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Ian Brinkley
Economic Advisor
Ian Brinkley

Employers can do more to help the unemployed – but don’t blame migrants

Authors: Ian Brinkley Ian Brinkley

30 July 2013


The Skills Minister, Matthew Hancock MP, has recently (25th July) called on firms to hire from their local community rather than take on migrants from overseas. 

The Minister is right to call on firms to do more to help the disadvantaged in their local communities. Many firms are already doing so, both directly and indirectly, with a wide range of agencies using imaginative schemes to help give people work experience, confidence, training, and opportunities that they would otherwise not have. Indeed, we see this as an important and growing trend – and one that government should be doing everything it possibly can to encourage. Our recent report sets out what employers are doing and how that role can be expanded.

The Minister is also right to highlight the need to improve the way the educational and training systems equip some of our young people for the world of work. Germany has persistently had a much lower youth unemployment rate than the UK. The gap is even greater if we use the more comparable share of the youth population who are out of work (the youth population ratio). In the final quarter of 2012 the young unemployed made up just over 4 per cent of the youth population in Germany and over 12 per cent in the UK.

The inability of successive governments – including the current government - to replicate Germany’s labour market success in this area is both frustrating and disappointing. Our recent report draws on best practice from other European economies to show how we could improve the approach in the UK.

The Minister is completely wrong in making a spurious link with immigration. It may have popular appeal – many people will look at the high numbers of migrants and the high number of young people unemployed and conclude that fewer migrants means less unemployment. This is called the “lump of labour” fallacy where there are only a fixed number of jobs to go around. This sort of thinking in the past led to restrictions on the employment of women in favour of male heads of households. Yet, we would not condone encouraging women to remain at home in order to reduce higher rates of unemployment amongst men. And let us remember that Germany has a higher share of non-nationals than the UK and that has not prevented them having one of the lowest youth unemployment rates in the OECD.

Extensive research has been undertaken which shows that migration has had little measurable impact on aggregate unemployment. A recent study by the independent National Institute confirms the results, even in a period of recession.  A major review of the available literature across the OECD concludes that migrants are imperfect substitutes for natives, that they have little or no impact on the employment and wages of natives, but that significant adverse effects are found in some studies for previous waves of migrants. In other words, new arrivals are more likely to take jobs and force down wages of migrants already here.

There are large swathes of the country where migrants are conspicuous by their absence and yet the problems of unemployment are just as acute and, in some cases, worse than in areas where migrants are concentrated. And in the past we have seen exactly the same problems emerge when the economy has been struggling and migration was simply not an issue.

Many of the firms already active in their local communities are also employers of migrant labour. They see no contradiction between doing both. Moreover, companies willing to invest in these social programmes are also typically above average investors in their own workforces.

The Minister suggests that firms which do not have apprenticeship programmes should not turn to recruitment overseas but instead train up locals. It is unlikely firms that are so reluctant to invest in training are going to scour the world for talent – they will recruit from people already here. And these are often the firms that, even in the absence of migrants, will not invest in training. Instead, they will try and attract workers from firms that do train – the old problem of “poaching”.

Firms should always employ the best person for the job – regardless of background. Nationality is irrelevant provided the individual concerned has the right to work in the UK and complies with any visa restrictions.  EU nationals can work in the UK and it would be illegal for a firm to turn down someone just because they were German, Italian or French. Many UK people work overseas and we would be rightly outraged if a German, French or American firm decided not to employ someone just because they were British.

The Minister makes some good points about encouraging business to do more in their local communities and take the long term view about the benefits of investing in people. Making a link to immigration ignores the evidence, and devalues what would otherwise have been a helpful intervention. And I leave it to the reader to work out how this linkage between migrants and domestic disadvantage differs from a more famous intervention made back in 2007.