Review of the transitional restrictions on access of Bulgarian and Romanian nationals to the UK labour market
Migration Advisory Committee
November 2011
Migration Advisory Committee 1st Floor Green Park House 29 Wellesley Road Croydon CR0 2AJ www.ukba.homeoffice.gov.uk/mac email: [email protected]
Review of the transitional restrictions on access of Bulgarian and Romanian nationals to the UK labour market
Migration Advisory Committee
November 2011
Contents
Contents
The Migration Advisory Committee and secretariat ...... 1
Chapter 1 Introduction ...... 3
1.1 The Migration Advisory Committee ...... 3
1.2 Our task ...... 3
1.3 Background ...... 4
1.4 Our approach ...... 7
1.5 How we gathered evidence ...... 8
1.6 Other issues ...... 9
1.7 Structure of this report ...... 12
1.8 Thank you ...... 12 Chapter 2 Policy Context ...... 13
2.1 Introduction ...... 13
2.2 Rights to residence in the UK for Bulgarian and Romanian nationals ...... 13
2.3 Rights to employment in the UK for Bulgarian and Romanian nationals ...... 14
2.4 Transitional restrictions imposed by other EU Member States ...... 22 Chapter 3 Analysis of the UK labour market ...... 25
3.1 Introduction ...... 25
3.2 The UK and global macro-economy and labour market ...... 25
3.3 The causes and definition of a „serious labour market disturbance‟ ...... 36 Chapter 4 Analysis of labour market restrictions ...... 41
4.1 Introduction ...... 41
4.2 The drivers and impacts of economic migration ...... 41
4.3 Economic, labour market and migration context in Bulgaria and Romania ..... 51
4.4 Bulgarian and Romanian nationals in the UK...... 54
4.5 Possible impact of maintaining or removing the current labour market restrictions on Bulgarian and Romanian nationals ...... 66
4.6 Concluding remarks ...... 75 Chapter 5 Conclusions ...... 77
5.1 Introduction ...... 77
5.2 Our commission ...... 77
5.3 Existence or threat of a serious labour market disturbance ...... 77
5.4 Effect on migration flows of lifting labour market restrictions on Bulgarian and Romanian nationals ...... 78
5.5 Economic and labour market impacts of lifting labour market restrictions on Bulgarian and Romanian nationals ...... 79
5.6 Conclusions ...... 79
Annex A Consultation ...... 81
A.1 List of organisations / individuals that submitted evidence ...... 81
A.2 List of organisations met with ...... 81 Annex B Summary of transitional restrictions imposed by ...... 83
B.1 Definitions ...... 83
Abbreviations ...... 87
References ...... 89
Chapter 1: Introduction The Migration Advisory Committee and secretariat
The Migration Advisory Committee and secretariat
UK Commission for Employment and Skills Chair Members representative
Professor David Dr Diane Coyle OBE Dr Martin Ruhs Mark Spilsbury Metcalf CBE UK Border Agency representative
Professor Jonathan Professor Rob Glyn Williams Wadsworth Wilson The secretariat Vanna Aldin; Samantha Allen; Anne Ball; Alex Barr; Jeremy Clarke; Ros Coles; Cordella Dawson; Stephen Earl; Emily Eisenstein; Mark Franks (head of secretariat); Jocelyn Goldthorp; Kathy Hennessy; Kyle Magee; Daniel Pease
1
Chapter 1: Introduction ChapterChapter 1 1 IntroductionIntroduction
1.1 The Migration Advisory to the Government‟s shortage Committee occupation list (Migration Advisory Committee, 2011b). 1.1 The Migration Advisory In a report that is being Committee (MAC) is a non- published alongside this one, departmental public body we have advised on what comprised of economists and would be the likely economic migration experts that impact of restricting or provides transparent, removing settlement rights independent and evidence- under Tier 1 and Tier 2 of the based advice to the PBS. Government on migration issues. The questions we 1.2 Our task address are determined by the Government. 1.3 The UK Government is obliged by EU law to notify the 1.2 Previously, we have provided European Commission if it advice on the design of Tier 1 intends to maintain labour and Tier 2 of the Points Based market restrictions on System (PBS) for managed nationals of Bulgaria and migration (Migration Advisory Romania (the so-called „A2‟ Committee, 2009a and countries) beyond the 2009b), the transitional labour beginning of January 2012. In market access for citizens of May 2011, the Government new European Union (EU) asked that we consider, by accession states (Migration October 2011, the following Advisory Committee, 2008) question: and the first annual limits on Tier 1 and Tier 2 of the PBS “Is there a serious (Migration Advisory disturbance, or threat of such Committee, 2010). In early a disturbance, to the UK 2011, we provided advice on labour market and would occupations and job titles maintaining the existing skilled to National restrictions on Bulgarian and Qualifications Framework Romanian nationals‟ access to level 4 and above for Tier 2 of the labour market assist in the PBS (Migration Advisory addressing any such Committee, 2011a) and disturbance or threat?” recommended amendments
3 A2 labour market restrictions 1.3 Background acceded to the EU in 2007 and are known as the „A2‟. All 1.4 The EU consists of 27 EU countries are members of countries: the 15 Member the European Economic Area States before enlargement in (EEA), together with some 2004 known as the EU15 countries not in the EU. A full (which includes the UK); the breakdown of EU and EEA „A10‟ countries that acceded Member States is provided in to the EU in 2004 and consist Box 1.1 below. of Cyprus and Malta and the eight „A8‟ countries; and Bulgaria and Romania, which
4 Chapter 1: Introduction
Box 1.1 Breakdown of European Union and European Economic Area Member States
The „EU15‟ comprises: Austria; Belgium; Denmark; Finland; France; Germany; Greece; Ireland; Italy; Luxembourg; Netherlands; Portugal; Spain; Sweden; and United Kingdom.
The „A10‟ countries are: Cyprus; Czech Republic; Estonia; Hungary; Latvia; Lithuania; Malta; Poland; Slovakia; and Slovenia.
The „A8‟ countries are all of the above excluding Cyprus and Malta.
The „A2‟ countries are: Bulgaria; and Romania.
All of the above countries are members of the EEA.
The following countries are members of the EEA but not the EU: Iceland; Liechtenstein; and Norway.
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.
5 A2 labour market restrictions
1.5 The Treaty of Accession 2003 labour market on the same was the agreement between terms as other EU nationals the EU and the A10 countries (except Bulgarian and governing the accession of Romanian nationals). the latter into the EU. The Treaty allowed existing EU 1.8 The UK decided to restrict members to impose access to its labour market to transitional restrictions on the nationals of Bulgaria and free movement of labour on Romania when those the new Member States, with countries acceded to the EU the exception of Cyprus and on 1 January 2007. In 2008, Malta, for a maximum of the MAC was asked to advise seven years from the day of on whether those restrictions accession. The Treaty of should be retained beyond the Accession 2005 governs the beginning of January 2009. accession of Bulgaria and Our advice was provided in Romania to the EU and Migration Advisory Committee allowed existing members to (2008). impose transitional restrictions on the free movement of 1.9 Following receipt of the advice labour from those countries, provided by the MAC, in a also for a maximum of seven Written Ministerial Statement years from the day of dated 3 November 2009, the accession. then Minister of State for Borders and Immigration, Phil 1.6 For both A8 and A2 nationals, Woolas, stated on behalf of the seven-year period during the former Government that which restrictions can apply is the restrictions on working in divided into three phases the UK which applied to according to a “2+3+2” Bulgarian and Romanian formula. The accession nationals would continue until treaties stated that the end of 2011. He said: employment restrictions can “The Government remain be imposed for the first two committed to the principle of years following accession and free movement of workers can be extended for a further within the European Union three years. After that, they and acknowledge the benefits can be extended for an that intra-EU migration brings additional two years only if the to the UK both as an exporter national domestic labour of British workers to other market is experiencing a member states and as a result serious disturbance (or threat of the role of migration from thereof). other member states in meeting labour shortages in 1.7 The seven year transitional important sectors of the UK‟s period for A8 nationals economy. However, the expired on 1 May 2011. From Government have chosen a that date, A8 nationals have gradual approach to Bulgarian been able to access the UK and Romanian workers'
6 Chapter 1: Introduction
access to the UK‟s labour 1.12 The first part of our task market. Given the current required that we considered labour market situation, it is the state of the UK labour important that we continue to market. In doing so, we give weight to the need to analysed national-level data protect the interests of the and evidence published or resident workforce.” Details of provided by government the current restrictions are set departments, academics, and out in Chapter 2. other corporate partners. On the basis of this evidence we 1.10 In accordance with the Treaty made a judgement as to of Accession 2005, by 1 whether we consider the January 2012 the Government current UK market to be has to demonstrate that the „seriously disturbed‟. UK is experiencing a „serious disturbance (or threat thereof) 1.13 The second part required that to the labour market‟ if it we examine the impact of wishes to maintain the current maintaining (or removing) the restrictions on A2 nationals labour market restrictions in until the end of 2013. This is the context of the current state the last time that the UK can of the UK labour market. We decide whether to maintain analysed existing evidence on restrictions on A2 nationals‟ the impacts of migration, and access to the UK labour the profile of flows and market because the seven existing stocks of Bulgarian year transitional period for A2 and Romanian nationals nationals ends in January resident in the UK, in order to 2014. consider the possible impact of maintaining (or removing) 1.4 Our approach the current labour market restrictions on Bulgarian and 1.11 We decided to separate our Romanian nationals. We task into two parts. First, we regarded the questions of consider whether there is a whether maintaining serious disturbance, or threat restrictions would help to thereof, to the UK labour address disturbance to the market. Second, if the answer labour market or whether to the first question is yes, we removing them would consider whether maintaining exacerbate such disturbance the current labour market as essentially equivalent. restrictions imposed on Bulgarian and Romanian 1.14 This report develops and sets nationals would help to out our views on the above address the disturbance or issues. We understand that threat. The analytical the Government may decide, approach we have adopted in on the basis of this report, to this report reflects this retain or remove existing distinction between the two restrictions. We therefore parts of our task. make our views on the answer to the question that was put to
7 A2 labour market restrictions
us as explicit as possible. Our Businesses, the Federation of remit did not, however, require Small Businesses Scotland, us to specifically recommend the National Farmers Union, whether restrictions should be the Recruitment and retained, relaxed or removed Employment Confederation, altogether, and this report Scotland‟s Trade Union does not do that. Centre, the Scottish Government, the Trades 1.15 In Migration Advisory Union Congress, the Scottish Committee (2008) we Trades Union Congress, and considered existing, and the United Kingdom potential additional, sector Permanent Representation to schemes for the employment the European Union. We also of A2 nationals. We have not sought evidence from been asked to consider the operators of the Seasonal case for maintaining, Agricultural Workers Scheme broadening or curtailing such (SAWS). schemes for this report, and have not done so. 1.18 In addition, although we wrote to all Government 1.5 How we gathered departments about this work, evidence we specifically invited written evidence from the Department 1.16 The analysis in this report is for Business, Innovation and based on a combination of Skills, the Department for desk-based research and Communities and Local evidence we received from Government, the Department corporate partners, gathered for Work and Pensions, the through a series of targeted Foreign and Commonwealth activities. In this report Office, HM Treasury, the „corporate partners‟, or just Home Office, the Northern „partners‟, refers to all parties Ireland Office, the Office for with an interest in our work or National Statistics, the its outcomes, including private Scotland Office, and the and public sector employers, Wales Office. trade unions, representative bodies and private individuals 1.19 We wrote to the Bulgarian are included within this term. Labour Attaché at the We received correspondence Bulgarian Embassy in the UK, on this matter from 16 the Bulgarian Ministry of the partners and quote from this Interior, and the Bulgarian in boxes throughout this National Statistics Institute. report. We also wrote to the Romanian Labour Attaché at 1.17 We sought evidence from the Romanian Embassy in the organisations including the UK, the Romanian Economic British Chambers of and Finance Ministry, the Commerce, the Confederation Romanian Interior and of British Industry, the Administrative Reform Federation of Small Ministry, the Romanian
8 Chapter 1: Introduction
branch of the International were important and we Organisation for Migration and summarise them here. the Romanian National Institute of Statistics. We 1.22 The issue not directly related received evidence on the to our commission that was Romanian labour market from most frequently raised was the Romanian Embassy in the that the current labour market UK and the Romanian restrictions, and, in particular, Ministry of Labour, Family and the process of certification, Social Protection. has led to some A2 nationals being exploited, or being left 1.20 We met with officials from vulnerable to exploitation, both the Bulgarian and during their time in the UK. Romanian Embassies in We were told that some London and attended an employers offer employment event with representatives to A2 nationals on the from Romanian community condition that they certify associations and businesses. themselves as self-employed We refer to aspects of these and that, with few discussions at relevant points opportunities of alternative in this report. In addition, employment in the UK, some some other issues were A2 nationals are effectively raised with us and these are forced to accept this discussed in the next section. arrangement.
1.6 Other issues 1.23 We were told that, as self- employed workers, many A2 1.21 Much of the evidence that we nationals have no written received from partners directly contract with their employer. informed our consideration of Instead, they are paid via a the question put to us. payroll company whose fees However, some of our are often deducted from partners, particularly those workers‟ pay. By hiring within the Bulgarian and workers that are registered as Romanian communities, self-employed, employers are sought to draw our attention able to avoid the need to to the impact of the current make National Insurance labour market restrictions on contributions and to provide Bulgarian and Romanian benefits such as paid sickness nationals already resident in or annual leave. the UK. These issues do not fall within the scope of the 1.24 It was put to us that this specific question we were arrangement has three asked by the Government, particular adverse and so they could not be used consequences. First, it harms to inform our response to that the A2 nationals affected by question. Nevertheless, we subjecting them to poor understand why our partners working conditions, uncertain felt that these other issues employment arrangements, and fewer employee rights.
9 A2 labour market restrictions
Second, it reduces the “ALP members complain of facing amount of tax paid by those unfair competition due to the use of companies that employ A2 false self-employment of Bulgarians migrants who are registered and Romanians on food and self-employed. Third, by agricultural contracts by their reducing the cost of A2 competitors. Bulgarians and migrant workers to employers, Romanian nationals are prone to it makes the rest of the UK such abuse because of their lack of labour force (i.e. those free access to the employment workers who are not market due to the immigration registered as self-employed) restrictions imposed upon them. less competitive relative to A2 Such bogus self-employment is used migrants. to deny Bulgarians and Romanian workers NMW [National Minimum “A further practice related to the Wage], holiday pay, and other rights.” employment of Romanian nationals in the UK is the high incidence of Association of Labour Providers self-employment, creating a evidence to the MAC review secondary labour market, where (self-employed) workers are deprived 1.25 When we met with of various social and residence representatives of the entitlements. Moreover, the lower Romanian communities in the level of social contributions related to UK it was argued that their „employment‟ leads to an removing the labour market undercutting of the price of labour in restrictions on A2 nationals the specific trades in which these would help to protect those A2 self-employed have clustered (e.g. migrants already resident here domestic workers, construction because this would offer them sector).” alternatives to self- employment. It was said that Dr. Liliana Harding (University of this would also benefit the UK East Anglia) evidence to the MAC economy, by increasing tax review receipts from employers, and the existing UK labour force, by denying UK employers the option of hiring A2 nationals at a lower cost. The Romanian Embassy in the UK also argued that removing labour market restrictions would not increase the number of Romanian nationals seeking employment in the UK, but was important because it would protect Romanian nationals currently resident in the UK.
10 Chapter 1: Introduction
“Romanian authorities are certain “Whilst employment for up to 20 that lifting the labour restrictions hours is possible for any international would not increase the number of student proving full time enrolment, Romanian nationals seeking Romanian students need once again employment in the UK, but would to apply for a registration certificate. provide equal treatment and social Only upon certification can the protection to those who already work Romanian student obtain in this country. In our view, labour employment for the statutory time. market restrictions have not limited That puts the Romanian student at a the number of Romanian nationals disadvantage to all other who chose the UK as an employment (international) students, who can destination; instead, the transitional seek and take up a part time job regime has led workers into a grey upon proving enrolment in the UK area of the labour market – by higher education system.” turning them into self-employed workers – and, as a consequence, Dr. Liliana Harding (University of workers have constantly been denied East Anglia) evidence to the MAC basic employment rights. Extensive review evidence suggests that workers are often at risk and their protection is 1.27 Some partners also argued limited if not non-existent.” that restrictions on A2 nationals should be lifted on Embassy of Romania evidence to the grounds of fairness: we were MAC review told that labour market restrictions deprive A2 1.26 We also received evidence nationals of their most basic that argued that the rights as citizens of the EU. registration process was too Furthermore, there was some complex and too long, and feeling among those we met that this process put A2 that the decision to impose nationals at a disadvantage to labour market restrictions was all other prospective workers a response to the large in the UK. We were told that migrant flows from the A8 the lengthy waiting times countries following their could lead employers to accession to the EU in 2004, withdraw offers of rather than based on a employment to A2 nationals, consideration of Bulgaria and and that the inability to work Romania themselves. legally during the time that the registration certificate is being 1.28 We recognise the concerns issued could increase the expressed to us, and think it likelihood that A2 nationals would be legitimate for the UK claim welfare support or Government to consider them consider working illegally. We alongside our analysis in were also told that some subsequent chapters of this registration processes put A2 report. Nevertheless, several nationals at a disadvantage counter-arguments also need relative to all other migrants, to be considered. First, it was including those from outside not suggested to us that A2 the European Union (EU). workers were being forced to
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work, or remain, in the UK considers whether there is a against their will. The option to serious disturbance, or threat return to their home countries of such a disturbance, to the is available. Second, the UK labour market. In Chapter terms of the accession treaty 4 we address the second part were clear at the point when of the question and, in the Bulgaria and Romania context of the current state of entered the EU, and those the UK labour market, we look terms have not changed. at the possible impact of Finally, it is legitimate for the maintaining or removing the Government to take into current labour market account lessons learnt from restrictions on nationals of the A8 experience when Bulgaria and Romania. considering the position of A2 nationals. 1.31 In Chapter 5 we conclude by summarising our findings in 1.7 Structure of this report this report and setting out our response to the question we 1.29 In Chapter 2 we provide the have been asked by the background to the accession Government. of Bulgaria and Romania to the EU. We set out the UK 1.8 Thank you policy and legal position in respect of A2 nationals and 1.32 We are extremely grateful to we discuss the experience of the individuals and other EU countries, including organisations that provided the restrictions on input for this work and, in employment of A2 nationals particular, those who hosted that those countries have in events on our behalf or who place. helped us to identify partners with an interest in this work. A 1.30 Chapter 3 addresses the first list of partners who wrote to part of the question put to us and met with us is supplied as by the Government. It an annex to this report.
12 Chapter 2: Policy context Chapter 2 Policy Context Chapter 2 Policy context
2.1 Introduction as other EU nationals and can enter and leave freely, 2.1 In this chapter we describe provided that they are able to the labour market restrictions prove their nationality and that currently apply to identity when required to do Bulgarian and Romanian (or so. „A2‟) nationals who wish to work in the UK. We also set 2.3 This right of free movement out the various migration includes the right to move to routes that are available to the UK, or to any Member economic migrants from State, and reside for up to Bulgaria and Romania. three months following arrival. Additionally, we describe the A2 nationals who wish to live labour market restrictions in a Member State for longer imposed on Bulgarian and than three months need to Romanian nationals by other exercise a Treaty right to Member States of the reside in the UK (see below). European Union (EU), in They may also require particular the EU15 countries permission from a Member (as defined in Chapter 1), in State to reside there. Treaty order to put the UK labour rights apply where the person market restrictions in an is: a worker (see section 2.3 international context. for discussion of routes to employment); a student; a 2.2 Rights to residence in the self-employed person; or a UK for Bulgarian and self-sufficient person. Romanian nationals 2.4 The family members of an A2 2.2 Following accession to the EU national who has a right to on 1 January 2007, nationals reside in another Member of Bulgaria and Romania do State will also have a right to not require a visa to come to reside in that Member State the UK. They benefit from the (see Box 2.1 for definition of a same rights of free movement family member).
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Box 2.1: Definition of a family member according to European Community legislation EEA nationals‟ family members include the following:
Spouse or civil partner.
Children of the national or his or her spouse or civil partner who are:
o under 21;
o dependants (this includes stepchildren or adopted children, provided that the adoption is recognised by the UK).
Dependants in the ascending line (i.e. parents, grandparents) of the EEA national or his or her spouse or civil partner.
In certain circumstances, members of their extended family.
In the case of EEA national students, only their spouse or civil partner and dependant children are entitled to the right of residence for more than three months.
2.3 Rights to employment in restrictive than the rules that the UK for Bulgarian and applied to them prior to Romanian nationals accession.
2.5 In October 2006, a Written 2.6 What this means in practice is Ministerial Statement by the that A2 nationals can exercise then Home Secretary, John a Treaty right to reside as a Reid MP, set out in detail the worker in the UK provided that ways in which Bulgarian and they first obtain authorisation Romanian nationals could of their employment. The come to the UK to work exemptions to this legally. The chief effect of this requirement are discussed is to restrict A2 nationals to below. skilled employment except where they are coming under Where work authorisation is not quota-based arrangements for required the agricultural and food 2.7 As discussed in paragraph 2.5 processing sectors. A2 Bulgarian and Romanian nationals are not, however, nationals do not always have subject to the numerical limits an automatic right to work in on skilled workers that apply the UK. However, they are to non-EEA nationals admitted able to exercise a Treaty right under Tier 2 of the Points to reside and work without Based System. Furthermore, restriction if any of the under the „standstill clause‟ in following apply: the Accession Treaty, the restrictions applied to A2 nationals cannot be more
14 Chapter 2: Policy context
On or after 31 December undertaking established in 2006, they had completed one Member State to post 12 months‟ continuous workers to another Member legal employment in the State on a temporary basis in UK. connection with the supply of a service. The UK‟s work On 31 December 2006, authorisation requirements do they had leave to enter or not interfere with the remain in the UK and that exercising of these rights. leave was not subject to a restriction on taking 2.10 A2 nationals are also able to employment, or they were exercise a Treaty right to given such leave after that reside in the UK as: date. a self-employed worker They are the spouse or (see Box 2.2); civil partner of a UK national or a person a student; or settled in the UK. a self-sufficient person. They are the family member of an EEA 2.11 Those A2 nationals who are national who has a right to exercising a Treaty right as a reside in the UK (including student or a self-employed the family members of an person can apply for a yellow A2 national who is subject registration certificate to work authorisation and confirming their status. A has been granted such Bulgarian or Romanian authorisation). national who is exercising a Treaty right to reside as a 2.8 Persons in these categories student and who wishes to may apply for a blue engage in part-time or registration certificate which vacation work must obtain confirms that they have free such a certificate. This is access to the labour market. endorsed to indicate that the holder can engage in such 2.9 In addition, under EU law employment. there are also provisions which are intended to enable, in certain circumstances, an
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Box 2.2: Bulgarian and Romanian nationals exercising a Treaty right to self-employment If A2 nationals claim a Treaty right as self-employed persons, they need to be able to demonstrate that they are genuinely self-employed. The UK Border Agency works to the following guidelines when assessing whether an applicant is self-employed.
Suitable sufficient evidence that indicates self-employment is:
invoices showing payment for services;
contracts to provide services;
evidence from HM Revenue and Customs (HMRC) of a National Insurance special reference number (see below);
evidence from HMRC of registration for tax; and
evidence from HMRC of National Insurance contributions.
In addition, applicants are encouraged to provide as many of the following pieces of evidence as possible:
Original bank statements.
Proof of National Insurance registration.
Evidence of tax payment under the Construction Industry Scheme (if appropriate).
Details of their business premises.
Client lists.
Details of how they advertise their business.
Letters of recommendation from clients.
As a general guide, the following questions are considered when determining whether an applicant‟s claim to be self-employed is genuine (this is not an exhaustive list):
Do they have to do the work themselves?
Can someone tell them at any time what to do, where to carry out the work, or when and how to do it?
Do they work a set number of hours?
Can someone move them from task to task?
16 Chapter 2: Policy context
Are they paid by the hour, week, or month?
Can they receive overtime pay or bonus payments?
Do they hire someone to do the work or engage helpers at their own expense?
Do they provide the main items of equipment they need to do their job, not just the small tools that many employees provide, for themselves?
Do they agree to do a job for a fixed price, regardless of how long the job may take?
Can they decide what work to do, how and when to do the work, and where to provide the services?
Do they regularly work for a number of different people? and
Do they have to correct unsatisfactory work in their own time and at their own expense?
Once they have commenced self-employed work in the UK, A2 nationals must register with HMRC within three months. HMRC will give them a special seven-digit reference number to prove they have registered, and with this they can begin paying contributions. This number is given after providing basic personal details.
Once they have their reference number, A2 nationals have an interview with the Department for Work and Pensions (DWP) to obtain a National Insurance Number. DWP will usually issue the number as long as the applicant can provide:
a letter from HMRC confirming self-employment and a reference number;
a relevant identity document, or documents; and
proof of address.
In some circumstances DWP will also ask for other proof of self-employed working (e.g. invoices or an accountant‟s letter).
Routes for highly skilled, skilled work authorisation on the and less skilled employment basis of the same criteria as, or less stringent criteria than, 2.12 Under the Accession those that applied to A2 (Immigration and Work nationals on 31 December Authorisation) Regulations 2006. This is known as the 2006, A2 nationals may obtain „standstill clause‟. Work
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authorisation may be obtained admission under the Points for highly skilled and skilled Based System (PBS) for the employment. Those coming same purpose. This is, in part, for low skilled employment are because some of the criteria subject to quota-based applied to the latter (for arrangements, which are example, the requirement to currently restricted to the hold a minimum amount of agricultural and food funds and English language processing sectors. The requirements) are immigration arrangements are explained in control-derived criteria rather more detail below. than labour market-based criteria. In addition, some of 2.13 A2 nationals will be granted the requirements of the Points authorisation to be employed Based System are more in the UK if: restrictive than those that applied pre-accession, they are „highly skilled‟ meaning that their application (i.e. they meet the criteria would be contrary to the of the Highly Skilled standstill clause. For example, 1 Migrant Programme as the PBS requires the sponsor they stood on the date of (employer) to be licensed and accession), in which case for the job to be skilled to they will be granted National Qualifications unrestricted access to the Framework level 4 or above; labour market; or the skill requirement for the work permit scheme could be they have an offer of a satisfied by someone coming „skilled‟ job that cannot be to fill a job skilled to the filled by the resident equivalent of level 3 or above. labour market (i.e. they meet the criteria for a work 2.15 Before A2 nationals can begin permit). employment as skilled workers, the employer first 2.14 A2 nationals seeking needs to obtain a letter of authorisation to work are not approval through the existing subject to the same criteria as work permit arrangements. non-EEA nationals seeking The A2 national can then apply for an accession worker card. This is issued for a specific job, so if employees wish to change jobs they need to obtain a new accession worker card. 1 The Highly Skilled Migrant Programme (HSMP) is still open to A2 nationals who can 2.16 Work authorisation is currently show that they meet the criteria of the given to less skilled workers scheme as they stood on the date of from Bulgaria and Romania accession. However, the scheme was coming through: closed to all other nationals in 2008..
18 Chapter 2: Policy context
the Seasonal Agricultural which are 21,250 and 3,500 Workers Scheme (SAWS); places respectively for 2011. and These schemes were previously open to non-EEA the Sectors Based nationals, but since 2007 they Scheme for the food have been reserved for A2 manufacturing sector. nationals only.
2.17 Both of these arrangements are subject to annual quotas,
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Box 2.3: Seasonal Agricultural Workers Scheme (SAWS) The Seasonal Agricultural Workers Scheme (SAWS) is designed to allow farmers and growers in the UK to recruit low-skilled workers to undertake short-term agricultural work. The scheme operates on a quota basis.
To be eligible under the SAWS, applicants must be at least 18 years of age and from Bulgaria or Romania. Participants are allowed to work in the UK under the scheme for up to six months.
SAWS workers carry out low-skilled work including:
planting and gathering crops;
on-farm processing and packing of crops; and
handling livestock.
Workers should be paid at least the Agricultural Minimum Wage and be provided with accommodation by the farmer or grower employing them. No extensions beyond six months are allowed, but applicants can reapply to the scheme three months after their participation ends.
The scheme is managed by nine approved operators and a fixed number of work cards are issued to each operator each year. The operators are responsible for:
sourcing and recruiting eligible workers to take part in the scheme;
assessing and monitoring employers‟ ability to provide suitable work placements to SAWS workers;
ensuring workers are treated fairly and lawfully; and
ensuring farmers and growers are provided with people who are suitable to do the work on offer.
The scheme was originally due to close in 2010, and the continuation of the scheme is linked to the continuation of the A2 restrictions.
20 Chapter 2: Policy context
Box 2.4: Sectors Based Scheme The Sectors Based Scheme is designed to fill shortages in the food manufacturing sector.
The basic entry requirements under the Sectors Based Scheme are:
applicants must be nationals of Bulgaria or Romania;
applicants must be aged between 18 and 30;
jobs should be within the food manufacturing sector (specifically the fish, meat and mushroom processing industries); and
the employer must show that there is a shortage of people in the UK to fill these vacancies and will normally need to advertise jobs in order to demonstrate that there are vacancies.
The continuation of the scheme is linked to the continuation of the A2 restrictions.
Other routes to employment Skills‟ (BIS) Register of Education Providers2. 2.18 Students from A2 countries can work, but they must first 2.19 Provided that the work obtain a yellow registration undertaken by students certificate. This confirms that amounts to employment (i.e. they are EEA nationals not self-employment) they will exercising a Treaty right to be eligible for exemption from reside in the UK as students. the restrictions once they This gives them permission to have satisfied the qualifying work for up to 20 hours a period of 12 months week during term time and continuous legal employment. full-time during vacations, or as part of a vocational course. Irregular employment Registration certificates are only issued to those people 2.20 Since 1 January 2007, it has studying at genuine been an offence to employ a educational establishments Bulgarian or Romanian included in the Department for national who is required to Business, Innovation and
2 A list of these establishments can be found at http://www.bis.gov.uk/policies/higher- education/recognised-uk-degrees/listed- bodies.
21 A2 labour market restrictions
hold an accession worker card retained restrictions beyond but who does not have one, or that date. Spain removed all who is undertaking work other restrictions imposed on A2 than that specified in the card. nationals. Employers face a maximum fine on conviction of £5,000 2.24 At present, nationals of per worker. Bulgaria and Romania have the right to work, as employed 2.21 If prosecuted and convicted of or self-employed, without a working without the work permit in: Bulgaria; mandatory documentation, an Cyprus; Czech Republic; A2 worker could face Denmark; Estonia; Finland; imprisonment of up to three Greece; Hungary; Latvia; months or be offered the Lithuania; Poland; Portugal; opportunity to discharge their Romania; Slovakia; Slovenia; liability to prosecution by and Sweden. A work permit, paying a fixed penalty fine of or similar form of £1,000. documentation, is required in: Austria; Belgium; France; 2.4 Transitional restrictions Germany; Ireland; Italy; imposed by other EU Luxembourg; Malta; the Member States Netherlands; and the UK. Iceland, Liechtenstein and 2.22 The impact on the UK labour Norway, which are members market of lifting the labour of the EEA but not the EU, market restrictions currently also require Bulgarian and imposed on A2 nationals will Romanian nationals who wish depend, at least in part, on to access their labour markets the labour market restrictions to hold a work permit. imposed on those economic migrants by other EU Member 2.25 Spain continues to allow States. Past and current nationals of Bulgaria the right restrictions are discussed to work without labour market below. Further details of the restrictions. However, in a labour market restrictions letter to the European imposed on A2 nationals by Commission dated 28 July EU Member States are in 2011, Spain invoked the Annex B to this report. „safeguard clause‟ in the Treaty of Accession 2005, 2.23 When the A2 countries thereby seeking permission acceded to the EU on 1 from the Commission to January 2007, 17 of the 25 reinstate work restrictions for existing EU Member States Romanian workers. This imposed labour market clause allows a Member State restrictions on A2 nationals. to request to reintroduce EU Member States were previous restrictions on labour required to review these market access, if it is labour market restrictions after undergoing or foresees two years, from 1 January serious labour market 2009. Ten member states disturbances.
22 Chapter 2: Policy context
2.26 On 11 August 2011, the labour markets. However, it European Commission seems plausible to expect approved Spain's request to that, on the basis of the restrict access to its labour current global and European market to Romanian workers economic situation, many until 31 December 2012 due other countries will keep their to a serious disturbance in the restrictions in place. Spanish labour market. We understand that the 2.28 All other things being equal, restrictions will apply to we might expect migrant activities in all sectors and inflows to the UK from regions, but will not affect Bulgaria and Romania to be Romanian nationals who are larger under a scenario where already active in the Spanish the UK is the only country to labour market. remove the current restrictions than under a scenario where 2.27 At the time of writing this other Member States lift their report it is not clear what restrictions at the same time. changes, if any, the countries We consider this issue further discussed above will make to in Chapter 4. First, in Chapter the restrictions imposed on A2 3, we examine the state of the nationals‟ access to their UK labour market.
23
Chapter 3: Analysis of the UK labour market Chapter 3 Analysis of the UK labour market Chapter 3 Analysis of the UK labour market
3.1 Introduction September 2011 inclusive. They do not reflect the results 3.1 This chapter sets out the of the October 2011 statistical analysis we have used to publication, which was consider whether there is a released shortly before we serious disturbance, or threat submitted this report to the of such a disturbance, to the Government. We considered UK labour market. This the October statistics prior to addresses the first part of the submitting our report and they question that we have been did not substantively affect the asked by the Government, as analysis presented in this discussed in Chapter 1. chapter nor change the conclusions reached. 3.2 First, we discuss the UK macro-economic and labour 3.2 The UK and global macro- market context to this report, economy and labour considering both past and market projected trends in economic and labour market indicators. 3.4 This section sets out the Here we also consider the current, and projected future, state of the UK macro- trends of leading macro- economy and labour market economic and labour market within a global context. indicators for the UK. It also Second, we consider, with puts the current condition of reference to these indicators, the UK economy and labour how we believe a serious market into a global context. labour market disturbance, or threat thereof, should be The UK macro-economy defined. On the basis of this definition, we set out our view 3.5 Figure 3.1 shows one-quarter of whether the UK labour and four-quarter growth of real market is currently in a state Gross Domestic Product of serious disturbance. (GDP) in the UK since the beginning of 1975. The UK 3.3 The UK labour market experienced a sustained statistics presented in this period of real GDP growth chapter reflect the Office for between 1992 and 2007, National Statistics‟ (ONS) averaging 2.8 per cent per statistical publications to annum. In contrast, the UK
25 A2 labour market restrictions
experienced six consecutive of 2009 the UK economy has, periods of negative growth with the exception of the from the second quarter of fourth quarter of 2010, 2008: real GDP contracted by maintained generally modest 6.4 per cent over this period. but positive economic growth. In GDP terms this represents UK real GDP grew by 0.1 per the worst recession cent in the second quarter of experienced by the UK for 2011 compared to the over 60 years (Joyce and previous quarter, and by 0.7 Sibieta, 2011). per cent compared to the second quarter of 2010 (Office 3.6 Since emerging from of National Statistics, 2011a recession in the fourth quarter and 2011b). Figure 3.1: One-quarter and four-quarter growth of real Gross Domestic Product, UK, 1975 Q1 to 2011 Q2 8%
6%
4%
2%
0%
Real GDP growth GDP Real -2%
-4%
-6% Growth on previous quarter Growth on one year ago
-8%
2011 Q2 2011
1975 Q2 1975 Q2 1979 Q2 1981 Q2 1985 Q2 1989 Q2 1993 Q2 1995 Q2 1999 Q2 2003 Q2 2007 Q2 2009 1977 Q2 1977 Q2 1983 Q2 1987 Q2 1991 Q2 1997 Q2 2001 Q2 2005
Notes: Seasonally adjusted, chained volume measure, constant 2006 prices. Sources: Office for National Statistics, 2011a and 2011b.
3.7 Short- and medium-term Responsibility (OBR) (2011) forecasts of UK real GDP forecasts that UK real GDP growth are, of course, subject will grow by 1.7 per cent in to uncertainty and are 2011, followed by 2.5 per cent continually revised. These in 2012, 2.9 per cent in 2013 forecasts for the UK economy and 2014, and 2.8 per cent in reflect the global financial 2015. These forecasts are crisis in 2008-09 and the higher than the average of ongoing sovereign debts crisis those from a range of financial in Europe. The independent and economic institutions Office for Budget compiled more recently by HM
26 Chapter 3: Analysis of the UK labour market
Treasury (2011): the average 3.10 There are of course factors forecast of real GDP growth other than growth of real GDP from these institutions is 1.2 that might affect the per cent for 2011 and 1.8 per unemployment rate, which cent for 2012. In September makes it difficult to assess 2011, International Monetary whether this relationship will Fund (2011) forecasted that be stable over time. However, UK real GDP would grow by as we observe later in this 1.1 per cent in 2011 and 1.6 chapter, the UK per cent in 2012. unemployment rate increased during the period of recession 3.8 The labour market in 2008-09, and stabilised implications of stagnant and once the recession had below-trend growth in real ended. It can also be GDP are prescribed by observed that the current Okun‟s law, which is the growth rate of real GDP is empirically observed significantly below the level correlation between the required to stimulate a fall in unemployment rate and real the unemployment rate. GDP (Okun, 1962). Okun‟s law implies that a given The UK labour market percentage point increase in the unemployment rate is 3.11 A notable impact of the recent associated with a larger economic downturn on the UK percentage decrease in real labour market was the effect GDP. The exact magnitude of on average weekly earnings. this relationship will vary These data are shown in depending on the country and Figure 3.2. Year-on-year the time period considered. growth in nominal average weekly regular earnings 3.9 We tested the relationship (which exclude both bonuses between the unemployment and arrears of pay) fell from a rate (as defined by the recent peak of 4.7 per cent in International Labour the three months to Organisation (ILO)) and real September 2007 to a low of GDP for the UK using annual 1.1 per cent in the three data for the period 1971 to months to November 2009, 2010. For this analysis we before increasing to 2.1 per used the dataset for real GDP cent in the three months to presented above and the July 2011. Year-on-year dataset for the unemployment growth in nominal average rate that we present in the weekly total earnings (which next section of this chapter. include bonuses but exclude We found that, historically, arrears of pay) fell from a real annual GDP growth of recent peak of 6.1 per cent in approximately 2.5 per cent is the three months to March needed before the UK 2007 to a low of minus 2.7 per unemployment rate starts to cent in the three months to fall. March 2009, before increasing to 2.8 per cent in the three
27 A2 labour market restrictions
months to July 2011. Year-on- increasing to minus 2.2 per year growth in real average cent in the three months to weekly regular earnings fell July 2011. from a recent peak of 3.6 per cent in the three months to 3.12 As these data on average June 2009 to a low of minus weekly earnings include both 3.6 per cent in the three part-time and full-time months to April 2010, before workers, some of the increasing to minus 2.9 per observed changes in these cent in the three months to earnings over time may also July 2011. Year-on-year reflect a change in the growth in real average proportion of workers that are weekly total earnings fell in part-time employment. This from a recent peak of 2.9 per in itself may also be a cent in the three months to response to the economic March 2006 to a low of minus downturn, as employers 3.9 per cent in the three reduce individuals‟ working months to June 2010, before hours as an alternative to making redundancies.
28 Chapter 3: Analysis of the UK labour market
Figure 3.2: Three month average year-on-year growth in average nominal and real weekly earnings: total and regular pay, Great Britain, Jul 2001 to Jul 2011
7 6 5 4 3 2 1
0 year (3 month average) year (%) month (3 average)
- -1
on - -2 nominal average weekly earnings (total pay) -3 nominal average weekly earnings (regular pay)
-4
Change year Change
Jul 11 Jul
Jul 01 Jul 03 Jul 04 Jul 05 Jul 06 Jul 08 Jul 10 Jul Jul 02 Jul 07 Jul 09 Jul Three months to
5
4
3
2
1
0
-1
year year (3 month (%) average) -
on -2 - -3 real average weekly earnings (total pay) -4 real average weekly earnings (regular pay)
Change year Change -5
Jul 11 Jul
Jul 01 Jul 02 Jul 04 Jul 05 Jul 06 Jul 07 Jul 09 Jul 10 Jul Jul 03 Jul 08 Jul
Three months to Notes: Average weekly earnings of total pay includes bonuses but excludes arrears of pay. Average weekly earnings of regular pay excludes both bonuses and arrears of pay. The figures are three-month averages and have been seasonally adjusted. Average weekly earnings are calculated by dividing the total amount paid by the total number of employees paid in Great Britain. The growth rate is equal to average weekly earnings over a three- month period against the same three-month period a year ago. Real earnings have been estimated using data from the Retail Price Index (RPI), which is not seasonally adjusted. Sources: Office for National Statistics (2011c) and (2011d).
29 A2 labour market restrictions
3.13 Joyce and Sibieta (2011) the most recent recession found that, as well as remained higher than might earnings, state benefits and have been expected based on tax credits also fell in real the experience of previous terms in the UK during the last recessions in the UK. The financial year (2010-11). This authors cited a combination of is estimated to have led to a high levels of firm profitability fall in median net household prior to the recession, income of 3.5 per cent, the supportive monetary and largest single-year fall in 30 fiscal policies, and reductions years. in real producer wages (that is, the real-term reduction in 3.14 As shown in Figure 3.3, the wage costs faced by UK employment rate fell to a employers) as the main recent low of 70.2 per cent in reasons for this smaller the three months to March impact of the recession on the 2010. It has since modestly UK employment rate. The fluctuated, and stood at 70.5 data on real growth in per cent in the three months average weekly earnings to July 2011. This is still 2.5 presented earlier offer support percentage points below the to this view. UK employment rate observed in the three months to May 3.16 The Office for Budget 2008, and at least 2 Responsibility (OBR) percentage points lower than forecasted in March 2011 that the UK employment rate there will be little change in observed at any time between the level of employment December 2000 and between 2010 and 2011, but September 2008. This is a that it will increase steadily substantial reduction. from 2012 in response to projected above-trend output 3.15 As noted by Gregg and growth rates (Office for Wadsworth (2010), the UK Budget Responsibility, 2011). employment rate throughout
30 Chapter 3: Analysis of the UK labour market
Figure 3.3: UK working-age employment rate, July 1990 to July 2011
74%
73%
72%
71%
70%
69%
68%
67% Working age employment rate age employment Working
66%
2011 Jul 2011
1990 Jul 1990 Jul 1991 Jul 1992 Jul 1994 Jul 1996 Jul 1997 Jul 1999 Jul 2001 Jul 2002 Jul 2003 Jul 2004 Jul 2006 Jul 2008 Jul 2009 1993 Jul 1993 Jul 1995 Jul 1998 Jul 2000 Jul 2005 Jul 2007 Jul 2010 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 individuals 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 (2011e).
3.17 The unemployment rate (as months to July 2011 and the defined by the ILO) and the claimant count rate stood at claimant count rate 4.9 per cent in August 2011. (measuring claimants of Job As we discussed in the Seeker‟s Allowance) reached previous section of this respective recent highs of 8.0 chapter, historical trends per cent in the three months suggest that the current to March 2010 and 5.0 per growth rate of real GDP is too cent in January 2010, as low to stimulate a reduction in shown in Figure 3.4. Both the the unemployment rate. unemployment rate and the claimant count rate have 3.18 Both the unemployment rate remained reasonably stable and the claimant count rate since early 2010 and are still are expected to peak in 2011 considerably higher than their before starting to decline levels immediately prior to the thereafter (Office for Budget most recent recession, and Responsibility, 2011; HM very close to their recent peak Treasury, 2011). Office for levels: the unemployment rate Budget Responsibility (2011) was 7.9 per cent in the three forecasts that the
31 A2 labour market restrictions
unemployment rate will fall limited and that the main risks back to 6.4 per cent by 2015, around the forecast a higher rate than observed in (especially those associated the years immediately prior to with the continuing sovereign the recession. debt crisis) are negative. Both the claimant and ILO 3.19 The UK Commission for measures of the Employment and Skills unemployment rate are (UKCES) has commissioned expected to peak in 2011 and an update of the Working then come down slowly. Futures projections last published in 2008. This 3.20 This suggests that the UK update looks forward over the labour market is not likely to decade to 2020. This work is see a significant improvement nearing completion and will be in the short to medium term as published shortly (UK far as overall unemployment Commission for Employment rates are concerned. The full and Skills, 2011). It suggests results of the latest Working that the prospects for a rapid Futures will be made available decline in unemployment from via the UKCES website before the current high levels are the end of 2011.
32 Chapter 3: Analysis of the UK labour market
Figure 3.4: UK unemployment rate, August 1990 to July 2011 and claimant count rate, August 1990 to August 2011
12%
10%
8%
6%
4%
2% Unemployment rate Unemployment / Claimant Claimant /rate count Unemployment Claimant count rate
0%
2011 Aug 2011
1996 Aug 1996 Aug 1997 Aug 1998 Aug 1999 Aug 2000 Aug 2001 Aug 2002 Aug 2003 Aug 2004 Aug 2005 Aug 2006 Aug 2007 Aug 2008 Aug 2009 Aug 2010 1991 Aug 1991 Aug 1992 Aug 1993 Aug 1994 Aug 1995 1990 Aug 1990
Notes: Seasonally adjusted. 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 unemployment rates are those calculated in the three months to the date shown, while the claimant count is calculated for each month. The definition of unemployment is internationally agreed and recommended by the International Labour Organisation. Individuals are defined as unemployed if they are aged 16 and above and 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 Labour Force Survey 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 (2011e).
33 A2 labour market restrictions
“It is clear that conditions within the stabilised since the recession: UK labour market have deteriorated total job vacancies fell from a since the last review [of the labour peak of 692,000 in the three market restrictions on A2 nationals]; months to March 2008 to a most recently demonstrated by the low of 424,000 in the three overall unemployment rate of 7.9 per months to July 2009. cent. Of particular relevance to this However, the number of year‟s review must be the youth vacancies remains unemployment rate [20.8 per cent in substantially below the level 2011 Q2], given the predicted make- observed before the up and jobs taken by future migrants recession. from the A2 nations. Although job 3.22 Redundancies typically peak creation in the private sector has in the midst of a recession. As continued to date, losses in the shown in Figure 3.5, the public sector will weaken the labour number of redundancies market in 2012.” peaked at 310,000 in the three months to April 2009, up CBI evidence to the MAC review from a recent low of 109,000
in the three months to 3.21 Figure 3.5 shows that, December 2007. Redundancy according to the ONS levels have since declined to Vacancy Survey, there were 162,000 in the three months 453,000 vacancies in the to July 2011. three months to August 2011. The number of vacancies appears to have broadly
34 Chapter 3: Analysis of the UK labour market
Figure 3.5: Total vacancies, August 2001 to July 2011 and total redundancies, August 2001 to August 2011
800
700
600
500
400
300
200
100 Vacancies Redundancies
Number of vacancies / redundancies redundancies (000s) / of vacancies Number 0
2011 Feb 2011
2011 Aug 2011
2002 Feb 2002 Aug 2002 Feb 2003 Aug 2003 Aug 2004 Feb 2005 Aug 2005 Feb 2007 Aug 2007 Feb 2008 Feb 2009 Aug 2009 Feb 2010 Aug 2010 2001 Aug 2001 Feb 2004 Feb 2006 Aug 2006 Aug 2008 Three months to
Notes: Seasonally adjusted. Total redundancies are estimated from the Labour Force Survey 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. Vacancies do not include those in agriculture, forestry and fishing, and are for the three months to the date shown. Source: Office for National Statistics (2011e).
3.23 Although the number of government spending. The redundancies has fallen CIPD concluded that while the considerably over the past two overall labour market outlook years, this variable remains “appears to show a modest vulnerable to the effects of the pick-up in the second quarter recent recession. As of 2011…near-term and discussed in the Chartered medium-term employment Institute for Personnel and prospects remain uncertain Development‟s (CIPD) Labour and subdued compared with Market Outlook for Spring pre-recession levels.” 2011, while the private sector (Chartered Institute for was beginning to generate Personnel and Development, new jobs, this was being at 2011a). least partly offset by the weak employment prospects in the 3.24 In the Summer 2011 Labour public sector and the planned Market Outlook (Chartered future public sector job losses Institute for Personnel and caused by reductions in Development, 2011b) the CIPD warned that the jobs
35 A2 labour market restrictions
market may weaken over the Japan. The study projected next 12 months, and this may that global growth will fall from even lead to a fall in over 5 per cent in 2010 to 4 employment levels over the per cent in 2012 and that real next four quarters. The long- GDP in advanced economies term outlook for employment (including the UK) will grow at levels is likely to be affected an „anaemic‟ pace in the near by ongoing uncertainty about future: 1.6 per cent in 2011 the prospects for economic and 1.9 per cent in 2012. growth, both in the UK and internationally. 3.3 The causes and definition of a ‘serious labour The global macro-economy and market disturbance’ labour market 3.27 In Migration Advisory 3.25 So far in this section we have Committee (2009c) we said focussed on the impact of the that a labour market most recent recession on the disturbance, occurring in the UK. Jenkins et al. (2011) labour market as a whole or in found that the decline in UK a particular sector, occupation real GDP during the most or locality, could be caused recent recession lies by: somewhere in the middle of global experience: economies chronic structural such as Ireland and Japan problems in the macro- experienced sharper falls, economy or labour whereas the impact was market; smaller in countries such as Canada and Australia. The a shock in the macro- decline in the UK employment economic environment, rate was also in the middle of resulting in changes in the range: the employment demand; or rate in Germany actually rose during the recession, and did a shock to labour supply. not change considerably in France, whereas the fall in the 3.28 There is no universally employment rate in the US accepted definition of what was larger than in the UK. constitutes a „serious disturbance to the labour 3.26 International Monetary Fund market‟. It is therefore (2011) warned that the global necessary to explore what economy is entering a might be considered to be the „dangerous new phase‟ of main characteristics of such a considerably lower economic disturbance. growth, citing reasons such as falling consumer confidence, 3.29 In Migration Advisory financial turbulence in the Committee (2009c) we said eurozone, and natural that significant changes in disasters such as the recent labour market indicators, such earthquake and tsunami in as employment, unemployment, vacancies and
36 Chapter 3: Analysis of the UK labour market
redundancies, would be particularly when compared to expected if the UK labour their pre-recession levels, that market were disturbed. It suggest that the labour market would then be necessary to is currently seriously consider the economic and disturbed. labour market context to these changes, as well as to employ 3.32 Table 3.1 presents the sensible and considered average values of the main judgement, to determine labour market indicators whether the observed discussed above between disturbance is „serious‟. 1997 and 2006 and between 2000 and 2007, which could 3.30 In that report we defined a both arguably be considered „serious disturbance‟ in the to best reflect the period prior labour market in terms of to the most recent recession. rapid adverse changes in The current performance of leading labour market the labour market indicators, indicators, including presented as the average employment, unemployment, value over the most recent 12 vacancies and redundancies. months for which data are We concluded that “the UK available, is also shown in labour market is currently Table 3.1. suffering what might reasonably be described as 3.33 The first comparative period serious disturbance as a considered is January 1997 to result of the macro-economic December 2006, which covers downturn. Recent data the period of the most recently indicate sharp and sudden completed economic cycle, as increases in unemployment identified by HM Treasury and redundancies and falling (2008). HM Treasury‟s vacancy levels and identification of this period employment rate” (Migration was subsequently supported Advisory Committee, 2009c). by National Audit Office (NAO) (2008). HM Treasury‟s 3.31 At the time of writing this methodology to identify this report the UK is technically period as the most recently out of recession, and leading completed economic cycle is labour market indicators, such based on a wide range of as those listed above, are no cyclical indicators, including longer experiencing „rapid vacancies and wage and price adverse changes‟ from one inflation. The methodology quarter to the next. However, incorporates a consideration it is not necessarily the case of National Statistics and that these indicators must information provided by the have recently experienced Bank of England and rapid adverse changes to infer employer surveys. a seriously disturbed labour market. Instead, in the current 3.34 The second pre-recession context, it is the adverse period considered is January levels of these indicators, 2000 to December 2007
37 A2 labour market restrictions
inclusive. This was a period of basis for comparison with the continuous real GDP growth current performance of the UK during which many leading labour market. Because it has labour market indicators, been agreed by both HM including the employment Treasury and the NAO, we rate, the unemployment rate, are inclined to prefer the the claimant count rate and former as the most useful for vacancy and redundancy comparison. However, for levels, remained relatively flat. completeness we present and consider both. 3.35 We believe that either of these periods provides a useful
Table 3.1: Comparison of average labour market indicators across the following periods: most recent 12 months for which data are available; Jan 1997 to Dec 2006; and Jan 2000 to Dec 2007 Labour market indicator Average of the Average from Average from most recent 12 Jan 1997 to Jan 2000 to months for which Dec 2006 Dec 2007 data are available Employment rate 70.6 72.3 72.7 (per cent) (y/e Jul 11) Unemployment rate 7.8 5.5 5.1 (per cent) (y/e Jul 11) Claimant count rate 4.6 3.5 3.0 (per cent) (y/e Aug 11) Total redundancies 144 161 155 (thousands) (y/e Jul 11) Total vacancies 469 614(1) 621(1) (thousands) (y/e Aug 11) (Jun 01 to (Jun 01 to Dec 06) Dec 07) Growth in real average -2.8 1.4(2) 1.2(2) weekly earnings (based (y/e Jul 11) (Mar 01 to (Mar 01 to on regular pay) (per cent) Dec 06) Dec 07) Growth in real average -2.7 1.6(2) 1.5(2) weekly earnings (based (y/e Jul 11) (Mar 01 to (Mar 01 to on total pay) (per cent) Dec 06) Dec 07) Notes: averages are calculated using monthly data over the period shown. (1) Data on the level of vacancies in the UK are only available from June 2001, thus the figures presented do not necessarily represent the true average for the whole period indicated in the table. (2) Data on growth in average weekly earnings are only available from March 2001, thus the figures presented do not necessarily represent the true average for the whole period indicated in the table. Sources: Office for National Statistics (2011c), (2011d) and (2011e).
3.36 As there is a considerable are calculated over the two amount of overlap between pre-recession comparator them, we would not expect to periods. Table 3.1 confirms observe large differences this. between the averages of labour market indicators that 3.37 Over the past 12 months the UK employment rate has
38 Chapter 3: Analysis of the UK labour market
been, on average, 3.40 There are similar limitations to approximately two percentage comparing the performance of points lower than the average the growth in real average employment rate over both of weekly earnings indicators, the comparative pre-recession as the necessary data are periods, as shown in Table only available from March 3.1. Similarly, the average 2001. Nevertheless, available unemployment rate over the data suggest that growth in past 12 months has been real average weekly earnings more than two percentage (either based on regular or points higher than the total pay) is depressed average unemployment rate relative to its pre-recession over both of the comparative level. We consider the pre-recession periods. The significant deterioration of the average claimant count rate growth of real average weekly over the previous 12 months earnings to be a strong has been over one indicator of a disturbance to percentage point higher than the UK labour market. its average over both of the comparative pre-recession 3.41 Six of the seven labour market periods. indicators presented in Table 3.1 suggest that the UK 3.38 The average total number of labour market is currently redundancies over the past performing poorly relative to year has been slightly lower the period prior to the last than during either of the pre- recession. We believe it is recession periods. This is reasonable to conclude, on because the number of the basis of the these redundancies tends to indicators and the labour increase during period of market data discussed recession, before falling back above, that the UK labour once positive real GDP growth market is in a state of returns, as shown for the serious disturbance. 2008-09 recession in Figure Furthermore, we are mindful 3.5. of the uncertainty around the future performance of the UK 3.39 It is not possible to compare labour market (reflected in the the number of vacancies over forecasts presented above), the previous 12 months with particularly when taking into its performance over the consideration such factors as entirety of either of the two the ongoing reduction in comparator periods because public sector spending in the published data on vacancy UK and the labour market levels are only available from impacts that this is likely to June 2001. Nevertheless, on generate, and the recently the basis of the available data increased pessimism about it would appear that current global economic growth vacancy levels are depressed prospects in the immediate relative to their levels prior to future. This uncertainty further the recent recession. supports our view that the UK
39 A2 labour market restrictions
labour market is seriously current disturbance rather disturbed at the present time than simply a threat of future and looks set to remain disturbance. In the next disturbed in the near future. chapter of this report we consider the second part of 3.42 In conclusion, our short the question that we have answer to the first part of the been asked: “Would question that we were asked maintaining the existing to consider by the restrictions on Bulgarian and Government, namely “Is there Romanian nationals‟ access a disturbance, or threat of to the labour market assist in such a disturbance, to the UK addressing any such labour market?”, is yes. disturbance or threat?” Specifically, there is an actual
40 Chapter 4: Analysis of labour market restrictions Chapter 4 Analysis of labour market restrictions Chapter 4 Analysis of labour market restrictions
4.1 Introduction on the drivers, and economic and labour market impacts, of 4.1 This chapter considers economic migration. Next we whether maintaining the discuss conditions in the existing restrictions on Bulgarian and Romanian Bulgarian and Romanian labour markets to consider nationals‟ (A2 nationals) whether economic factors access to the UK labour may drive nationals of these market would assist in countries to migrate to the UK. addressing the serious labour We then examine the market disturbance that we characteristics of those A2 believe the UK is currently nationals already resident in experiencing. This addresses the UK to aid our the second part of the consideration of the possible question that we have been labour market impact of asked by the Government. maintaining (or removing) the The focus of this chapter is on current restrictions on A2 those issues that are relevant nationals‟ access to the UK to potential future flows of A2 labour market. As an nationals into the UK labour alternative potential proxy of market and the potential this impact, at points during impacts of those flows. this chapter we also consider briefly the experience of 4.2 For the purposes of this report migration from the „A8‟ we assume that maintaining countries to the UK since the current labour market these countries‟ accession to restrictions is one of two the European Union (EU) in options under consideration: 2004. alternatively, the current restrictions on A2 nationals‟ 4.2 The drivers and impacts access to the UK labour of economic migration market could be removed. It is necessary, therefore, to 4.4 In this section we briefly consider the possible impact consider the existing evidence on the UK labour market of and academic literature in both of these options. relation to:
4.3 We begin by discussing the the drivers of economic relevant academic literature migration;
41 A2 labour market restrictions
the labour market impacts use evidence on the drivers of of migration; and migration to accurately predict flows from the A2 countries to the economic impacts of the UK under different policy migration. scenarios. Nevertheless, it may indicate potential broad 4.5 We have discussed this trends. evidence in some of our previous reports, such as 4.8 Two key drivers of migration Migration Advisory Committee decisions are the labour (2008), Migration Advisory market performance and the Committee (2009c) and migration policies of potential Migration Advisory Committee destination countries. In the (2010), and we do not repeat case of emigration from all of this discussion here. Bulgaria and Romania, Instead we aim to draw out whether and to what extent and summarise the key other European Union (EU) points. countries lift their restrictions on workers from these The drivers of economic migration countries will be a key driver of likely flows to the UK. We 4.6 The drivers of migration are discussed the current those factors which influence restrictions in other EU the decisions made by countries in Chapter 2. individuals and households regarding whether to 4.9 One recent study on the temporarily or permanently drivers of international emigrate from the source migration to and from the UK country, and which destination found that the UK‟s stance on country they migrate to. These migration policy relative to that factors will therefore affect the of other destination countries volume and composition of (measured as net immigration flows between different to the UK relative to net countries, such as between immigration to other Bulgaria or Romania and the destination countries) was an UK. important determinant of immigration into the UK from, 4.7 It may be possible to use the among others, the A8 and evidence on the drivers of Latin American countries migration for forecasting (Mitchell and Riley, 2011).The purposes: if we understand study found that a more lax what drives migration, and immigration policy in the UK those drivers themselves can relative to other potential be predicted, then in principle destination countries was it is possible to forecast associated with an increased immigrant flows. In practice, rate of immigration into the UK however, the evidence is often from the countries mentioned. equivocal and it is always specific, to some degree, to a 4.10 We would also expect particular time and place. As a economic migration to be consequence, it is difficult to
42 Chapter 4: Analysis of labour market restrictions
influenced by factors that the associated financial and relate to anticipated economic non-financial costs of moving prosperity and labour market between countries. success (for the main migrant and their dependants) in the 4.13 In Migration Advisory destination country, relative to Committee (2008) we set out the source country. Relevant some of the existing theories, factors may include: economic or otherwise, on the drivers of migration. These expected income and theories include: standard of living in the source country relative to neoclassical the destination country; microeconomic theory, which emphasises the relative employment rates individual migration and demand for labour; decision within a cost- benefit framework (Hicks, skills and recognition of 1932; Sjaastad 1962; professional qualifications; Harris and Todaro 1970);
exchange rates; and neoclassical macroeconomic theory, the demographic profile of which focuses on labour the source and destination market aggregates such countries. as productivity, pay level and employment 4.11 Blanchflower et al. (2007), opportunities (Borjas, which looked specifically at 2000), but, again, this is the impact of A8 migration on embedded in micro-cost the UK, found that the benefit theory; propensity to migrate to the UK was negatively correlated dual labour markets, with the per capita Gross which emphasise the Domestic Product (GDP) in demand side of the labour the source country. The market such that difference in GDP between employers require a the A2 countries and the UK permanent supply may thus be a considerable (primary labour market) pull factor. We consider this and a fluctuating reserve issue later. (secondary labour market) (Piore and Berger, 1980); 4.12 There are also other, non- economic, factors that will family decision making, influence migration decisions. which moves the focus Family networks, historical away from the individual links between countries, and towards family cultural similarities, and the strategies and presence of established opportunities (Stark, migrant communities may 1991); have an impact, as may geographical proximity and
43 A2 labour market restrictions
systems theory, which UK incomes relative to emphasizes the other EU countries and interaction between source countries; societies and links between economic, population factors political, cultural and including population military factors (Chase- growth in source regions Dunn et al., 1994); and and the share of young adults in source country the application of network populations; theory to the issue of migration. This theory is bilateral trade; based on the premise that a network becomes more UK unemployment; and valuable as its usage increases, because costs the existing stock of fall or benefits rise, migrants in the UK. thereby encouraging increasing numbers of 4.15 The findings of international adapters (Massey et al., studies also support the 1993). theory that the existing stock of a migrant population in a 4.14 In Migration Advisory destination country increases Committee (2008) we also the propensity of further flows discussed Mitchell and Pain of their compatriots to (2003), which developed an emigrate to that country econometric model of the (Pederson et al., 2004). The economic and demographic literature suggests that this drivers of annual immigrant network effect can also inflows into the UK from improve the labour market various source countries. To outcomes of immigrants to a do so, Mitchell and Pain country: Munshi (2003) found (2003) compared the average that Mexican migrants working level of International in the United States with Passenger Survey (IPS) access to larger networks migration between 1988-90 were more likely to be in and 1998-2000 and found that employment and hold more average annual inflows during highly paid jobs soon after the latter period were 83,400 their arrival. (or 30 per cent) higher per annum. Their study found that 4.16 None of the literature the following variables were discussed above relates indicators of legal flows of directly to the decision of immigrants intending to stay in Bulgarian and Romanian the UK for over 12 months in nationals to migrate to the UK. the periods under One recent study, however, consideration: found that the high economic status associated with living and working in the UK has become a significant pull factor for recent waves of
44 Chapter 4: Analysis of labour market restrictions
Bulgarian migrants (Maeva, communities in the UK over 2010). This study cited the the same period. finding of Markova and Black (2008) that Bulgarian migrants 4.18 A further limitation is that tend to work in occupations in there is relatively little the UK that are significantly evidence that allows the less skilled than the potential composition of future occupations in which they migration flows to be reliably were employed in Bulgaria. inferred. Consider, for Maeva (2011) found that the instance, the case of an UK has only recently become across-the-board increase in a popular migration the prospective migrants‟ destination for Bulgarian incomes in the A2 countries. nationals, and that this While this may raise the ability growing popularity can be and propensity of low-income attributed to factors such as individuals to emigrate, it may the high standard of living in simultaneously persuade the UK and the positive those prospective migrants experience of other already on a relatively high Bulgarians in the UK. In income to remain in their particular, the author cited the country of nationality. recent flows of Bulgarian students to and from the UK 4.19 Despite these limitations, on as potential explanation in the the basis of the available growing interest in the UK as literature it would appear that a migration destination. a range of factors could influence the decision to 4.17 While studies such as Mitchell migrate to the UK from either and Pain (2003) identify Bulgaria or Romania. These factors that may be positively include: labour market and correlated with an individual‟s wider economic conditions in decision to migrate to a the UK and Bulgaria and destination country, the Romania; differences in wage relative importance of these levels and purchasing power factors is likely to vary between the UK and Bulgaria according to time and place. and Romania; the pre- For example, although the existence of Bulgarian or current UK unemployment Romanian migrant rate, when compared to its communities in the UK; labour pre-recession levels, may be demand in the UK; and the considered a deterrent to level of access to labour potential Bulgarian and markets other than the UK. Romanian immigrants to the We consider some of these UK, this may be more than factors in the next sections of offset by the increased this chapter. attractiveness of the UK as a migration destination that may Labour market impacts of be caused by a strengthening migration of the Bulgarian or Romanian 4.20 We discussed the existing literature on the labour market
45 A2 labour market restrictions
impacts of migration in detail migration to be statistically when we were asked to significant “either on average consider the limits on Tiers 1 or at any point on the wage and 2 of the Points Based distribution”. On the other System (PBS) for 2011/12 hand, Dustmann et al. (2008) (Migration Advisory found that such impacts vary Committee, 2010). It is difficult across the wage distribution, to identify the impact of reporting a negative impact on migration on the UK labour the wages of natives at the market in the absence of a bottom end of the wage counterfactual (what would distribution, and a positive have happened if the impact on wages at the top migration had not occurred). end of the distribution. As we Nevertheless, many studies said above, Dustmann et al. have attempted to isolate this found the overall impact of impact of migration by migration on wages to be comparing groups or localities slightly positive. that have been affected by migration with otherwise 4.23 Separate studies have also similar groups or localities that examined the impact of have not. migration on wages within occupations. Nickell and 4.21 The available empirical Salaheen (2008) found that a evidence suggests that 10 percentage point increase migration has little effect on in the migrant share of an average wages. Some occupational workforce studies have found no reduces average wages by statistically significant effect of 0.4 per cent. This impact of migration on non-migrant migration is estimated to be wages (e.g. Dustmann et al., larger for some occupational 2005), some have found that, groups, in particular the overall, migration led to a unskilled and semi-skilled slight increase in average service sector: here, a 10 wages (e.g. Dustmann et al., percentage point increase in 2008), while others have the migrant share is estimated reported a negative impact on to reduce average wages by wages (e.g. Reed and Latorre, approximately 5 per cent. 2009). 4.24 The variation in the impact of 4.22 The academic literature migration across the wage provides mixed conclusions distribution and occupations regarding whether the wage suggests that migrants and impacts of migration vary non-migrants are not always across the wage distribution. perfect substitutes. Lemos and Portes (2008), Furthermore, the findings of which considered the impact Dustmann et al. (2008) on the UK labour market of suggests that substitutability the accession of the A8 between migrant and non- countries to the EU in 2004, migrant labour is lower in did not find the impact of more highly skilled jobs at the
46 Chapter 4: Analysis of labour market restrictions
top end of the wage time and place and typically distribution. On average, only allow for a modest certain types of new degree of disaggregation. In immigrant flows are more Migration Advisory Committee likely to be substitutes for the (2010 and 2009b) we existing stock of migrants in discussed anecdotal evidence the UK than for non-migrants that migrant workers may because migrants are displace non-migrants in disproportionately some circumstances and in concentrated at the bottom some sectors. Such end of the wage distribution. eventualities will be of interest to policymakers yet they do 4.25 This increased substitutability not necessarily contradict of new and existing migrants findings showing that, at the was tested by Manacorda et whole-economy level, al. (2006). The results of this migrants do not have a study suggest that new significant impact on migration depresses the employment levels or rates of earnings of migrants relative UK workers. to the native-born population, such that a 10 per cent rise in 4.28 An important consideration, the migrant share leads to a 2 given the conclusions drawn per cent rise in the wage in Chapter 3 of this report, is differential between natives how migrant employment and migrants. rates are affected by times of economic downturn. 4.26 Many empirical studies find no Dustmann et al. (2006) statistically significant impact provided some empirical of migration on the support to the hypothesis that employment levels of non- migrant employment rates are migrant workers (see, for disproportionately affected by example, Dustmann et al. recession compared to non- (2005); and Lemos and migrant employment rates, Portes, 2008)). Jean and finding that migrant Jimenez (2007) found that an employment rates in the UK increased share of migrants in and Germany vary more than the labour force may lead to those of non-migrants through higher unemployment among the economic cycle. However, non-migrant workers in the there is some evidence that first five to ten years, but they this was not the case during too found no significant impact the most recent recession, in the long term. where the unemployment rates of migrants and the UK- 4.27 All such studies are, to born population rose together differing extents, constrained and by similar amounts by the ability to isolate the (Wadsworth, 2010). specific impact of migration in the available datasets. 4.29 The effect of migration on the Furthermore they are, once employment rate of natives at again, specific to a particular different stages of the
47 A2 labour market restrictions
economic cycle is considered per cent between 2003 and by Peri (2010). This study 2005. However, this does not found that there is no tell us about the impact on significant impact of migration individuals‟ economic on the employment rate of prosperity or standards of natives while the economy is living, so the use of GDP as a growing. This is found to be measure of the economic the case even in the short run impact of migration is limited, and even for less-educated or even potentially misleading native workers. However, the (House of Lords, 2008). study found that, during economic downturns, new 4.32 GDP per capita (per head) is immigrants have a small a more useful measure, as it negative short-run impact on takes into account the change the employment rate of in population size. Migration natives. Immigration is found can have a positive effect on to have no impact in the long UK GDP per capita by run. changing one or more of its key determinants: Economic impacts of migration By boosting the 4.30 Academic studies into the employment rate. economic impacts of migration have tended to focus on the By boosting productivity, impacts on: GDP; GDP per through complementing capita; productivity; prices; existing residents‟ skills remittances (income leaving and capital, and through the UK economy); investment increasing the overall and trade; and fiscal effects skills available and (net contribution to public providing spillover benefits finances). We discussed to the economy. these impacts of migration in detail when we were asked to By boosting trade and take them into account as part inward investment. of our consideration of the limits to Tiers 1 and 2 of the By boosting other PBS for 2011/12 (Migration components of trend Advisory Committee, 2010). economic growth relative This section provides a brief to the change in review of this material. population size that occurs as a result of the migrant 4.31 By increasing the size of the inflow. UK population, positive net migration clearly has a 4.33 The impact of migration on the positive impact on UK GDP. employment rate will depend Riley and Weale (2006) on the extent to which estimated that migration migration workers are accounted for 0.9 percentage complements or substitutes points, or 17 per cent, of the for the existing domestic total growth in UK GDP of 5.3 workforce. As we discussed earlier in this section, the
48 Chapter 4: Analysis of labour market restrictions
available evidence suggests might migrate to the UK if the that migrant and non-migrant current labour market labour are less likely to be restrictions were not substitutes at higher levels of maintained. We consider this skill. Thus we might expect issue later in this chapter. skilled migration to increase the UK employment rate and, 4.37 Migration can also have an with it, GDP per capita. impact on the prices of goods and services in the 4.34 There is evidence from both UK. This impact operates the United States and Europe through two opposing that migration, particularly channels. First, migrant skilled migration, does inflows increase the UK labour increase average productivity supply, thus raising potential levels (Peri, 2010; Huber et UK output. Second, migrant al., 2010; Hunt and Gauthier- inflows increase the demand Loiselle, 2008). Similarly, for UK goods and services. there is evidence that migration boosts levels of 4.38 It is the relative size of these trade across countries, either changes in aggregate supply through migrants‟ own and aggregate demand that innovation or through the determine the net effect of innovation of the business migration on prices of goods and personal networks they and services. The limited generate (Neumark and evidence available suggests Mazzolari, 2009). that, on balance, migration has reduced inflationary 4.35 The practical implications of pressures in the UK (see the endogenous growth Frattini, 2008). Blanchflower literature (see, for example, et al. (2007), which focussed Aghion and Howitt, 1997), in particular on the impact of which indicates that there may immigration from the A8 be long-term benefits of countries, noted that the migration in terms of human extent of the inflationary capital spillovers that promote impact depends on the increased productivity and per economic characteristics of capita GDP growth, will the migrant cohort relative to depend on the skill level of the non-migrant workforce: migrants. Again, we would the higher the migrants‟ expect the skill level of the productivity relative to the migrant inflow to be positively non-migrant workforce, the correlated with the benefit to more the migrant cohort the UK non-migrant raises the potential supply of population, and consequently the UK economy. to UK per capita GDP growth. 4.39 The impact of migration on the 4.36 A key consideration for this UK economy will depend on review, therefore, is the skill the proportion of migrants‟ profile of those Bulgarian and income that is sent back to Romanian nationals who their home country in the form
49 A2 labour market restrictions
of remittances: the higher the make a greater net fiscal proportion of migrants‟ income contribution than those with that is spent in the UK, the low earnings and low levels of greater the contribution to UK skill. GDP. Studies suggest that remittances are likely to be 4.41 None of the academic higher if migrants retain strong literature discussed so far in family links in their home this section has considered country, if price and wage the specific economic and levels in their destination labour market impact of country are high relative to Bulgarian and Romanian prices and wages in their nationals in the UK. One home country, or if migrants recent paper, Fic et al. (2011), view their relocation as looked at flows of Bulgarian temporary (Merkle and and Romanian nationals to Zimmerman, 1992). the so-called „EU15‟ countries (defined in Chapter 2), which 4.40 Migrants‟ net fiscal impact includes the UK, between (that is, their contribution to 2004 and 2009. This period government tax receipts less covers the first two years the value of the public following Bulgaria and services, including welfare Romania‟s accession to the payments, that they consume) EU. Using an econometric depends greatly on their model that specifies the individual characteristics. As labour market in each migrants often spend the very destination country in terms of early and very late periods of a wage equation and a labour their lives outside of the UK, demand equation, Fic et al. and reside in the UK only (2011) assessed the short- whilst of working age, several and long-term macroeconomic studies have found evidence impact of migration from in support of migrants making Bulgaria and Romania. a positive net fiscal contribution to the UK (Gott 4.42 Taking into account the fact and Johnston, 2002; that migrant flows from Sriskandarajah et al., 2005). Bulgaria and Romania were Dustmann et al. (2009) predominantly of working age, estimated that, on average, Fic et al. (2011) estimated A8 migrants to the UK made a that, in the long run, UK per positive net fiscal contribution capita GDP would increase by in each fiscal year from 0.04 per cent as a result of 2005/06 to 2008/09. Of immigration from these course, migrants‟ net fiscal countries between 2004 and contribution will also be highly 2009. The long-term impact correlated with their earnings, on the UK unemployment rate and thus with their skill level was estimated to be very and qualifications: all else small, a decrease of 0.01 equal, we would expect that, percentage points. The paper on average, highly skilled, also estimated a reduction in high-earning migrants will real wages in the UK of 0.05
50 Chapter 4: Analysis of labour market restrictions
per cent in the long term as a 2010 (World Bank, 2011). For result of immigration from the same period, UK GDP per Bulgaria and Romania over capita was US$36,100. the same period. There is Expressed in Purchasing some uncertainty around Power Standards (PPS), these estimated long-term which adjust for differences in impacts because they are price levels across countries based on the assumption that to enable meaningful all migration flows over the comparison of price data, in period were permanent. In 2010 Bulgaria had the lowest reality, as we discuss GDP per capita of all EU27 elsewhere in this chapter, this countries, at only 44 per cent is unlikely to be the case. of the EU27 average (Eurostat, 2011b). 4.3 Economic, labour market Comparatively, UK GDP and migration context in expressed in PPS was 14 per Bulgaria and Romania cent higher than the EU27 average in 2010. A recent 4.43 This section summarises the study by the Open Society current economic and labour Institute – Sofia (2011a) market situation in Bulgaria reported that Bulgaria is the and Romania. It also poorest of the 27 EU Member considers migration flows from States in terms of GDP per these two countries to the UK capita adjusted for purchasing and the characteristics of the power, and that “the large stock of Bulgarian and difference in income between Romanian nationals in the UK. Bulgaria and the old Member States is a powerful engine for Economic, labour market and the movement of migrants - migration context in Bulgaria from Bulgaria to more well-to- do countries.” 4.44 Bulgaria‟s GDP fell by 5.5 per cent between 2008 and 2009, 4.46 The unemployment rate in followed by growth of 0.2 per Bulgaria was 11.7 per cent in cent in 2010 (Eurostat, August 2011. This is a 1.5 2011a). Forecasts provided by percentage point increase on Eurostat (2011a) suggest that one year previously, and 2.2 Bulgarian GDP is forecast to percentage points higher than grow by 2.8 per cent in 2011 the average unemployment and 3.7 per cent in 2012. rate of all EU27 countries in However, it is possible that August 2011 (Eurostat, these forecasts will be revised 2011c) and higher than the downward as a result of the current unemployment rate in economic and financial crises the UK. that are being experienced at the time of writing this report. 4.47 Bulgaria is a country of net emigration. Net emigration 4.45 GDP per capita in Bulgaria from Bulgaria has slowed from was estimated to be over 45,000 per annum in the US$6,325 (US dollars) in 1990s to around 15,000 in
51 A2 labour market restrictions
2009 (National Statistics most popular destinations for Institute, 2011). In the context Bulgarian migrants. of the economic downturn, migration to and from Bulgaria 4.50 Spain lifted its labour market declined in 2009, and restrictions on Bulgarian preliminary data suggest that nationals on 1 January 2009. this decline continued in 2010 There is no evidence that this (Organisation for Economic led to increased flows of Co-operation & Development Bulgarian nationals to Spain: (OECD), 2011). In 2009, 60 Spanish migration data per cent of emigrant flows indicate that approximately from Bulgaria were women. 9,700 Bulgarians migrated to Furthermore, in 2009, more Spain in 2009 (OECD, 2011). male Bulgarian migrants This is the lowest number returned to Bulgaria than since 2000, which is most female Bulgarian migrants likely a reaction to the (OECD, 2011). uncertainty caused by the economic downturn 4.48 Due to this positive net experienced in both the host emigration, the Bulgarian and destination countries at Diaspora is large relative to this time. the size of the population of Bulgaria: an estimated 2.5 4.51 There is survey evidence that million Bulgarians are thought many Bulgarian nationals to reside abroad (Black et al., return to their home country 2010), while the population of after a short period abroad, Bulgaria is currently estimated but that a majority of these at 7.5 million (Eurostat, individuals consider it highly 2011d). likely that they will emigrate again, and not necessarily to 4.49 According to OECD (2011) the same destination country the most popular migration (Minchev and Boshnakov, destinations of Bulgarians are 2007). Spain and Greece. Recent surveys (Open Society Economic, labour market and Institute - Sofia, 2011b), on migration context in Romania the other hand, found that Germany and Spain were the 4.52 Romania‟s GDP fell by 6.6 per most popular destinations of cent during 2009 and by 1.9 Bulgarian emigrants, followed per cent during 2010. by the UK. A separate survey However, the Romanian by the Bulgarian Academy of economy is expected to Science (2011) found the UK strengthen in future years, to be the most popular with forecasted GDP growth destination, followed by of 1.5 per cent and 3.7 per Germany and Spain. The cent respectively in 2011 and findings of this evidence are 2012 (Eurostat, 2011a). As mixed, but they do suggest with the forecasts for that the UK ranks among the Bulgarian GDP growth, it is possible that these forecasts will be revised downwards.
52 Chapter 4: Analysis of labour market restrictions
4.53 Per capita GDP in Romania that the level of emigration of was estimated to be Romanian nationals is in fact US$7,538 in 2010, compared much higher than is reported to US$36,100 in the UK for in Romanian statistics: in the same year (World Bank, 2009, the number of 2011). Expressed in PPS Romanian nationals living in terms, Romania‟s GDP per Italy increased by capita in 2010 was the second approximately 90,000 to a lowest of all EU27 countries total of 890,000, while in (at only 45 per cent of the Spain the corresponding EU27 average). As we increase was approximately discussed above, Bulgaria 33,000, to a total of had the lowest GDP per approximately 750,000 capita in PPS terms in 2010, (OECD, 2011). The total while UK GDP per capita in number of Romanians PPS terms was 14 per cent working abroad in 2009 is above the EU27 average estimated to be 3 million, with (Eurostat, 2011b). the largest populations in Italy and Spain. To put this figure 4.54 In August 2011 the into context, Eurostat (2011d) unemployment rate in estimates the total population Romania was 7.3 per cent, of Romania to be 21.4 million. which is unchanged from 12 months before. This is lower 4.57 Evidence we received from than both the average the Romanian Embassy in the unemployment rate in all UK and Dr. Liliana Harding EU27 countries and the provided support for Spain unemployment rate in the UK and Italy being the preferred in August 2011 (Eurostat, migration destinations for 2011c). Romanian nationals. The Romanian Embassy in the UK 4.55 Romania is a country of net told us that approximately 80 emigration (OECD, 2011). per cent of all Romanian Data on the emigration of nationals who migrate within Romania nationals or people the EU are thought to migrate born in Romania is limited, as to Spain or Italy, but that it is only a small proportion of not possible to determine actual outflows are captured exact levels due to existing by official emigration statistics. data limitations and free In 2009, there were movement of Romanians approximately 17,000 newly across EU Member States. It registered Romanian was argued that Spain and emigrants - an increase of 17 Italy were the preferred per cent on the previous year destinations due to cultural, - with Canada, Germany and geographical and linguistic the United States the most similarities. Of course, the fact popular destinations. that these countries have in the past been relatively open 4.56 Statistics provided by the to allowing A2 nationals, destination countries suggest including those working in low
53 A2 labour market restrictions
skilled occupations, to gain remittances coming from access to their labour markets Romanian nationals resident may also be a possible in Italy and Spain (OECD, explanation for this observed 2011). preference. We were told that many Romanians who 4.4 Bulgarian and Romanian emigrate to Spain and Italy nationals in the UK work in construction or as home carers. 4.60 In this section we examine evidence on those A2 4.58 Spain lifted its labour market nationals already resident in restrictions on Romanian the UK. This evidence will nationals on 1 January 2009. help us to consider the However, as we discussed in possible impact of these Chapter 2, the European future flows on the UK labour Commission permitted Spain market. We consider this to re-impose labour market evidence in two parts. First, restrictions on Romanian we examine the magnitude of nationals from August 2011. stocks of A2 nationals in the In practice, this measure did UK and flows to the UK. not affect those Romanian Second, we consider the nationals already in characteristics of those A2 employment in Spain, but nationals already resident in meant that no further the UK. Romanian nationals would be permitted to gain access to 4.61 It is important to note that the the Spanish labour market discussion in this section is without the relevant work based on historical data. The permit or exemption. The past is not a fully reliable restrictions, which are in place guide to the future, particularly until 31 December 2012, were in the context of the authorised by the European potentially significant change Commission “in view of the to UK labour market policy current economic situation in with respect to A2 nationals Spain. The unprecedented fall being considered in this in GDP (3.9 per cent between report. 2008 and 2010) has resulted in the highest unemployment Migration of Bulgarian and rate in the EU, over 20 per Romanian nationals to the UK cent since May 2010” (European Commission, 4.62 Table 4.1 shows the 2011). estimated populations of Bulgarian and Romanian 4.59 Flows of remittances to nationals in the UK since Romania are estimated to be 2004, as reported by the the largest in the EU: more Annual Population Survey than €3 billion were remitted (APS). This table shows that by Romanian nationals living there were approximately abroad in 2009, with 52,000 Bulgarian nationals approximately two-thirds of and 79,000 Romanian nationals resident in the UK in
54 Chapter 4: Analysis of labour market restrictions
2010. These estimates Romanian nationals represent a considerable represented the 35th and 24th increase in the UK-resident largest foreign-born populations compared to the populations resident in the UK years immediately prior to the respectively. As we set out accession of Bulgaria and earlier in this chapter, the Romania to the EU in 2007. population of Romania is The UK also observed a approximately three times as considerable and steady large as that of Bulgaria. It is increase in the stock of A8 therefore unsurprising that the immigrants following the stock of Romanian-born accession of these countries individuals in the UK is larger to the EU in 2004. We than the stock of individuals considered stocks and flows born in Bulgaria. Relative to of A8 migrants in more detail the size of the populations of in Migration Advisory the two A2 countries, Committee (2008). however, the proportion of all Bulgarians living in the UK is 4.63 The APS estimated that, in larger. 2010, Bulgarian and
Table 4.1: Estimated Bulgarian and Romanian population resident in the United Kingdom, by country of birth Year Estimated population (000’s) Bulgaria Romania 2004 <14* 14 2005 15 18 2006 <17* 17 2007 <20* 23 2008 33 41 2009 37 56 2010 52 79 Year to July 2011(1) 52 82 Notes: Estimates are based on the Annual Population Survey (APS) which is the Labour Force Survey (LFS) plus various sample boosts. The LFS excludes students in university halls that do not have a UK resident parent and people in most other types of communal establishments (e.g. hotels, boarding houses, hostels, mobile home sites, etc). It is grossed to population estimates of those living in private households that only include migrants staying for 12 months or more. The Office for National Statistics only publishes estimates of the 60 largest foreign-born populations in the UK. An asterisk (*) denotes that the Bulgarian-born population in the UK was not one of the 60 largest foreign-born populations. In these instances it is only known that the Bulgarian-born population is smaller than the 60th largest foreign-born population estimated in that year. The figure shown is the size of the 60th largest foreign-born population in the UK, as recorded by the APS. (1) This estimate is based on the most recent four quarters of LFS data, from 2010 Q3 to 2011 Q2. It is not an APS estimate and thus does not include the various sample boosts that are used in calculating these APS estimates. Source: Office for National Statistics (2011f).
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4.64 The Romanian Embassy in was very small (117) and the the UK told us that the UK- survey was conducted outside resident Romanian population the Bulgarian Embassy in represented only a small London, so the findings of the proportion of the total number survey are not necessarily of Romanian nationals living representative of all Bulgarian in EU Member States. We nationals resident in the UK. were told that a relatively Approximately three quarters small number of Romanian of all respondents to the nationals have chosen the UK survey said that they had as an employment destination come to the UK primarily for but that Romanian students economic reasons, citing the continue to be attracted by the insufficient earnings in UK‟s highly ranked Bulgaria and the lack of universities. prospects in Bulgaria as the main reasons for migrating 4.65 Survey evidence from (Markova, 2011). None of Bulgaria suggests that these respondents reported Bulgarian nationals are being unemployed before attracted to the UK as a leaving Bulgaria, and some migration destination due to said that they were in fact the popularity of the English disappointed by the economic language and English- situation that they were speaking culture among experiencing in the UK. younger Bulgarians. The same survey evidence found 4.67 The population estimates set that the opportunity to out in Table 4.1 provide a increase earnings and the snapshot of the Bulgarian- presence of friends and and Romanian-born relatives already resident in populations resident in the UK the UK are also important in a given year; they do not factors that may explain the indicate the level of long-term growing stock of Bulgarian migration to the UK by nationals resident in the UK Bulgarian and Romanian (Open Society Institute - nationals. Sofia, 2011b). We were also told that, like many 4.68 The primary source for Romanians, Bulgarian estimates of long-term students are attracted to the migration is the International UK because of the large Passenger Survey (IPS). The number of high quality IPS defines long-term universities. migrants as those changing their place of residence for 4.66 A survey was conducted on a one year or more. The IPS is small sample of Bulgarian a continuous voluntary sample nationals resident in the UK at survey that is conducted at all the time of the Bulgarian principal air and sea routes to parliamentary elections in July the UK, as well as at the 2009. The number of Channel Tunnel. Due to its respondents to this survey limited sample size, the IPS
56 Chapter 4: Analysis of labour market restrictions
becomes less reliable when 4.70 In Chapter 2 we set out how disaggregating by specific Bulgarian and Romanian nationality or over short time nationals may live and work in periods. Even when the UK. Table 4.2 shows the combining all Bulgarian and number of applications for Romanian nationals recorded accession worker cards, the in the IPS between 2004 and Sectors Based Scheme 2009, the resulting migration (SBS), the Seasonal estimates still have large Agricultural Workers Scheme standard errors, which (SAWS) and registration suggests that they may be certificates approved each unreliable. Consequently, we year from 2007 to 2010. do not present the IPS data in These data on annual inflows this report. do not correspond to the annual growth in the stock, 4.69 Unfortunately there is no which we set out in Table 4.1. single data source that can There are two main reasons accurately describe all for this: first, the data in Table economic migration flows of 4.2 correspond to the inflow A2 nationals to the UK, only, and so they do not take particularly as entry clearance account of the outflow in each visas are no longer required year; second, a large following accession. In light of proportion of the annual inflow this, and the small sample is via temporary migration sizes in the IPS, it is routes (the SBS and the necessary to consider a SAWS). Migrants through variety of administrative data these routes may not be sources to build a picture of picked up in the APS. flows of A2 nationals to the UK.
57 A2 labour market restrictions
Table 4.2: Approved applications by A2 nationals for accession worker cards, the Sectors Based Scheme, the Seasonal Agricultural Worker Scheme and registration certificates, 2007 to 2010 2007 2008 2009 2010 Approved accession worker cards (1) 3,797 2,776 2,097 2,592 …of which Bulgarian nationals 1,615 1,507 913 794 …of which Romanian nationals 2,182 1,269 1,184 1,798 Approved Sectors Based Scheme applications (1) 1,407 1,569 775 601 …of which Bulgarian nationals 1,162 1,381 704 452 …of which Romanian nationals 245 188 71 149 Approved Seasonal Agricultural Workers Scheme applications (2) 8,058 16,461 20,179 17,150 …of which Bulgarian nationals 5,638 10,833 12,421 9,971 …of which Romanian nationals 2,420 5,628 7,758 7,179 Approved registration certificates (3) 29,753 19,568 21,479 26,315 …of which Bulgarian nationals 9,163 6,262 6,821 8,030 …of which Romanian nationals 20,590 13,306 14,658 18,285 Notes: (1) Accession worker cards are typically issued to A2 nationals who have been granted a skilled (business and commercial) work permit or permission to enter low-skilled employment in the UK via the Sectors Based Scheme (SBS). They are also issued to A2 nationals entering the UK via smaller employment routes, such as au pairs and domestic workers. Entering the UK via the SBS is a two-stage process: first, the applicant is approved for the SBS; second, the applicant is issued with an accession worker card. Consequently, the number of approved accession worker cards and the number of approved SBS applications should not be treated as separate migration flows, as the number of approved accession worker cards will include most, if not necessarily all, of the approved SBS applicants. However, because there may be some delay between the two stages of this process, and because it may be the case that not all individuals whose application for the SBS is approved will subsequently receive an approved accession worker card, these data are presented separately in this table. (2) Approved applicants to the Seasonal Agricultural Workers Scheme are not issued with an accession worker card or a registration certificate. Therefore, they will not be picked up in any of the other grants or approvals for documentation listed in this table. (3) The approved registration certificates presented here include all blue and yellow registration certificates (but not purple certificates, which are accession worker cards). These numbers therefore include those registering as being students, self-sufficient or self-employed, and those registering as being exempt from work authorisation. Source: Home Office (2011).
4.71 The number of approved Entering the UK via the SBS accession worker cards is a two-stage process: first, shown in Table 4.2 includes the applicant is approved for those accession worker cards the SBS; second, the that were issued to A2 applicant is issued with an nationals entering the UK via accession worker card. the SBS. The number of Consequently, the number of approved SBS applications is approved accession worker also published separately by cards and the number of the Home Office, and these approved SBS applications data are also presented should not be treated as separately in Table 4.2. separate migration flows, as
58 Chapter 4: Analysis of labour market restrictions
flows via the SBS should also expense of migrating to the be included in the accession UK. The Romanian Embassy worker card data. However, to the UK told us that because there may be some Romanian nationals were not delay between the two stages familiar with, or attracted to, of this process, and because it many of the jobs available may be the case that not all under the SBS, which may individuals whose application explain the relatively small for the SBS is approved will numbers of Romanian subsequently receive an nationals that come to the UK approved accession worker via this route. card, these data are presented separately in Table 4.74 As Table 4.2 highlights, the 4.2. majority of A2 nationals are not issued business and 4.72 The data show that the total commercial work permits or number of accession worker work authorisation through the card approvals was lower in SAWS or the SBS. Instead, 2010 than in 2007. The they apply for, and are number of approved SBS subsequently granted, a applications has also declined registration certificate. We over this period, while the discussed the various types of number of approved SAWS registration certificate in applications issued to A2 Chapter 2. The registration nationals has more than certificate data shown in Table doubled. In every year since 4.2 includes those A2 2007 Bulgarian nationals have nationals who enter the UK as made greater use of the SBS „highly skilled‟ (according to and the SAWS than the Highly Skilled Migrant Romanian nationals. Programme (HSMP) or the Science and Engineering 4.73 In its discussions with us the Graduate Scheme (SEGS) in Romanian Embassy in the UK Scotland), students, domestic said that the SAWS and the workers or au pairs, or who SBS are not particularly register as being self-sufficient attractive to many Romanian or self-employed during their nationals. Employment with a time in the UK. Self-employed SAWS operator often involves workers are not obliged to working outside, and therefore apply for a registration obtaining work on any certificate, therefore Table 4.2 particular day is often does not pick up the total flow dependent on the weather. of self-employed A2 nationals We were told that this deters that enter the UK in any given many prospective Romanian year. migrants from coming to the UK: with no guarantee of 4.75 Table 4.2 shows that the constant or even regular work number of approved during their time in the UK, registration certificates many Romanian nationals find declined during the period of that they cannot justify the the economic downturn (2008-
59 A2 labour market restrictions
2009) before increasing again as self-employed during their in 2010. However, the number time in the UK will be granted of approvals in 2010 was still a registration certificate, as lower than the level observed there is no obligation for them in the first 12 months following to apply for one. Furthermore, accession. It also shows that some registration certificates the large majority of will be issued to students who registration certificates are may wish to qualify for the issued to Romanian nationals. right to work in the UK, but This suggests that there is a who may not actually enter greater number of Romanian employment. Therefore, to nationals than Bulgarian obtain an alternative picture of nationals coming to the UK to flows of A2 nationals into work who exercise a Treaty employment in the UK it is right (e.g. by registering as useful to examine the number self-employed or self-sufficient of National Insurance Number during their time in the UK) or (NINo) allocations to A2 who are exempt from labour nationals between 2007 and market restrictions (e.g. by 2010. These data are set out being highly skilled). in Table 4.3.
4.76 As we explained above, not all A2 nationals who register
Table 4.3: National Insurance Numbers issued to A2 nationals, 2007 to 2010 2007 2008 2009 2010 National Insurance Number allocations 31,420 39,330 33,610 31,420 …of which Bulgarian nationals 12,250 15,890 13,540 12,450 …of which Romanian nationals 19,170 23,440 20,070 18,970 Notes: National Insurance Number allocations for each foreign-born population are rounded to the nearest 10. Source: Department for Work and Pensions (2011).
4.77 A comparison of Tables 4.2 Alternatively, it is possible that and 4.3 shows that the some A2 nationals may enter number of NINos issued to A2 employment without a NINo nationals has been lower than (i.e. illegally). the number of approved registration certificates and 4.78 As Table 4.3 shows, more SAWS, SBS and accession NINos have been allocated to worker card applications in Romanian nationals than to every year of the period Bulgarian nationals in each considered. This may be year since 2007. Overall NINo explained by the fact that not allocations to A2 nationals all A2 nationals who are were highest in 2008, but they issued a registration certificate fell thereafter and returned to in fact enter employment in 2007 levels in 2010. This the UK (e.g. students). decline in NINo allocations
60 Chapter 4: Analysis of labour market restrictions
might be a consequence of in the UK before registering to the economic downturn, with work, thus making it difficult to worsening labour market attribute work-related visas to conditions deterring some A2 migration flows in any nationals from seeking particular year. However, on employment in the UK. the basis of the available Nevertheless, data presented evidence we can conclude, earlier in this chapter tentatively, that A2 nationals suggests the stock of A2 comprise a relatively small, nationals in the UK has albeit growing, part of the continued to rise. entire UK labour market. Furthermore, a considerable 4.79 As discussed earlier in this proportion of these economic section, there is no one data migrants from the A2 source that allows us to countries are currently determine the exact number employed through the SAWS of A2 nationals that are and the SBS, which are both resident in the UK population. temporary work-based The results of the 2011 migration routes. As census will provide a good suggested by the survey indication of the stock of A2 evidence discussed in the nationals resident in the UK, previous section, it is also but these results are not likely that at least some A2 available at the time of writing nationals who come to the UK this report. What we can say, via non-temporary routes based on the available data, return to their home countries is that the number of after a certain time period. In Bulgarian and Romanian time these individuals may nationals that are resident in emigrate again, and they may the UK has increased again consider the UK as a considerably since the possible destination. accession of Bulgaria and Romania to the EU in 2007. Characteristics of Bulgarian and However, in absolute terms, Romanian nationals resident in these numbers are still quite the UK small, particularly in the context of the size of the UK 4.81 In this section we examine the population as a whole and the characteristics of those size of some other foreign- Bulgarian and Romanian born populations in the UK. nationals already resident in the UK. This may provide a 4.80 Likewise, when considering useful proxy for future the flow of economic migrants immigrant flows to the UK from the A2 countries to the from the A2 countries. UK, the lack of one all- encompassing data set makes 4.82 The evidence presented in it difficult to determine exact this section is based on the numbers. The picture is characteristics of those further clouded by the fact that Bulgarian and Romanian A2 nationals may reside freely nationals recorded in the UK
61 A2 labour market restrictions
Labour Force Survey (LFS). 4.84 Table 4.4 compares the age For the purposes of our and gender breakdown of analysis we considered the Bulgarian-born and characteristics of those A2 Romanian-born nationals nationals recorded in the most resident in the UK to that of all recent four quarters of LFS UK residents. It shows that data, from the third quarter of the median age of Bulgarian- 2010 to the second quarter of born and Romanian-born UK 2011. As the sample size of residents (31 and 28 A2 nationals recorded in the respectively) is lower than the UK LFS is relatively small, median age of all UK there is a considerable margin residents (39). UK residents for error when drawing strong born in Bulgaria and Romania conclusions from these data. are more likely to be of working age (defined as aged 4.83 The Department for 16-64 for both men and Communities and Local women the purpose of this Government has recently analysis): 94 per cent of those published a study that born in Bulgaria and 91 per examined the characteristics cent of those born in Romania of A2 nationals recorded in are of working age, compared the LFS from 2004 to 2009 to 65 per cent of all UK (Kausar, 2011), but in this residents. The fraction male is section we focus on the also slightly higher than for all findings of our own analysis UK residents. and any relevant evidence that was provided by our partners. Table 4.4: Age and gender breakdown of all UK residents, those born in Bulgaria, and those born in Romania, 2010 Q3 to 2011 Q2 Per cent Per cent Per cent Stock aged 16- aged 20- female 64(1) 34 All UK residents 65 20 51 61,604,310 …of which Bulgarian-born 94 56 50 52,152 …of which Romanian-born 91 73 45 82,404 Notes: (1) This age range approximates the working-age population. However, as it includes females aged between 61 and 64, it slightly overestimates the working-age population of the groups shown. Source: Labour Force Survey, 2010 Q3 to 2011 Q2.
4.85 We have also used the LFS to formal qualifications that he or analyse the skill profile of she possesses. We consider Bulgarian- and Romanian- both in this section. born participants in the UK labour market. An individual‟s 4.86 Figure 4.1 shows the skill level can be considered in occupational grouping of UK- terms of the skill level of the born, Bulgarian-born and occupation in which he or she Romanian-born employees is employed, or in terms of the grouped at the 1-digit level of
62 Chapter 4: Analysis of labour market restrictions
the Standard Occupational occupations and elementary Classification (SOC) 2000. occupations. Furthermore, a Figure 4.1 shows that UK- significant proportion of born workers are more likely Romanian-born workers, in to be employed than particular, are employed in Bulgarian-born and personal service occupations. Romanian-born workers in the These results can possibly be first three 1-digit categories of explained in part by the fact SOC 2000 (managers and that there are specific senior officials, professional migration routes (i.e. the occupations, and associate SAWS and the SBS) that are professional and technical designed to allow low skilled occupations). A2 nationals are migrants from Bulgaria and disproportionately Romania to work temporarily concentrated in skilled trades in the UK.
Figure 4.1: Occupational profile of UK-born, Bulgarian-born and Romanian- born respondents to the UK Labour Force Survey, 2010 Q3 to 2011 Q2
100.00
90.00 9. Elementary Occupations
80.00 8. Process, Plant and Machine Operatives 70.00 7. Sales and Customer Service Occupations 60.00 6. Personal Service Occupations 50.00 5. Skilled Trades Occupations 40.00 4. Administrative and Secretarial 30.00 3. Associate Professional and
Percentage of all of all those Percentagein employment 20.00 Technical 2. Professional occupations 10.00 1. Managers and Senior Officials 0.00 UK-born Bulgarian-born Romanian-born Participants in UK labour market
Notes: Occupations are at the 1-digit level of Standard Occupational Classification 2000. The sample size of A2 nationals recorded in the UK Labour Force Survey is relatively small, so there may be considerable margin for error when drawing strong conclusions from these data when disaggregating this sample into even smaller groups. We present these data not to make generalised statements about all A2 nationals resident in the UK, but rather to analyse the available data to provide an indication of what the characteristics of typical A2 nationals might be. Source: Labour Force Survey, 2010 Q3 to 2011 Q2.
63 A2 labour market restrictions
4.87 Foreign qualifications are not group and tend to be of always reliably or consistently working age. It is, therefore, reported in the LFS. This most useful to compare the makes it difficult to ascertain schooling of these migrant the true skill level of the populations with UK-born individual who possesses individuals of similar age. them, including in comparison with individuals with UK- 4.89 Figure 4.2 shows that a very accredited qualifications. small proportion of working- Therefore, as a proxy for the age Bulgarian-born and level of qualifications obtained Romanian-born individuals left by individuals in the UK labour schooling at or before age 16. market, we examine the age Comparatively, around half of at which individuals finished all working-age UK-born their education. This individuals surveyed left information is well reported in education at or before age 16. the LFS and thus enables This result is not surprising: more reliable comparison. we were told by the Romanian Embassy that, for most 4.88 Figure 4.2 shows the age at students in Romania, which working-age UK-born, compulsory schooling does Bulgarian-born and not end until age 18, and that Romanian-born respondents this compulsory school- to the LFS completed their leaving age was increased schooling. We have restricted from 16 many years ago. this analysis to the working- Therefore, the relatively small age population (again defined proportion of Romanian-born as men and women aged 16- individuals recorded in the 64) to take account of the fact LFS as leaving school at or that A2 nationals resident in before age 16 is likely to the UK are a self-selecting comprise older migrants.
64 Chapter 4: Analysis of labour market restrictions
Figure 4.2: Age of leaving education for UK-born, Bulgarian-born and Romanian-born respondents to the UK Labour Force Survey, 2010 Q3 to 2011 Q2
100
90 21+
80 17-20 70
60 0-16 50
Percentage 40
30
20
10
0 UK-born Bulgarian-born Romanian-born Working age population
Notes: The sample size of A2 nationals recorded in the UK Labour Force Survey is relatively small, so there may be considerable margin for error when drawing strong conclusions from these data when disaggregating this sample into even smaller groups. We present these data not to make generalised statements about all A2 nationals resident in the UK, but rather to analyse the available data to provide an indication of what the characteristics of typical A2 nationals might be. Source: Labour Force Survey, 2010 Q3 to 2011 Q2.
4.90 Figure 4.2 also shows that, Bulgarian and Romanian compared to working-age UK- populations resident in the UK born individuals, a larger are arguably atypical of all proportion of Bulgarian-born Bulgarian and Romanian and Romanian-born nationals (in that they are self- individuals recorded in the selecting as migrants), and LFS left school aged 21 or thus arguably cannot be above: 20 per cent of working- compared fairly with all UK- age UK-born individuals born individuals, this result is recorded in the LFS left perhaps not surprising. school aged 21 or above, compared to 49 per cent of 4.91 Considering Figures 4.1 and Bulgarian-born and 35 per 4.2 together suggests that A2 cent of Romanian-born. This nationals resident in the UK suggests that those A2 are more likely than UK-born nationals resident in the UK individuals to be overqualified are, on average, more likely for the occupations in which than the average UK-born they are employed. A higher individual to have high-level proportion of A2 nationals are qualifications. Again, as the employed in low skilled
65 A2 labour market restrictions
occupations (according to the for Romanian migrants. These 1-digit level of SOC 2000), yet flows of relatively low skilled A2 nationals are more likely to migrants to Spain and Italy leave school with higher-level rather than to the UK may qualifications. also be explained by the fact that Spain and Italy have 4.92 We noted a similar pattern made it easier for low skilled relating to migrants from A8 A2 nationals to access their countries in Migration labour markets: Spain lifted its Advisory Committee (2008). In labour market restrictions on that report we noted that “A8 A2 nationals in 2009 migrants to the UK have (although these have recently tended to be young, relatively been re-imposed on educated and in employment” Romanian nationals), while but also that “in spite of their Italy permits free movement of level of education, a large labour in some sectors, such proportion of A8 immigration as agriculture, hotels and has been into lower skilled tourism, construction and occupations”. seasonal work.
4.93 When we met with 4.5 Possible impact of representatives of the maintaining or removing Romanian community in the the current labour market UK we were told that the skill restrictions on Bulgarian level of Romanians in the UK and Romanian nationals was generally higher than the skill level of Romanian Impacts within our remit communities that had emigrated to other Member 4.94 This section uses the States of the EU. We were evidence presented so far in told that the main reason for this chapter to consider the this was the difficulty for many possible impact of maintaining Romanians of learning the or removing the current labour English language, and that, market restrictions on A2 therefore, successful nationals. Specifically, as we participation in the UK labour have been tasked by the market was only attainable for Government, it considers this those Romanians who are issue in terms of the possible highly educated and highly impact on the current skilled. We were told that disturbance to the UK labour those prospective Romanian market. As we set out in migrants who are Chapter 3, we consider this comparatively less skilled are labour market disturbance to more likely to choose Spain be serious. Furthermore, and Italy as migration independent forecasts destinations due to the suggest that the UK labour linguistic and cultural market may experience similarities and the perceived further disturbances availability of low skilled throughout the remainder of employment in Spain and Italy 2011 and 2012.
66 Chapter 4: Analysis of labour market restrictions
4.95 The specific question we have 4.97 The main ways in which been asked by the removing the current labour Government asks whether market restrictions on A2 maintaining the existing nationals can affect the UK restrictions on Bulgarian and labour market are by affecting: Romanian nationals‟ access to the UK labour market would the size of the net flows of assist in addressing the A2 nationals that enter the current labour market UK labour market; and disturbance. As we set out in Chapter 1, we regard the the composition of the questions of whether net flows of A2 nationals maintaining restrictions would that enter the UK labour help to address disturbance to market, in terms of their the labour market or whether demographic and removing them would occupational profile. exacerbate such disturbance as being essentially the same. 4.98 We discuss both of these potential impacts in this 4.96 Maintaining the existing labour section, with reference to the market restrictions is the „do literature on the drivers of nothing‟ option: it implies no migration, which we discussed change in migration policy, earlier in this chapter. and thus implies that the impact on the UK labour 4.99 As we outlined earlier in this market of migration from the chapter, a key driver of A2 countries should remain economic migration flows to unchanged from what is the UK is the attractiveness of currently being experienced or the UK as a migration what would happen anyway. destination. A rational migrant This current impact may be will consider the strictness of positive, negative, or the UK‟s migration policy negligible. Removing or relative to other countries, and amending the current labour consider his or her expected market restrictions, on the prospects in the UK labour other hand, implies a change market relative to his or her in migration policy, and thus a home country as well as in change in the impact of other potential destination migration from the A2 countries. The migrant will countries on the UK labour then use this information to market. This change in the decide whether, and where, to impact may also be positive, migrate. negative or negligible. It is the effect of the latter scenario 4.100 One important driver of the that is most relevant to the size of migration flows to the question that we have been UK in response to a removal asked by the Government, of the labour market and which is the focus of our restrictions on A2 nationals, discussion in the remainder of therefore, will be the change this chapter. in migration policy that occurs in other EU Member States.
67 A2 labour market restrictions
As we discussed in Chapter 2, potential implications of other Member States, including the countries‟ decisions regarding UK, must decide whether to labour market restrictions on maintain restrictions on A2 A2 nationals on the size of nationals‟ access to their migration flows to the UK. We labour markets beyond 31 said that we would expect December 2011. immigrant flows from the A2 Unfortunately, although we countries to the UK to be can form expectations about largest if the UK were to be what decision other Member the only country that lifted its States will make (for example, current labour market on the basis of the ongoing restrictions, and smallest if the disturbances to international UK were the only country that labour markets that we did not. The theoretical discussed in Chapter 3), we discussion we presented in cannot be certain what action Migration Advisory Committee these countries will take. In (2008) is set out again in Migration Advisory Committee Box 4.1. (2008) we discussed the
68 Chapter 4: Analysis of labour market restrictions
Box 4.1: A representation of how the decisions of other European Union Member States might impact upon potential immigration flows from Bulgaria and Romania to the UK
The following diagram illustrates the possible outcomes of different combinations of decisions regarding the labour market restrictions on Bulgarian and Romanian nationals. It relies on four main assumptions:
1. There is a fixed pool of potential A2 immigrants.
2. These potential immigrants have three options: stay in their home countries; emigrate to the UK; or emigrate to other EU countries.
3. Both the UK and the other EU Member States have three options: retain the current restrictions; relax the current restrictions; or remove the current restrictions.
4. The economies of the EU are identical, or at least very similar, in terms of their labour markets and demand for immigrant labour.
More fundamentally, this diagram assumes that immigration restrictions are the only, or at least the key, determinants of immigration. In practice, we know that this is not the case.
EU Keep Relax Lift UK
Status Quo Lowest flows to Keep the UK
Relax
Highest flows to Lift the UK
The two arrows indicate directions of increasing flows of potential immigrants from the A2 countries to the UK, depending on the decisions being made by the other EU Member States. The box at the top right of the figure represents the situation where the UK retains the current restrictions while the other Member States remove theirs. In this case, we should expect a low flow of immigrants from the A2 countries into the UK. Conversely, if the UK removes its restrictions but other countries retain theirs, there is a high flow of immigrants to the UK. Relaxing the assumptions might affect the precise result but the same general principles hold true.
69 A2 labour market restrictions
4.101 As we discussed in Chapter 2, the context of possible Spain has recently re-imposed changes in other EU Member restrictions on Romanian States‟ migration policies, it nationals‟ access to its labour can be considered in isolation. market. Theoretically at least, Lifting the current labour in a situation where the UK is market restrictions on A2 the only country to remove its nationals would mean moving labour market restrictions on from a situation where A2 A2 nationals from January nationals have the right to 2012, it is possible that a reside in the UK, but not number of Romanian necessarily the right to work, nationals who are working, or to a situation where A2 who would have otherwise nationals have the automatic chosen to be working, in right to both reside and work Spain would instead attempt in the UK. We believe it is fair to gain employment in the UK. to assume that this policy When we met with change would increase the representatives of the attractiveness of the UK as a Romanian community we potential migration destination were told that this is unlikely for A2 nationals (certainly, it because Spain and the UK would not reduce the attract very different types of attractiveness of the UK). The Romanian migrant: Romanian key issue for the purpose of nationals working in Spain our review is whether this tend to be low skilled, increased attractiveness whereas the difficulty of would affect the size and learning the English language composition of immigrant and the types of employment inflows to the UK, and available in the UK are more whether, in turn, this would suitable to more highly have an affect on the UK educated, highly skilled labour market. Romanians. Furthermore, we were told that the standard of 4.103 The Romanian Embassy living of Romanian nationals is argued that lifting the current very different in Spain and the labour market restrictions on UK: in Spain Romanian A2 nationals would not migrants would expect to live increase the size of immigrant alone or with a Spanish inflows into the UK because family, whereas the cost of those A2 nationals who housing in the UK (and, in wished to emigrate to the UK particular, London) means have already done so. Here that Romanian nationals tend the Romanian Embassy to share accommodation with referred to the fact that A2 several other individuals. nationals have had right of residence in the UK since the 4.102 While the impact on A2 countries acceded to the immigration inflows of EU on 1 January 2007. changing UK migration policy Furthermore, the Romanian cannot be fully considered in Embassy argued that the
70 Chapter 4: Analysis of labour market restrictions
declining number of young emigration to the UK in terms Romanians was an indicator of the Romanian population that the pool of prospective could constitute a significant Romanian emigrants was increase in the UK‟s migration decreasing. inflow. As we set out earlier in this chapter, the combined 4.104 In its evidence to us the population of the A2 countries Bulgarian Ministry of Labour is estimated to be and Social Policy said that approximately 29 million in active measures taken to 2011. To put this figure into improve labour market context, the combined prospects in Bulgaria may population of the A8 countries improve the relative in 2011 is estimated to be attractiveness of the Bulgarian approximately 73 million labour market and thus help to (Eurostat, 2011d). reduce levels of emigration. The Bulgarian Ministry of 4.106 Migration Watch UK argued Labour and Social Policy also that the fact that there were argued that removing the already established current restrictions on A2 communities of A2 nationals nationals‟ access to the UK in the UK increased the labour market would not lead likelihood that removing the to a significant increase in current labour market migration flows to the UK. restrictions would increase immigration inflows into the “A significant increase of labour UK. Migration Watch UK said mobility from Romania seems that these established unlikely. Large numbers have communities would act as a already been working in the EU over significant pull factor for the past years, suggesting that many prospective migrants. of those who wanted to move have already done so and that the “The current restrictions allow potential for additional emigration is Bulgarian and Romanian nationals to limited. In addition, due to a reside in the UK provided that they substantially shrinking young are a student, self-employed or self- generation, the pool of potentially sufficient but not economically active. mobile workers is getting smaller and As a result there are sizeable is likely to act as a brake on populations of Romanian and geographic labour mobility within the Bulgarian nationals already in the UK EU.” providing a further pull factor were restrictions on access to the labour Embassy of Romania evidence to the market to be lifted.” MAC review Migration Watch UK evidence to the 4.105 On the other hand, we note MAC review that, in recent history, the young Romanian population 4.107 Another potential pull factor is has shown a high propensity the attractiveness of the UK to emigrate, and even a labour market relative to the relatively small increase in labour market prospects in
71 A2 labour market restrictions
Bulgaria and Romania. When that the difference in GDP per we met with representatives of head between the UK and the the Romanian community we A2 countries would act as a were told that, especially significant pull factor for when compared to the further inflows of A2 migrants situation prior to the recent into the UK. Here Migration recession, the UK labour Watch UK cited the disparity market is currently relatively in GDP per head between the unattractive to many UK and Poland prior to the prospective Romanian accession of the A8 countries nationals. The difference in to the EU in 2004, attributing the rates of unemployment in the large inflows of A8 Romania and the UK, which migrants into the UK to pull we have presented in this factors such as higher GDP report, was cited as one of the per head. reasons why emigrating to the UK is not as attractive to “…a higher GDP per capita rate in Romanian nationals as it was the United Kingdom provides at the time of Romania‟s significant incentive for Bulgarian and accession to the EU. The Romanian nationals to migrate to the Romanian community argued UK to enjoy a significantly higher that this was another reason standard of living and will therefore why immigrant inflows into the act as a major „pull factor‟. In 2004, UK would not increase GDP per capita for Poland was significantly in the event that $13,000 compared to $32,000 for the the current labour market UK and was clearly a significant restrictions on A2 nationals driver of Polish migration following were removed. Indeed, the accession to the EU.” Romanian Embassy said that it expects some Romanian Migration Watch UK evidence to the nationals currently working in MAC review the UK to return to Romania in the near future due to 4.109 Certainly, as we set out earlier increasing economic and in this chapter, UK per capita labour market prosperity in GDP, both in absolute and Romania relative to the UK. PPS terms, is considerably This argument is supported by higher than per capita GDP in some survey evidence from both Bulgaria and Romania. Bulgaria, discussed earlier in As we discussed earlier, there this chapter, which found that is existing evidence that migration is often temporary suggests this is encouraging or circular. Nevertheless, the Bulgarian nationals to Bulgarian and Romanian consider the UK as a potential populations in the UK grew in migration destination. We 2010, as shown earlier in this believe it is plausible that chapter. Romanian nationals would be encouraged to consider 4.108 Despite the effects of the migrating to the UK for the recent economic downturn, same reasons. Migration Watch UK argued
72 Chapter 4: Analysis of labour market restrictions
4.110 In Migration Advisory sources we have for doing this Committee (2008) we are the information we receive examined the UK experience from partners and the of immigration from the A8 available data on past countries and considered immigration inflows. It may whether this experience had also be possible to gain useful potential implications for the insights from the UK scale of flows from the A2 experience of A8 migration countries to the UK that might following the accession of the occur if labour market A8 countries to the EU in restrictions were removed or 2004. relaxed. Based on the experience of A8 immigration, 4.112 As discussed earlier in this we said that: chapter, under the current labour market restrictions A2 income levels and living nationals presently working in standards, as well as the UK are typically employed labour market demand, in low skilled occupations. appear to affect migrants‟ Given the nature of the labour choice of destinations and market restrictions, and the the latter could potentially existence of low skilled affect choice of location migration routes that are within destination specifically designed for A2 countries; nationals (the SAWS and the SBS), this is not surprising. labour market conditions in sending member states 4.113 Nevertheless, our discussions appear to have been less with partners and our analysis of a factor in terms of of the LFS suggest that A2 influencing flows to the nationals resident in the UK UK; and are relatively well educated: comparing working-age the experience across the populations, A2 nationals EU does not suggest that resident in the UK are, on flows can be reliably average, more likely to have a gauged on the basis of the high level of schooling than restrictions in place in the average UK-born different member states. individuals. One hypothesis, therefore, is that an increasing 4.111 A further consideration when number and proportion of A2 deciding whether or not to nationals would switch into remove the restrictions on A2 highly skilled employment if nationals‟ access to the UK the current restrictions on their labour market is whether this access to the UK labour would affect the composition market were removed. of net flows of A2 nationals to the UK. As with magnitude, it 4.114 However, A2 migrants do not is very difficult forecast the currently have unrestricted composition of future access to the whole of the immigration inflows. The best less skilled sectors of the UK
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labour market, including made to Scotland, both sectors such as hospitality economically and socially, and and catering and its importance in the context manufacturing where A8 of an ageing population. migrants account for a disproportionately large share “Scotland has benefited greatly from of UK employment. The migration both economically and experience following the socially, therefore we would suggest accession of the A8 countries it would be appropriate to lift the to the EU in 2004 tells us that, restrictions currently being placed on even in the absence of labour nationals from the A2 countries. For market restrictions, well example, employers from some parts educated and highly skilled of the care sectors have recruited migrants may remain significant numbers of workers from disproportionately employed out with the UK and EEA in past. We in low skilled occupations are currently exploring present and (Migration Advisory future demand for non-UK workers in Committee, 2009c). One services such as Care at Home and possible explanation for this is Care Home for Adults Services.” that, despite high-level qualifications, migrants‟ The Scottish Government evidence access to highly skilled to the MAC review employment is limited by their proficiency in the English 4.116 On the other hand, some language, at least in the short partners raised concerns that term. The A8 experience lifting the restrictions and, in suggests that the impact of doing so, closing the SAWS lifting labour market and the SBS, would have restrictions on A2 nationals negative consequences on might be disproportionately the sectors that currently concentrated at the bottom employ large numbers of A2 end of the skill (and therefore nationals. Several SAWS wage) distribution. Its impact operators argued that A2 may also be concentrated in nationals would move away particular occupations and from agricultural work and into sectors. alternative low skilled employed if they were given Impacts outside our remit free access to the UK labour market. 4.115 The Scottish Government and the Department of Health (DH) argued that removing the current labour market restrictions may in fact increase the supply of social care workers available in the UK. In its evidence, the Scottish Government also highlighted the important contribution that migration has
74 Chapter 4: Analysis of labour market restrictions
“Lifting the restrictions on A2 would “At present the A2 workers are the disrupt the seasonal labour supply only category of workers from EU into agriculture currently facilitated and EFTA member states not to through SAWS. Many of those who enjoy full access to the UK labour are candidates for SAWS will switch market. This is an anomalous to other sectors such as hospitality, situation which is confusing to catering and care where the work is employers and workers alike and less seasonal and more permanent unnecessarily distorts the UK labour when restrictions are lifted.” market whilst transitional provisions remain in force. […] We recommend Concordia (YSV) Ltd evidence to the that the UK labour market be opened MAC review to workers from the A2s in 2012. In the alternative, if the UK labour “Should the restrictions not continue market is to remain closed generally we feel we will be faced with the to A2s workers, we ask that SAWS in same situation as we were back in its present form be retained for a 2007/2008 when sufficient numbers further 2 years as a transitional of A8 nationals could not be sourced scheme allowing A2 workers limited to meet the demands, which resulted access to the UK labour market, and in crops being left un-harvested in that during this period the the fields.” Government prepares a follow on scheme to SAWS to be implemented Place UK Ltd evidence to the MAC from 1 January 2014.” review National Farmers Union evidence to 4.117 The National Farmers Union the MAC review (NFU) argued that the current labour market restrictions on 4.118 In this review we have not A2 nationals should be been asked to consider the removed on the basis that impact of removing the current they distort the UK labour labour market restrictions on market and are confusing to particular migration routes or both employers and workers. programmes, such as SAWS. If labour market restrictions Therefore, whilst we are maintained, the NFU acknowledge these concerns, argued, then the SAWS we believe it would be outside should be retained in its our remit to make a present form and, judgement as to whether such furthermore, a successor issues justify maintaining or scheme to SAWS should be removing the current labour prepared by the Government market restrictions on A2 for implementation at the end nationals. of transitional measures on A2 nationals in 2014. 4.6 Concluding remarks 4.119 This chapter has considered whether maintaining the existing restrictions on access of Bulgarian and Romanian nationals to the UK labour
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market would assist in migrants and/or of the jobs addressing a serious they work in, and how? disturbance to that labour market. This addresses the On the basis of the above, second part of the question would retaining current that we have been asked by restrictions assist in the Government. Three issues addressing the serious are of primary relevance: labour market disturbance that we believe the UK is Would lifting restrictions currently experiencing? increase the annual inflow of Bulgarian and 4.120 Although the evidence is Romanian migrants into partial and equivocal, the the UK and into the UK discussion in this chapter labour market? allows us to draw some conclusions in relation to the Would lifting restrictions above. These are set out in affect the composition of Chapter 5. Bulgarian and Romanian
76 Chapter 5: Conclusions Chapter 5 Conclusions Chapter 5 Conclusions
5.1 Introduction the possible impact of maintaining or removing the 5.1 In this chapter we summarise current labour market the findings of this report and restrictions on nationals of set out our response to the Bulgaria and Romania. In question we have been asked doing so, we have regarded by the Government. the questions of whether maintaining the current 5.2 Our commission restrictions would help to address any labour market 5.2 This report has been disturbance, or whether produced in response to the removing the restrictions following question that we would exacerbate any such were asked by the disturbance, as being Government: essentially the same. Our analysis of this part of the “Is there a serious question is set out in full in disturbance, or threat of such Chapter 4. a disturbance, to the UK labour market and would 5.3 Existence or threat of a maintaining the existing serious labour market restrictions on Bulgarian and disturbance Romanian nationals‟ access to the labour market assist in 5.5 There is strong evidence that addressing any such many leading labour market disturbance or threat?” indicators, including real earnings growth, vacancy 5.3 We have separated this levels, and employment and question into two parts. First, unemployment rates, continue we have considered whether to exhibit the adverse effects there is a serious disturbance, of the most recent recession. or threat of such a Growth in real GDP remains disturbance, to the UK labour low, and Okun‟s law would market. Our analysis of this suggest that it is currently part of the question is set out insufficient to stimulate a in full in Chapter 3. sustained reduction in the rate 5.4 Second, we have considered, of unemployment. in the context of the current Independent forecasts state of the UK labour market, suggest that the overall state
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of the UK labour market is not 5.8 To the extent that removing set to improve in the near restrictions on UK labour future. Indeed, due to market access for Bulgarian stagnant and below-trend and Romanian nationals levels of economic growth, would alter the behaviour of both in the UK and prospective migrants from the internationally, as well as A2 countries, it seems likely ongoing sovereign debt that inflows to the UK would crises, financial turbulence increase: it is plausible that at and depressed consumer least some A2 nationals who confidence, it is highly currently decide not to plausible that the UK labour emigrate to the UK would be market will experience further encouraged by the improved adverse changes before it access to the UK labour begins to recover. market that would occur if the current restrictions were 5.6 We believe it is reasonable removed. Removing to conclude, on the basis of restrictions might also these factors, that the UK encourage some A2 nationals labour market is in a state who currently come to the UK of serious disturbance. via temporary employment routes to seek more 5.4 Effect on migration flows permanent employment in the of lifting labour market UK. restrictions on Bulgarian and Romanian nationals 5.9 An additional important factor is the decisions that other EU 5.7 Since the accession of Member States will make Bulgaria and Romania to the regarding A2 nationals‟ European Union (EU) in 2007, access to their labour migrant inflows to the UK from markets, which must also be these countries have been reviewed by 1 January 2012. relatively small. Furthermore, It is unclear whether Member a significant proportion of States that currently impose these inflows have been via restrictions will remove them. temporary migration routes, It is also possible that other i.e. the Seasonal Agricultural Member States that are Workers Scheme (SAWS) and currently relatively open to the Sectors Based Scheme economic migration from the (SBS), and there is evidence A2 countries will, like Spain, that a considerable number of opt to re-impose labour A2 nationals return to their market restrictions. These home countries after a short decisions could have a period abroad. Nevertheless, significant impact on the relative to pre-accession number of A2 nationals that levels, the number of choose to migrate to the UK in Bulgarian and Romanian response to the UK‟s current residents in the UK has risen labour market restrictions substantially since 2007. being removed.
78 Chapter 5: Conclusions
5.10 Overall, there is a wide range individuals themselves were of uncertainty around the relatively highly educated. In a effects on UK migration healthy labour market this inflows of ending restrictions may not be a matter for on labour market access for concern, but we believe that Bulgarian and Romanian such an eventuality risks citizens. All other things being exacerbating the serious equal, lifting the restrictions labour market disturbance would almost certainly have a currently being experienced in positive impact on migration the UK. inflows to the UK from those countries. At one extreme the 5.12 We believe that there is a effect could be small (with the risk that an increase in the additional annual inflow being inflow of A2 nationals in the hundreds or low and/or a change in the thousands, for instance) but it composition or behaviour of could be significantly higher. It A2 nationals in the UK would not be sensible, or could have negative helpful to policymakers, for us impacts on the UK labour to attempt to put a precise market. Removing existing numerical range around this restrictions on the likely impact. employment of A2 nationals in the UK would increase 5.5 Economic and labour this risk. These impacts market impacts of lifting would be small in comparison labour market restrictions to the ongoing adverse on Bulgarian and impacts of the recent Romanian nationals recession and the global economic situation, but they 5.11 The impact of the increased could nevertheless be inflow would be contingent in considered significant. part on its size, but also its composition. While some 5.6 Conclusions studies have found little or no 5.13 In response to the question overall impact of migration on of whether there is a levels of employment or serious disturbance, or average wages, others have threat of such a found that these impacts vary disturbance, to the UK across different occupational labour market, our answer and skill groups. Overall, is yes. There is a current because currently A2 workers and actual disturbance to do not have unrestricted the UK labour market. access to the less skilled labour market, it seems likely, 5.14 Regarding the question of if not certain, that lifting whether maintaining restrictions would increase the existing restrictions on number of Bulgarian and Bulgarian and Romanian Romanian immigrants nationals’ access to the entering less skilled labour market would assist occupations even if the in addressing the serious
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labour market disturbance considerations, such as the our answer is also yes. The impact of the current extent to which maintaining restrictions on the existing restrictions would employment of A2 nationals assist in addressing any who are already resident in such disturbance is, the UK (discussed in Chapter however, subject to 1) and the implications for considerable uncertainty. particular sectors (discussed in Chapter 4), that the 5.15 As we discussed in Chapter 1, Government may wish to take our commission from the into account alongside the Government was to consider labour market impact the possible labour market described above when impact of maintaining or deciding whether or not to removing the current labour maintain restrictions beyond 1 market restrictions on A2 January 2012. Although we nationals in the context of the have discussed some of these current state of the UK labour issues in this report, they have market. There are other not influenced our conclusion.
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Annex A Consultation Annex A Consultation
A.1 List of organisations / Place UK Ltd individuals that submitted evidence Scottish Government
50 Club Horticultural A.2 List of organisations met Employers Association with
Association of Labour Anglo-Romanian Economic Providers and Political Forum
British Embassy in Bulgaria British Chambers of Commerce British Embassy in Romania British Embassy in Bulgaria Bulgarian Ministry of Labour and Social Policy British Embassy in Romania
Concordia (YSV) Ltd Confederation of British Industry Confederation of British Industry Embassy of Romania in the UK Department for Business, Innovation & Skills Embassy of the Republic of Bulgaria, London Department of Health Honorary Consul on Romania Embassy of Romania in the in Leeds UK London Resources Ltd Harding, Dr. Liliana (University of East Anglia) Radio Romani on line
HOPS Labour Solutions Ltd Romanca Society
Main, Anne (Member of Romani in UK Parliament for St Albans) Romani on line Migration Watch UK Romania in the Third National Farmers Union Millenium
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Romanian Cultural Centre Romanian Student Society, University of Nottingham Romanian Medical Society - UK Scottish Romanian Society
Romanian Self Support Trades Union Congress Group, Ballymena
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Annex B Summary of transitional restrictions imposed by Annex B Summary of transitional restrictions imposed by EU Member States on nationals of Bulgaria and Romania
B.1 Definitions
B.1 „Free movement of labour‟ refers to migrants from other EU Member States being able to take up employment in another Member State without restriction. There may be a requirement to register that employment with the relevant authorities. This is the current situation between the EU15 Member States and will be the situation for all EU Member States once transitional arrangements for accession countries expire.
B.2 „Transitional arrangements‟ are different arrangements for Bulgarian and Romanian nationals that will be in effect between the date of accession and when free movement of labour is permitted. These must not be more restrictive than the arrangements that were in place immediately prior to accession.
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Table B.1 Summary of transitional restrictions to free movement of labour from Bulgaria and Romania Member Current restrictions on Bulgarians and Romanians Further information State United Work permit required unless the applicant: is coming to the UK to work under the http://www.ukba.homeoffice.gov.u Kingdom Seasonal Agricultural Workers Scheme (SAWS) and holds a valid work card issued by k/workingintheuk/eea/bulgariarom a SAWS operator; or was given permission to enter or remain in the UK before 1 ania/ January 2007 and his or her passport has been endorsed with a condition restricting employment to a particular employer or category of employment; or qualifies for an exemption (full details of exemptions are available here: http://www.ukba.homeoffice.gov.uk/workingintheuk/eea/bulgariaromania/liveworkuk/). Austria Work Permit required and further restrictions for posted worker apply in some http://www.ams.at sectors. Freedom of movement will be granted once the worker has been legally employed for one year. Family members resident in Austria will only be granted freedom of movement after 18 months. Some sectors are subject to further restrictions on posted workers: agriculture, landscaping, masonry, constructions, security, industrial cleaning, care and social work. Belgium Modified work permit required. A resident labour market test is required unless the Brussels region: occupation is deemed to be in shortage. Permits issued within five days for shortage http://www.bruxelles.irisnet.be/fr/c occupations. itoyens/home/travailler/travailler_c omme_ressortissant_etranger.sht ml Flemish region: http://www2.vlaanderen.be/ned/sit es/werk/index.html Walloon region: http://emploi.wallonie.be/THEME S/PERMIS_TRAVAIL/MENU.htm
Cyprus Free movement of labour permitted. Czech Free movement of labour permitted. Republic Denmark Free movement of labour permitted. Temporary restrictions on nationals of A8 and www.workindenmark.dk A2 nationals were abolished from 1 May 2009. If seeking work, Bulgarian and Romanian nationals may reside in Denmark for up to six months without applying for a
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registration certificate. If employed for more than three months, the worker must apply for a registration certificate. Estonia Free movement of labour permitted. EU nationals must register their stay in Estonia within three months of their arrival but they do not need any extra permits to start work in Estonia. Finland Free movement of labour permitted. http://www.mol.fi/finnwork France Full work permit required but some occupational exemptions apply. Permit www.anaem.social.fr conditions include labour market test, and job meets prevailing labour and pay http://www.travail-emploi- conditions. Permit issued without need for labour market test for selected occupations, sante.gouv.fr/espaces,770/travail, which fall into the following sectors: construction and public works; hospitality; 771/ agriculture; mechanical engineering and metal industries; processing industries (incl. manufacturing); commerce and sales; and cleaning. Germany Work permit required until 31 December 2012 and further restrictions applied to www.arbeitsagentur.de posted workers. Permit conditions include labour market test and other checks, e.g. qualifications. Restrictions are applied to posted workers in construction, industrial cleaning and interior decorating. Greece Free movement of labour permitted. Hungary Free movement of labour permitted. Ireland Work permit required. Permit conditions include labour market test. Permits only http://www.djei.ie/publications/lab considered for a limited number of occupations below an annual salary of €80,000. our/2011/Guide%20to%20Work% 20Permits%20for%20BR%20Nati onals-June11.pdf Italy Modified work permit for some sectors, free movement of labour in other sectors. Free movement of labour permitted in the following sectors only: agriculture; hotels and tourism; domestic work and care services; construction; engineering; managerial and highly skilled work; and seasonal work. For other sectors, a simplified work permit is required. Latvia Free movement of labour permitted. Lithuania Free movement of labour permitted. Luxembourg Full work permit with sectoral exemptions. Simplified procedures for obtaining a http://www.mae.lu/ permit for agriculture, viticulture, hotel and catering, and qualified people in financial sector. Permits in other sectors granted more speedily depending on labour market conditions. Malta Modified work permit required. Permits granted for jobs that require qualified and/or
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experienced workers and for those occupations for which there is a shortage of workers in the Maltese labour market. Netherlands Work permit required. Permit issued following Resident Labour Market Test. Employer must obtain permit. Poland Free movement of labour permitted. Portugal Free movement of labour permitted. www.sef.pt www.iefp.pt Slovakia Free movement of labour permitted. Slovenia Free movement of labour permitted. Spain Free movement of labour permitted for Bulgarian workers. Labour market restrictions imposed on Romanian workers. Sweden Free movement of labour permitted. Notes: This information is not intended as a definitive legal guide to restrictions imposed by Member States; jobseekers should always seek information from the relevant authorities in each Member State. Bulgaria and Romania have not taken the opportunity to apply reciprocal restrictions to any EU Member State. Source: EURES Portal: http://ec.europa.eu/eures/home.jsp
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AbbreviationsAbbreviations
ALP Association of Labour Providers APS Annual Population Survey BIS Department for Business, Innovation & Skills CIPD Chartered Institute for Personnel and Development DH Department of Health DWP Department for Work and Pensions EEA European Economic Area EFTA European Free Trade Association EU European Union GDP Gross Domestic Product HMRC HM Revenue and Customs HSMP Highly Skilled Migrant Programme ILO International Labour Organisation IPS International Passenger Survey LFS Labour Force Survey MAC Migration Advisory Committee NAO National Audit Office NFU National Farmers Union NINo National Insurance Number OBR Office for Budget Responsibility OECD Organisation for Economic Co-operation & Development ONS Office for National Statistics OSI Open Society Institute PBS Points Based System PPS Purchasing Power Standards RPI Retail Price Index SAWS Seasonal Agricultural Workers Scheme SBS Sectors Based Scheme SEGS Science & Engineering Graduate Scheme SOC Standard Occupational Classification UK United Kingdom UKCES UK Commission for Employment & Skills
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