As concern for the state of the economy continues to rumble, the drive to improve the competitiveness of the UK economy acquires a new and greater significance. And to remain competitive the UK must drastically improve the skills levels of the workforce.  Ministers have recently introduced a range of measures aimed at achieving this, including a new points-based system for migrants, to ramp their net contribution to the skills of the UK’s workforce. 

This week’s Knowledgeshop takes a look at the skills challenge and the migrant workforce.

Skills Agenda

Throughout the past year there have been many mentions, both in politics and the media, of the UK’s need to improve skills levels if we are to remain a global competitor.  In a recent survey, the Confederation of British Industry (CBI) found that three out of four firms in London were increasingly struggling to fill skilled jobs.  A quarter of all firms said that the problem threatened London’s competitiveness. 

The government’s Skills Agenda aims to improve the situation.  The focus of the Education and Skills Bill, which was published on the 28th of November, is to achieve high levels of adult skills and literacy as well as increased skills among young people.  It would raise the minimum age at which young people may leave education or training to 18.  The draft Apprenticeships Bill will complement this by aiming to reduce the number of young people not in education, training or employment.  In addition, the Welfare to Work strategy aims to help unemployed people into jobs.  

Gordon Brown has also launched a massive skills push to fulfill a government promise of upgrading the skills of Britain’s workforce.  An extra £500 million a year will be invested from 2008. This funding will provide over seven million training places, 120,000 new apprenticeships for young people, 30,000 places for older workers, 95,000 places for those without 5 GSCEs, and 310,000 places on A level courses.  Many of the new training and education courses are to be part-funded by employers through the “Train to Gain” initiative, which aims to help businesses establish which skills they need and how to ensure employees who are able to provide them.

Is it working?

While all this effort is going on, a report from the Organisation for Economic Co-operation and Development (OECD) was recently published, comparing the reading, mathematical and scientific progress of 400,000 15-year-olds in the 30 OECD countries and 27 others, covering 87% of the world economy.  Britain’s slide down the rankings caused concern among some commentators, but was met phlegmatic by government officials.

At the same time, a CBI survey also found that London businesses are increasingly being forced to hire workers from abroad because of the skills shortage. Two out of three businesses in the City are expected to be hit by the shortage in the next six months with most already recruiting overseas.

Migration

With the exception of Romania and Bulgaria, there are no restrictions on people from EU countries coming to work in the UK.  Under the new points-based system, those from outside the EU will have to pass a number of tests designed to ensure they have value for the UK economy.  Applicants will earn points for their skills and the potential they show for economic success and competence in English.

Entry to UK for Highly-Skilled Migrant Workers

On the basis that they will not fit the criteria under this new system, unskilled workers from non-EU countries will effectively be banned from taking jobs in the UK for the “foreseeable future”. 

This announcement comes as the UK expresses concern at the European Commission’s proposals for a common EU visa aimed to attract highly skilled workers from outside the EU.  The Commission believes that common rules would help solve shortages of highly-skilled labour across Europe.  Allowing foreign workers into the country would seem to be a good solution to fill the skills gaps in our economy, it is argued, and there is strong support for this in the business community. 

However, as the number of migrants needed to sustain our economic well-being rises, so it would seem does public unease.  A recent MORI poll on migration found that 68% of the UK feels there are too many migrants in Britain.  Many feel that too many British jobs are being taken by eastern Europeans, or that schools, hospitals and roads are getting overcrowded.  Public services are under pressure:  last month Cambridgeshire police force said they need an extra 100 police officers just to cope with the increasing migrant population. However, there is a general consensus among politicians that our ageing population combined with our lack of ability, or inclination, to do many jobs, mean that more foreign workers are likely to be needed.  According to an article published in The Economist this month, it has been estimated that Europe’s native-born workforce could shrink by 44m by the middle of the century. If that were the case then our skills shortage would be a risk of getting worse.

Clearly there are mixed opinions:  BBC Newsnight found that 44% thought migrants to the UK did more to help the country, while 41% thought they did more to harm it.  Opinions differ between political parties too. The Conservatives have critisised the government’s new points-based system for failing to have an upper limit. David Cameron has acknowledged that there are many benefits from migration, but argues that levels should be “substantially lower”.  He highlighted the pressures which high numbers place on services such as schools, hospitals and housing.

Are workers from overseas the answer?

The implications of our ageing population and our skills shortages for the UK’s economy and public finances are worrying. One obvious answer is to boost the working-age population by admitting more migrants, yet the arguments over the benefits of migration are fairly complicated.  For example, it is very difficult to calculate the costs to the state compared with the benefits of taxes raised.

Susan Anderson of the CBI believes that “Migrants to the UK bring valuable skills and ideas with them and help to fill job vacancies where Britons are unable or unwilling to do so. Their taxes help pay for our public services and our pensions. Their presence also helps keep inflation low at a time when there are many forces pushing the other way.” 

The Chair of the Equality and Human rights Commission, Trevor Philips, refers to current political thinking on migration which proposes any capping on numbers as asking “21st Century questions, but giving 20th Century answers”.  He believes that we should embrace migration and the benefits it can bring, while striving to improve our public services and infrastructure enough to meet the increased demands on them.  The Economist for its part asserts: “These are all hard things to do; but most of them are part of good government anyway.”  Perhaps some of the money and political effort which the government has been pouring into education and skills could be better spent on improving the country’s infrastructure to cope with an influx of immigrant workers.

Striking a balance

Regular reports of a national skills shortage and its negative effect on the economy causes concern. Mass migration causes concern. Both are understandable, but political leaders must act to address these concerns, not pander to them.  The Government must ensure that the general public and employers have a better understanding of the benefits migrants can bring, as well as taking steps to help them play a full role in society. 

A key player in the skills agenda, John Denham, Secretary of State for Innovation, Universities and Skills, believes that upgrading the skills of the UK workforce is a necessity linked to staying competitive in the future.  Yet he doesn’t see a conflict between improving skills at home and importing them from abroad: “Overall skill levels must improve regardless of the influx of migrants.”

Jack Dromey, deputy general secretary of the largest trade union, Unite, agrees: “You need both, we should not pose one against the other. Here in Britain we have workers out of work and the government needs to help those workers back into work. We will also need the skills of migrant workers as well.” 

In order to help the Government with this complex issue, a new panel of independent experts has recently been set up by the Government.  The Migration Advisory Committee (MAC), which held its inaugural meeting held on 7th December of this year, will advise on where migration is needed and, crucially, where it is not. The committee will analyse the UK labour market and will report to Government in June 2008 with advice on which specific occupations have shortages which can sensibly be filled by enabling employers to recruit migrants. Hopefully, this will help the Government strike the right balance between setting the criteria for migrants entering the UK, while at the same time solving our country’s skills crisis.

It can be argued that both a sustained skills drive and migration are needed for the economy, and in order to get the balance right the needs of business must be fully understood.  If migration and skills are not managed properly Britain’s competitiveness will be affected.