Brexit and skills shortages

Alarm bells continue to ring about the implications of (a hard) Brexit for UK skill levels, future growth and prosperity.  By the end of 2016 there were 2.2 million working EU migrants -7% of the labour force.  Most recently there’s been specific concern about the effect of Brexit on an already understaffed NHS. EU immigrants make up about 5% of NHS staff (10% of registered doctors and 4% of registered nurses).

Migrants from the original 14 EU member states are more likely to be in better-paid employment, requiring higher skill levels – such as the business and finance sectors. By comparison, despite significant representation in professional and managerial categories, later Eastern European migrants provide a regular supply of semi and unskilled labour. In the ‘hotels, restaurants, and accommodation’ sector they make up I in 8 of the workforce and in construction over 7%.  According to one survey, (CIPD, Facing the future 2017) 40% of EU migrants could be considered ‘over-educated’ for the work they do, compared to 15% of UK nationals (evidence shows that, overall, EU migrants tend to be more highly qualified than UK workers).

Labour leader Jeremy Corbyn has given Brexit a socialist tweak, telling the BBC (23/07) that the “wholesale importation” of workers from Eastern and Central Europe has been used to undermine pay and working conditions particularly in industries like construction. CIPD report that one in seven employers consider EU nationals have lower expectations about pay and conditions, but they also regarded them as more productive.

It isn’t clear however, whether wages would rise if EU migration was curtailed. According to the CIPD study, a quarter of employers reported difficulties in recruiting UK born candidates for semi-skilled and unskilled posts.  To ease shortages, employers could recruit from ‘underutilised’ groups like young people. Unemployment rates for young people are still double that generally – 1 in 8  of all 19-24 years olds are still NEET, but many UK employers have been reluctant to offer proper apprenticeships.

With new ‘flexible’ working arrangements in the 24/7 service sector, employers will also continue to recruit from groups  not wanting to work on ‘standard’ contracts because of family and caring responsibilities (over 4 million part-time women workers, don’t want or can’t do full-time employment for example) and almost a million full time students currently work part time. It’s clear that this pool of labour is not yet exhausted.

Employers could also automate. While it is difficult to replace workers with machines in many low skilled ‘non-routine’ jobs like serving in restaurants or in-home care, many other jobs could be, however the CIPD survey found little concrete evidence of any plans to do this.  Uncertainty about the post Brexit economic climate may be a factor, but the UK’s historically low rate of capital investment (compared with other countries) is probably more significant.  In other words, for key sections of UK business a low-skilled, low-pay business model is the most preferred and a hard Brexit would result in a labour shortage, as much as a skills problem. Without a migrant ‘reserve army’ many employers may not be prepared to keep businesses running at all.