our to be included in the limit, some partners and some of our partners supported the suggestion suggestions to amend the in the Government’s consultation intra-company transfer route document that those of under 12 presented later on in this chapter months’ duration should not be were based on consideration of limited. We discuss visas issued them. We have also considered for less than 12 months under Tier the issue of trade agreements, 2 routes later in this chapter.
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9.3 T rajectory 9.46 These options were expressed in net migration reductions per year, 9.43 This section discusses what and would be consistent with a trajectory reduced migration linear trajectory: in other words through Tiers 1 and 2 should reducing net migration by the follow, in line with the reductions in same amount each year. work-related net migration set out in Chapter 6. As discussed earlier, 9.47 A number of considerations were we assume that the objective will raised in the evidence we received be achieved over four years, with from partners, which we have the final one being April 2014 to considered. Some themes were March 2015. particularly prominent in terms of trajectory. 9.44 We set out three potential options for the trajectory for Tiers 1 and Skills 2 in our consultation document in June this year: 9.48 The time required for up-skilling was frequently raised as a • make smaller reductions to rationale for making smaller begin with, and larger ones later reductions in earlier years. We on; or were told that there are often considerable lead-in times to up- • make similar reductions each skilling UK workers in order to fill year; or jobs that would otherwise have been filled by migrants. • make larger reductions to begin with, and smaller ones later on. “Alternatives to employing Tier 1 and 9.45 In Chapter 6, we considered 2 migrants, including training and what precise objective for net up-skilling of the resident workforce in migration is consistent with Scotland will take time to achieve.” the Government’s objective of reducing net migration to the Scottish Government response to tens of thousands, and what MAC consultation contribution Tiers 1 and 2 can make over the four years. We concluded by presenting two 9.49 For example, the Society of options for Tiers 1 and 2 total Radiographers said there is contribution to the net migration a considerable lead-in period reduction, as measured in the IPS: before any impact of extended training will have an impact on the • Option A: a net migration availability of sonographers, which reduction of 7,300 main is an occupation currently on the applicants per year; shortage occupation list. The UK Screen Association told us that • Option B: a net migration there was a global skills shortage reduction of 3,650 main of experienced visual effects applicants per year. workers and there is no alternative in the short to medium term to
232 hiring migrant workers in addition Agency told us that the monetary to employing those from the UK and time costs of up-skilling need and EEA. to be taken into consideration.
9.50 The UK Commission for Employment and Skills (UKCES) “It is important for employers to stated that the UK is already take responsibility for identifying experiencing serious skills skills requirements as well as deficiencies in a number of key investing training in their staff rather occupational groups which are than relying on government funding currently being mitigated by for training.” employing non-EEA migrants. It said that up-skilling for highly Skills Funding Agency response to skilled occupations could take MAC consultation between 1 and 3 years even without taking account of the need for appropriate work experience. 9.52 The Department for Work and According to the UKCES, one Pensions (DWP) told us that it is way to offset the negative effects committed to support the limits on of a limit would be to up-skill net migration by increasing the the UK population to help supply of domestic workers to take alleviate shortages. up vacancies that might otherwise be taken by non-EU migrants or remain unfilled. However, up- “Policy-makers should turn this skilling domestic workers will potential threat to UK take time, especially as this will competitiveness into an opportunity be during a period of expected to raise employer ambition and to economic growth. encourage employers to invest into the training and skills development of the UK resident workforce.” “There is a range of activity already underway to ensure more UK UKCES response to residents are seeking work and MAC consultation have the necessary skills. However, this work will necessarily take time to develop and put in place. For 9.51 The Skills Funding Agency told example, the Work Programme which us that there are a number of will provide an integrated package of ways the Government and other support to help unemployed people bodies can facilitate a shift in back into sustained work will be employer behaviour to reduce introduced from summer 2011”. reliance on migrant labour. These include increasing employers’ Department of Work and Pensions engagement with the employment response to MAC consultation and skills systems and gathering information to find out which qualifications employers want job applicants to have to fill skills shortages. The Skills Funding
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9.53 Some corporate partners suggested that progress could “Given that so many of our posts be made over a four-year time are highly specialised, and funded horizon. At one of our partner by limited-term grants from events we were told that an external funding bodies and other engineering firm would use the organisations, it is frequently not time offered by a more gradual practicable for us to train resident trajectory to bring in experts from workers, both because of the abroad to work alongside, and specialised background required and train, their UK counterparts. because of time constraints.”
9.54 On the other hand, we were told University of Oxford response to that up-skilling for many jobs MAC consultation could take in excess of four years, or was not a viable alternative, so it might not be a relevant 9.55 At one of our consultation events, consideration for the trajectory. some employers expressed the For example, some employers view that, if there are going to be told us that there were jobs where negative impacts, it may be best up-skilling was not viable because for reduced access to migrants a job was so specialised or to come into force sooner rather because talent was being than later, in order that companies sought in a global market. can plan for the future with greater certainty.
“Compared to most other professions, 9.56 Whatever the precise trajectory the training period for scientists is for migration through Tiers 1 and extremely long. In the life sciences, 2, it is clear that an acceleration becoming a specialist researcher of in activity to train and upskill the type employed by the Wellcome UK workers to fill some of the Trust Sanger Institute would be jobs currently done by migrant likely to involve three years of workers is imperative in terms undergraduate study, four years of of mitigating significant adverse postgraduate training and three or economic consequences that more years of postdoctoral work. could otherwise result from limits Training a person to this level is also on migration through Tiers 1 and very expensive.” 2. Box 9.3 presents the evidence we received from the UKCES on “The UK’s world-class research this point. institutions need to be able to hire the best individuals in their fields, not simply a UK or EEA individual who is ‘good enough’”.
Wellcome Trust Sanger Institute response to MAC consultation
234 Box 9.3: Evidence from UK Commission for Employment and Skills
“…If any reduction in work related migration is implemented, it will be essential to mitigate its negative effects through action to ‘fill the gap’ created, with indigenous workers through:
Up-skilling the UK working age population.
Improved Information, Advice and Guidance.
Making the occupation/jobs more attractive by improved pay and conditions and other means.
Increasing innovation in the ways of working by improving technologies to reduce dependence on labour.
“We recommend an enabling framework of policy responses aimed at:
1. encouraging skills development of the UK working age population by encouraging employers to invest in skills development and training;
2. improving the skills and employment system through improving the provision of high quality information, advice and guidance (IAG) (both of these are aimed at up-skilling the UK working age population);
3. improving the attractiveness and perception of certain sectors and occupations to encourage the domestic workforce to (re) train and seek work in those occupations; and finally,
4. improving innovation and technological advances in some occupations to make them less reliant on labour and increase their knowledge and skills intensity.
“These actions will require time to impact, most notably, action on up-skilling for highly skilled occupations which can take between 1 and 3 years even without building the appropriate work experience. Consequently, we recommend a trajectory for any T1/T2 reductions which starts very low and increase gradually in line with improvements in the skills available in the indigenous workforce.”
Source: UK Commission for Employment and Skills response to MAC consultation
9.57 We agree with the UKCES that and addressing shortages, action on skills is critical and of economically or otherwise we suggest taking action to important workers, that might ensure that the skills and otherwise occur as a result of, training system plays a key role or be exacerbated by, limits on in systematically identifying work-related migration.
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The economic cycle consequences of recession. This could provide a rationale for 9.58 The economic cycle was raised making larger reductions to begin by a number of partners as a with, and smaller ones as the consideration. It was argued that labour market becomes tighter in the level of the limit should reflect future years. the relative state of the UK labour market at a particular point in Implications for trajectory time. The UK economy is currently emerging from recession. Some 9.60 On balance, we think there corporate partners expressed is merit in the argument that the view that reducing the pool employers should be given time to of skilled workers that employers adjust to limits on migration, and could recruit from had the potential this implies that limits on Tiers 1 to limit the ability of companies and 2 should become increasingly to grow, thus hindering the restrictive over time. economic recovery. 9.61 A linear trajectory can be considered consistent with the “Every effort must be made to above. The reductions of 7,300 ensure the economic routes remain or 3,650 per year in net work- flexible enough to meet demand, related non-EEA migration as which we would expect to increase discussed above are additive on as the economic situation in the UK a year-on-year basis: compared improves.” to the baseline year of 2009, the higher of these two figures implies Confederation of British Industry a reduction of 7,300 in year one, response to MAC consultation and 14,600 in year two, and so on.
9.62 A trajectory that delayed the “Without these migrants, economic largest cuts until the later years recovery is put at risk as companies of this Parliament would also be fail to fill job vacancies with potentially consistent with limits becoming damaging effects on output and more restrictive over time, but growth. Companies may fail to this risks employers limiting expand or expand less than they or delaying action required to would do otherwise.” accelerate the training and up- skilling of UK workers. UKCES response to MAC consultation 9.63 Taking the above into account, and also bearing in mind that the uncertainties involved mean that 9.59 The argument above could it is unlikely we can plan for a be used to support a smaller very precise trajectory anyway, reduction in net migration in the required limits we set out early years. On the other hand, for Tiers 1 and 2 in 2011/12 are the analysis of the UK labour based on the assumption that market presented in Chapter inflows through those routes will 3 demonstrated that it has not fall by the end of this Parliament yet fully recovered from the according to a linear trajectory.
236 9.4 Numerical levels of limits 9.68 Volumes of visas issued for on Tiers 1 and 2 work-related migration are considerably higher than the 9.64 In summary, our suggested limits inflows of work-related migrants include: in the International Passenger Service (IPS). The most important • out-of-country immigration reason for the difference between through the Tier 1 General IPS and visa inflows is likely to route; and be the fact that some visas are issued for people who do not • out-of-country immigration intend to come to the UK for a via Tier 2 Resident Labour year or more. Unfortunately, it is Market Test (RLMT), shortage difficult to accurately disaggregate occupation, and intra-company those coming for short periods transfer routes. from visa figures. These short- term visa holders are not counted 9.65 Our suggested limits exclude: by the IPS, because they do not meet the definition of long-term • dependants (although we also migrants. Also, some individuals examine an additional scenario who are issued visas do not including dependants); come at all. For example, a major IT company that uses the intra- • in-country switchers and company transfer route told us extenders (with the possible that it invariably allocates more exception of those switching Certificates of Sponsorship than from Tier 2, whose previous the number of transferees who visa was for under 12 months, actually come to the UK. discussed later). 9.69 We therefore compared visa flows 9.66 Later on in this chapter we discuss with migration inflows recorded whether Tier 2 migrants with in the IPS and derived scaling visas of under one year should factors to allow us to convert be excluded from the limit for changes in IPS flows to changes that Tier, but the calculations in visas. In order to calculate the immediately below assume that all reduction in visas required to migrants through relevant Tier 2 achieve a given reduction in IPS routes are included. inflows, we need to divide the IPS figure by the scaling factor. 9.67 Chapter 6 identified two potential A detailed discussion on how we options for reductions in IPS estimated the scaling factor is net migration via Tiers 1 and 2 presented in Annex B. Table 9.1 that would be consistent with presents the total visa reduction the Government’s objective of and the resulting out-of-country reducing net migration to the tens limit for Tier 1 and Tier 2 for the of thousands by the end of this two options A and B identified in Parliament. However, these do Chapter 6. not translate into reductions in numbers of visas on a one-to-one basis. Therefore, in this section we consider the implications for actual visa numbers in 2011/12.
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Table 9.1: Converting options for lower International Passenger Survey work-related migration inflows into reductions in visas for Tiers 1 and 2 in 2011/12
IPS Scaling Corre- Total Resulting reduction factor (2) spond- Tier 1 out-of- (1) ing visa and Tier country reduction 2 2009 limit for (3) visas Tier 1 granted and Tier 2 Option A Main 7,300 0.58 12,600 50,010 37,400 applicants Option B Main 3,650 0.58 6,300 50,010 43,700 applicants
Note: (1) The IPS reduction required is the 2011/12 contribution of Tiers 1 and 2 to the overall reduction in non-EU IPS migration that is required to meet the Government’s objective. These figures were calculated in Chapter 6. (2) The scaling factors represent the average ratio between visas and corresponding IPS inflows between 2006 and 2009. (3) The visa reduction applies to the routes within Tiers 1 and 2 that are in scope for limits: Tier 1 General and the intra-company transfer, Resident Labour Market Test and shortage occupation routes. The resulting out-of country limits for 2011/12 are rounded to the nearest 100. Source: MAC analysis
9.70 Option A assumes that Tier 1 9.71 Therefore, our best estimate is and 2 main applicants make a that the Government objective combined contribution on behalf to reduce net migration to the of all work-related migration. tens of thousands by the end This implies a contribution that of this Parliament implies a amounts to 20 per cent of the reduction, compared to 2009, required reduction in non-EU of 6,300 or 12,600 visas to be migration. Option B assumes issued in 2011/12. The total that Tier 1 and 2 main applicants required limit for Tier 1 General make a combined contribution in and Tier 2 combined in 2011/12 proportion to their actual share is, therefore, between 37,400 of IPS inflows. This implies and 43,700. a contribution of 10 per cent, but would additionally require 9.72 In order to calculate these limits that Tier 5 and permit-free we use the latest annual published employment also make a 10 per full-year visa data, for 2009, as our cent contribution to reducing net baseline. The Government may migration in proportion to their choose to apply the reductions share of inflows. The 10 per cent to a more recent baseline before represents the share that Tiers the actual limits are put in place in 1 and 2 inflows account for in April 2011. However, if more recent IPS inflows. data indicate significant changes to migration flows via Tiers 1 and 2 or other routes, the assumptions made in Chapter 6 to calculate the required reductions may change.
238 9.73 We have had to make numerous Evidence assumptions, based on our analysis of the available data, 9.77 One of our key criteria for policy in order to calculate the above suggestions is better identification visa reductions. Some of the and attraction of migrants who calculations we made, and have the most to contribute to the associated assumptions, are set UK. We therefore consider the out in Annex B of this report. evidence in relation to the relative importance of Tiers 1 and 2 on 9.5 Balance between Tiers 1 this basis. and 2 9.78 We received a much larger 9.74 The next step in our analysis is to volume of evidence relating to translate the total reduction in Tier Tier 2 than Tier 1. Submissions 1 and 2 visas set out in Table 9.1 arguing in favour of Tier 2 heavily into separate reductions for Tier 1 outnumbered those arguing for General on the one hand, and Tier Tier 1 to be protected. 2 on the other.
9.75 As shown in Chapter 3, 14,300 “As a University we value being visas for main applicants from able to use both routes and whilst outside the UK were granted we do not extensively use Tier 1 we under Tier 1 General (and its would not wish to see a reduction predecessor, the Highly Skilled of numbers in this Tier, however the Migrant Programme (HSMP)) impact on the University would be in 2009. In the same period, less significant, than a reduction in 35,700 out-of-country visas for Tier 2.” main applicants were granted for routes that are within the Cranfield University response to MAC scope of the limit for Tier 2 (intra- consultation company transfers, RLMT and shortage occupation routes, and predecessor work permits). 9.79 The Chartered Institute of Tier 1 therefore accounts for Personnel and Development told approximately one third of current us that its members primarily flows within the scope of a limit. use Tier 2 to recruit non-EEA workers. They said the impact of 9.76 One option would be to allocate reducing the number of migrants the visa reductions in Table 9.1 through Tier 1 would be minimal in proportionately across the two comparison to any reduction in the tiers, so that the absolute reduction number of migrants through Tier 2. to Tier 2 is twice as large as that to Tier 1. However, it is appropriate to 9.80 We also heard from Balfour Beatty consider whether either tier should Utility Solutions (BBUS) that it be cut by a disproportionately would not notice a significant large amount, in order that the impact of reducing the number other tier takes a proportionately of migrants through Tier 1. They smaller cut. The evidence received said that reducing Tier 2 migration from our partners on this issue is would put at risk the completion of set out below. key infrastructure projects which
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would jeopardise the security of 9.82 Some said that the impacts on supply of electricity and put the both tiers were inter-related health of the UK economy at risk. as employers would look to switch between routes for some employees depending on the “BBUS, and the wider utilities sector nature of restrictions put in place. within which it operates, would be hugely impacted through reducing tier 2 migrant’s entry into the UK.” “Tier 1 is a common route of entry for scientists and researchers…The Balfour Beatty Utility Solutions Wellcome Trust Institute advises response to MAC consultation prospective non-EU recruits who meet the criteria for Tier 1 to apply under this category as we consider it “Provided the Tier 2 route remains as offers greater flexibility to employers currently defined the impact of Tier 1 and applicants than Tier 2.” reductions would be negligible.” “If the criteria for Tier 1 are changed Doosan Babcock response to MAC in a way that makes it more difficult consultation for high-skilled scientists to qualify, it is likely that science employers will increasingly rely on Tier 2.” 9.81 Oil and Gas UK told us that although Tier 1 is an important Wellcome Trust Sanger Institute way of increasing the available response to MAC consultation pool of skilled workers, and is used frequently by the sector, if a choice between the two routes “The impact from Tier 1 would had to be made, a sensible limit become fundamentally greater if Tier should be imposed on Tier 1 2 is restricted as most bank sector migration rather than on Tier 2. employees are, by nature of their earnings, defined as highly skilled “Every effort must be made to and would seek to use this route if ensure the economic routes remain the other is not accessible.” flexible enough to meet demand, which we would expect to increase Joint response from the Association as the economic situation in the UK of Foreign Banks and the British improves. As we have made clear in Bankers’ Association to MAC previous submissions to the MAC, consultation retaining flexibility in Tier 2 is the primary focus for CBI members.” 9.83 On balance, the evidence supports a greater proportionate reduction Confederation of British Industry to Tier 1 than to Tier 2 in 2011/12. response to MAC consultation We apportion the reduction in net migration between the two routes on that basis. The Government may choose, however, to apportion visas between Tiers 1 and 2 on a different basis to that which we use below.
240 9.6 Levels of limits on Tiers 1 9.86 For Tier 1, the required overall and 2 in 2011/12 reduction translates into:
Calculations • a reduction in the number of entry clearance visas issued, 9.84 A simple way of apportioning compared to 2009, in the range reductions so that the burden falls of 3,150 to 6,300; and therefore more heavily on Tier 1 is simply to split the required reduction, in • a limit on the number of absolute terms, between Tiers 1 • Tier 1 entry clearance visas and 2 equally. To put it differently, • in the range of 8,000 to 11,100 because Tier 1 is half the size of in 2011/12. Tier 2, in proportionate terms the burden falls twice as much on 9.87 Correspondingly, for Tier 2 the Tier 1 as Tier 2. Using 2009 as required overall reduction should the baseline year, Table 9.2 sets translate into: out the required reduction and the resulting out-of-country limits for • a reduction in the number Tiers 1 and 2. • of entry clearance visas issued, compared to 2009, 9.85 The figures in the right-hand • in the range of 3,150 to 6,300; column of Table 9.2 provide the and therefore basis for our suggested limits for Tiers 1 and 2. It would be • a limit on the number of reasonable to view these two • Tier 2 entry clearance visas options as the boundaries of a • in the range of 29,400 to range of possible options. 32,600 in 2011/12.
Table 9.2: Apportioning visa reductions for main applicants between Tiers 1 and 2 for a 2011/12 annual limit
2009 visas Required Resulting granted reduction out-of- in visas for country 2011/12 limit for 2011/12 Option A Tier 1 General (and HSMP) 14,265 6,300 8,000 Tier 2 main routes 35,745 6,300 29,400 (and work permits) Option B Tier 1 General (and HSMP) 14,265 3,150 11,100 Tier 2 main routes 35,745 3,150 32,600 (and work permits)
Note: The required reduction in visas is derived from calculations in Table 9.1. The resulting out-of- country limit is calculated by subtracting the reductions from the 2009 baseline. Options A and B for are based on the assumption that all visas, regardless of their durations, are included in the annual limits. The resulting out-of country limits for 2011/12 are rounded to the nearest 100. Source: Control of Immigration Statistics, 2009; MAC analysis
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9.88 2009 is the most recent year for in the UK. The limits for Tier 2 which published visa data are main migrants and dependants available. The Government could do not include the sportspeople or apply the required reductions to ministers of religion routes. more recent data, if these data show flows of similar orders of Caveats magnitude, to the extent that our assumptions about IPS flows 9.91 The above limits, for main discussed in Chapter 6 remain migrants and dependants, are broadly valid. It may also, on that calculated on the assumption basis or some other, decide to that all visas, including those of apportion visas between Tiers 1 less than 12 months, are covered and 2 on a different basis to that by the limit. If visas lasting for used above. less than 12 months were to be excluded, the levels of the limits 9.89 The above figures do not include would need to be adjusted to dependants. If dependants were account for this. This could be to be included in the limits, the done by subtracting the number limits would need to be higher to of visas expected to be issued reflect that. eW may calculate how for under 12 months from the much higher using visa data on baseline (2009 visas granted the ratio of dependants to main in Table 9.2) and applying the migrants under Tier 1 General required reductions to the and Tier 2 (and the previous revised baseline. work permit route) as set out in Table 3.3 of this report. The ratios 9.92 Excluding visas of less than 12 are 0.8 and 0.7 respectively. months from the limit could also The implications of including have an impact on the scaling dependants in the limits on Tiers 1 factor we have used to translate and 2 are as follows: IPS inflows into the number of visas issued. It is not possible • a limit on the number of Tier from the information available to 1 entry clearance visas for us to estimate this impact but it dependants in the range of is possible that, in time, a better 6,400 to 8,900 in 2011/12. estimate of the scaling factor could be produced. • a limit on the number of Tier 2 entry clearance visas for 9.93 Under certain circumstances, both dependants in the range of Options A and B are consistent 20,600 to 22,800 in 2011/12. with Tiers 1 and 2 making a contribution to net migration in the 9.90 Implementing a limit on tens of thousands by the end of dependants may be complicated this Parliament, following a linear by the fact that some dependants trajectory towards that objective. arrive after main applicants However, they are based on have entered the UK. The ratios numerous assumptions and therefore incorporate some of judgements, which are set out in this lag and there may be issues this report and discussed in the of legitimate expectation for following section. dependants of migrants already
242 Determining the final limits on Tiers 1 • Tiers 1 and 2 bear the total and 2 proportion of the total cut in migration relative to inflows 9.94 Some of the assumptions are through all economic routes, required due to the inherent including Tier 5 (i.e. 20 per uncertainty involved in trying to cent), rather than simply in influence overall net migration proportion to the shares of Tiers using Tier 1 and 2 migration as 1 and 2 alone (i.e. 10 per cent). a lever, when those tiers only account for a small proportion • The Government decides to of total net migration. The aim for overall net migration of assumptions we have had to below 50,000, in order to be make about British and EU more confident of achieving net migration fall into that category. migration of under 100,000. The Government has little control over these factors. Taken literally, • The Government decides to the Government’s objective aim to reduce net migration would imply stricter limits on non- to the tens of thousands by EEA migration if, for instance, 2013, the last complete year for Bulgarians and Romanians which Long Term International gaining free access to the UK Migration (LTIM) data will be labour market leads to an increase available, according to current in net EU migration from those reporting schedules, by the countries. The reverse logic would time of the presumed General also apply if net EU migration Election in May 2015. fell due to other countries, such as Germany, fully opening their • Family migration takes less borders to workers from the A8 than its proportionate share countries that acceded to the EU of the required reduction in in 2004. net migration, meaning that larger cuts have to be found 9.95 Some of the required elsewhere. assumptions, however, are with regard to migration policy and its • Non-EEA students take a objectives. The Government does disproportionately low share have some control over these of the reduction in overall net factors. The final decision whether migration, or continue to rise to choose limits towards the top or rapidly as in recent years. bottom of our suggested ranges, or even outside them, needs to • Flows through the Post-Study be influenced by consideration of Work Route (PSWR) remain at various factors, listed below. their current levels, or increase.
9.96 The Government may need to • The ratio of dependants to aim towards the lower end of our main migrants increases from range, or potentially even below 2009 levels. it (i.e. may need to make the deepest cuts to visas in 2011/12) under the following circumstances:
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9.97 Alternatively, the Government • The ratio of dependants to main would be able to aim towards migrants decreases, possibly as the higher end of our range, or a result of policies with this aim potentially even above it (i.e. may in mind. need to make the least severe cuts to visas in 2011/12) under the 9.98 In addition, the Government could following circumstances: aim to achieve less than 10 and 20 per cent of its objective for • The Government decides to net migration through reductions aim for overall net migration of to Tiers 1 and 2, possibly on the higher than 50,000, targeting, basis that those tiers are judged to for instance, a figure of 80,000 be more economically beneficial, or 90,000 instead. Annex C and that work-related migration provides an illustrative example accounted for a higher share of of what an objective of net non-EU migration in the early to migration of 80,000 would imply mid-1990s, when net migration for Tier 1 and 2 reductions. was last in the tens of thousands. It could also choose to apportion • Policy is put in place so that out- visas between Tiers 1 and 2 on of-country reductions to Tiers 1 a different basis to that which we and 2 can be traded-off against have used above. For example, increased outflows achieved the Government could decide that through reductions to in-country Tiers 1 and 2 should bear only extensions and switching 5 per cent of the total required (although it is important to note reduction in migration. that the required limits currently hold outflows constant, during 9.99 Another policy option is to a period when inflows will fall, consider whether the link between meaning that some such policy work-related migration and to boost the ratio of outflows to settlement should be weakened. inflows will be required anyway Such a policy could have to keep in line with the required significant effects on net migration trajectory for net migration). in the long term, although less The full impacts of action to so before the end of the current boost outflows, however, may Parliament. This is discussed not be experienced by the end further below. of this Parliament. 9.100 The next sections in this chapter • Family or student migration set out options, within the context takes more than its proportionate of the above limits, to avoid or share of the required reduction mitigate potentially significant in net migration. adverse economic consequences.
• Flows through the PSWR fall, or the route is closed down altogether.
244 9.7 Policy options for Tier 1 Evidence
9.101 This section summarises the 9.103 As stated previously, the majority evidence received in relation of the evidence we received to Tier 1, and considers some was in favour of protecting Tier policy options for reducing flows 2. However, we also received through Tier 1 General. The evidence which made the case PSWR under Tier 1 is also briefly for Tier 1. Some businesses discussed: the PSWR is outside argued that it was important the scope of our suggested limit, that they were able to recruit the but it is a work-related route, and brightest and best candidates subsequent action in relation to and this was essential to the UK’s the PSWR may affect the scale economic success. of visa reductions under Tier 1 General and Tier 2 to meet 9.104 Bechtel told us that they employ a the Government’s target of net number of Tier 1 immigrants and migration in the tens of thousands. if restrictions are enforced some may not be able to secure leave to 9.102 When we last reviewed Tier remain in the UK. They also said 1 General in MAC (2009e) that, as the economy rejuvenates, we concluded that “there Tier 1 migrants will be in high remains a strong rationale demand. BT also expressed for attracting highly skilled concerns regarding restrictions immigrants to the UK and that on Tier 1. the Tier 1 General route plays an important role in attracting highly skilled immigrants”. Our “Highly skilled migrants are globally recommendations included mobile and provide a positive a recalibration of the points contribution to any economy.” awarded for age, prior earnings, qualifications and UK experience BT response to MAC consultation in order to better select the brightest and the best. The recommendations regarding the “…if severe restrictions are put on points table were accepted by the the Tier 1 (General) route it would former Government, and provided make the UK a less attractive place the basis for the Tier 1 points table for individuals to come to the UK to set out in Chapter 2 of this report, work and would severely hamper although the pass mark was our members’ ability to recruit the raised from 95 points to 100 points “brightest and best” to work in the by the Government alongside the UK, thereby hindering our members’ introduction of interim limits. local and global competitiveness.”
Joint response from the Association of Foreign Banks and the British Bankers’ Association to MAC consultation
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“It’s important for the UK economy “Both Tier 1 and Tier 2 migrants that it is open and attractive to the bring enormous talent and skills to best talent in the world, and those the UK, in turn benefiting businesses global high flyers considering and the economy as a whole as coming to the UK face a visa well as passing valuable skills and process that is quick and that knowledge to resident workers.” has a predictable outcome.” KBR response to MAC consultation Sybersolve Solutions Ltd response to MAC consultation 9.107 Some responses to our consultation said that, given a 9.105 Fluor Limited told us that due choice of where reductions to the economic downturn any should fall, they favoured Tier 1 reduction in numbers for Tier being reduced more than Tier 2. 1 would not have a big effect For example, FactSet Europe on their company. However, told us that although they saw they did argue that employers value in both Tier 1 and Tier 2, may favour Tier 1 over Tier if forced to state a preference, 2 because the absence of a they would favour a moderate sponsorship requirement reduces reduction in the number of Tier 1 administrative costs and may (General) migrants. speed recruitment. 9.108 If there was more flexibility in 9.106 Some corporate partners told Tier 2 routes some employers us that highly skilled non-EEA said they would prioritise the migrants prefer the flexibility usage of that route over Tier 1. of using Tier 1, while other So Tier 1 reductions might be employers made the case that acceptable if Tier 2 could be used both Tiers 1 and 2 should be as an alternative. protected equally. 9.109 We received some evidence from partners who did not favour “…highly skilled non-EU nationals immigration via Tier 1 at all. We prefer to apply to come to the UK were told by some corporate under Tier 1 (General) as it is the partners that Tier 1 workers immigration category which gives came to the UK without a job them the most flexibility in relation to offer whereas those using the the type of work they are able to do in Tier 2 route were coming to fill the UK.” an identified shortage in a skilled occupation. Joint response from the Association of Foreign Banks and the British Bankers’ Association to MAC consultation
246 9.111 The Government is considering “Migration should be reduced introducing a cap and pool exclusively through the Tier 1 route. mechanism for Tier 1, where the Tier 1 individuals are coming to candidates with the highest points the UK on a speculative basis, and within the pool would periodically are by definition the lower priority be invited to apply for entry to the than the Tier 2 route which is for UK. This potential mechanism individuals required specifically for was not within the scope of our employment by employers.” consultation, and so we did not give it close consideration, Masala World response to although we see the benefits of a MAC consultation system that selects the migrants that are most skilled, according to their characteristics. We note, “Although Tier 1 is for highly skilled the however, that some employers jobs the migrants undertake overseas expressed dissatisfaction at may have little or NO relevance to UK the uncertainty a cap and pool employers. Often jobs that migrants mechanism would create as under Tier 1 undertake are low paid migrants wait to find out if they and unskilled and irrelevant to the jobs have sufficient points to enter they did overseas.” the UK.
Las Iguanas response to 9.112 Below we look at three further MAC consultation aspects of Tier 1 that could be amended to improve its selectivity. They could be implemented 9.110 We could have suggested that alongside either a cap and pool Tier 1 General was closed down or queue mechanism. They are (i.e. a limit of zero for that tier), calibration of points, checks made either immediately or over time, at the extension stage, and use of in recognition of the fact that salary multipliers. the employer evidence received was heavily in favour of Tier Pass mark and points thresholds 2. However, Tier 1 may favour new companies that have not 9.113 The most straightforward method previously used migrant labour, of improving the selectivity of and thus boost entrepreneurship. Tier 1 is through amending the Furthermore, on the basis of the pass mark, as the Government arguments presented above, we did alongside the introduction favour a more moderate option of interim limits. Advantages of where Tier 1 remains open but simply amending the pass mark measures are taken to improve the are that such an approach is clear, ability of the route to select only transparent and simple. the brightest and the best. This requires action over and above our 9.114 An alternative is to recalibrate previous recommendations on Tier the actual points awarded for 1 because, in the context of limits different criteria, such as prior on migration, each additional Tier earnings and qualifications, or the 1 migrant is effectively displacing a thresholds associated with certain Tier 2 migrant. points. For example, 25 points are
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currently awarded for earnings 9.117 Under the limits set out above, between £40,000 and £49,999. inflows throughTier 1 General will The points awarded for that level have to fall. As a general rule, we of earnings could be reduced to favour recalibration of the points, 20, or the minimum threshold rather than simple changes to the for 25 points could be raised to pass mark, as the best method £45,000 or £50,000. An advantage of doing this. Therefore, we of recalibrating the points in this suggest that the Tier 1 points manner is that it allows more table is periodically recalibrated precise consideration of the balance in orderto ensure that it between different criteria than appropriately selects the most simply raising the passmark. We skilled migrants, in the context took this approach in MAC (2009e). of an overall limit on that tier.
9.115 In response to our consultation 9.118 Progressively more restrictive we received some evidence for limits on Tier 1 General over time changing the points criteria for Tier suggest progressive raising of the 1. Sybersolve Solutions Ltd told us points criteria. Our view is that, in that if cuts to Tiers 1 and 2 have to the first year, the points should be be made, it could make sense to raised to such an extent that they raise the pass mark further so that effectively take up most or all of Tier 1 was a route for top-level the slack in terms of likely over- professional staff. subscription of Tier 1 after the reduction in flows that any other policy changes in the first year of “Having set a desired level of Tier 1 annual limits would bring about. visa issuance, we strongly support Raising the points thresholds in using the pass mark as the primary this way would provide employers and overwhelmingly dominant tool to and potential migrants with greater bring the number of applications into certainty, and reduce the number balance with the quota.” of unsuccessful applicants to the Tier 1 General pool under a Sybersolve Solutions Ltd response to pool and cap system. We would MAC consultation be happy to work with the UK Border Agency on any required recalibration if the Government 9.116 As demonstrated in Chapter 7, wished us to do so. the mostly highly paid migrants are likely to contribute the most to Checks at the extension stage Gross Domestic Product (GDP), and make the most positive net 9.119 In our previous report on Tier 1 we fiscal contribution. In a situation recommended that the initial leave where overall numbers of work- to remain entitlement be reduced related migrants are limited, given from three to two years, with a that past earnings are a good three-year extension subject to indicator of likely future earnings, evidence that the individual is in the analysis in Chapter 7 provides highly-skilled employment. The further support for raising the limited evidence we had at that earnings thresholds under time suggested that most Tier 1 Tier 1 General. migrants find skilled employment
248 relatively quickly. Therefore, we occupations. Their analysis looked concluded that two years would be at changing qualifications in the a sufficient amount of time to find workforce, together with survey appropriate employment within the evidence. It also incorporated UK instead of the previous three. more fine-grained information acquired using the development 9.120 As presented in Chapter 2, of SOC 2000 on behalf of the in order to extend their leave Office for National Statistics. In after the initial two year period, MAC (2008a) we used this list migrants need to meet points’ of 148 graduate occupations in requirements that are currently order to calibrate our analysis of awarded on the basis of the occupations skilled to NQF level 3 applicant’s age, qualifications and or above – the current skill level at earnings. Migrants also need to which Tier 2 aims. However, two meet the maintenance and the ‘graduate’ occupations failed our English language requirements. top-down skilled test in that report: occupations 1224 (Publicans and 9.121 In addition, migrants can score managers of licensed premises) an additional 5 points for UK and 4137 (Market research experience, as shown in table 2.5. interviewers) were not included. However, none of these criteria Subtracting these two occupations take account of the occupation in from the Elias and Purcell’s list which the migrant is employed. might provide a ready-made list It is conceivable that migrants of graduate jobs that the UK could be earning enough to meet Border Agency could use to apply the required threshold by holding the requirement we suggest down more than one job in a above. Once the new SOC low-skilled field. The extension 2010 occupational classification criteria do not require the migrant becomes fully operational in to be in a skilled or highly-skilled relevant labour market datasets, occupation. Particularly in the this list may need to be updated. context of a limit, we believe that only those migrants in highly Salary multipliers skilled occupations should be allowed to extend under Tier 1. 9.123 As explained in Chapter 2, to Therefore, we suggest that the reflect differences in income levels additional requirement to be across the world, and in the pay employed in a skilled graduate- of equally skilled workers, the level occupation should be earnings level required to score introduced at Tier 1 extension points varies depending on where stage. the applicant was working at the time they earned the money. 9.122 There already exists a potential The UK Border Agency uses a list of highly skilled occupations series of calculations (known as that could be used by the UK salary multipliers) to bring salaries Border Agency to apply this previously earned overseas in line requirement. Elias and Purcell with UK equivalents. The level (2004) analysed the 353 4-digit of uplift depends on the average occupations in the Standard income in the country in which the Occupational Classification earnings were made. (SOC) 2000 to identify ‘graduate’
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9.124 We received no written evidence 9.126 As a result, we recommended the on salary multipliers, and they former Government carried out a were not a major theme raised full review of the salary conversion with us at our consultation events, model prior to introducing the potentially suggesting that their recommendations we made in key role within Tier 1 is not widely relation to Tier 1. Specifically, known, and that, as currently we suggested that the review designed, they are not providing should consider whether, if the a barrier to employers bringing current approach is to be people in through Tier 1 General. retained, it should be refined and/or updated or whether 9.125 Nonetheless, the salary multipliers the entire approach should be are a key component of Tier 1. In fundamentally amended. MAC (2009e), we identified four possible important issues with the 9.127 The former Government accepted methodology used: our recommendations in this regard and commissioned the • The multipliers have not been Home Office to review the model updated since 2002 and so it is but, in the meantime, our other very likely that the rankings of recommendations on Tier 1 were countries will have changed to also accepted and implemented some extent. while keeping the same multipliers in use. We understand that the UK • The use of broad bandings for Border Agency plans to implement the multipliers means that the a revised salary conversion model appropriate salary multiplier for in April 2011. countries at the top and bottom of each band can be a long 9.128 The revised multipliers have not way from the salary multipliers yet been implemented because a used for that band. As a result, full review requires updating the migrants from some countries data previously used such us GDP may be potentially benefiting per capita (Purchasing Power from salary multipliers that are Parity) and income distribution for too high, and conversely those all the countries. Data on the latter from other countries may be are scarce and difficult to collate. hindered by multipliers that are too low. 9.129 In Table 9.3, we list the top 10 nationalities for out-of-country • The assumptions used to Tier 1 General approvals between identify-highly-skilled individuals the first quarter of 2009 and first in the income distribution are quarter of 2010. India was the top based on out-of-date evidence. source country, accounting for 41 per cent of total main migrants, • The observational followed by Australia with 12 per breakpoints used to devise cent, Pakistan with 10 per cent, the original multiplier bands and the United States with 9 per appear arbitrary. cent. Of the top 10 countries, three were in Band A, one in Band B, two in Band C, three in Band D, and one in Band E. Looking
250 Table 9.3: Top 10 migrant nationalities of approved main applications through Tier 1 General, 2009 Q1 to 2010 Q1
Nationality Percentage of Tier 1 General Salary multiplier band India 41 D Australia 12 A Pakistan 10 D United States 9 A Nigeria 6 E New Zealand 3 B Sri Lanka 2 D China 2 C Russia 2 C Canada 1 A
Notes: The figures for Tier 1 General include granted main applicants only. Source: UK Border Agency management information, 2009 Q1 to 2010 Q1
at all countries, Bands D and applications from lower income E accounted for 63 per cent of countries overall and within each approved main applicants through band. The top five countries with Tier 1 General. the highest ratios of Tier 1 to Tier 2 applications were, in order, 9.130 It is notable that a high proportion beginning with the highest: Nigeria of ‘highly-skilled’ migrants are (Band E); Armenia, Pakistan and coming from less developed Azerbaijan (all Band D); and New economies. This could indicate Zealand (Band B). that the current salary multipliers are making it relatively easy for 9.132 Appropriate multipliers are migrants from those countries necessary to ensure the system to come to the UK, compared to gives fair access to suitably skilled those from countries with lower migrants from any country. However, salary multipliers. if the multipliers are incorrectly calibrated, this matters more in the 9.131 In MAC (2009e) we also context of limits on Tier 1 General compared the ratio of Tier 1 out-of- and Tier 2 than previously, because country applicants to those under it is possible that less skilled Tier 2. This showed that migrants individuals will displace genuinely from particular countries tend highly-skilled migrants, or skilled to display a relative preference migrants with a job offer coming to for Tier 1 over Tier 2, and that fill a gap in the labour market. this effect is more pronounced in the bands that display highest 9.133 Although we appreciate the multipliers. We suggested that difficulties involved in reviewing salary multipliers may favour and updating the salary
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multipliers, we are concerned about the fact that our suggested “Given the potential for dependants points table and revised criteria to take up unskilled jobs that could thresholds for Tier 1 General otherwise be occupied by UK- have been put in place alongside non born workers, we believe that the current salary multipliers. dependant numbers should be Therefore, it is important that a reduced by a greater proportion than methodology for updating the migrant numbers. To address this, multipliers is finalised and new CIPD believes that immigrants with salary multipliers are put in unskilled dependants should have place as quickly as possible. their points reduced accordingly”.
Further options Chartered Institute of Personnel and Development (CIPD) response 9.134 The changes set out above are to MAC consultation our preferred options for reducing flows throughTier 1 General in 2011/12, in the context of limits 9.136 Another option would be to award on migration. However, additional extra points to migrants who or alternative options the can produce evidence that Government could consider are they have a firm offer of highly- discussed briefly below. skilled employment. However, such a policy is potentially open to 9.135 If there is a target for net migration abuse, if migrants produce false supported by limits on non-EEA job offers, and risks conflating migration, an additional dependant Tiers 1 and 2. coming to the UK effectively displaces a main migrant. One 9.137 Currently, except for those option is to award extra points earning under £150,000 per for bringing highly-skilled annum, the minimum qualification dependants, as suggested in requirement for Tier 1 is a the Government consultation bachelor’s degree. Another way on migration limits. This could of limiting flows through Tier 1 be supplemented by points for General would be to raise the bringing no dependants at all. minimum requirement to a As discussed above, there may be master’s degree, or a bachelor’s legal barriers to awarding points degree plus a professional for bringing no dependants. It is qualification. However, as not self-evident that a migrant who reported in MAC (2009e) we brings a skilled dependant (who believe that many very highly- will, to an extent, consume public skilled people possess only a services and use an additional bachelor’s degree as their highest visa) should be given greater academic qualification. Although recognition in terms of points than a some such individuals will also migrant who brings no dependants. have professional qualifications, Therefore, unless a legally sound not all will. Therefore, this is not basis can be found for awarding one of our most preferred options points for bringing no dependants, for increasing selectivity through extra points for skilled dependants Tier 1 General. should probably not be awarded.
252 Post-Study Work Route 9.140 In its response to our recommendations, the previous 9.138 When we reviewed the PSWR Government told us that the in MAC (2009e), we considered Department for Business, the options of recommending Innovation and Skills (BIS) had closure of the PSWR and already commissioned research reducing the length of leave to which would shed more light on remain that was granted. We also international students’ experience considered both the effects on of the PSWR, the jobs they university funding and graduate take on and whether or not the unemployment through labour availability of Post-Study leave market displacement. We saw to remain was decisive in them no evidence of displacement and choosing to study in the UK. found that the effect of PSWR It was therefore decided that closure on current levels of any further consideration of our university funding was likely to recommendation should await be comparatively small in relation the outcome of that research. We to overall university budgets, asked BIS about the outcome of but nevertheless significant, and this research and we were told likely to affect some courses and that the first part of it has been institutions more than others. We completed but not published. recommended that the PSWR be The second and final part will be retained and its leave entitlement completed at the end of 2011. of two years be maintained. 9.141 Although the PSWR is not within 9.139 We also noted in MAC (2009e) the scope of our suggested limit, that the PSWR is probably one in the context of limiting work- of the most generous schemes related migration from outside of its type in the world: “[W]e the EEA, it is more essential believe the arrangements should than before that the design and be subject to regular review. It is coverage of this route is very also important that, if the route closely examined. It is crucial that and its current leave entitlement the economic returns to degree are to be retained, flows into the courses held by individuals PSWR represent the most highly coming through this route is fully skilled and highly qualified.” We reviewed, and the design of the therefore recommended that policy is reviewed in line with the Government commission those findings at the earliest detailed analysis of economic possible opportunity. returns to studying at particular institutions and for particular 9.142 If the route is maintained, in the degree subjects. We also said the context of the Government’s Government should then review objective to reduce net migration, whether the policy at the time with there may well be a case for: regard to equal PSWR allowance shortening the duration of for graduates of all qualifying stay allowed under this route; intuitions and degree subjects restricting it to master’s degree should be amended. graduates only; restricting it to those institutions and courses which can be shown to generate
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the greatest future economic 9.146 Table 9.4 below summarises returns for their students; or some our recommendations for the combination of the above. recalibration of points awarded under Tier 2. 9.8 Policy options for Tier 2: options for all routes 9.147 The previous Government accepted most of our 9.143 Before considering individually the recommendations in relation intra-company transfer, RLMT and to the calibration of the points shortage occupation routes, first but, because of the difficulties in we consider some policy options identifying occupations involved in that relate to more than one route. the delivery of key public services, it amended the points table to Points thresholds accommodate these occupations within the RLMT by awarding 9.144 As with Tier 1 General, either the the five extra points to the RLMT pass mark or points thresholds route across the board, as shown could be amended in relation to in Table 2.8. This represented a Tier 2. For the purposes of this slight dilution of our proposals discussion we regard the pass to ensure that the RLMT route mark as fixed and focus on the was focused on the most skilled points thresholds. workers or those in key public service occupations. 9.145 In MAC (2009c) we reviewed the design and operation of Tier 2 and 9.148 Some partners told us that made various recommendations. recalibrating the points would In relation to the points table, our be a good way of improving the recommendations included: selection process of the PBS while limiting the numbers of non-EEA • raising the minimum migrants. Sybersolve Solution Ltd requirement for prospective told us they believe the PBS offers earnings to £20,000 (from great flexibility to raise or lower the previous £17,000) under the bar by altering the required the RLMT and intra-company points scores, and that restrictions transfer routes; arising from higher ‘pass marks’ are much easier to live with than • raising the minimum salary for ‘arbitrary limits’. Therefore, to the an individual with low-level or no extent that numbers need to be qualifications from £28,000 to cut, their view is that the least £32,000 under the same routes adverse way to do this would be to as above; increase the points requirements (for both Tier 1 and Tier 2), and to • certain occupations involved fine tune pass marks if the number in the delivery of key public of successful applicants at a given services (to be identified by the level of pass mark is too high or Government) to be awarded an too low. extra 5 points under the RLMT route only.
254 Table 9.4: MAC recommendations on points, salary and qualifications for ierT 2 of Points Based System
Section Routes: Requirements: Requirements: Qualifications Prospective Earnings (or equivalents) (£) A Offer of job 50 No qualifications 0 20,000-23,999 5 (50 points in shortage needed) occupation Offer of job 30 GCE A-level 5 24,000-27,999 10 that passes (+5) RLMT (in key occupation) Intra-company 30 Bachelor’s 10 28,000-31,999 15 transfer Switching from 30 Master’s or PhD 15 32,000+ 20 a Post-Study (+5) category (in key occupation) B Maintenance requirement (mandatory) 10 C Competence in English (mandatory) 10
Sources: Migration Advisory Committee (2009c)
inflation, and with the exception “If the UK Government wishes to of special allowance being given strengthen the new system in to key public service occupations. limiting the number of non-EU However, in the context of limits, migrants, we would like to suggest there is a case for raising the that raising the points system on points thresholds further, in order higher income levels rather than to provide employers with greater raising the requirements for English certainty that they will be able to language ability.” bring in those employees they need the most. Mitsubishi Corporation International (Europe) Plc 9.150 As demonstrated in Chapter 7, response to MAC consultation the mostly highly paid migrants are likely to contribute the most to GDP, and make the most 9.149 The current points table is similar, positive net fiscal contribution. In a but slightly less stringent, than the situation where overall numbers of one we recommended in 2009. As work-related migrants are limited, a minimum, in the context of limits, the analysis in Chapter 7 provides our previous recommendations further support for raising the should be implemented in full, with earnings thresholds under Tier 2. the salary thresholds adjusted for
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9.151 Having considered the evidence, we suggest that “Notwithstanding our view that there the Government puts in should be no cap on ICTs, Morgan place the points table we Stanley believes that ICTs and recommended in 2009, having Tier 2 (Generals) on assignments made appropriate adjustments lasting less than 12 months should for pay inflation. There may, be exempt from any limit. This is furthermore, be scope to raise because they do not contribute to the points thresholds further than the annual net migration figures and we recommended in 2009, in the therefore capping them will not assist context of limits on Tiers 1 and 2. the Government’s aim of reducing net However, we do not suggest, as migration to the tens of thousands.” we did previously, that additional points be awarded for working in Morgan Stanley response to a key public sector occupation. MAC consultation We believe that, in the context of limits on Tiers 1 and 2, such occupations are better accounted 9.153 Similar logic applies to other for via the shortage occupation routes under Tier 2. We suggest route, as discussed later on in that visas of under 12 months this chapter. duration under the intra- company transfer route and the Tier 2 visas of under 12 months RLMT and shortage occupation routes could be excluded from 9.152 As some of our partners have our suggested limit if either: highlighted, visas of under 12 months should make no • such short-term visa holders contribution to migration inflows, will not be permitted to switch as measured by the International in-country to other work-related Passenger Survey (IPS), if routes; or migrants coming via this route intend to come to the UK for less • they are permitted to switch than 12 months. This is because, in-country to other routes, but in the IPS, only those individuals the in-country visas issued in who report they are coming to these cases count towards the the UK for at least 12 months are (otherwise out-of-country) limits counted as immigrants. However, on Tiers 1 and 2. if some migrants are coming with a visa of less than 12 months 9.154 If neither of the two conditions with the intention of switching stated above can be satisfied, all to another route, they may well visas under Tier 2 for less than report to the IPS that they expect 12 months should be regarded their visit to the UK to last for as being included within our over a year, and will be counted suggested limit. as inflows.
256 9.155 As noted in section 9.6, the numerical limits for Tiers 1 and 2 “We believe, therefore, that it is were calculated on the assumption critical to the UK’s attractiveness as that all visas, including those of a place in and from which to invest less than 12 months, are covered and do business that the ICT route by the limits on those tiers. If visas is excluded from the limits in Tier 1 lasting for less than 12 months and 2.” were to be excluded, the levels of the limits would need to be Confederation of British Industry adjusted to account for this. response to MAC consultation
9.9 Policy options for Tier 2: Intra-company transfer “We strongly support the continued route exemption of [the intra-company transfer] route from annual limits.” 9.156 This section summarises the evidence received in relation to UK Trade & Investment response to the intra-company transfer route MAC consultation and considers some policy options for improving its selectivity. We also reviewed this route in “Whilst we appreciate that the MAC (2009c). In that report we Government has a commitment to acknowledged that intra-company reducing the net migration flow into transfers are important to many the UK, removing the flexibility from multinational companies operating global businesses that have chosen in the UK, and therefore contribute to invest in UK jobs is not the way to to the UK’s economic prosperity. do this, and could have severe long term consequences for the economy.” 9.157 The British Chambers of Commerce (BCC) told us that they British Chambers of Commerce strongly opposed the inclusion of response to MAC consultation intra-company transfers within the limit, regardless of whether there is an exemption for individuals 9.158 We also heard from Fluor Limited entering the UK for less than that in the face of stiff competition 12 months. They argued that from the US and the rest of the it gives a bad impression to Europe, sensible use of the intra- companies considering setting up company transfer route is a key an office, or establishing their EU element in attracting work to the Headquarters, in the UK. The BCC UK and the effective execution of also said that fewer intra-company this route maximises the potential transfers would not mean more for repeat business. The Law jobs for UK workers. Society told us that the intra- company transfer route is an essential feature of global mobility and facilitates the operation and growth of multinational organisations, which in turn leads to the creation of UK jobs.
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“ICT is essential to the continued “The TUC and affiliates have for strength and competitiveness of the years expressed their concerns about sector. Given the predominance of the over lax rules governing the use multinationals and the global nature of Intra Company Transfer (ICTs). of the industry, the ability to move The continuing growth of ICTs as personnel between regions is critical to a percentage of all those migrant companies’ business models. It enables workers entering via Tier 2 merely the transfer of key knowledge and skills, adds to this concern. Whereas the ensures the safe delivery of projects TUC and affiliates have always important to the UK’s energy security accepted that there is a legitimate and economy by competent and role for ICTs we do not believe it experienced personnel and allows UK legitimate that ICTs are being used resident workers to develop and share to fill jobs which could be done by their own expertise across the globe. people in the resident labour market. The ICT is a two way process which This is an issue which needs to brings great benefit to UK workers, be addressed irrespective of the thousands of whom are currently discussion around the cap.” working overseas in other oil and gas provinces. If the ICT route were stifled TUC response to MAC consultation in the UK, these UK expats could in some cases have to be brought back to the UK to redress the balance across “We recognise, however, that the organisation as non-EEA migrants concerns have been raised about were denied entry to the UK.” potential abuse of the ICT route. CBI members believe there is little Oil & Gas UK response to foundation for these concerns and MAC consultation the CBI has not seen any evidence of abuse of the system.”
9.159 Not all partner organisations were Confederation of British Industry in favour of the intra-company response to MAC consultation transfer route. The London School of Economics told us that it would prefer closing the intra-company “The basic fact is that it’s cheaper transfer route because felt it to operate this way. The idea that unfair that companies benefit from the vast majority of these 30,000 securing a visa without conducting employees have unique skills is the RLMT simply because they simply not true. The majority are have an office based in a non-EEA undertaking Business and System country. We also discussed earlier Analysis work and technical in this chapter the evidence we development work which require received about this from APSCo, skill sets which can be readily who told us that they believe found here in the UK from intra-company transfers have led unemployed IT professionals.” to a restriction in opportunities for IT contractors in the UK. Some Member of the public’s response to partner organisations went further MAC consultation and stated that the intra-company transfer route was being abused.
258 9.160 We discussed this issue when we addition to this and allowances last reviewed this route in MAC are not taxed if the migrant claims (2009c). We said “We did not to be coming for under two years. receive firm evidence of outright We understand that this is not abuse of this route. However, exclusively an intra-company strong enforcement activity will transfer issue, but we think allow better information to be allowances are most widely collected and better detection used for points purposes under of any abuse that is occurring. this route. We strongly recommend that the Government give consideration 9.164 Because of the potential to whether the level of resource incentives to undercut domestic currently being devoted to labour, we recommended in MAC enforcement of intra-company (2009c) that allowances used for transfers is sufficient and whether PBS points purposes should be the degree of transparency around scaled down, by an appropriate enforcement of the system could factor to be agreed between be increased”. the UK Border Agency and HM Revenue and Customs (HMRC), 9.161 As with Tier 1 General, we believe when calculating points for the intra-company transfer route earnings under the PBS. We also should remain open. However, recommended that the UK Border we do think that there is scope Agency and HMRC consider the to make further amendments scope for sharing information on to this route, in the context of what they are being told in relation immigration limits, to ensure that to the intentions of particular it selects those migrants who are immigrants, and investigate, on likely to make the most substantial the basis of risk, potential abuse contribution to the UK economy. of the system where there is an indication that it may be occurring. 9.162 Below we look at some aspects of the route that could be examined 9.165 It was put to us, when we in order to improve its selectivity. reviewed the intra-company These are the use of allowances, transfer route in 2009, that it and the rules in relation to would be difficult and inconvenient extensions under this route. for firms to pay their foreign contractors in terms of salary Allowances rather than allowances. However, during our current review one 9.163 We discuss allowances in Chapter major user of the route told us 2 of this report, where we explain that they were increasingly paying that, under the intra-company their intra-company transferees in transfer route, allowances for terms of salary anyway. Therefore, accommodation and travel can we believe it is possible to do this. count towards up to 30 per cent Any inconvenience to employers, of the salary total for PBS points albeit regretful, is more than purposes, or 40 per cent if the counterbalanced by the benefit of Certificate of Sponsorship is for ensuring that domestic workers a period of 12 months or less. have fair access to available jobs. Other allowances can be paid in
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9.166 On the basis of the above, we still is two years. Tata told us that believe our previous suggestion most of their intra-company was valid. Furthermore, as our transferees stay in the UK for remit for this work covers the an 18-24 month period. Shell impact of migrants on the public said it finds that 2 to 3 years finances, as discussed in Chapter is the normal length required 7, and because, in the context of for most of its assignments. As limits, intra-company transferees discussed earlier in this chapter, on allowances are effectively we also received evidence from a displacing other migrants, we number of Japanese companies believe it is more important emphasising that extensions are now than it was previously. a vital component of their use of Therefore, again, we suggest the intra-company transfer route that allowances used for PBS because their intra-company points purposes are scaled transferees usually stay in the UK down when calculating points for five years or more as it takes for earnings under the PBS. time to transfer skills, make useful In the context of limits on work- business connections and provide related migration, consideration product support. should also be given to awarding zero points for allowances under the PBS. “The main reason for the length of stay is it takes time to transfer skills, 9.167 Our suggestion to alter the depending on the mature of transfer, recognition given under the PBS build good relationships for business to often tax-free allowances used and to provide continuous support by intra-company transferees will now and when they return to Japan help to ensure that such migrants for our products etc. If the necessary make a full contribution to the length of stay for the Japanese UK Exchequer, which will help to transferees is not permitted, the ensure that the net fiscal impact business operations in the UK will be of Tier 1 and 2 migrants is as seriously restricted /damaged.” positive as possible. Hochiki Europe (UK) Limited Extensions response to MAC consultation
9.168 We discuss the current policy on intra-company transfer extensions 9.170 We believe that there are at least in Chapter 2 of this report. two distinct types of use of the Migrants making successful intra-company transfer route: applications to live and work in the one is for senior managers or UK under Tier 2 are initially given specialists coming to the UK to permission to stay for three years. share best practice and expertise. They can then apply for a two Many of these individuals make year extension at the end of a key economic contribution, that period. including promoting investment in the UK, and need to remain for a 9.169 Many partner organisations told us period of several years in order to that the average length of intra- have maximum economic value. company transfer assignment The second use is for individuals
260 coming in to carry out a specific 9.172 We recognise the need for any task, often not directly for the such criteria to be operationally company that employs them, who effective, and would be happy to typically need to remain for less liaise with the UK Border Agency time. If average durations of the in order to develop these criteria. latter group in the UK were to be reduced this could, in the short Further options term, help to contribute towards lower net migration. Currently, 9.173 The changes set out above are the criteria for the intra-company our preferred options for reducing transfer route do not distinguish flows throughTier 2 in 2011/12 in between these two different types the context of limits on economic of roles. migration. However, additional or alternative options the 9.171 On the basis of the above, Government could consider in we suggest that more the longer term are discussed stringent criteria are applied briefly below. at the extension stage for intra-company transfers than are 9.174 As discussed elsewhere in this currently applied at the point of report, both during our current initial entry. Criteria could include: review and in our review of Tier 2 in MAC (2009c), concerns • the employee being a were repeatedly expressed to us senior manager or having that intra-company transferees, specialist company knowledge largely from India, were carrying significantly over and above out work for large UK companies the entry requirement of 12 on a contracting basis that could months’ prior experience with otherwise be done by UK IT the company; workers. As discussed in Chapter 7, although this activity has • the individual being employed adverse impacts for the domestic primarily at the premises of the IT workers concerned, it is less company that employs them; straightforward to analyse whether there is a net economic benefit or • evidence that the individual disbenefit to the UK. concerned is helping to promote investment in the UK 9.175 One option open to the or UK exports; Government would be to limit the number of visas issued to • the migrant being employed migrants working for individual in an identified sector or employers in correspondence occupation where there is a with the number of UK specific and identified need to employees employed by the retain intra-company transferees company. But there is a practical for longer than 3 years; and problem in terms of defining what constitutes ‘the employer’, • more stringent salary criteria and therefore the relevant UK being applied than at the point workforce, in the case of large of entry. industrial conglomerates.
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9.176 The rules for intra-company 9.178 However, monitoring this and transfers already rule out direct quality-assuring the information displacement of UK workers. received is complex and resource- They could go further and rule intensive. Furthermore, given out indirect displacement of emigrants already count towards UK workers too. This would net migration, this may not do mean, for instance, that if a UK enough to help meet the net company changed its business migration target. model in order to outsource some of its IT work and laid off its UK 9.179 Another option which was put workers, it would be restricted in to us was that a proportion of terms of bringing in contractors visas could be auctioned, within from abroad in order to replace the limits on Tiers 1 and 2. This them. However, again, there are would mean that, if a worker practical difficulties, including was so economically critical defining and identifying indirect that a sponsored employer was displacement in specific cases. prepared to pay whatever amount Under certain definitions of was required to bring that person indirect displacement, such an into the UK, there would be arrangement would immediately allowance in the system for such bring to an end a large proportion cases. In its submission to the UK of migration of workers within the Border Agency limits consultation, IT sector, which may have adverse the Migration Policy Institute (MPI) economic consequences. suggested that the Government should introduce a limited auction 9.177 Another option would be to of additional visas after the limit favour employers whose net has been exhausted so that migration is equal to zero or employers willing to bid for the negative (i.e. the number of UK- privilege could still access visas. based employees sent abroad equals or exceeds the number of transferees brought here) in the “’Market-based’ mechanisms such allocation of permits, as some as these are not perfect, but they partners suggested to us. do provide a clear indicator that the employer faces a genuine need and that the prospective immigrant has “Our members do not generally scarce and valuable skills. They contribute to net migration would also raise needed funds to and through their international support workforce development and/ assignment programmes, the number or the cost of processing visas.” of individuals they transfer into the UK is balanced by the number they Migration Policy Institute (MPI) transfer overseas.” response to UK Border Agency consultation shared with the MAC Joint response from the Association of Foreign Banks and the British Bankers’ Association to the MAC consultation
262 9.180 Although we have not examined teachers in some specialist the practical aspects of this subjects, the local authority argued proposal in detail we do, in that schools would not be able principle, see appeal to it. We to find suitable candidates, and suggest that consideration waiting for up to a month before be given to whether, in future appointing a skilled migrant worker years, a proportion of visas so that a RLMT can be completed should be auctioned. would be counter-productive.
9.10 Policy options for Tier 2: Combining the Resident “It is important to ensure that the Labour Market Test and labour market remains flexible. We shortage occupation routes cannot support the merging of the shortage occupation list (SOL) and 9.181 The Government consultation the resident labour market test.” document on migration limits asked whether the RLMT route Confederation of British Industry and shortage occupation route response to MAC consultation should be combined. The majority of partner organisations that expressed a preference 9.183 We do not favour combining the told us that they were opposed two routes, as they are distinct to combining the routes. For routes meeting different needs. example, the British Chambers of The shortage occupation route Commerce told us that merging provides special dispensation for the two routes would make it more occupations in national shortage. difficult for businesses where The RLMT route provides a there is a local shortage, rather useful release valve in the case of than a national shortage, in the occupations where there may be skills and experience they require. a local shortage and where efforts They said merging the RLMT to recruit from the local labour and the shortage routes risks market have failed, and bringing undermining businesses’ ability to in labour in sufficient quantity hire the best and most productive from further afield within the UK candidate for the job and also may may be impractical. compound the skills shortages that some regions currently face. 9.184 Nonetheless, we do see scope for amendment to both routes. This is 9.182 In addition, the evidence received discussed further in the following from many Japanese companies two sections. suggested that to combine the routes would make it impossible 9.11 Policy options for Tier 2: for the relatively small number of Resident Labour Market Japanese doctors working in the Test route UK to gain entry. A local authority also told us that it would not be 9.185 Here we summarise the evidence helpful to them if the RLMT and received in relation to the RLMT the shortage occupation routes route and look at aspects of the were merged. Faced with a route that could be examined to shortage of secondary school improve its selectivity.
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9.186 Many partners argued on behalf of resident labour market should the RLMT route. Chapter 8 set out not be rigorously tested before in detail the key contribution that a migrant comes to the UK. In Tier 2 makes towards supporting the context of limits, it is more certain public services. Many important than ever that migrants of those migrants come to the only come to the UK through this UK via the RLMT route. Lantra, route when there is no suitable the Sector Skills Council for the UK worker available. Furthermore, environment and land-based as discussed in Chapter 8, the sector, told us that there is a perception that migrants are significant undersupply of people taking jobs that could be filled by through the skills and training UK workers could have a negative system to meet industry needs impact on social cohesion. within parts of the sector. As such, in the short term, the 9.189 In MAC (2009c) we considered RLMT provides an employer with whether there is scope for a a route to recruit skilled workers certification regime, as exists if all else fails. in some other countries. Certification is where an employer 9.187 As shown in Chapter 3, scientific needs to obtain confirmation research occupations had the from a particular body that the highest proportion of Tier 2 jobs requirements of the labour market as a proportion of UK full-time test have been met before the employment, which suggests application is submitted. The that these occupations are most success of certification depends dependent on Tier 2 migrants. on the design and enforcement of Partners in the Higher Education pre-admission checks. sector explained that the RLMT route is important to them 9.190 In MAC (2009c) we expressed because it allows the sector our view that there needed to to recruit the most appropriate be a review of the operation of candidates for each role into the RLMT to ensure that it is often extremely specialist posts rigorously enforced. We said we that would not be suitable for the thought that there was scope and shortage occupation list. They said a need for the Government to any restriction to the route may consider introducing a certification impact on their ability to continue regime, and we recommended to employ current workers when that the UK Border Agency, their existing permission to live DWP and Jobcentre Plus study and work in the UK expires, which the matter in more detail. The could negatively impact on the previous Government accepted sector’s international reputation in this recommendation. We the long term. suggest that the Government continues to give consideration 9.188 We recognise the value of to introducing a certification the RLMT route in supporting regime with a view to certain sectors and occupations. implementation if practicable. Nonetheless, none of the arguments presented above lead to the conclusion that the
264 9.12 Policy options for Tier 2: and where it is difficult to attract Shortage occupation route UK resident workers.
9.191 The shortage occupation route 9.194 The care sector also relies, to an was not included in our overall extent, on non-EEA workers to fill review of Tier 2 in MAC (2009c) senior care worker shortages. The but we gave close consideration to argument made is that UK workers its design and use in our reviews are often less willing to undertake of the shortage occupation list these roles, and that the demand (MAC 2008a, 2009b, 2009d and for these jobs is increasing with an 2010a). We also comprehensively ageing population. reviewed our shortage occupation methodology in MAC (2010d). However, in none of the above “In the case of care workers, a reports did we consider the number of employers have told shortage occupation list in the us that they will not be able to context of limits on Tiers 1 and 2. continue to provide services safely and legally without the recruitment 9.192 We know from our previous of migrant workers.” reviews of the shortage occupation list that certain Skills for Care & Development occupations rely on this route response to MAC consultation in particular, and we received evidence to this effect in response 9.195 We had a number of responses to our consultation. Many argued that noted skilled chefs as an that a reduction in numbers occupation that would be affected coming through this route would by introducing a limit. We were be harmful to certain businesses told that up-skilling initiatives had and public services. We discuss begun, but would take some time here a number of examples, but to make an impact. Furthermore, this is by no means an exhaustive there may be some specialist list of the occupations that we chefs that it may not be possible received evidence in relation to. to replace from within the resident labour market. 9.193 Much of the evidence discussed in Chapter 8 in terms of the public sector workforce related to the shortage occupation route, as well as the RLMT route. There are a number of health-related occupations on the UK shortage occupation list. In terms of medical posts we were told the training time is lengthy and therefore up- skilling would take time. We are also aware, from previous reviews of the health sector and from evidence received for this report, that there are some roles which have high attrition rates in training
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“The impact on our company of “The impact of limiting Tier 2 reducing the number of migrants migrants would be huge to the through the Tier 2 shortage route oil and gas industry.” would be crippling. Skilled specialist chefs are fundamental to our Oil & Gas UK response to business and without them we would MAC consultation not be able to survive. We would at best need to curtail our operations 9.198 Finally, there are shortages very significantly, and at worse even of teachers within specific liquidate the business. In the interim subject areas (e.g. mathematics we have had to put all expansion and science). plans on hold.”
Masala World response to MAC “Without the flexibility of recruiting consultation non-EEA migrant teachers, one likely consequence of teacher shortages is greater use of temporary supply 9.196 There are other occupations which teachers. Covering vacancies with use the shortage route to access supply teachers is much more what they refer to as staff from expensive for schools than employing an international talent pool, for full-time non-EEA migrant teachers.” example ballet dancers and sheep shearers. Department for Education response to MAC consultation “The Royal Ballet recruits dancers from an international talent pool 9.199 We received very little and to maintain its standing as evidence against retaining the a world class company needs to shortage occupation list route. ensure that it can recruit the very MigrationWatch UK told us they best candidates.” thought the route should be abolished. Some other corporate The Royal Opera House response to partners suggested the route was MAC consultation not flexible enough for their needs.
9.197 We received evidence from a “As a company we have always number of engineering companies felt that the shortage occupation who argued that they use route does not adequately the shortage route to bring in reflect or address the challenges engineers with specialist skills. the engineering contracting industry faces when trying to fill certain positions.”
Fluor Limited response to MAC consultation
266 9.200 In the context of limits on 9.202 As with the rest of Tier 2, the migration, it is appropriate to shortage occupation route is review the role and design of currently reserved for occupations the shortage occupation route, skilled to National Qualification for two reasons: Framework (NQF) level 3 or above only. In line with our general • Prior to migration limits, there objective of improved selectivity, was no direct trade-off between, it may be that the shortage for instance, a skilled chef occupation list should be confined coming to work in the UK and a to occupations that are skilled to skilled engineer. Where overall NQF level 6 or above (i.e. NVQ visas are limited, such trade-offs level 4, or graduate level). may have to be made. 9.203 The same point could be made for • To the extent that the objective Tier 2 as a whole. We have not to limit migration leads to given it detailed consideration in increased pressure on other this review, but in the case of the routes, such as the RLMT route, RLMT and intra-company transfer it may be appropriate for some routes it could be considered pressure to be transferred to alongside recalibration of the the shortage occupation route, points for those routes. where arguments for special dispensation on the grounds 9.204 In terms of the shortage of labour shortage can be occupation list, we propose closely scrutinised. that the MAC is asked to reconsider the criteria used to 9.201 It is for the second of the above identify skilled occupations, reasons that we do not repeat and to rigorously review the our suggestion, made in MAC occupations currently on the (2009c), that key public service shortage occupation list in occupations be given additional the context of the limits. The points under the RLMT route. revised shortage occupation list Chapter 8 showed that Tier 1 would ideally be in place by the and 2 migrants play a key role time permanent limits on migration in the provision of some public come into effect in April 2011. services. To the extent that limits on migration will reduce 9.13 Policy on settlement the availability of such workers, and this will lead to negative 9.205 As described earlier in this chapter, outcomes, it should be possible the average length of time spent for the relevant Government by migrants in the UK (and, in departments and other sector particular, whether migrants bodies to produce robust evidence eventually leave) is as important, in that demonstrates the risk that the long term, as the level of annual such outcomes will occur. It would inflow in determining net migration. make sense to review the need to The extent to which average provide specific occupations with durations can be influenced will special dispensation in a case-by- affect the level of action required, case evidence-based manner. in the longer term, to moderate inflows through the PBS.
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9.206 It was shown in Chapter 3 that separate economic migration from different levels of net migration, migration leading to settlement. accumulated over a time In addition they suggested that, horizon of 25 years, can have a as an alternative, the UK could significant impact on the size of introduce a tough regime for the UK population. Much of the the renewal of any work permit evidence discussed in Chapter and, perhaps, stipulate that time 8 demonstrated that many of spent on the first work permit the negative public service and would no longer count towards social impacts of Tier 1 and 2 the qualifying period for migration, to the extent that they settlement. MigrationWatch UK are significant, occur primarily due believes that these changes to the contribution of migrants to would also increase the the size of the population, rather pressure on employers to than due to the characteristics train British replacements. of those migrants in particular. Therefore, to the extent that policy on settlement can reduce net “We believe that Tier 1 and 2 migration over the longer term, it workers’ automatic eligibility to will reduce the rate of population apply for permanent residency growth, and any negative impacts …should be reviewed. We believe associated with such growth, that entitlements to permanent albeit some of the positive residency and citizenship should be impacts too. amended under Tier 2 to ensure that more people leave at the end of their 9.207 The annual limit on Tiers 1 and stay, one of the original aims of the 2 does not apply directly to Points Based System.” settlement, and so we have not considered policy on settlement in Chartered Institute of Personnel detail for this report. Nevertheless, and Development (CIPD) response as that policy stands, migrants to MAC consultation coming to the UK under Tier 1 and the RLMT and shortage occupation routes are currently 9.209 On the basis of the above, we on a route to potential permanent suggest that the Government settlement in the UK. Furthermore, reviews its policy in relation although time spent in the UK to settlement, and considers under the intra-company transfer whether explicit economic route does not count towards the criteria should be applied to qualifying period for settlement, decisions regarding whether migrants who switch from that or not migrants are allowed to route to other Tier 2 or Tier 1 settle permanently in the UK. routes can still eventually settle in the UK. 9.14 Impact analysis
9.208 MigrationWatch UK argued that 9.210 As is noted throughout the report, the best way to achieve the the required limits on Tiers 1 benefits of economic migration and 2, and the policy options to without the disbenefits of rapid support them, will have potential population growth would be to impacts on the economy, public
268 services and society. They will June 2010, data by 4-digit SOC also have impacts on migrants occupation on Certificates of and the people who employ them. Sponsorship issued show that the These impacts will not always be largest volume of intra-company evenly distributed across different transferees were IT and software groups. This section considers professionals, which made up 48 impacts of the required limits in per cent of this route. Nurses and three different ways: medical practitioners, including doctors and surgeons, were • It considers impacts in terms the largest volume users of the of sectors and occupations, RLMT route. Chefs, cooks, care and notes one potential assistants and home carers policy implication. accounted for the largest volume of the shortage route. • It summarises the evidence on the economic, public service 9.213 The proportion of Tier 2 jobs (in and social impacts of Tier terms of the number of Certificates 1 and 2 migration, and of a of Sponsorship used at 4-digit reduction in 2011/12 of such SOC level) relative to UK full-time migration. occupation specific employment in the year to June 2010, is highest • It considers equality impacts, for scientific research occupations. in terms of age, gender Higher Education Statistics and nationality. Agency (HESA) data show that the majority of non-EU nationals Sectors and occupations employed in UK Higher Education Institutions are academic staff 9.211 It is not possible for us to (67 per cent). consider the full sectoral and occupational impacts of the 9.214 Department for Business limits and supporting policies Innovation and Skills (BIS) set out in this report, because, estimates show that five sectors in addition to having access to accounted for almost 50 per only limited data and information, cent of total UK Gross Value we do not know what the final Added (GVA) in 2008: financial design of the underpinning policy intermediation; real estate, mechanism will be. However, as a renting and business activities; rule of thumb, those sectors and hotels and restaurants; health occupations that currently make and social work; and transport the heaviest use of migrant labour storage and communication. can expect to be most affected. Furthermore, these five sectors Therefore, we briefly consider accounted for a disproportionately sectoral and occupational use of high share of total non-EU migrant labour below, based on employment: 60 per cent of all data presented in Chapter 3. non-EU workers were employed in these sectors, compared to 39 per 9.212 Data on the number of Certificates cent of all employed UK nationals. of Sponsorship used show that some sectors and occupations 9.215 It is important to recognise that are particularly high users of patterns of occupational and Tier 2 migrants. In the year to sectoral use of Tier 2 are a
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response to market signals. It clearly has a positive impact on may be that approximately half of GDP, through its effect on the size the intra-company transfer route of the UK workforce. The impact being dedicated to one specific of migration overall on GDP per occupation (IT and software head, which is the more relevant professionals) represents an metric in many cases, is less clear optimal allocation of migrant cut. This impact will be influenced labour. However, on the face of it, by the impact of migrants on it seems unlikely that the marginal productivity, trade, investment migrant in that occupation will and skill development of resident be making the same level of workers. It is likely that Tier 1 and contribution as a migrant in another 2 migrants, on average, have a occupation, such as civil engineer, positive impact on GDP per head. which is a less voluminous user of Tier 2. Thus, it may be sub-optimal 9.219 A reduction in migration through if the allocation within a limit is Tiers 1 and 2 will have significant disproportionately used by those effects on the micro-economy, sectors or occupations that are in terms of impacts on individual currently the largest users of sectors and occupations. For Tier 2. instance, the occupation ‘IT, software professionals’ accounts 9.216 Therefore, pending analysis of the for 27 per cent of total Tier 2 initial impacts of the first annual Certificates of Sponsorship limits and the underpinning policy, issued, and 48 per cent of those in future years, the Government issued under the intra-company should give consideration to transfer route. limiting the number of visas issued to particular sectors 9.220 Nonetheless, in the short term, the or occupations that are heavy overall impacts on GDP and GDP users of Tier 2, in order to per head will be relatively small. ensure that a small number of In the longer term, the effects sectors and occupations do not may be more significant, due to a overwhelmingly dominate Tier 2. continued accumulation over time of the relatively small static effects. Economic, public service and The economy will adjust to some social impacts extent in response to a reduced supply of migrants. Employers 9.217 This section summarises and will have stronger incentives to draws together to conclusions train UK workers, and there may drawn on economic, public service be expansion in sectors and and social impacts of Tier 1 and 2 occupations that are less reliant migrants, as set out in Chapters on migrant workers. Skills policy 7 and 8 of this report. Most of the can play a critical role in mitigating evidence relates to the average any adverse impacts that would impacts of Tier 1 and 2 migrants. otherwise occur, particularly in Improved selectivity may help to relation to those sectors and mitigate any negative impacts of occupations most affected. reduced Tier 1 and 2 migration, and boost any positive impacts. 9.218 All things being equal, migration 9.221 Any impact of Tier 1 and Tier 2
270 migration on inflation is likely to depend on training and up-skilling be very modest. It should not be of the resident population. a major consideration in setting limits for Tiers 1 and 2. 9.225 Reduced Tier 1 and 2 migration will, naturally, also contribute to 9.222 Migration has impacts across the reduced consumption of public wage distribution in the labour services. Tier 1 and 2 migrants market. Evidence suggests are likely to be relatively light that Tier 1 and 2 migrants are consumers of health services in more likely to be complements the short term, as they tend to to resident workers and capital, be young and healthy on arrival and hence are less likely to place in the country. The longer-term downwards pressure on pay impacts of reduced consumption than those competing with less of health services are likely to be skilled workers. Reduced Tier 1 more significant. There will also be and Tier 2 migration is unlikely reduced consumption of education to increase the employment of services corresponding to the resident workers in the aggregate, number and age of the children but positive effects may be felt Tier 1 and 2 migrants have, both by individuals at the local level in upon and after arrival in the UK. certain sectors and occupations. As well as consuming public services, migrants also fund 9.223 Based on the available evidence them, through their contribution it can be inferred that Tier 1 to tax receipts. and Tier 2 migrants are highly likely, on average, to make a 9.226 Migrants also interact with the positive net fiscal contribution, housing market. There is some especially in the short term. If evidence that migrants, through these migrants remain in the UK, adding to the population, exert they will age and make a greater upward pressure on house prices. call over time on state services However, in the short term, Tier 1 such as pensions and healthcare. and 2 migrants are more likely to Reduced Tier 1 and 2 migration directly contribute to higher rents, may reduce the overall net fiscal albeit also indirectly to higher contribution of such migrants, but house prices through the buy to this is contingent on the selection let market. In the longer term, mechanisms put in place, as their impact is likely to shift from discussed in this chapter. rents to house prices, as they move from the private rented 9.224 Regarding provision of public sector to the owner occupier services, migrants, including Tier sector. Any such impacts will be 1 and 2 migrants, help alleviate reduced by smaller flows of Tier 1 skill shortages in key public and 2 migrants. service occupations in areas such as health and education. 9.227 The impact on crime is likely to In the longer term, the extent differ between migrant groups. to which reduced Tier 1 and 2 The total amount of crime migration leads to shortages, and committed by Tier 1 and 2 pressure on wages in the fiscally migrants is likely to be small due constrained public sector, will to the selection mechanism of
271 Limits on Migration
the PBS which ensures that they we examine the available data are highly employed, well paid on the nationality, gender, age of and highly educated, meaning a Tier 1 and Tier 2 migrants and the reduction in Tiers 1 and 2 will only regions of the UK they are likely to have a small effect on crime. work in.
9.228 Reduced Tier 1 and 2 migration 9.231 Indian nationals make up by far will contribute to lower total the largest proportion of total congestion. Such migrants are granted applications for Tiers 1 likely to generate more congestion and 2. In the 15-month period than the average UK resident, to 2010 Q1, 41 per cent of Tier reflecting the fact that they are 1 General, 68 per cent of Tier more likely to work, and therefore 2 intra-company transfer and live, in London. 24 per cent of Tier 2 General granted applications were 9.229 Locally concentrated surges in for Indian nationals. Migrants migration may have a negative from China, Pakistan and the impact on social cohesion, United States are also strongly although the difficulties in defining represented across Tiers 1 and social cohesion, and the absence 2. Nigerian nationals make up a of comprehensive data, make the significant proportion of approved relationship difficult to estimate. applications for Tier 1 General It is not possible to estimate with and the PSWR. any degree of confidence the likely impact of reduced flows of 9.232 On average, Tier 1 and Tier 2 Tier 1 and 2 migrants on social main migrants are younger than cohesion: they are often employed the average person in the UK in the provision of public services population. In the period to 2010 and are likely to have good Q1, the median age for a Tier 1 English language skills, and these main migrant was 28 (including factors may counterbalance any those on the PSWR) compared potential positive impacts. to 30 for a Tier 2 migrant. The median age for adult dependants Equality impacts was 29 for Tier 1 (again including those on the PSWR) and 31 9.230 In providing our advice we have for Tier 2. 62 per cent of child also kept in mind whether any dependants of Tier 1 and 2 specific type of migrant may migrants were aged 5 or under. In be disproportionately affected: terms of gender, for both Tiers 1 for example, according to their and 2, around 70 per cent of main age, gender or nationality. As applicants and 10 per cent of adult with sectors and occupations, dependants were male. as a rule of thumb, those types of individuals who make the 9.233 London has a higher share of heaviest use of Tiers 1 and 2 can the population of individuals expect to be most affected by the born outside the UK than any contents of this report. We briefly other country or region of the consider some of the equality and UK, reflecting an historic bias distributional issues. This is based in patterns of migration towards on data from Chapter 3, where London. London has also
272 exhibited the fastest rate of will be taken into account by the change in terms of increases in Government when considering the proportion of the population our advice. Implications of that are EEA and non-EEA born. the required limits and policy The latest data available from suggestions set out in this the Annual Population Survey chapter are discussed further for 2009, show that 34 per cent in Chapter 10. of London’s population was born outside the UK and 25 per cent was born outside the EEA. These proportions have increased from 30 per cent and 23 per cent respectively in 2004. Similarly, the magnitudes of inflows and outflows of long-term migrants (defined as those entering or leaving the UK for a year or more) to and from London are greater than for any other country or region of the UK. Approximately 28 per cent of LTIM inflows in 2008 were destined for London.
9.234 It is not possible to accurately determine where Tier 1 or Tier 2 migrants live in the UK. However, Tier 2 immigrants are tied to a sponsoring employer and the location of this employer is known. Between November 2008 and March 2010 45 per cent of Tier 2 visas were issued for London employers. More specifically, 50 per cent of intra-company transferees worked for London employers, as well as 42 per cent of migrants coming to the UK via the RLMT route and 32 per cent of migrants entering the UK via the shortage occupation route. We have not been able to examine disaggregated Tier 2 data for other regions of the UK. Tier 1 immigrants do not need to be sponsored by an employer and there are currently no data that reliably record their place of work.
9.235 We expect that the above impacts
273 Chapter 10 Conclusion
10.1 Context report presents suggestions to amend the current design of these 10.1 In this chapter we make some two tiers to ensure they operate to concluding remarks and discuss select those migrants likely to be next steps. The Government of most benefit to the UK economy aims to reduce overall annual and labour market. net migration to the ‘tens of thousands’ by the end of this 10.2 Summary of economic, Parliament. In this report, we have public service and focussed on the contribution to social impacts achieving this aim to be made by Tiers 1 and 2 of the Points 10.3 The Government asked that we Based System (PBS), taking into consider the economic, public account the implications for public service and social impacts of services and wider society as well migration. This report does so, in as those for the UK economy and detail. Our findings in relation to labour market. We have assumed Tier 1 and Tier 2 migrants can be that the work-related routes summarised as follows: for migrants from outside the European Economic Area (EEA) • All things being equal, Tier 1 need to contribute towards the and 2 migration clearly has achievement of the objective for a positive impact on Gross overall net migration. Domestic Product (GDP). In a straightforward static 10.2 In Migration Advisory Committee analysis, Tier 1 and 2 (2009c and 2009d) we reviewed migration makes a small Tiers 1 and 2 of the PBS and but positive contribution to provided advice to the former GDP per head. Such effects Government on the design of will accumulate over time those tiers. Much, if not all, of and become more that advice was accepted and is significant. Furthermore, reflected in the present design the impact on GDP per head of those tiers. Nonetheless, the will also be influenced by principle of selecting the best dynamic factors such as migrants is now even more critical the impact of migration on in the context of limits on work- productivity, trade, investment related migration. Therefore, and skill development of alongside our suggested limits on resident workers. Tier 1 and Tier 2 for 2011/12 this
274 • There is no evidence, at the • We have not found clear aggregate level, of adverse evidence that Tier 1 and Tier 2 labour market impacts. Tier 1 migrants have either a strong and 2 migrants, in the short term or negative net effect on social at least, and on average, almost cohesion in the UK as a whole. certainly make a positive net fiscal contribution. 10.4 The above summary is provided in terms of aggregates and • The economy will adjust to averages. This is representative of some extent in response to a the majority of evidence available. reduced supply of Tier 1 and 2 Nonetheless, analysis of impacts migrants. Employers will have purely at the aggregate level will stronger incentives to train paint an incomplete picture. Some UK workers, and there may examples are as follows: be expansion in sectors and occupations that are less reliant • The economic and labour on migrant workers. Skills policy market impacts will not be can also play a critical role in evenly distributed. A reduction mitigating any adverse effects of in migration through Tiers 1 and reduced migration through Tiers 2 will have significant effects on 1 and 2. the micro-economy, in terms of impacts on individual sectors • Tier 1 and 2 migrants, and their and occupations, particularly dependants, do consume public those that make heavy use of services, such as health and skilled migrant workers, or which education services. They also rely on them to attract and contribute to the provision of support trade and investment. key services as members of the workforce. In the longer term, • It is unlikely that all Tier 1 and the extent to which Tier 1 and 2 Tier 2 migrants make a positive migration alleviates shortages, net fiscal contribution. Some and relieves pressure on wages, Tier 1 and 2 migrants will bring will depend on training and up- several dependants and, as skilling of the resident population. such, consume more in public services than they fund in taxes. • The impact of Tier 1 and Tier 2 Some Tier 1 migrants will not be migrants on broader outcomes in work, at least when they first affecting the whole of society, arrive in the UK. such as crime, congestion and housing, is difficult to estimate. • The evidence also suggests Through their effect in adding that some Tier 1 and Tier 2 to the UK population they will migrants have displaced some inevitably have an effect on UK workers in the IT industry, such outcomes. The impact per even though the quantitative head is likely to be smaller than evidence for the labour market that of the migrant population as a whole does not generally as a whole in relation to some show that migrants displace impacts, such as crime. In resident workers. relation to others, such as congestion, it may be larger.
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• When Tier 1 and Tier 2 exception of those switching from migrants affect migrant Tier 2 routes whose previous visa concentrations in local areas, duration was below 12 months. it does not follow that no social tensions at all have 10.8 The numerical limit for Tiers 1 and resulted, or could yet result. 2 presented above was calculated on the assumption that all visas, 10.3 Summary of required limits including those of less than 12 and policy options months are covered by the limit. If visas lasting for less than12 Overall limits on Tiers 1 and 2 months were to be excluded, the levels of the limits would need to 10.5 Our best estimate is that the be adjusted to account for this. Government objective to reduce net migration to the tens of 10.9 The range of the limits set out thousands by the end of this above is consistent with Tiers Parliament implies a reduction of 1 and 2 making a contribution between 6,300 and 12,600 visas to achieving the Government’s split across Tiers 1 and 2 to be aim following a linear trajectory. issued in 2011/12. They are based on numerous assumptions and judgements as 10.6 In order to calculate limits from set out in this report. these reductions, we use the latest annual published full-year 10.10 The final decision to choose limits visa data, from 2009, as our towards the top or bottom of our baseline. The baseline figure is suggested ranges, or even outside 50,000. The total required limit them, needs to be influenced by for Tier 1 General and Tier 2 consideration of various factors, combined in 2011/12 including: the proportion of the is therefore between 37,400 total reduction in net migration and 43,700. The Government borne by Tier 1 General and may choose to apply our Tier 2, relative to other routes reductions to a more recent for non-EEA migrants, including baseline before the actual those under the Tier 5 and annual limits are put in place permit free routes and the Post- in April 2011. Study Work Route (PSWR), and those for students and family; 10.7 Our suggested limits relate to out- the precise objective for net of-country migration through the migration; and whether action Tier 1 General, Resident Labour is taken to reduce or limit the Market Test (RLMT), shortage numbers of dependants. occupation and intra-company transfer routes. They exclude 10.11 In the medium to long term, the dependants, although we also extent to which Tier 1 and Tier model an additional scenario 2 migrant durations in the UK including dependants: higher limits are influenced through policy would be required if dependants on extensions, switching and were included. Our limits also settlement may also have a exclude in-country switchers significant impact on net migration. and extenders, with the possible
276 10.12 In support of the above, it is Tier 2 critically important that action is taken to ensure that the skills 10.15 For the Tier 2 shortage occupation, and training system plays a key RLMT and intra-company transfer role in systematically identifying routes, the following is consistent and addressing shortages, with the Government’s objective of economically or otherwise for net migration: important workers, that might otherwise occur as a result of, or • a reduction the number of be exacerbated by, limits on work- entry clearance visas issued, related migration; compared to 2009, in the range of 3,150 to 6,300; and Tier 1 • a limit on the number of Tier 10.13 For the Tier 1 General route, 2 entry clearance visas in the in order to achieve the range of 29,400 to 32,600 in Government’s policy objective, 2011/12. This limit excludes we suggest the following: extensions, switchers and dependants, with one possible • a reduction in the number of exception, discussed below. entry clearance visas issued, compared to 2009, in the range 10.16 In addition, the Government of 3,150 to 6,300; and should consider:
• a limit on the number of Tier • excluding Tier 2 visas issued 1 entry clearance visas in the for less than 12 months range of 8,000 to 11,100 in duration from the limits on the 2011/12. assumption that:
10.14 Alongside the above, the • such short-term migrants will not Government should consider: be permitted to switch in-country to other work-related routes; or • periodically recalibrating the Tier 1 General points table in order • if Tier 2 migrants are permitted to ensure that it appropriately to switch in-country to other selects the most skilled routes, the in-country visas migrants; and issued in these cases count towards the (otherwise out-of- • introducing the requirement country) limits on Tiers 1 and 2; of being employed in skilled graduate-level occupations at • amending the points calibration the extension stage. for Tier 2 in order to ensure that only skilled migrants can come • revising the methodology to the UK under this tier; for updating the multipliers and putting in place new salary • scaling down the allowances multipliers as quickly used for points purposes as possible. in relation to the required points for earnings for intra- company transfers;
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• applying criteria at the extension 10.4 Next steps and future work stage for intra-company transfers that are more stringent Policy than those applied at the point of initial entry; and 10.18 There are some issues in relation to the suggestions in this report • giving consideration to for limits in 2011/12 that require strengthening the RLMT route further detailed consideration. We through the introduction of a will be happy to work further with certification regime; and the Government on the detail of some issues: • asking MAC to reconsider the criteria used to identify • Recalibration of points for Tiers skilled occupations under the 1 and 2. shortage occupation route, and to rigorously review the • The precise details of any occupations currently on the revised extension criteria to be shortage occupation list in the put in place in relation to the context of the limits. intra-company transfer route.
Other options 10.19 The MAC will be happy to advise the Government on limits on 10.17 In this report we set out other Tiers 1 and 2 in future years, options for reducing net and other issues as appropriate. migration, which either need We emphasise that our report sets examining further in terms of their out required limits for 2011/12 implications or practicality, or only. Limits for future years on which would probably not have work-related migration will need major impacts on Tier 1 and 2 to be based on consideration migration in 2011/12, but which of factors that are not yet fully the Government should consider known, including: for the longer term. These other options include: • the mechanisms that will ultimately be put in place for • putting in place arrangements to Tiers 1 and 2 alongside the auction a portion of those visas introduction of annual limits; included within future annual limits; and • evidence on the economic, public service and social • reviewing policy in relation to impacts of the limits and settlement, and considering mechanisms; whether explicit economic criteria should be applied to • future policy on other economic decisions regarding whether routes for non-EEA migrants or not migrants are allowed to outside the scope of limits set settle permanently in the UK. out in this report, including Tier 5 and the PSWR;
• future policy on the student and family routes;
278 • future policy on switching, To address the inconsistency extensions and permanent between the number of visas settlement in the UK; and issued by the UK Border Agency and the volume of flows • future net flows of UK and EEA measured by the IPS in current migrants to and from the UK. available data sources, it would be extremely helpful if the survey Data could ask respondents what type of visa they hold. This would allow 10.20 Data on PBS migrants, in terms the Government to better monitor of their characteristics and labour the impact on net migration of the market outcomes, are still limited. limits on Tiers 1 and 2 and any For example, the UK Border impact of policy changes on the Agency does not currently publish other immigration categories. the points scored by successful Tier 1 and Tier 2 applicants. Research and analysis Although we welcome the recent improvements to its 10.23 In terms of future analysis, we management information system, found good evidence on the we urge the Agency to consider economic impacts of migration, further steps to facilitate the although there is still considerable collection and the accessibility scope for further research in of relevant data on migrants this area. Our consideration has applying through these tiers. highlighted gaps in the existing evidence base, particularly around 10.21 We also welcome the data made the social and public service available from the experimental impacts of migration. In particular, variable recently introduced in the the existing literature on the fiscal Labour Force Survey, which asks costs and benefits of migration migrants their main reason for would benefit from being extended coming to the UK, and we hope to enable a comparison of the that it will be included soon in specific impacts of various cohorts the mainstream survey. This will of migrants to the UK. The MAC provide valuable information about has its own research budget and the characteristics of migrants we may consider commissioning over the medium and long term. research on how to best address the lack of data currently available 10.22 We recognise that the in these areas. International Passenger Survey (IPS) was not developed to estimate migrant flows, but it is nonetheless unarguable that this survey has become one of the principal sources for measuring net migration. Based on the current confidence intervals, it would be welcome if consideration was given by the Office for National Statistics to increasing the sample size of the IPS.
279 Annex A Consultation
A.1 List of organisations that submitted evidence and did not request anonymity
Aberystwyth University Biotechnology and Biological Sciences Accenture Research Council ACS International Schools Boeing Advancing UK Aerospace Defence and BP Security British Association of Social Workers Airbus Operations Limited British Chambers of Commerce Apex Care Homes British Embassy Tokyo Association for Consultancy and British Hospitality Association Engineering British Medical Association Association of British Orchestras Brooklands Nursing Home Association of Directors of Children’s Brother International Europe Limited Services BT Association of Foreign Banks and British Buckinghamshire New University Bankers Association (joint submission) Building Design Partnership Limited Association of Medical Research Charities Buro Happold Association of Professional Staffing Business & Decision Companies Campaign for Science and Engineering Association of School and College Leaders Cancer Research UK Association of Thai Businesses in the UK Canon Europe Limited Association of the British Pharmaceutical Central Japan Railway Company Industry Centre for Workforce Intelligence Aston University Chartered Institute of Personnel & AstraZeneca plc Development Atkins Global Christine Lee & Co (Solicitors) Limited Australian High Commission Citi Babcock International Group Clifford Chance BAE Systems plc Clyde and Co LLP Baker & McKenzie LLP CMS Cameron McKenna LLP Balfour Beatty Utility Solutions Cognizant Banff & Buchan College Company Chemists’ Association Bangor University Confederation of British Industry Barclays Bank plc ConstructionSkills Barclays Capital Services Limited Convention of Scottish Local Authorities Beatson Institute Cosmo Restaurant Group Bechtel Business Services Coventry City Council BEMIS Cranfield University
280 Credit Suisse GE UK Cundall General Healthcare Group Cwm Taf Local Health Board Goldman Sachs International Davis Polk Goldstar Chefs Definitive Immigration Services Limited GoSkills Deloitte LLP Greater London Authority Denso Manufacturing UK Limited & Ricoh Ground Forum UK Products Limited (submission from GSK Marketing Standard Limit) Günay UK Limited Denso Sales UK HCA International Limited Department for Business, Innovation and Skills Heriot-Watt University Department for Communities and Local Hitachi Zosen Europe Limited Government HM Revenue & Customs Department for Education HM Treasury Department of Culture, Media and Sport Hochiki Europe (UK) Limited Department of Health HSBC Deutsche Bank HSMP Forum Diageo IBM Doosan Babcock Energy IChemE Duff & Phelps Limited IEP Management Limited Durham University iicorr Limited Dynamic Futures Immigration Law Practitioners’ Association e2e linkers Imperial College East Midlands Healthcare Workforce Improve Limited Deanery Incorporated Society of Musicians East of England Faiths Council Independent Healthcare Advisory Services East of England Strategic Migration Independent Schools Council Partnership Institution of Civil Engineers Embassy of Japan Intellect Embassy of the United States of America International Transport Workers’ Federation Employment Lawyers Association Inverhome Limited Energy & Utility Skills and the National Japan Automobile Manufactures Associations Skills Academy for Power (endorsed by Japan External Trade Organisation London Energy Networks Association) Japan Green Medical Centre Engineering Council Japan Petroleum Exploration Company Engineering Professors’ Council Limited Ernst & Young Japanese Chamber of Commerce and ExCeL London Industry in the United Kingdom Exlayer Limited JEOL (UK) Limited FactSet Europe Limited JK Techosoft (UK) Limited FarSite Communications Limited Joint Council for the Welfare of Immigrants Federation of Small Businesses JP Morgan Chase Flour Limited K Line (Europe) Limited Foreign & Commonwealth Office Kawasaki Heavy Industries (UK) Limited Forum for Expatriate Management KBR Fragomen LLP Kent and Medway Strategic Partnership on Framestore Migration Freshfields King’s College London Fujitsu Laboratories of Europe KPMG LLP G O Few & Sons Lantra
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Las Iguanas Newcastle University Law Centre (NI) NFU Scotland Leeds Metropolitan University NGK Spark Plugs (UK) Limited Leung & Co Solicitors NHS North West Liverpool John Moores University Nigeria High Commission London Borough of Camden Nikkei Europe Limited London Borough of Hounslow Nissan Motor Manufacturing London Borough of Redbridge Nissan Technical Centre Europe London Business School Nissin Travel Service (UK) Limited London Chamber of Commerce North East Strategic Migration Partnership London First North Somerset Council London Nippon Club North Tees & Hartlepool NHS Foundation Trust London School of Business & Finance North West Regional Strategic Migration London School of Economics Partnership Loughborough University North Yorkshire County Council Magrath LLP Northern Ireland Civil Service Management Consultancies Association Northern Ireland Council for Ethnic Manchester City Council Minorities Marshall Aerospace Northumbria University Masala World Nottingham Trent University Medacs Healthcare plc Nova IT Consulting UK LIMITED Medical Research Council Oil & Gas UK and Scottish Council for Micron Eagle Hydraulics Limited Development & Industry Microsoft Orion Consultancy Services Limited Migrants’ Rights Network Pakistan Embassy in London Migrationwatch UK Penningtons Solicitors LLP Ministry of Defence People 1st Mitsubishi Corporation International Pepsico (Europe) plc Permits Foundation Mitsubishi Electric Europe B.V Plymouth City Council Mitsubishi UFJ Securities International plc PricewaterhouseCoopers Mitsubishi UFJ Trust & Banking Corporation Producers Alliance for Cinema and Mitsui Zosen Europe Limited Television Limited Mizuho Corporate Bank Limited Production Services Network (UK) Limited Morgan Stanley Professional Contractors Group Morgan Walker Solicitors Queen’s University Belfast MW Kellog Limited Ramsay Health Care UK NASSCOM Recruitment & Employment Confederation NASUWT Regents College NATECLA National Centre Registered Nursing Home Association National Association of Agricultural Ricardo UK Contractors RICS National Campaign for the Arts RLG International Limited National Farmers Union Roehampton University National Farmers Union Scotland Rolls-Royce plc National Grid Romax Technology Limited National Institute of Adult Continuing Royal Bank of Canada Education Royal Bank of Scotland National Skills Academy for Power Royal College of Nursing National Trainers Federation Royal College of Veterinary Surgeons
282 Royal Holloway, University of London The Society of Radiographers Royal Opera House The Sumitomo Trust & Banking Co Limited Sarah Buttler Associates Limited The University of Nottingham Scottish Government The Welding Institute Scottish Government Health Directorates TIGA on behalf of NHS Scotland Tokyo Electric Power Company Scottish Social Services Council Toyota Motor Manufacturing UK, Toyota Semta GB, Toyota Financial Services and Shaw Energy & Chemicals Group Toyota Motor Europe (London Office) Shell (combined submission) Siemens Trades Union Congress Skills for Care and Development Trafigura Skills for Health Trans4m Skills Funding Agency Ubisoft Entertainment Limited Skillset UCEA (awaiting permission to list) SKM EMEA UK Commission for Employment and Skills SNC Lavalin UK Limited UK Screen Association Society of London Theatre and Theatrical UK Trade & Investment Management Association Unison Socres Unite Sompo Japan Insurance Company of Universal Shipbuilding Europe Limited Europe Limited Universities UK, GuildHE and UCEA Sony Europe Limited (combined submission) South East Strategic Partnership for University of Bedfordshire Migration University of Central Lancashire South West Forum for Migrant Workers and University of Edinburgh the South West Regional University of Essex Employment and Skills Board University of Glasgow Southampton City Council University of Leicester Spinal Injuries Association University of Nottingham Spire Healthcare University of Oxford Stanley Electric Motor Company University of Plymouth Steria University of Portsmouth Sumitomo Mitsui Banking Corporation University of Sheffield Surrey County Council (maintained University of Surrey schools) University of Ulster Sybersolve Solutions Limited University of Warwick Tata Consultancy Services V.Ships UK Limited Taylor Wessing LLP Visalogic Limited Thai Garden Restaurant Wellcome Trust The Bank of Tokyo-Mitsubishi UFJ Limited Welsh Assembly Government The Evangelical Lutheran Church of Westinghouse Electric Company UK England Limited The Institution of Structural Engineers Wood Mackenzie The Law Society of England and Wales WorleyParsons Europe Limited The London Clinic YKK Europe Limited The Newcastle upon Tyne Hospitals NHS Yorkshire & Humber Regional Migration Foundation Trust Partnership The Royal Bank of Scotland * 28 members of public also submitted The Sainsbury Laboratory responses
283 Limits on Migration
A.2 Indicative list of organisations / individuals met with
It has not been possible to identify all of the attendees at some of the larger meetings.
786 Law Associates British Hospitality Association ABS-CBNEU British Medical Association Accenture (UK) Ltd British Pharmacological Society ACS International Schools British Psychological Society Adelphi Care Services Brooklands Nursing Home ADS Group Bryan Cave LLP Aeropeople Building Design Partnership Limited Allen & Overy LLP BUPA Alliance of Sector Skills Council Buro Happold Allstate Northern Ireland Cabinet Office Ashurst Café Oto ASIC Calderdale Borough Council Asset Skills Cambridge Institute of Medical Research Association of Medical Research Charities Cambridgeshire Police Association of the British Pharmaceutical Canada-UK Chamber of Commerce Industry Canadian High Commission Association of School and College Leaders Capgemini UK Plc Association of Technology Staffing Caprice Holdings Companies Cargill Association of Thai Businesses in the UK Carillion Plc Atkins plc CaSE Executive Australian High Commission Central Beds Council BAC Centre for Workforce Intelligence Baker & McKenzie Centrica plc Bangladesh Caterer’s Association CHC CED Bank of England Chemistry Communications Group plc BBSRC Babraham Institute Children’s Social Care, London Borough of Belfast City Council Multi-Cultural Resource Hounslow Centre Chartered Institute of Personnel and Belfast Health and Social Care Trust Development Berwin Leighton Paisner City of London Law Society BEST HR City of London (Economic Development BioIndustry Association Office) Bird & Bird Clifford Chance Birmingham Royal Ballet CMS Cameron McKenna Black & Ethnic Communities Organisation Cognizant Network Confederation of British Industry Black Health Agency Corus Blake, Cassels & Graydon LLP Convention of Scottish Local Authorities Blankkettown Cosmo Restaurant Group Bradford Metropolitan District Council Council of British Pakistanis Breakfast Group CRUK Cambridge Research Institute British Association of Social Workers CSC British Chambers of Commerce Czajka Care Group British Computer Society Debevoise & Plimpton LLP
284 Dechert LLP ExxonMobil Deloitte FD Denso Sales UK Limited Federation of Bangladeshi Caterers DentonWildeSapte Federation of Small Businesses Department for Business, Innovation and Ferguson Snell and Associates Skills First Permit Department for Communities and Local Foreign and Commonwealth Office Government Forum for Expatriat Management Department for Culture, Media and Sport Framestore Department for Education Frank Field MP Department for Employment & Learning Freshfields Bruckhaus Deringer (NI) Fujitsu Services Department for Social Development (NI) Gangmasters Licensing Authority Department for Transport Gaucho Department for Work and Pensions General Social Care Council Department of Health GKN Department of Immigration and Citizenship, GlaxoSmithKline Australian Government Goldstar Chefs Derby Bosnia-Herzegovina Community GoSkills Association Government Office North East Derbyshire Dales District Council Grange Hotel DHSSPS Law Centre Greater London Authority Dim t Greater Manchester Pay and Employment Disney Rights Advice Service Double Negative Greater Manchester Police Dover District Council Greater Peterborough Partnership e2e Linkers GuildHE East Midlands Councils Hakkasan East Midlands Regional Migration Herbert Smith LLP Partnership HM Revenue and Customs East of England Business Group HM Treasury East of England Faiths Council Homeplus NI East Riding of Yorkshire Council Honda Motor Europe Limited East Sussex County Council HPA Education International Hull City Council Elite International Caterers Ltd IBM Embassy of Japan in London IChemE EMBRACE NI IFRH Endava IMI Endemol Immigration Advisory Service Engineering Council Imperial College Engineering Professors’ Council Imperial College Healthcare NHS Trust Engineering UK India KA Group Equality South West Institute of Cancer Research Ernst & Young Intellect e-Skills UK Intertain UK Limited Everest Inn Restaurant Group IPPR Eversheds ITC Arts ExCel Japanese Chamber of Commerce & Exlayer Limited Industry in the UK
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JGR McGuireWoods London Jobcentre Plus Medical Research Council John Innes Centre Medical Research Council Cambridge Joint Council for the Welfare of Immigrants Medway Council Kaplan Financial Metropolitan Police (Human Exploitation Kemp Little and Organised Crime Unit) Kent Care Training Associates Migrant Workers’ Employment Rights Kent County Council Advice Service for Greater Manchester King’s College London Migrants’ Rights Network Kingsley Napley Migrationwatch UK Kings UK Limited Millfield School Kirkland & Ellis International LLP Milner LLP Kirklees Migration Impact Fund Mitsubishi Corporation International Kout Food Group (Europe) Plc KPMG LLP Moy Park Limited Lantra Namh Latham & Watkins NARIC Laura Devine Solicitors NASSCOM Leeds City Council NASUWT Leeds Initiative National Association of Medical Personnel Leicester City Council Specialists Leicestershire Education Business Centre National Audit Office Lewis Silkin National Campaign for the Arts Lin Group Investments t/a Noddle Nation National Care Association Linklaters LLP National Farmers Union Live Language National Grid plc Liverpool City Council National Institute of Adult Continuing Local Government Association Education Local Government Employers Nestor Services Local Government Yorkshire and Humber New Zealand High Commission London Borough of Camden NGK Spark Plugs London Borough of Redbridge NHS Employers London Borough of Richmond upon Thames NHS Greater Glasgow & Clyde London Chamber of Commerce and NHS Lothian Industry NHS Tayside London Councils NI Medical and Dental Training Agency London Development Agency Nissan Motor Manufacturing (UK) Limited London First Nomura International plc London Mathematical Society Norfolk & Norwich Race Equality Loughborough University Norfolk County Council Lovells North East Strategic Migration Partnership Macquarie Funds Direct North Lincolnshire Council Magpie t/a Indian Room North Tees & Hartlepool NHS Trust Magrath LLP North West Development Agency Man Group plc North Yorkshire County Council Manchester City Council Northern Ireland Council for Ethnic Manchester NHS Trust Minorities Manifesto Club Northern Ireland Fish Producer’s Marshall Aerospace Organisation Limited Masala World Northern Ireland Food & Drink Association
286 Northern Ireland Local Government Scotland Office Association Scottish Chambers of Commerce Northern Ireland Social Care Council Scottish Council for Development and Northern Refugee Centre Industry Norton Rose Scottish Government Nottingham City Council Scottish Social Services Council NW Consortium Scottish Southern Energy NW Universities Association Scottish Trades Union Congress Office for National Statistics Semta Office of the First Minister and Deputy First Shearman & Sterling London Minister Sheffield City Council Oil & Gas Academy Shell International Oil & Gas UK Shine O’Melveny & Myers LLP Simmons & Simmons Oracle Corporation UK Ltd Singapore Ministry of Manpower Oxfordshire County Council SJ Berwin Ozer Skills for Care Patara Fine Thai Cuisine Skills for Care & Development People 1st Skills for Health Phoenix Leisure Skillset Praxis Community Project Slaughter and May PricewaterhouseCoopers LLP Slough Borough Council Producers Alliance for Cinema and SMBC Television Limited Smith Stone Walters Professional Contractors Group Society of Biology Public and Commercial Services Union Society of London Theatre and Theatrical Queens University Belfast Management Association RAISE Soho House Group RCUK South East Strategic Partnership for Recruitment and Employment Migration Confederation Southampton City Council Reed Smith South Tyneside MBC Registered Nursing Home Association South West Regional Development Agency Regulation and Improvement Authority Southern Health and Social Care Trust Regulation and Quality Improvement Speechly Bircham LLP Authority Spire Healthcare ReneCassin Steria Limited Research in Motion UK Ltd Suffolk County Council Researcher at London School of Sumitomo Mitsu Banking Corporation Economics SummitSkills Rolls Royce Sybersolve Romax Technology Limited Talent Scotland Rotherham Metropolitan Borough Council Tata Consultancy Services Royal Holloway University of London Taylor Wessing Royal Society Teradata UK Ltd Royal Society of Engineering Thai Embassy Ryedale District Council Thai Trade Centre Sainsbury Laboratory The Children’s Society Sake No Hana The Law Society SCDEA The Sage Home
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The Welding Institute Tiger Aspect Toray Industries Inc Tower Hamlets New Resident and Refugee Forum Toyota Motor Manufacturing (UK) Limited Trades Union Congress UK Border Agency UK Commission for Employment and Skills UK Film Council UK NARIC UK Screen UK Trade & Investment Unipart Unison Unite United Response Universities and Colleges Employers Association Universities UK University and College Union University College London University of East London University of London Union Visalogic Voluntary Action Wakefield District VT Group (Surrey Schools) Wakefield Metropolitan District Council Warner Bros Watson, Farley and Williams LLP Welcome Skills Wellcome Trust Wellcome Trust Sanger Institute Welsh Local Government Association West Midlands Regional Migration Partnership White & Case LLP Work Permit Services Wright Hassall LLP Y Ming Restaurant/London Chinese Community Centre Yorkshire and Humber Regional Migration Partnership Yorkshire Futures Your Homes Newcastle Zuma Restaurant
288 Annex B Estimating policy impacts on net migration
B.1 Introduction and 2, and account for uncertainty around future B.1 This annex describes the analysis migration flows outside direct conducted in order to assess the Government control. The annex potential impact on net migration, is divided into four sections: as measured by Long Term International Migration (LTIM) • estimating the impact of visa estimates produced by the Office reductions on IPS inflows; for National Statistics (ONS), of a limit on Tiers 1 and 2 of the Points • estimating the impact of visa Based System (PBS). reductions on outflows and LTIM net migration; B.2 The Home Secretary’s question to the MAC, as set out in Chapter 1, • estimating impacts of in-country referred to the Government’s aim policies on net migration; and of “reducing net migration to an annual level of tens of thousands • accounting for uncertainty and by the end of this Parliament”. We volatility in British, EU and non- understand that the annual level IPS net migration. of tens of thousands refers to LTIM estimates of net migration. B.2 Estimating the impact of LTIM figures are based on the visa reductions (out-of- results from the International country) on non-EU inflows Passenger Survey (IPS) with certain adjustments made to B.4 In order to estimate the impact account for flows to and from the of limits on the number of out-of- Irish Republic, asylum seekers, country visas issued under Tiers and migrant and visitor switchers. 1 and 2 on inflows, as measured by LTIM, it is essential to B.3 The objective is expressed in understand how the data on terms of net migration, which is the number of visas issued measured by LTIM, but the direct relate to LTIM inflows. impact of policy will be on visas issued (out-of-country) and for B.5 For reasons other than short extensions of leave to remain visits, visas are required by (in-country). This annex presents most non-EEA nationals. When the analysis that we conducted in individuals cross the UK border, order to reconcile the two sets of they may be sampled as part data, estimate the impacts on total of the International Passenger net migration of limits on Tiers 1 Survey (IPS). If they report that
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they intend to change their usual • calculate a ratio between place of residence for more visas and IPS inflows for than a year, they are counted each IPS category. as migrants; otherwise they are counted as visitors. The same Allocating visa categories to IPS flows process occurs when individuals leave the UK. B.10 The IPS, which makes up the core component of LTIM estimates, does B.6 The first important difference not record the type of visa held by between the number of visas the migrants that are surveyed. and LTIM inflows is that visas Instead, the IPS asks individuals can also be issued to visitors their main ‘reason for migration’ and tourists for short periods of and allocates migrants into five time, whereas the IPS definition categories: ‘work-related’ (split by of migrants (those changing their ‘definite job’ and ‘looking for work’), usual place of residence for a year ‘formal study’, ‘accompany / join’, or more) excludes such people. ‘other’ and ‘no reason.’ We therefore exclude from our analysis categories of visa that B.11 Table B.1 sets out our allocation clearly relate to visitors. of visa categories to the three IPS categories we believe to be B.7 Second, some individuals with relevant. We do not have enough non-visitor visas may also fall information to estimate which outside the definition of migrant proportion of any visa categories employed by the IPS because should go into the last two IPS they intend to come to the UK for categories presented in Table B.1, less than a year. These cases are ‘other’ and ‘no reason’. much more difficult to identify, as the individual may possess a B.12 We assume that Tier 1 and 2 visa lasting for more than a year. migrants will be picked up by Visas may be granted for a set the IPS work-related inflow. As period, but the migrant may discussed in Chapter 3, visas actually plan to come for a issued under Tier 1 and Tier 2 shorter or longer period. only make up around half of total work-related visas. We therefore B.8 Third, not all those who are assume that Tier 5 and permit- granted a valid visa will actually free employment are included in use it to come to the UK. the IPS work-related inflow data. Although these are temporary B.9 For these reasons, the number routes, evidence suggests that the of visas granted to non-EEA majority of these visas last for over nationals exceeds the volume of a year. UK Border Agency (2010b) the inflow of non-EU nationals find that, for the 2004 cohort, only recorded in the IPS. Our approach 12 per cent of visas issued under to dealing with this issue is divided equivalent predecessor routes into two steps: expired within 2004, and 25 per cent in 2005. We also assume that • allocate visa categories to dependants of main applicants will corresponding components of be captured in the ‘accompany / IPS inflows; and then join’ IPS category.
290 Table B.1: Allocation of visa categories to IPS categories based on ‘reason for migration’
IPS reason for migration Visa Category Work-related Tier 1, Tier 2, Tier 5, Permit-Free Employment, PBS predecessor routes (including HSMP, Work Permits, other Employment) Formal Study Tier 4 and students Accompany / Join Family visas (including spouse, civil partners, fiancés, other family) and dependants (including dependants of Tier 1, Tier 2, Tier 4, Tier 5 , permit-free employment, family visas and all their predecessor routes) Other - No Reason -
Note: Visa categories correspond to those reported in the Home Office Control of Immigration Statistics. We exclude visitor visa categories as these will not be included in the International Passenger Survey (IPS) definition of a migrant: someone moving country for a year or more. ‘Work-related’ includes both subcategories ‘looking for work’ and ‘definite job’. Source: MAC analysis
B.13 As for the ‘other’ and ‘no reason’ Calculating the ratio between visas and IPS categories, these represent IPS inflows relatively small flows, and we do not have relevant information B.14 Once we have allocated visa to form a sensible allocation. categories to IPS ‘reason for Therefore, at this stage we have migration’ categories, we can excluded them from this analysis. compare the volumes coming However, it may well be plausible through each paired category. to split them proportionately Table B.2 shows the annual between the work-related, formal figures for the work-related, study and accompany / join student and family IPS categories inflows, given that some of these alongside the corresponding people are also likely to fall into volume of visa groups. these categories. We consider this alternative option at the end B.15 For all categories, we observe of this section. that the volume of visas issued is considerably larger than inflows measured in the IPS by reason for migration. For example, in 2009, 108,000 work-related visas were issued but only 55,000 migrants were recorded by the IPS as coming to the UK for work-related reasons (either looking for work or with a definite job).
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Table B.2: Comparing non-EU inflows to visas issued, 2006 to 2009
Inflows (000s) 2006 2007 2008 2009 Work-related IPS inflows 101 74 69 55 Work-related visas 146 130 119 108 Work-related scaling factor 0.69 0.57 0.58 0.51
Formal study IPS inflows 114 104 124 163 Formal study visas 218 224 209 273 Formal study scaling factor 0.52 0.47 0.59 0.60
Accompany / join IPS inflows 74 65 59 54 Accompany / join visas 184 167 153 145 Accompany / join scaling factor 0.40 0.39 0.39 0.37
Notes: Scaling factors are calculated by dividing IPS inflows by the number of visas issued in each category. Ideally, a longer time-series would be used, but detailed visa data are only available for 2006 onwards. The visa categories are based on the assumptions outlined in Table B.1. Source: MAC analysis of the International Passenger Survey, 2006-2009, published in Office for National Statistics (2010c); Home Office Control of Immigration statistics (2010)
B.16 To estimate the proportion of visas the same method demonstrated in likely to be captured in the IPS Table B.2: we divide the number inflows by reason for migration, of visas issued by the volume of we calculated the ratio of IPS inflows estimated from the IPS for inflows to the total number of visas each category. As shown, there is issued. We refer to these ratios as some variation in the ratios over ‘scaling factors’. time, which implies an imperfect correlation between visas and IPS B.17 Figure B.1 shows how the scaling inflows, and as such a degree factors for each category have varied of error around using any point over time when we examine rolling estimates. In addition, there may quarterly data. Rolling quarterly data also be considerable variation within are available for non-EU inflows by each of the broad IPS categories. reason for migration from the last For example, it is plausible that quarter of 2008. We estimate these intra-company transferees coming data for the period between the last for short assignments may be less quarter of 2006 to the third quarter likely to be counted in the IPS than of 2008 using quarterly data on Tier 1 General migrants who intend total non-EU inflows and apportion to settle. However, there is little them by reason for migration based information available to allow us to on annual IPS data on non-EU take into account how likely different inflows. The scaling factors used routes are to be counted in the IPS in Figure B.1 are calculated using measure of work-related inflows.
292 Figure B.1: Scaling visa flows to IPS flows for non-EU reason for migration categories, rolling quarterly data 2006 Q4 to 2009 Q4
Work related IPS 160 Scaled down visas 140 Actual visas
120
100
80
60
40
20
0
Out-of-country visas issued / inflow (000s) Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2006 2007 2008 2009 2010 Study IPS 350 Scaled down visas
300 Actual visas
250
200
150
100
50
0
Out-of-country visas issued / inflows (000s) Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2006 2007 2008 2009 2010
Accompany / join IPS
200 Scaled down visas 180 Actual visas 160
140
120
100
80
60
40
20
0 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Out-of-country visas issued / inflows (000s) 2006 2007 2008 2009 2010
Notes: Rolling International Passenger Survey (IPS) quarterly data are available for non-EU inflows by reason for migration from 2008 Q4. For the period between the 2006 Q4 and 2008 Q3, the quarterly IPS figures are calculated using rolling quarterly IPS data on non-EU inflows split by reason for migration using assumptions based on annual IPS data on non-EU inflows.The visa categories are based on the assumptions outlined in Table B.1. Source: MAC analysis of the International Passenger Survey, 2006-2009, published in Office for National Statistics (2010c); Home Office Control of Immigration statistics (2010)
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Table B.3: Average scaling factors based on rolling quarterly data, 2006 to 2009
Scaling factor Work-related 0.58 Formal study 0.54 Accompany / join 0.39
Notes: The scaling factors presented are the average of those calculated in Figure B.1 which used rolling quarterly data between 2006 and 2009. Source: MAC analysis of the International Passenger Survey, 2006-2009, published in Office for National Statistics (2010c); Home Office Control of Immigration statistics (2010)
B.18 We use these scaling factors to • assume that the migrants translate a given reduction in recorded under the ‘other’ and IPS inflows into a reduction in ‘no reason’ categories should be the number of visas in a single spread proportionately across year. The scaling factors we use the other reasons for migration. in Chapter 9 are the average over rolling quarterly data B.20 Regarding the first alternative, between 2006 and 2009. These if the temporary work-related are outlined in Table B.3 below. routes are excluded from the Therefore, we might expect that calculation, then the scaling factor a decrease in 10,000 Tier 1 and for work-related visas becomes Tier 2 out-of-country visas would 0.98, compared to 0.58 with these decrease estimated non-EU routes included. However, we do work-related inflows in the IPS not think there is a valid case for by 5,800. excluding the temporary work- related routes from the calculation Sensitivity analysis of the scaling factors. Evidence from UK Border Agency (2010b) B.19 As outlined in the previous suggests that 75 per cent of sections, a number of core those coming to the UK through assumptions need to be made to temporary employment routes do generate the scaling factors (listed stay longer than a year. in Table B.3) which convert the number of visas issued into an B.21 Regarding the second alternative, IPS inflow. Here we consider the if we believe that individuals in the implications of two alternative sets ‘other’ and ‘no reason’ categories of assumptions: are actually a combination of individuals coming to the UK for • exclude the work-related visa work, study or family reasons, it temporary routes that do not may be sensible to divide these lead to citizenship (Tier 5 and flows amongst the other three permit-free employment) to IPS categories. Without any calculate the work-related further evidence to inform this scaling factor; and decision it is difficult to know how best to allocate these flows. However, to illustrate the effect of
294 this assumption, we allocate the Migrant lengths of stay in the UK migrants under the ‘other’ and ‘no reason’ categories proportionately B.24 UK Border Agency (2010b) to the size of the other IPS provides estimates of the categories. This increases the proportion of the entry cohort of scaling factors for each of the migrants who entered the UK in three categories. The work-related 2004 who still have valid leave scaling factor becomes 0.64, the to remain five years later. These study scaling factor becomes 0.58 estimates can be used as a proxy and accompany / join becomes for the lengths of stay of migrants. 0.43. The implication is that a However, not all migrants will exit reduction in Tier 1 and 2 visas the UK when their leave expires will lead to a reduction in ‘other’ and many may exit before their and ‘no reason’ inflows alongside leave expires. work-related inflows, which is very difficult to test empirically. B.25 The study finds that 40 per cent of those who entered through B.3 Estimating the impact work-related routes leading to of visa reductions on citizenship (described in UK outflows and net migration Border Agency (2010b) as work (citz)) still had leave to remain in B.22 Estimating the impact of visa the UK after five years, compared reductions on inflows only with 11 per cent of work-related provides an indication of what routes not leading to citizenship might happen to net migration in (described in UK Border Agency the very short term. As highlighted (2010b) as work (non-citz)). Work in Chapter 9 of this report, any (citz) corresponds to Tiers 1 and 2 policy that seeks to change the of the Points Based System (PBS) level of inflows through Tiers 1 and their predecessor routes, and and 2 in one period will affect the work (non-citz) corresponds to outflows from these routes in the Tier 5 and permit-free employment longer term. This in turn will affect routes and their predecessor net migration in the long term. routes. The study also finds that 21 per cent of those who entered B.23 To understand the extent of through a study route and 63 per this longer-term impact, we first cent of those coming through the consider evidence on the average family reunion routes still had durations of stay of migrants in valid leave to remain in the UK the UK, then we analyse how after five years. these can be used to estimate the volume of outflows as measured B.26 The IPS also records ‘intended by the IPS. lengths of stay’ for migrants entering and leaving the UK1. This provides an alternative estimate, with the caveat that
1 The IPS also record ‘actual lengths of stay’ prior to migration. As discussed later in this section, it is not possible to analyse outflows by their reason for first coming to the UK.Therefore it is not possible to use data on ‘actual lengths of stay’ to estimate how long inflows measured by the IPS will stay in the UK.
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migrants are very likely to change family and study routes the IPS their mind during the course estimates of the proportion of of their stay in the UK. This is migrants still in the UK are lower acknowledged by the ONS who than that for UK Border Agency take these issues into consideration (2010b). The IPS estimate for the when making adjustments in their work-related category broadly final estimates of LTIM from the sits in between the estimates IPS survey results. for work (citz) and work (non- citz) categories of the UK Border B.27 Figure B.2 compares the intended Agency (2010b) study. lengths of stay recorded in the IPS in 2004 and 2005 with the implied B.28 Research conducted by Dustmann lengths of stay of the 2004 migrant and Weiss (2007) has also cohort presented in UK Border examined the lengths of stay Agency (2010b). As shown, for of migrants in the UK using the
Figure B.2: Comparison of intended lengths of stay reported in the International Passenger Survey in 2004 to 2005 and implied lengths of stay from expired visa data for migrants entering the UK in 2004
100
90 Family (visas) 80 Accompany / 70 Join (IPS)
60 Work-related (Citz, visas)
50 Work-related (Non-Citz, 40 visas) Work-related (IPS) remaining in UK (%) 30 Students Estimates of the proportion 20 (visas) Students (IPS) 10
0 Enter UK 1 2 3 4 5 Years since arrival
Notes: International Passenger Survey (IPS) estimates are based on respondents’ answers to intended lengths of stay in the IPS conducted in 2004 and 2005. It is assumed that those who answered “uncertain” or “more than 4 years” will settle in the UK. Visa estimates are from UK Border Agency (2010b). This study tracks migrants that initially entered in 2004 through UK Border Agency administrative data and records the status of their leave to remain in the UK each year. We use the proportion of leave to remain expiries each year to calculate the implied lengths of stay. For example, if 90 per cent of migrants included in the study still had valid leave to remain in 2005, we assume that on average 90 per cent were still in the UK one year after arrival. A migrant is assumed to leave the UK once their Leave to Remain has expired. Source: International Passenger Survey, 2004-5, published in Office for National Statistics (2010c); UK Border Agency (2010b)
296 Labour Force Survey (LFS). B.32 To overcome this problem, we However, the LFS cannot be compare the estimated outflow used to identify migrants by type generated with IPS outflow of visa category. data on ‘usual occupation prior to migration’. These data are B.29 Having considered these broken down using different estimates of migrants’ lengths categories such as: professional of stay, we consider how these / managerial, manual / clerical, estimates can be used to generate students, other adults, and estimates of outflows from past children, which are presented inflow data. in Chapter 3. These data give a better indication of the likely Estimating the impact of reductions in reason why migrants first came inflows on outflows to the UK.
B.30 To look at how inflows might B.33 The above approach nonetheless lead to future outflows in a requires us to make some simple model, one can apply assumptions as to which inflows, assumptions of the average by reason for migration, are lengths of stay of different migrant likely to lead to outflows by usual categories to each inflow cohort to occupation prior to migration. generate an estimated outflow for Figure B.3 compares the volume the following years. For example, over time of IPS non-EU inflows, if 100 migrants entered the UK in by reason for migration, with non- 2004 and 10 per cent left after one EU outflows by usual occupation year then the outflow in 2005 from prior to migration. This provides this cohort will have been 10. This an initial visual comparison estimated outflow can then be between the two measures of IPS compared to actual outflow data, non-EU inflows and outflows. As measured by the IPS. shown, the volume of total non- EU inflows is much larger than the B.31 One difficulty in comparing the volume of total non-EU outflows. estimated outflow generated with Furthermore, the volume of actual outflow data is that the IPS inflows is larger than the volume does not record the initial reason of outflows when comparing for coming to the UK in the outflow broadly similar categories. For data. Therefore it is not possible example, inflows of students are to determine, for example, the much larger than outflows whose proportion of those leaving the usual occupation prior to migration UK for work-related reasons that was ‘study’. initially entered for work-related reasons. It is possible for people to come to the UK to study or to join their family and then leave for work- related reasons. We are primarily interested in work-related migration, so it is important to be able to examine each category separately.
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Figure B.3: Comparison of IPS non-EU inflows by reason for migration with non-EU outflows by usual occupation prior to migration, 1991 to 2008
Non-EU inflows, by Reason for Migration 350
300 Work (looking for work)
Work (definite job) 250 Students 200 Accompany / Join Other / No Reason 150 Inflow (000) 100
50
0 2007 2008 2005 2006 2002 2003 2004 2001 1999 2000 1996 1998 1993 1997 1992 1994 1995 1991
Non-EU outflows, by Usual Occupation prior to Migration 350
300 Employed (professional and managerial)
250 Employed (manual and clerical)
200 Students Other adults and children 150
Outflow (000s) 100
50
0 2007 2008 2005 2006 2001 2002 2003 2004 1999 2000 1996 1998 1993 1997 1992 1994 1995 1991
Notes: International Passenger Survey (IPS) data on usual occupation prior to migration for non-EU outflows is only available up until 2008. Source: International Passenger Survey, 2008, published in Office for National Statistics (2010c)
298 B.34 In our analysis of the ‘actual’ after three years (however, outflow, we assume: it may well occur sooner if there are, for example, a large • ‘Work-related’ inflows will proportion of masters students). generally lead to outflows of ‘employed’; • In terms of lengths of stay for work-related migrants, we • ‘Formal study’ inflows will assume that approximately generally lead to outflows of half of work-related inflows will ‘study’; and behave as work (citz) migrants, and half as work (non-citz), as • ‘Accompany / Join’, ‘Other’ defined in UK BorderAgency and ‘No Reason’ will generally (2010b). This is based on out- lead to outflows of ‘Other of-country visa data, presented adults / children’. in Chapter 3, which show that approximately half of work- B.35 The above assumptions do not related visas are issued to Tiers account for migrants that switch 1 and 2 and around half to Tier categories whilst in the UK. For 5 and permit-free employment. example, students may start working after they graduate • Around half of dependants are but before they leave the UK. children. This is based on UK Similarly, dependants may also Border Agency management work while in the UK before they information data on dependants leave. Therefore, some basic presented in Chapter 3. assumptions need to be made to account for this switching. • Around 30 per cent of family reunion inflows are children. B.36 For our analysis of the ‘estimated’ This is based on the average inflow we assume the following: proportion of children in the IPS ‘accompany / join’ category for • 10 per cent of students switch all nationalities between 2000 from studying to working while and 20082. in the UK. This is based on calculations in MAC (2009e) • 60 per cent of working age which show that approximately dependants and those coming 10 per cent of Tier 4 migrants through family reunion routes switch to the Tier 1 Post-Study will be employed whilst in the Work Route. Estimates in UK UK. This is based on estimates Border Agency (2010b) also from the Labour Force Survey show that roughly 10 per cent of looking at employment rates students switch to work-related of non-EEA migrants by main routes. We assume that on reason for coming to the UK, average this switching occurs presented in Chapter 3.
2 Data from the International Passenger Survey for Usual Occupation (prior to migration) by Reason for Migration for all nationalities show that the proportion of children in the ‘accompany / join’ category was 33 per cent on average between 2000 and 2008.
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B.37 The above assumptions can be switch and become employed, combined with assumptions on the model estimates that outflows the lengths of stay from UK Border of ‘study’ should be much larger. Agency (2010b), presented in The discrepancy between the Figure B.2, to generate a basic estimated volume and actual model to estimate IPS outflows data was around 47,000 flows in from inflow data.The results 2008. The size of this discrepancy from this approach are shown cannot be explained by increasing in Figure B.4. the assumption regarding the proportion of students that B.38 Regarding non-EU ‘employed’ switch to work-related routes outflows, the estimated volume (the current assumptions already is larger than the actual volume overestimate ‘employed’ outflows). recorded by the IPS. This gap Figure B.3 further illustrates this widens between 2001 and point by showing the scale of 2006, and has recently started the difference between inflows to close in 2008. There are of students and total outflows by several reasons for this, which usual occupational categories. are discussed when we consider the caveats to this approach. B.40 There are two potential reasons The volume of ‘other adults and why the estimated outflow of children’ outflows estimated by students is much larger than the the model are broadly in line with flows recorded in the IPS. First, those in the actual data. a proportion of students may be overstaying their legal right to B.39 The estimated outflows for non- stay in the UK, or second, the EU ‘study’ are much larger than IPS may potentially undercount recorded in the actual data. Even outflows of students. assuming that some students
300 Figure B.4: Estimating non-EU IPS outflows by usual occupation prior to migration, 1994 to 2008
Estimating outflows whose usual occupation prior to to migration was 'employed'
120 Estimated outflow
100 Actual outflow 80
60
40
Outflow (000s) 20
0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Estimating outflows whose usual occupation prior to migration was 'study'
120 Estimated outflow
100 Actual outflow 80
60
40
Outflow (000s) 20
0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Estimating outflows whose usual occupation prior to migration was 'other adult' or 'child' 120
100 Estimated outflow
80 Actual outflow
60
40
Outflow (000s) 20
0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Notes: Actual outflows are non-EU outflows by usual occupation prior to migration measured by the International Passenger Survey (IPS). Estimated outflows are generated from the assumptions described in this annex. Source: MAC analysis; International Passenger Survey, 1994-2008, published in Office for National Statistics (2010c)
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B.41 There are a number of further • The model assumes that the caveats to this approach for length of time migrants remain in estimating outflows.These are set the UK is, on average, constant out below: over time. It is possible that more recent migrants may stay for • The assumptions made to longer or shorter periods of time match inflows by reason for than previous migrant cohorts. migration to outflows by usual occupation prior to migration are B.42 These estimates may be used very crude and can easily be to produce crude estimates of varied. net migration, by migrants’ main reason for coming to the UK. If • The approach does not consider we take the estimated outflows any economic or other factors generated above (given the that are likely to be significant caveats outlined), we can estimate drivers affecting an individual’s the contribution of each reason for decision to migrate over time migration category to non-EU net for all three outflow categories. migration. Broadly speaking, the The recent downturn may have proportions generated are similar caused particular distortions in to the proportion based on each the pattern of migrant lengths of category’s contribution to total non- stay in the UK. EU inflows, with the caveat that the approach overestimates outflows • The length of stay assumptions, of the employed and significantly taken from UK Border Agency overestimates outflows of (2010b), examine leave to students. It may therefore be remain expiries and may not reasonable to assume that the accurately capture the actual proportion that each category lengths of stay. People may contributes to total non-EU inflows stay after their visa has expired will be similar to the proportion that or leave much earlier. To be each category contributes to total recorded as part of a long-term non-EU net migration. migrant outflow in the IPS, a respondent must be intending Implications for estimating the impact of to leave the UK for a year or inflow reductions on net migration more. It may well be the case that non-EU nationals leave the B.43 As discussed above, there UK expecting to return, but then are a number of issues when change their mind once they comparing outflows generated are home. As such they would from inflow data using the set of not be recorded as outflows in assumptions described above, the IPS survey. This may be a and actual outflows measured by particular issue for students. the IPS. However, we can apply The IPS has been known to the above methodology to provide significantly undercount outflows a broad idea of the likely scale in the past, as discussed in of the longer-term impact on net Chapter 3. migration of reducing the number of out-of-country visas issued to Tier 1 and Tier 2 applicants.
302 B.44 To do this we: B.46 This illustrative estimate does not take into account any wider • take the required reductions effects that a limit on Tier 1 and in work-related IPS inflows to 2 migration may have on net be met through reductions to migration. It is possible that inflows throughTiers 1 and 2 employers may turn to either from options A and B presented British workers living at home or in Chapter 6; abroad or EU nationals to fill jobs, instead of non-EU nationals. This • use assumptions on the lengths may cause net migration of British of stay of Tier 1 and 2 migrants and EU nationals to increase, from UK Border Agency (2010b), compensating for any changes in shown in Figure B.2; and net migration as a result of a limit on Tiers 1 and 2. It is also possible • estimate the longer-term that non-EU migrants may be reduction in net migration more likely to remain in the UK if from the reduction in inflows opportunities to re-enter the UK described by options A and B, are restricted. These displacement taking into account the fact that effects are very difficult to estimate future outflows will be reduced. and further increase the levels of uncertainty of future net migration, B.45 Figure B.5 presents the reduction as discussed in section B.5. in inflows resulting from optionsA and B, and an illustrative estimate B.47 The estimates presented in this of the impact on net flows. As annex are generated using a shown, in the first few years the set of broad assumptions to impact on net migration is very illustrate a way of thinking about similar to the impact on inflows. the potential scale of the longer- The difference between the inflow term impact of reductions in reductions and net migration inflows on net migration, over reductions becomes larger in future years measured by the IPS. the longer term, as the stock of Understanding how long migrants Tier 1 and 2 migrants who are stay in the UK, and the proportions able to leave the UK as outflows that settle permanently, is decreases. In the long term, the key to understanding how net estimated net migration reduction migration relates to long-term will only be 40 per cent of the size changes in the composition of of the reduction in inflows. The the UK population. We strongly reason for this is that we assume encourage future research in this that only 40 per cent of Tier 1 area to better understand the and 2 migrants stay five years or dynamics of migration flows. more, based on evidence from UK Border Agency (2010b).
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Figure B.5: Estimating the long term impact on net migration from a reduction in work-related inflows, 2010/11 to 2019/20
Long term impact of reduction in work-related IPS inflows: Option A 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 0
-5
-10
-15 Option A reduction in net -20 migration
net migration (000s) Option A reduction -25 Reduction in LTIM inflows / LTIM Reduction in in inflows
-30
Long term impact of reduction in work-related IPS inflows: Option B 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 0
-5
-10 Option B
TIM inflows / reduction in -15 net migration -20 Option B
net migration (000s) reduction in inflows -25 Reduction in L Reduction in
-30
Notes: Option A and option B are taken from Chapter 6. In this chapter we consider reductions of work-related inflows of 7,300 for option A and 3,650 for option B per year from 2011/12 to 2014/15. The net migration reduction is generated by comparing the magnitude of these reductions with the ‘do nothing’ option of keeping the level of work-related migration constant from 2009. Source: MAC analysis
304 B.4 Estimating impacts of B.52 Third, there may be changes in in-country policies behaviour as a result of a limit that could cause people to stay in the B.48 This annex has so far tackled two UK for longer or shorter periods of issues: understanding how the time. This further complicates any number of out-of-country visas modelling approach. issued are recorded in inflows (measured by the IPS); and how B.5 Uncertainty and volatility in reductions in inflows are likely net migration flows to lead to reductions in future outflows (again measured by B.53 In Chapter 6, we outline the the IPS). arithmetic used to generate two potential options for limits on B.49 The question we turn to address Tiers 1 and 2 consistent with now is how one might estimate the the objective of reducing net impact on net migration measured migration to the tens of thousands. by the IPS of any changes in the As discussed in that chapter, number of in-country grants of calculating the extent of reductions leave to remain. We have not in non-EU net migration required endeavoured to calculate this to reach total net migration in the in the body of our report as we tens of thousands depends on the have not provided a limit on in- scale of net migration of EU and country grants of leave to remain. British nationals. However, we briefly set out below three key issues which make B.54 This section examines the range addressing this question difficult. of uncertainty generated from the:
B.50 First, one needs to understand • sampling error in the IPS; and how inflows generate future in-country applications. This • volatility of migrant flows would require the construction outside the direct control of of a model to understand the migration policy. volume of in-country applications generated from past inflows. Sampling error in the International Passenger Survey B.51 Second, it is necessary to understand how any additional B.55 The reliability and accuracy of data outflows generated from a limit on net migration has important on in-country grants will be implications for any policy that recorded by outflows measured seeks to influence net migration. by LTIM and the IPS. There is As with any survey, there are a large degree of uncertainty in sampling errors associated with reconciling the volume of out- estimates from the IPS. The LTIM of-country visas issued with IPS estimates of net migration are inflows. There is likely to be an made up of estimates from the IPS even greater level of uncertainty with adjustments made to account in reconciling estimated outflows for migrant and visitor switchers, generated from an in-country limit flows to and from Ireland and with outflow measured by LTIM asylum flows. Here we consider and the IPS. the confidence intervals around
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the sample estimates of the figure for the outflow was +/- IPS components. 20,000, shown in Figure B.6. A 95 per cent confidence interval B.56 The IPS is a survey of passengers implies that, on average, for arriving in, and departing from, the every 20 possible samples drawn UK. Approximately one in every we would expect 19 of them to 500 passengers travelling through result in estimates within the UK ports is surveyed, but the range. Since net migration is the migrant sample (i.e. those defined result of a subtraction of outflows as intending to change their usual from inflows, the margin of error place of residence for a year or is not strictly a sampling error. more) is only a fraction of this. In Nevertheless, the sampling error 2008, 3,216 immigrants and 1,901 associated with the inflow and emigrants were surveyed. outflow figures must introduce a degree of uncertainty. An B.57 In 2009, we calculate the 95 per approximation of the resulting error cent confidence interval for the might be in the region of +/- 37,000 total inflow was approximately for the 2009 figure3. In other +/- 31,000 and the equivalent words, if the IPS was conducted
Figure B.6: 95 per cent confidence intervals for inflows and outflows for all nationalities measured by the IPS, 1991 to 2009
Net
Inflow - estimate
Outflow - estimate
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Note: Approximate confidence intervals are shown for inflows and outflows. The chart only refers to the International Passenger Survey components of net migration and do not include the adjustments made for the Long-Term International Migration (LTIM) estimates. 2009 figures are provisional. Source: MAC analysis of the International Passenger Survey, 1991-2009, published in Office for National Statistics (2010c)
3 Calculated by taking the square root of the sum of the squared standard errors.
306 100 times we think the resulting B.62 The largest single factor LTIM net migration estimates influencing these historical flows would fall between 159,000 and was the large inflow of nationals of 233,000 in 95 out of 100 times. the countries that acceded to the EU in 2004 (the A8). However, net Volatility of British, EU and non-IPS outflows of British nationals were net migration generally larger over the same period, which somewhat balanced B.58 Arguably, the largest source this out. There are some difficulties of uncertainty is around future in assessing what might happen to flows of migrants outside direct these flows in the future: Government control. These include flows of British and EEA • there is no clear trend in net EU (European Economic Area) or British net migration: there nationals as well as the non-IPS is considerable year-to-year components of LTIM. variability in net migration of both; and B.59 In this report we have adopted the simple assumption that these • there is no clear relationship flows will remain at 2009 levels between these flows and until 2014/15. We have not suitable economic variables attempted to forecast different which could be used to predict migration flows. One reason is future flows. that there are few clear underlying trends or relationships with other B.63 Our assumption is that net British variables. Another more pragmatic and EU migration will remain at reason is that the uncertainties +7,000 until 2014. This is the same are so large that forecasts may as the level observed in 2009. not actually be any better than a However, there may be reasons simple assumption. that net migration of EU and British citizens will be lower than in the B.60 In the following paragraphs we past, such as: consider the assumption that flows will remain constant together with • outflows ofA8 citizens have the risks associated with doing increased in comparison this, focussing first on British to inflows, suggesting net and EU nationals measured in migration of A8 citizens is the IPS and then on the non-IPS likely to be smaller than in components of LTIM. the past; and
B.61 In 2009, provisional IPS net • the lifting of transitional migration of British and EU arrangements for A8 nationals in nationals combined was positive, other European countries could with a net inflow of 7,000. Net mean that fewer A8 nationals migration of UK citizens was choose to come to the UK. -36,000 and the equivalent figure for EU citizens was +43,000, shown in Figure B.7.
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Figure B.7: Net migration of British and EU citizens recorded in the International Passenger Survey, 1991 to 2009
150 Net British Net EU
100 Net British and EU
50
0
-50 IPS net migration (000s) -100
-150 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Note: This chart considers IPS flows rather than LTIM in order to isolate flows over which the Government has no direct control from LTIM figures. 2009 IPS figures are provisional. Source: MAC analysis of the International Passenger Survey, 2006-2009, published in Office for National Statistics (2010c)
B.64 In contrast, there may be reasons B.65 In 2009, net migration of the why net migration of British and non-IPS components of EU will be higher than in the past: LTIM (the components of, and adjustments to, LTIM that are not • comparative economic conditions derived from the IPS, described between A8 countries and the UK in the following paragraph) may change, resulting in greater totalled +5,000, shown in inflows and smaller outflows; Figure B.9. The magnitude and composition of these • future accession of countries to components remained broadly the EU or lifting of transitional constant between 2004 and arrangements for Bulgaria and 2008. The 2009 figure for total Romania may increase EU non-IPS net migration is not inflows; and available in the published ONS data, so we have estimated this • in the event that employers are figure based on the residual prevented from recruiting non- between published provisional EU nationals, they may seek to LTIM and IPS estimates. This recruit British or EU nationals estimate is considerably lower who are currently living abroad, in 2009 than the official figure which may increase inflows. for 2008. Therefore, the official
308 Figure B.8: Net migration of non-IPS components of Long-Term International Migration 120 Net Visitor switchers
Net Asylum 100 Net Migrant switchers Net Irish Republic
80 Net non-IPS
60
40
20
IPS net migration (000s) 0
-20
-40 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Notes: Official figures for net migration of the non-IPS component ofTIM L are not currently available from the ONS. In this chart, we estimate this figure from the residual between the total TIML net migration estimate and the IPS net migration estimates by nationality for the provisional 2009 figures. Source: MAC analysis of estimates of Long-term International Migration (LTIM), 1991-2009, published in Office for National Statistics (2010c)
figure for the 2009 level of B.67 Again, there is no obvious trend non-IPS net migration when evident in these flows. The released by the ONS may differ largest component between 1998 from our estimates. and 2003 was asylum, which is likely to have been influenced by B.66 Between 1998 and 2003, the unpredictable changes to policy figures were dominated by large and world events. Visitor switchers asylum-related inflows. Net flows are also a significant flow in recent of visitor switchers (those originally years, but it would not be possible intending to visit the UK, but who to accurately predict how any eventually become migrants4) individual policy measure may have grown in recent years, with influence their volume. We assume the exception of 2008. Migrant that flows will remain broadly at switchers and movements to 2009 levels. Again, there is a large and from the Irish Republic are degree of uncertainty surrounding relatively small flows. such an assumption.
4 Switching assumptions apply to both inflows and outflows. Thus, the increase in net flows of visitor switchers is partly due to fewer numbers of individuals that intended to leave the UK for a short period, but stayed abroad as migrants.
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B.68 Taking together our assumptions their fan charts to show the about British and EU flows probability distribution around their and other flows over which the forecasts of GDP growth (OBR, Government has no control, 2010). To produce estimates we find they balance out of uncertainty to illustrate the approximately at a modest volatility of British, EU and non-IPS positive 12,000 net migration net migration we make two key inflow. However, there is assumptions. First, we assume considerable uncertainty around that the net migration through these assumptions, particularly these routes is equally as likely if we are relying on them to to increase as it is to decrease. make judgements about Therefore the distribution of migration in the future. errors in the ‘in-sample’ forecast described above is likely to be B.69 Quantifying uncertainty around symmetrical. Second, in the future flows of British, EU and absence of a better assumption, non-IPS flows is a difficult task. we assume that these errors are Ideally, we would want to express likely to be normally distributed. such uncertainties in the form of probabilities. The construction of B.72 Figure B.9 presents the mean such probabilities (often called squared error of the ‘in-sample’ prediction intervals) usually forecasts t+h periods into the relies on the specification of a future. The mean squared error formal forecasting model, and is calculated as the square root assumptions about the model of the sum of the squared errors and underlying data. However, and is the measure of the average as noted above, we have not error experienced in the historic attempted to construct a formal data. The standard error is also forecasting model because of presented, which is the standard an absence of suitable data with deviation of the ‘in-sample’ which to do so. We have simply distribution of errors. Alongside assumed that flows will remain at the two assumptions made above, the same level as in 2009. the standard errors can be used to estimate approximate confidence B.70 One way of assessing the intervals, which are also presented uncertainty around such an in Figure B.9. The actual data, assumption is to look at how well which are based on a small it would have performed when sample, show that the standard applied to historic data. The error for the three-year-ahead distribution of the errors arising forecasts is smaller than that for from these ‘in-sample’ forecasts the two-year-ahead forecasts. may tell us something about the We would expect the standard magnitude of the uncertainties errors to increase over time and associated with applying these therefore assume, as the OBR assumptions to the future. assumed in similar situations, that the standard errors follow a linear B.71 Here, we follow a similar trend between the first-year and methodology to that employed fifth-year forecasts. by the Office for Budget Responsibility (OBR) in compiling
310 Figure B.9: Estimates of volatility in British, EU and non-IPS net migration flows, 1991 to 2009
Measures of error if net migration is assumed to stay constant t+h years ahead t+1 t+2 t+3 t+4 t+5 Mean squared error 32 39 39 38 40 Standard error 19 20 17 20 25 Assumed standard error 19 20 22 23 25
Probability distribution around the assumption that future British, EU and non-IPS net migration will stay constant over time
80
60 95%
40 75%
50% 20 25%
25% 0 50%
-20 75% Net migration of British, EU
and Non-IPS components (000s) 95% -40
-60 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Note: The table shows mean squared error and standard error for the distribution of errors that result if actual historical net migration figures are compared with the assumption that net migration will stay constant t+h periods ahead. The chart shows the probability distribution, or confidence intervals, around the assumption that net migration from British, EU and non-IPS will stay constant going forward. The probability distribution is calculated assuming a normal distribution of errors, with mean 12,000 and the assumed standard error listed in the table above. Source: MAC analysis of estimates of Long-Term International Migration (LTIM), 1991-2009, published in Office for National Statistics (2010c)
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B.73 For British, EU and non-IPS net B.74 In summary, the approach migration between 1991 and 2009, used to illustrate the level of the average error, measured by uncertainty with future net the mean squared error, was migration of British and EU +/- 32,000 one period ahead. As nationals and the non-IPS LTIM shown in Figure B.9, there is only components is crude, and relies a 50 per cent probability, based on a variety of assumptions: most on historic data, that British, EU fundamentally, that uncertainty in and non-IPS net migration will the future will be the same as that be between -1,000 and 25,000 experienced in the past. It also in 2010 and between -5,000 and suffers from a very small number 29,000 in 2014. There is a 95 per of data points in the time-series. cent probability, again based on Nevertheless, even a casual historic data, that net migration examination of the scale of error through these routes will be presented in Figure B.9 suggests between -25,000 and 49,000 in a potentially very large degree of 2010 and -37,000 and 61,000 in error around making assumptions 2014. To put these figures into about future net migration. context, between 1991 and 2009, the maximum level of British, EU and non-IPS net migration was 65,000 and the minimum was -24,000.
312 Annex C Summary of required limits calculations
C.1 Introduction
C.1 This annex presents a summary table of the calculations derived in Chapters 6 and 9 to reach the options A and B for limits on Tier 1 and Tier 2 migration. The table also illustrates the implications for these options were the overall objective for net migration to be varied.
C.2 Summary table of options A and B and an alternative option
C.2 As described in detail in Chapter 6, the Government’s aim for overall net migration to be in the ‘tens of thousands’ by the end of this Parliament may be interpreted as a level of net migration above zero and below 100,000. Because of the uncertainties involved, described in Chapter 6 and Annex B, we assume policy will aim for the mid point between zero and 100,000 to ensure the highest chance of net migration being within that range by 2014/15. We assume a precise objective for net migration of 50,000.
C.3 Box C.1 provides a summary of the calculation steps described in Chapter 6. We also include an additional column which repeats the same calculation described in Chapter 6 but with an assumed precise objective for net migration of 80,000.
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Box C.1: Summary of calculation steps to derive options A and B for limits on Tier 1 and Tier 2 (described in Chapters 6 and 9)
Calculation steps assuming a net migration objective of 50k 50k 80k objective objective We start with the 2009 estimate of LTIM net migration for all 196,000 196,000 nationalities. We think the highest chance of net migration in 2014/15 being 50,000 80,000 in the “tens of thousands” would be to aim for the middle of the range, i.e. 50,000 Since the Government can only control non-EU migration, this 146,000 116,000 component must bear all of the reduction to 50,000. By the end of this Parliament, non-EU migration needs to fall by 196,000 minus 50,000 = 146,000 (assuming other migration flows are constant) Assuming we use a linear trajectory for net migration over four 36,500 29,000 years, the annual reduction in net migration is 146,000 / 4 Next we decide on the proportion of the 36,500 reduction that - - should be borne by Tiers 1 and 2, based on the proportional contribution of work-related migration to inflows and come up with two options Option A: We assume Tier 1 and 2 main applicants make a 20 per 7,300 each 5,800 each cent contribution. This is equivalent to the share that work-related year year migration accounts for in IPS inflows. This limit does not assume the other work-related routes (Tier 5 and permit-free employment) make a contribution. The required reduction in IPS work-related inflows each year under option A is: 36,500 x 20% = 7,300. Option B: We assume Tier 1 and 2 main applicants make a 10 3,650 each 2,900 each per cent contribution. This is equivalent to our estimate of the year year share that Tiers 1 and 2 account for in IPS inflows. The required reduction in IPS work-related inflows each year under option B is: 36,500 x 10% = 3,650. We then decide, for both practical and economic reasons, that the reduction for 2011/12 should come from out-of-country visas only. We need to use a scaling factor to translate the necessary IPS reduction into a visa reduction. This is 0.58 for work-related migration (i.e. 100 visas result in 58 IPS inflows). 2011/12 visa 2011/12 visa Therefore, for the two options the reductions in Tier 1 and 2 visas are: reductions: reductions: Option A Main applicants = 7,300 / 0.58 12,600 10,000 Option B Main applicants = 3,650 / 0.58 6,300 5,000 To derive figures for a limit, we subtract the required reduction in main applicants from the 2009 baseline for Tier 1 General and 2011/12 limit 2011/12 limit Tier 2 main routes (ICT, RLMT, shortage occupation) and their for main for main predecessors within the scope of the limit: applicants: applicants: Option A: 50,000 – 12,600 37,400 40,000 Option B: 50,000 – 6,300 43,700 45,000
Note: Initial LTIM figures are rounded to the nearest 1,000 and steps in the calculation are rounded to the nearest 100. Source: MAC calculations
314 Abbreviations
ADCS Association of Directors of ECHR European Convention of Children’s Services Human Rights AFB Association of Foreign Banks EEA European Economic Area APS Annual Population Survey EFTA European Free Trade APSCo Association of Professional Association Staffing Companies ESR Electronic Staff Record ASEAN Association of Southeast EU European Union Asian Nations FDI Foreign Direct Investment ASHE Annual Survey of Hours and FTA Free Trade Agreement Earnings GATS General Agreement on Trade BBA British Banker’s Association in Services BBUS Balfour Beatty Utility Solutions GDP Gross Domestic Product BCC British Chambers of GLA Greater London Authority Commerce GMC General Medical Council BIS Department for Business, GP General Practitioner Innovation and Skills GSCC General Social Care Council BVPI Best Value Performance GTC General Teaching Council Indicators GVA Gross Value-Added CBI Confederation of British HEFCE Higher Education Funding Industry Council for England CfWI Centre for Workforce HEIs High Education Institutions Intelligence HESA Higher Education Statistics CIC Commission on Integration & Agency Cohesion HMRC HM Revenue & Customs CIPD Chartered Institute for HSMP Highly Skilled Migrant Personnel and Development Programme CLG Communities and Local ICT Intra-company transfer Government ILO International Labour COI Control of Immigration Organisation Statistics ILR Indefinite leave to remain CoS Certificates of Sponsorship IMF International Monetary Fund CPI Consumer Price Index IPPR Institute for Public Policy DfE Department for Education Research DfT Department for Transport IPS International Passenger DH Department of Health Survey EAL English as an Additional LAs Local Authorities Language LFS Labour Force Survey EB Employment Based LGA Local Government Association ECAA European Community LTIM Long Term International Association Agreement Migration
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MAC Migration Advisory Committee PPP Purchasing Power Parity MI Management Information PSWR Post-Study Work Route MIF Migration Impacts Forum PwC PricewaterhouseCoopers MODL Migration Occupations in QTS QualifiedTeacher Status Demand List RBC Royal Bank of Canada MPI Migration Policy Institute RLMT Resident Labour Market Test NAIRU Non-Accelerating Inflation RPI Retail Price Index Rate of Unemployment SEN Special Educational Needs NASSCOM National Association of SOC Standard Occupational Software and Services Classification Companies SSSC Scottish Social Services NFU National Farmers Union Council NHS National Health Service STEM Science, Technology, NINo National Insurance Number Education and Mathematics NPD National Pupil Database TCS Tata Consultancy Services NQF National Qualifications TFP Total Factor Productivity Framework TUC Trades Union Congress OBR Office for Budget UCEA Universities and Colleges Responsibility Employers Association OCJS Offending, Crime and Justice UK United Kingdom Survey UKCES UK Commission for OECD Organisation for Economic Co- Employment and Skills Operation and Development UKTI UK Trade and Investment ONS Office for National Statistics UN United Nations PBS Points Based System US United States PCG Professional Contractors WTO World Trade Organisation Group
316 References
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