The exaggerated tale of post-Brexit labour and skills shortages

By Gerwyn Davies, Labour Market Adviser, CIPD

Having spent three periods studying and working in mainland Europe and having voted remain, it should come as no surprise to hear I was disappointed with the EU referendum result. However, despite my own private views, I have found myself at the heart of recent debates where I have been the one pouring cold water on the popular idea that the Brexit vote has exacerbated existing labour and skills shortages in the UK. Much of the rhetoric is based on the idea that since the vote to leave the EU, many EU migrants have been put off coming to the UK or are choosing to leave. However, while certain sectors and regions may indeed be facing skill or labour shortages, a fall in EU migration is not to blame and across the economy the UK is certainly not yet facing a skills crisis.

Overall, the fact is that fears that employers would not be able to fill vacancies as a result of EU migrants leaving the UK have been overstated, with the number of EU nationals in employment hitting a record high according to the most recent official data.

Figure 1

Source: Office for National Statistics, Labour Force Survey

What is also striking about the data is how the composition has changed over the past year. It is perhaps no surprise to see that the number of Romanians and Bulgarians in employment in the UK has increased sharply during the past year given the wage premium they continue to enjoy compared with their home countries. However, what is perhaps surprising is that the number of EU15 nationals in employment in the UK has continued to grow, driven perhaps by the relatively high number of highly-skilled jobs that UK economy has generated over the past year. As we know, EU14 nationals have enjoyed the highest wage rates of all groups for a considerable period now.

Figure 2:

Another personal frustration of mine is the blinkered narrative put forward by some commentators that link migration with labour and skills shortages. As one commentator put it recently, ‘net migration from the EU is falling, which means the pool of people available to employers is falling’. This is wrong on two counts. It is true that the rate of increase in EU net migration has decreased over the past year, but it is still growing above post-enlargement average levels. This means that the supply of EU migrants is increasing, albeit at a slower rate, which is reflected in the employment numbers (Figure 1).

Source: Office for National Statistics, Long-Term International Migration


Generalised statements about the impact of migrant labour on skills shortages in the economy also ignore the efforts employers have made in relation to other sources of labour supply; especially welfare claimants and older workers. For instance, the number of short-term unemployed fell by 116, 000 in the 12 months to July, while the number of long-term unemployed fell by 66, 000 during the same period according to official data. At the same time, the number of 55-64 year olds in employment has increased by 200,000. This increase in the supply of workers is reflected in recent CIPD research which suggests that on average 24 applicants are chasing every low-skilled job vacancy, compared with 19 applicants for medium-skilled roles and six applicants for high-skilled roles . Around half of all applicants were deemed suitable by employers, which may also partly explain why organisations do not appear under undue pressure to raise wages.

This is not to say of course that recruitment difficulties have not ticked up for some roles, sectors and regions. The Spring 2017 CIPD Labour Market Outlook survey found that just over half of employers had one or more hard to fill vacancy compared to 40% of employers that reported any recruitment difficulties in Autumn 2015. The main cause of this however is the growing tightness of the labour market overall and not restrictions to the supply of migrant workers, which is reflected by the fall in the unemployment rate to its recent low of 4.3% - the lowest rate since 1975.

In addition, employer concerns about the inevitability of future migration restrictions on EU workers, which stand to hit low-wage employers particularly hard, are very real. As recent CIPD research found, many employers believe they have no alternative to employing EU migrant labour due to the type of sector they are or the nature of the roles they need to fill, or the tightness of the labour market in their region, despite their best efforts to recruit from the domestic workforce. And notwithstanding the positive contribution that employers tell us EU nationals make to their workforce, they also tell us that EU nationals are on average more geographically mobile than UK nationals. There is a big question mark therefore over how employers will be able to fill these roles in the future, which is why we have suggested that the government consider a labour shortage occupation list to ensure that employers with genuine recruitment difficulties are not penalised.

There are legitimate reasons for misunderstanding migration statistics. The ONS produces four different sets of migration statistics, which could perhaps be better packaged to improve public understanding of what each measure means. One idea we recently put forward in a presentation to the ONS’s annual public policy conference was a quarterly report a quarterly report that synthesises all the different bits of data, including the labour market statistics. The report could provide an overall assessment of what the different sets of data mean for issues such as the tightness of the labour market. One model that could be used as a template is the Bank of England’s quarterly Inflation Report. This would improve the quality of the public debate and ensure that individuals or bodies that have an interest in talking up the needs of the UK labour market don’t have the excuse of poor misinterpretation or misunderstanding, which to some extent they could be currently forgiven for.

This can only be achieved however with objective and thorough analysis of data, which could be improved and packaged better. The risk is that we make the wrong public policy choices during a period of heightened uncertainty if we don’t.

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