Skilled Shortage Sensible The recommended shortage occupation lists for the UK and Scotland Migration Advisory Committee September 2008 Migration Advisory Committee 6th Floor Advance House 15 Wellesley Road Croydon CR0 2AG www.ukba.homeoffice.gov.uk/mac e-mail: [email protected] Skilled, Shortage, Sensible: the recommended shortage occupation lists for the UK and Scotland Migration Advisory Committee September 2008 Contents Chairman’s foreword 7 Migration Advisory Committee and secretariat 9 Summary 11 List of tables and figures 17 Introduction 21 0.1 The Migration Advisory Committee 21 0.2 Our approach 21 0.3 Report structure 22 0.4 Thank you 22 Part I: Context Chapter 1: UK labour market and immigration context 26 1.1 The UK labour market and immigration stocks 26 1.2 Immigration flows 32 1.3 Key themes in the economics of immigration 36 1.4 Implications for the MAC 40 Chapter 2: The current work permit system for managing immigration 42 2.1 Immigration policy 42 2.2 Trends in immigration to the UK 45 2.3 Skilled immigrants to the UK: who and what? 51 2.4 Routes 55 2.5 Implications for the MAC 60 Chapter 3: The new Points Based System for managing immigration 61 3.1 Background 61 3.2 The five tiers of the PBS 62 3.3 Tier 2 of the PBS 64 3.4 Reviewing Tier 2 67 3 Skilled, Shortage, Sensible: The recommended shortage occupation lists for the UK and Scotland Part II: Analysis Chapter 4: Approach and issues 70 4.1 Conceptual approach 70 4.2 Country and regional analysis 76 Chapter 5: Gathering and considering the evidence 78 5.1 Introduction 78 5.2 How we gathered bottom-up evidence 78 5.3 Common themes in the bottom-up evidence 83 Chapter 6: Is it skilled? 87 6.1 Defining skill 87 6.2 Indicators of skill 89 6.3 Identifying skilled occupations: our approach 91 6.4 Graduate-level jobs 92 6.5 NQF level 3+ occupations 94 6.6 Next steps 96 Chapter 7: Is there a shortage? 103 7.1 Context 103 7.2 Theory of shortage 106 7.3 Indicators of shortage 107 7.4 Our indicators of shortage 115 7.5 Choosing the thresholds for each indicator 119 7.6 Results 122 7.7 Integrating top-down shortage indicators with bottom-up evidence 132 7.8 Next steps 134 Chapter 8: Is it sensible? 135 8.1 What do we mean by ‘sensible’? 135 8.2 Indicators of ‘sensible’ 137 8.3 Measuring ‘sensible’ 140 8.4 Scope and challenges 145 8.5 Next steps 146 4 Contents Part III: Results and next steps Chapter 9: Dovetailing the evidence 148 9.1 Introduction 148 9.2 Occupations included on our recommended shortage occupation list 149 9.3 Other occupations 182 Chapter 10: Results 191 10.1 Introduction 191 10.2 The UK shortage occupation list 191 10.3 What next? 197 Chapter 11: The Scotland list 198 11.1 Background 198 11.2 Process for producing the Scotland list 204 11.3 Stakeholder evidence 205 11.4 Occupational evidence 206 11.5 The Scotland shortage occupation list 209 11.6 Next steps 210 Chapter 12: Next steps 211 12.1 Updating and reviewing the list 211 12.2 Stakeholder input 211 12.3 Future research 212 12.4 Evaluation 212 12.5 Other MAC work 212 Annexes Annex A: Skilled 213 A.1 Approach 213 A.2 Indicators and classifications 215 A.3 Graduate-level occupations 217 A.4 Identifying occupations at level 3 and above 220 A.5 The initial list of skilled occupations 226 A.6 Table of results 230 5 Skilled, Shortage, Sensible: The recommended shortage occupation lists for the UK and Scotland Annex B: Shortage 250 B.1 Initial look at potential indicators 250 B.2 Background information on our key data sources 251 B.3 Choosing the indicators 254 B.4 Correlation of the indicators 257 B.5 Distribution of the indicators and determination of thresholds 259 B.6 Results 267 B.7 Glossary of basic statistical terms used in this report 282 Annex C: Sensible 283 Annex D: Consultation 301 D.1 Respondents to the call for evidence 301 D.2 List of organisations met with 302 D.3 Stakeholder Forum attendees 303 D.4 Scotland stakeholder meeting attendees 304 D.5 Presentations by the MAC 304 Abbreviations 305 References 307 6 Chairman’s foreword Immigration is – and in a spirit of social partnership. We sought and for some time has received evidence from firms and a wide variety been – fiercely debated of other organisations, including employer bodies, in the UK. Therefore, government departments, unions and Sector the Migration Advisory Skills Councils in relation to both the UK and Committee (MAC) Scotland lists. has a substantial and We submit this report against a background of historic task. In this emerging policy in other areas. In particular, the report we attempt to UK Commission for Employment and Skills is put some analytical rigour into the design of tasked to make the UK a world-class leader in labour immigration policy. The MAC’s role is to employment and skills by 2020. The Government provide independent advice concerning those aims to help more people into work, ensure occupations and jobs: (a) that are skilled; (b) business success in an increasingly competitive where there is a labour shortage; and (c) where world, and achieve sustainable economic it is sensible to fill that shortage via immigration growth and rising prosperity. This will all have from outside the European Economic Area (EEA). important consequences for future immigration The MAC focuses on the economics of the requirements and I look forward to the MAC labour market. The Migration Impacts Forum is a making a contribution to that. parallel body examining the social and community Our recommendations are based on an open, aspects of immigration. transparent, evidence-based, rigorous analysis The recommended shortage lists for the UK and of the labour market. The MAC has both Scotland are detailed in Chapters 10 and 11. commissioned research and done its own These present occupations that the MAC analysis research, received written evidence, been to all suggests pass the skill, shortage and sensible regions of the UK and taken evidence from well hurdles. We are conscious that our over 100 individual organisations, as well as recommendations will affect many businesses, organising several larger events. We are grateful organisations and individuals inside and outside to all the stakeholders who have participated the country. in this process, particularly members of our stakeholder panel and forum where we received The MAC is comprised of myself as Chair, strong endorsement of our proposed method four appointed economists and two ex officio of investigation as set out in our February 2008 members. This unusual composition of a non- report. Our shortage lists are not set in stone. governmental non-statutory advisory body was We welcome constructive criticism and intend to deliberately chosen by the Government as the review the lists on a regular basis. best mechanism to secure an impartial analysis of the labour economics of immigration. But it We are non-partisan and our recommendations must be emphasised that the MAC has operated are put forward for the good of the UK as a 7 Skilled, Shortage, Sensible: The recommended shortage occupation lists for the UK and Scotland whole. We hope they will be of direct benefit to hope to receive better evidence in the future, UK business but also to the UK population as a but the list is to be reviewed regularly and any whole, as well as to the immigrants themselves. errors of omission or commission can be speedily corrected if the evidence warrants it. The UK’s immigration policy has a long history. The new Points Based System (PBS) for We are indebted to our secretariat for their immigration breaks new ground by emphasising dedicated, professional hard work, initiative and both vertical and horizontal complementarity. excellent organisation. First, the pattern of relative demand for labour This report is unanimous (despite the MAC being has altered in favour of the skilled and this vertical a group of economists!). Committee members are element is a key component of the PBS. Second, privileged to participate in the new PBS and hope for this skilled labour the PBS – via the MAC – that we can make a continuing contribution to focuses on occupations where there is a labour migration policy as it evolves. shortage, the horizontal component within the skilled category. The MAC has analysed the whole skilled labour market whereas the previous work permit regime focused in practice on a limited number of sectors, particularly health and engineering. Professor David Metcalf CBE It is plausible, therefore, that the complexion of our shortage lists will be different and that the number of immigrants entering via the occupation shortage route will rise relative to those coming via other routes. This raises two key issues. First, it is essential that the calibration of points under the non-shortage routes – e.g. the resident labour market test and intra-company transfers – is regularly and thoroughly reviewed. Second, it is vital that firms and organisations sponsoring migrants who enter under the MAC shortage route are rigorously and regularly vetted. In particular, any deliberate attempts to abuse the shortage occupation route must be avoided and such sponsors warned or struck off. Our recommendations are a coherent package. We do not see them as a menu. We recognise that there are some issues that the Government may need to consider that go beyond our remit, including national security, social impacts, or broader objectives such as international development goals.