Why immigration isn’t working

An influx
of immigrants could be the solution to the UK’s skill crisis over the next
10-15 years.  But to what extent can
migrant workers resolve labour shortages and how do they fit into the complex
picture of the changing workplace?  Jane
Lewis reports in a six-page special

Thanks
largely to the impact of Kubrick’s masterpiece, 2001 has long been a date to
conjure with – one of those red-letter years in which anything was once
considered possible, a futuristic beacon of times to come. The reality, of
course, has been far more prosaic. Here in the UK, 2001 has so far been a damp
squib of a year.

Perhaps
the best lesson to be learnt from 2001, therefore, is the inherent danger of
placing too much trust in future projections – however scientific their
provenance. As many of the policy experts canvassed for this article have
noted, even the best futurologists can become badly unstuck. While many display
an uncanny knack for correctly identifying key trends they often completely
misinterpret the impact these will have on society. Thus, although it is
impossible not to admire the prescience of Orwell and Huxley for 1984 and Brave
New World – interactive TV, test tube babies, the emergence of the drug
culture, and the rest – the nightmarish worlds they thought would result from
these developments have, thankfully, not happened – yet.

The
same has been shown to be true of many of the more optimistic projections of
the past. As Stephen Bevan, associate director of the Institute of Employment
Studies points out, 20-30 years ago futurologists were predicting a rosy future
of leisure for most of us. They thought that the main impact of IT would be to
reduce the hours we spent at work. In fact, the acceleration of pace wrought by
computerisation has had the opposite effect.

"The
economy now is based on even longer working hours, and some people have
virtually no leisure life at all," says Bevan. Similarly, as the
International Labour Organisation’s World Employment Report for 2001 remarks,
the onset of the mobile digital era, hailed as the facilitator of a better
work-life balance for many workers, may turn out to be a double-edged sword.
"Far from adjusting working needs to the needs of family life, there can
be a rising pressure to work everywhere all the time," it states.

So
it is with some trepidation that we embark on an analysis of the future shape
of the UK workforce in 10, 15 or even 20 years time when so many highly influential
factors are as yet unknown. Even taking the broadest possible brush, as the
World Employment Report seeks to do, it is impossible to predict future
outcomes with any degree of accuracy. "The prospects of improving the
global employment situation will depend mainly on whether the current expansion
of the world economy can be expected to continue," it reports. And that in
itself is hardly a given. "There are many uncertainties, including the
trajectory of the US economy (towards a hard or soft landing), the possibility
of Europe taking over as the global economy’s dynamo, the sustainability of
Russia’s upturn and India’s ability to maintain its high economic growth
momentum." And that is before you consider the impact that a potential
superpower like China may have on world trade and security.

For
Britain itself, it is clear that the most important "what if" will be
the extent of our future commitment to the European Union – particularly if
some of the predictions for 2020 made by the Futures Observatory, a think-tank
led by David Mercer of the OU Business School, are given credence. As "the
first empire built not on military conquest, but on political ideals"
(itself a hardly uncontroversial point of view) the think-tank predicts the
future importance of the EU could extend to it becoming "the world
government of the future".

On
the whole, the picture painted by the Futures Observatory is highly optimistic
across the board. Life will be better in nearly all respects. We’ll be
healthier, live longer and enjoy more control over our destinies. All in all,
the projection is for a more "peaceful and prosperous planet". Within
the workplace itself, Mercer’s main prediction is the triumph of oestrogen over
testosterone. "It may become known as the ‘women’s century’," he
claims. "We shall see women, who are better suited to the modern
workplace, taking more of the jobs, certainly at junior and middle management
level. We shall also see the spread of ‘feminine’ values – cooperation rather
than competition – throughout society."

In
common with many commentators, Mercer places particular emphasis on the impact
of an ongoing "major skills shortage" which he believes will have a
particular impact on the relationship between companies and employees.
"Organisations will have to market themselves as much to their own
employees as to their customers," he predicts. Moreover, this skills
shortage will also necessitate a longer working life for most individuals,
"Retirement age will have to be raised to 70".

Indeed,
of all the predictions made by the Futures Observatory, this is the one most
grounded in hard statistical evidence – because it is linked to long-standing
demographic trends that point to a potential time bomb in Western employment
patterns. The main problem relates to fertility. As the Nobel Laureate
economist Gary Becker points out, although world population over the past few
decades has doubled to one billion, birth rates in many high-income countries –
including the whole of the EU – have fallen to unprecedented levels. "The
result is a demographic divide between nations that will have enormous
political significance," he says.

According
to Dr Wolfgang Lutz, demographic analyst at the Vienna-based EU Observation
Centre for Family Policy, OeIF, with an average 1.45 births per female, some EU
countries are already filling more coffins than cradles and the birth rate is
well below the level needed to maintain the union’s 377 million population. He
predicts that by mid-century the population could well drop by as much as 20
per cent. By 2020, meanwhile, half of the population will be over 50 years old.
The impact of this on the health of the European economy and its future
competitiveness is likely to be pronounced. Not only will there be dwindling
numbers of workers to make insurance contributions to finance state pensions
and elderly healthcare, but productivity is also bound to suffer.

"An
ageing labour force is not particularly innovative or productive,"
concludes Lutz, who backs the Future Observatory’s claim that most of us will
be forced to remain in the workforce until we are 70, "merely to support
ourselves".

Some
UK commentators have used the seriousness of the pan-European situation as an
argument against Britain’s continued membership of the EU. "It is extraordinary
that so many politicians seem obsessed with encouraging further integration
with Europe when its markets will decl-ine sharply with shrinking
populations," says restaurateur entrepreneur and Sunday Telegraph
columnist Luke Johnson.

He
argues that the UK is better placed than most of its European peers to deal
with the situation. Our future workforce will not fall as dramatically as that
of Italy or Germany – predicted to decline by 40 per cent over the next 30
years. And Britain has two further advantages. First, "We have
significantly greater pension provision than anywhere else". With 16
million UK nationals holding either occupational or private pension schemes, we
own 52 per cent of total EU pension fund assets. Second, our fertility rate is
still substantially above the EU average. "Consequently Britain will
experience nothing like the decline in living standards faced by countries like
Italy over the next 50 years," says Johnson.

But
given the extent of the perceived skills shortage already afflicting the UK, it
is clear to many government ministers that the short-term situation is serious
enough to merit immediate action. Moreover, even if our own long-term
demographic prospects are marginally better than those of our European
partners, the situation is still grave enough. As a report published by the
Government last year, Winning the Generation Game, makes clear, the UK’s
continuing youth-centric business culture, which has seen retirement at 50
become increasingly the norm, has already cost the country dear. With an
estimated 2.8 million of 50- to 64-year-olds out of the labour market, the
economy has forfeited £16bn in lost the GDP since 1979, while the public purse
has had to stump up between £3-5bn in extra benefits and loss of tax.

Although
economists such as Peter Robinson of the Institute for Public Policy Research
insist that claims of widespread skills shortages have been over exaggerated,
evidence on the ground demonstrates that employers are increasingly concerned
about short-term recruitment prospects. "The service sector is the worst
hit, in particular banking and accountancy," says Jason Cartwright
international recruitment manager at TMP Worldwide. The problem is we don’t
have enough managers. Today’s managers are the graduates of nine to 10 years
ago. When they left university the country was in one of the worst recessions
since the war and they could only find jobs as taxi drivers."

According
to a pan-European survey conducted by TMP, almost half of the 350 managers
surveyed said that the skills shortage was having a severe adverse effect on
their businesses, and four-fifths believed it was set to worsen. A leading
group of industrialists recently lobbied Europe’s ministers to take action to
counter the threat.

To
a large extent the problem has been caused by prosperity – healthy economies
have outstripped local ability to supply qualified workers. But other factors
have also played a part. In France, for example, the imposition of a 35-hour
week means that more workers are needed to produce the same economic output.
Meanwhile, over-lengthy training periods have spelled delays in getting
valuable workers to the market in the first place.

The
most obvious shortage across Europe is for computer engineers. It is estimated
that by 2003 there will be a deficit of some 1.7 million IT specialists. But
unglamorous industries like construction and metalworking are also in trouble.
According to Miriam Lewis, a construction industry account manager at the
Employment Service’s Large Organisations Unit, "There is a shortage of
electricians, bricklayers, welders – all the core skills even down to
semi-skilled people like scaffolders and demolition people. Everyone in the
industry knows we need to have commitment to training, but no-one wants to provide
it. There needs to be a whole culture change, a whole rethink."

Few
would disagree. But the real debate centres upon exactly what direction this
rethink should take. Indeed, the Labour Government is itself split on the
issue. Some ministers, most notably Foreign Secretary Robin Cook, have come out
openly in favour of tailoring immigration policies to fill the skills deficit.
In what has become widely known as his "tikka massala" speech – a
celebration of the strength of the UK’s multicultural heritage – Cook claims
that legitimate immigration is "the necessary and unavoidable result of
economic success" and "a condition of growth and prosperity in the
modern world".

There
are many others prepared to sign up to the view that the free movement of
people is the missing link in globalisation and, far from costing host
countries in terms of increased benefit expenditure, actually boosts revenues
and productivity. "Self-selection by migrants is likely to mean they are
more resourceful, entrepreneurial and ambitious than the norm," says
immigration minister Barbara Roche. Indeed, some academics, most notably
Jagdish Bhagwati, professor of economics at Columbia University, believe that
the US will remain predominant in the 21st century economy, precisely because
"other countries cannot reproduce America’s attitude to immigration".

But
the political barriers to even a controlled process of immigration in the UK
and Europe are huge. Germany was criticised when it announced a special
immigration programme for 30,000 computer engineers from India – unions
protested and opponents called the move discriminatory. Consequently the scheme
was scaled back. By the end of January this year, fewer than 5,000 workers had
signed on and most of these had come from Eastern Europe. Moreover, with
unemployment still running at 8.1 per cent across Europe as a whole, many
commentators believe it would be "political dynamite" to suggest that
immigration is the answer to shortages.

This
is certainly the view taken by Cabinet ministers such as trade minister, Kim
Howells, who believes the emphasis in the UK should be on training indigenous
workers rather than on bringing them in from abroad. Others, most notably
International Development Secretary Clare Short, have argued that encouraging
economic migration would "cream off" high-fliers from poorer
countries, where their talents are needed more urgently.

But
Prof Bhagwati disputes this claim, maintaining that the wealth generated by
emigrants invariably benefits their home countries. It was the Taiwanese and
Indian computer experts who migrated to Silicon Valley who, in the end, were
instrumental in building up the industries of their home countries. And some
countries actually bargain on training up more staff than they need, precisely so
that they can export them – Filipino nurses being a case in point.

What
is clear is that all over Europe there are examples of ad hoc arrangements to
circumvent strict immigration laws in favour of a more pragmatic approach. The
French economist Jean-Pierre Garson claims that the most innovative approach is
being shown in the UK, where both public and private sectors have long taken a
pragmatic approach to shopping around for missing skills. Moreover, the
Government is often prepared to "drop eligibility criteria and replace
them with fast-track work permits," says Garson.

Meanwhile,
research by the Recruitment Confidence Index last year showed that many UK
companies are achieving this themselves. During the six months to August 2000,
more than half the organisations surveyed were employing non-UK citizens –
primarily to fill gaps in management positions.

But
with immigrants estimated to make up no more than four per cent of Europe’s
total population over the next five years, it is clear too that drastic action
needs to be taken on the home front to counteract the demographic time bomb.
"We’re going to see a lot of social change, but the underlying theme is a
fundamental labour shortage which will remain for a long period," says
John Purcell, professor of HRM at the University of Bath.

The
most effective short-term means of tackling this is by removing barriers
preventing older men and women from participating in the labour market. Labour employment
minister Margaret Hodge announced in February that the Government intended to
abolish compulsory retirement at 65. Meanwhile, by 2006 it will have
legislation in place that effectively outlaws age discrimination. According to
the Employers’ Forum on Age work also needs to be done to scrap inflexible
pension rules which prevent older workers claiming part of their pensions.
Ideally, says the EFA, we need to revise the way we see retirement – instead of
being an unequivocal cut-off date, it should be phased in gradually in a
"decade of retirement" it says.

Some
critics, most notably CBI director general Digby Jones, have argued that it may
be irresponsible to employ people over retirement age. Others have suggested
that older workers are more likely to be in poor health, are more resistant to
change, less creative, more cautious, less responsive to training and more
resistant to technological change. But there is increasing evidence that – hard
economic realities aside – employers are beginning to warm to the merits of a
more diverse workforce.

The
pendulum is beginning to shift away from the cult of youth, which reached a
climax in the 1990s, when 35-year-old women and 42-year-old men routinely found
themselves classified as "older" workers. As one commentator remarks,
in potentially tough economic times, "employers want to see
battle-scars" and much of the attraction of youthful workers has waned in
line with the new economy principles they preached. Ideally, of course, you
need a balance of ages.

Predicting
future outcomes is about as inexact a science as is possible to devise. The one
thing that seems to unite commentators – despite all contrary evidence about
the inherent conservatism of human nature – is a belief that life in 2020, for
most of us, will be very different to the way we perceive it now. As John Bank,
professor of HRM at Cranfield concludes, the gap between the "haves"
and "have nots" both in the UK and across the world generally, is set
to increase still further.

But
for those of us in the fortunate position of being able to enjoy it, "I
really do think it’s going to be a pretty radical future".

Where
shortages hit home

High
employment levels are proving to be a nightmare for those seeking skilled
staff. This is a snapshot of the sectors most affected

Although
the monthly statistics indicate a slight decline in skills shortages since the
last quarter, nearly two-thirds of firms across the UK and Ireland report they
are continuing to experience problems, says James Reed, chief executive of
recruitment specialist Reed. "The year-on-year rising trend indicates a
steadily increasing problem for business."

Moreover,
there is clearly a discrepancy between the figures, which the experts claim are
improving and the experience of those on the ground. A recent survey of 150 top
HR professionals at a CIPD meeting showed that 90 per cent identified skills
shortages as a major problem for their businesses.

In
terms of regions, Reed reports that Thames Valley has now been overtaken by
demands of the fast-growing service sectors in Wales and Ireland and Scotland
where between 68-73 per cent of organisations are experiencing recruitment
difficulties.

But,
as the Recruitment and Employment Confederation monthly survey points out, the
situation is still tight in the South East, with only 1.6 unemployed people
existing for every unfilled Job Centre vacancy.

The
REC claims that the most acute shortages have shifted away from technical and
engineering skills to support staff. Nearly a quarter of employers said
secretarial and administrative positions were particularly hard to fill, but
only 17 per cent reported problems with IT.

IT sector

Although
the outlook is brightening for IT, there are still key skills in short supply,
most notably consultants, technicians, Java, C++ and CRM programmers, software
developers and Web designers. High-level database skills such as Unix and Linux
are also in demand. A chief problem in recruitment is that the profession is
still seen as a male domain – only 5 per cent of young women canvassed in one
survey consider entering IT.

Voluntary
sector

This
is beginning to feel the highest pressure with 67 per cent of those
organisations polled having difficulty finding suitably skilled staff, up from
44 per cent the previous quarter. "Charities are being forced to be far
more lateral in the way they look for staff," says a spokesman.

Retail

The
survey found 42 per cent of firms are reported as having difficulty filling
sales vacancies.

Hotel
and catering

Permanent
and temporary assistant managers, housekeepers, chefs, waiting staff are
treated as gold dust, despite the downturn caused by the foot-and-mouth crisis.
There are currently 30,000 vacancies for chefs in this country.

Executive/professional

A
big shortage of graphic designers, and continuing dearth of good managers means
salary levels continue to rise way ahead of those of more junior staff. The US
downturn has mean that skills shortages in the City – most notably for accountants,
bankers and legal personnel – are now easing.

Engineering
and construction

This
is considered one of the most critical sectors in terms of a long term shortage
of engineers of all disciplines. But there is also a pronounced shortage of
blue-collar workers: bricklayers, crane operators and drivers. The winding down
of many apprenticeship schemes in the 1980s and ’90s is beginning to be heavily
felt.

Public
services

Forty-three
per cent report problems recruiting accountancy staff.

Teachers:
Recruitment ex-perts put the shortfall at around 10,000 nationwide and
predict the situation will worsen because the number of pupils in secondary
education will continue to rise over the next four years. This is the most
serious shortage of teachers there has been for at least a decade.

Nurses:
 Estimates suggest that the UK is
currently short of some 20,000 nurses.

Doctors:
 There is a deficit of some 5,000
doctors.

Social
workers:
According to a recent survey, there is now a 16 per cent vacancy
rate, rising to 20 per cent in London.

Comments are closed.