The UK government’s immigration plans will hold back key sectors

In this weeks column, Julia Rampen looks at the UK government’s position on immigration and the effect it will have on key sectors post-Brexit.

Which of the following people is the most skilled? An IT technician, a junior doctor, a tech entrepreneur or an experienced private butler? Your answer probably depends on whether you prefer Fitbits or foie gras. But as far as the Home Office’s immigration plans are concerned, the answer is probably the private butler.

After all, the typical salary for running a super-rich household starts at £60,000 a year, whereas a junior doctor earns £26,500 in their first year and £31,000 in their second, tech entrepreneurs tend to be paid lower salaries and rewarded with company shares, and an IT technician can earn as little as £17,000 a year. Hence few of these workers would meet the criteria for a Tier 2 work visa, which the government says is for skilled employees. In theory, the minimum salary is set at £30,000 a year, but the real threshold is currently closer to £50,000. This is because it automatically rises after 20,700 visas have been granted.

Defining skilled workers

Until this week, the Home Office’s definition of a skilled worker might have seemed like a fairly obscure debate. But at the Conservative party conference, the Prime Minister Theresa May and her Home Secretary Sajid Javid made it clear that after Brexit, immigration rules would change in one fundamental way: EU citizens would be treated the same way as non-EU citizens.

If everything else remained the same, this would mean that the visa system described above would become the norm for millions of people. And the obvious problems with dividing the workforce based on whether they earn £49,000 or £51,000 would become harder and harder to ignore.

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Start-ups and immigration

So long as Britain was a member of the EU, freedom of movement allowed employers to sidestep the government’s narrow definition of a high-skilled worker. This was crucial because the majority of jobs in the UK aren’t highly or poorly paid, but somewhere in the middle, and includes workers with sought-after technical skills, like scientists. According to the website PayScale, the typical research scientist’s salary is around £30,519 a year. And a significant number are EU citizens: the Resolution Foundation calculates that they make up 6 per cent of science production technicians and that roughly three-quarters of such workers earn less than £30,000 a year. It’s a similar story for customer service and hospitality managers. When freedom of movement ends, that pool of experienced-workers-with-modest-salary-expectations may well dry up.

The government is yet to divulge its full immigration plan, so there’s still scope to come up with a more sensible solution. The first part of that should be challenging the blunt way it measures skills. Take Britain’s thriving tech start-up sector. “Virtually no ambitious tech startup that has raised less than £1m in seed investment will be paying anyone (including founders) a salary more than £50,000,” John Spindler of Capital Enterprise says. “They can’t afford to.” Instead, the founders and early employees receive stock options and shares. Spindler warns that a rigid definition of skills could starve the London-based tech ecosystem of talent. “With a £50,000 cap, we will stop virtually anyone who is not a British national from starting a tech startup in the UK or from joining one until the startup has raised a large round,” he says.

Visas, skills and net migration

Spindler dubs the proposed immigration scheme “madness”. Nevertheless, if the government does press ahead, he believes there are ways to mitigate the impact on the tech sector by expanding other types of work visas. The Tier 1 Exceptional Talent visa recognises workers with great promise in certain fields and could be expanded and streamlined (at present it is limited to 2,000 places a year). Meanwhile, the Tier 5 Youth Mobility Scheme visa allows under 30’s from Australia, New Zealand, Hong Kong, Japan, Monaco, South Korea and Taiwan and Canada to work in the UK for two years. This could be expanded to include all EU countries.

Employers are up against more than bureaucracy, however: the government’s stance is a response to public disapproval of immigration, not economic reality. In fact, net migration was at 270,000 in the year to March 2018, according to the Office for National Statistics, and this seems to be in response to demand since unemployment is at its lowest level since 1975. In the face of this evidence, Theresa May has consistently defended the much-criticised target to reduce annual net migration to below 100,000 a year. Just because the government has the tools to give skilled workers earning less than £50,000 visas, that doesn’t mean that it will.

Hence businesses that value truly skilled employees – not just those lucky enough to earn more than £50,000 a year – must be prepared to make the wider case for the value of immigrants in the workforce. Yes, it’s about the hard-headed question of how a construction company builds new social houses, or a hospital staffs its wards, or a start-up gets to market. But this is a reflection of the UK’s own skills shortages.

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Diversity, innovation and immigration

There is also, however, a case to be made for the diverse thinking immigrants bring. In some cases, this might be a perspective born out of a different educational system (India, for example, produces more female programmers than the US). Or it might be an understanding of globalised markets – TransferWise, a cross-border payments system, emerged after two Estonians moved to London and struggled with bureaucratic foreign exchange systems. And someone who takes the risk of moving countries and creating a new life is likely to have a can-do attitude that crosses over into other spheres: many of the world’s biggest companies were founded or are run by immigrants. Then there are the less flashy skills, like the ability to switch languages when dealing with a customer from abroad.

The government is yet to clarify how much of the existing visa regime it will continue: Javid, himself the son of an immigrant, has hinted he will reconsider the income threshold mechanism. But ultimately it is employers, not politicians, who understand the value of immigrants to their organisations, and the skills they bring. It’s time they started shouting about it.

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