In the UK, since exiting the European Union and recovering from the Covid-19 Epidemic, the question of labor immigration has hardly been far from the front pages. The demand is not hitting the end for greater immigration to increase the number of agricultural workers, nurses, or hospitality employees. No matter how many immigrants are brought to fill the vacant positions, the desire for more overseas workers only climbs.
Despite how loudly business groups moan about the UK’s lack of immigration, the government has taken significant actions to increase the number of immigrants to the UK. After the pandemic, immigration has increased in the UK to grapple with the lingering workforce shortage. Immigration reached an all-time high in 2022. This raises the question of whether a million extra immigrants in a single year is sufficient or how many we actually need to get through the workforce shortage.
Since the government opened gates for the high level of immigration to the UK, they have not mentioned that this will increase strain on the government. In other words, the number of services available for the native citizens will also be consumed by the immigrants. For instance, a barman also needs public transport, an immigrant doctor also requires a doctor, and immigrants coming with their families also need schools for their children. Immigrants coming to help fill the labor shortages will pressure the government as everyone needs shelter and services.
Industries having labor shortages can use immigration to meet their short-term requirements and to fill the strategic profiles. However, there are questions to ask industries hiring overseas workers. The major question is, despite paying the desired salary to a large number of broadband engineers to bring them into the UK workforce has caused the IT sector to put pressure on the government to integrate this profile into the shortage of occupation list (SOL).
The underlying motive was to provide the employer with the key benefit of a lower wage to the worker. Employers may hire people on the SOL from overseas at 80% of the current market wage for that occupation in the UK without promoting employment locally. The prime reason for hiring overseas workers is that companies want to avoid paying the going rate. Hence, they don’t hire employees and workers from within the country. This creates a strong desire for every employee to get an occupation added to the SOL list to eliminate the British workforce.
A broadband engineer coming to work here for five years on a Skilled Worker visa should not be taken lightly. In actuality, skilled workers can apply for an indefinite stay along with their families after passing five years. In addition to this, there are no such restrictions as of now on the number of overseas workers who can be recruited and paid 80% of the current market value through the SOL.
In an interview with the FT (Financial Times), this concern was recently highlighted by Professor Alan Manning, the former Chairman of the Migration Advisory Council.
Professor Manning discussed in the interview the need to fill strategic labor shortages to keep the economy moving without hindrance. However, we need to be cautious when contemplating non-strategic shortages in the hospitality and retail sectors.
Sectors and industries suffering from the labor shortage are not because of a lack of local people. People are not keen to take up jobs for various personal reasons, resulting in the increased demand for overseas workers.
Certain sectors need to be more interested in adequately paying their employees and offering them long-term growth. According to Professor Manning, if the government provides enough supply of foreign employees to an industry, that company would eventually become “completely dependent on that source of labor.”
When this occurs, a company model will shift as it adapts to a workforce that is either only interested in short-term work or is less willing to fight terrible working conditions. In a functioning market within the presence of a restricted labor supply, the company model would adjust to fewer, more capable employees, aided by fair levels of automation and enhanced efficiency. In the midst of a high labor supply, the reverse will occur. A corporation will not need to adapt its business model, focusing on a larger staff with lower compensation.
The most prominent example is how the number of mechanized vehicle washes was cut in half between 2000 and 2015. Conversely, hand-car washes have flourished drastically and now dominate the market. This has only been possible because low-wage immigrants have abandoned the machine in favor of man.
Since the availability of low-paid immigrants has decreased, the demand for automated car washes has increased throughout the UK. Although at the present time, this trend will go the opposite as the number of immigrants is heightening.
In the context of this trend, the pro-immigrant Confederation of British Industry (CBI) has modified its attitude and stated that the industry must prioritize greater childcare, employee welfare, flexible working, and automation.
It would be great if we could commence a long-term change away from wage-suppressing immigration policies. Still, with the Chancellor’s Spring Budget and the expansion of the SOL, it seems like Treasury orthodoxy has triumphed once again.
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