Slide 1 Inactive Labour Market Policy and Migration in Scotland November 2007 David Bell Department of Economics University of Stirling

2 Outline The Scottish Labour Market Migration The Skills Strategy Do We Need a Skills Policy?

3 Changes in the Scottish Labour Market Population of Working Age Employment, Self-Employment Up Inactivity, Unemployment Down Jan-Dec 2004Jan-Dec 2006Change Employees 2,096,4002,112,300 15,900 Self-Employed 225,500239,000 13,500 Unemployed 134,600132,600 -2,000 Inactive 656,400624, ,500 Total3,112,9003,108,800-4,100

4 Drop in Proportion of Inactive Wanting to Work % Who Level All Inactive want to Do not want work to work 29.80%28.60%178,500446,300624,900

5 NEET Number aged not in education, employment or training Proportion Level NEET Scotland 14.00%12.40%32,000

6 The Distribution of Pay

7 Scottish Labour Market Continuing Reductions in Unemployment and Inactivity –Suggests Volume Indicators of Labour Market are Healthy Distribtion of Pay Highly Unequal –And will remain so NEETs Declining –Successful Intervention? –Falling Birthrate

8 Data on Immigration From A8 Countries Last 6 quarters of LFS 158,800 first wave observations Small nos of non-UK nationals – 9,300 How good is this sample? –Instability in nos with A8 country of origin in Scotland –32,000 in 2006 LFS, 62,000 in 2007 LFS –52,000 New Worker Registrations in 2004/07

9 Workers Registration Scheme

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12 Impact of Immigration? The majority of those who have arrived in the UK from Eastern Europe have not come permanently. They have come to work, are highly productive, educated, mobile and are prepared to work for relatively low wages. Only 9% said they expected to stay for more than two years. Hence, in my view it is inappropriate to call them migrants, whereas in fact they should more appropriately be considered temporary or guest workers. (Blanchflower)

13 Many Dont Know How Long Theyll Stay

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15 Labour Force Survey Sampling difficulties –Most are young –Itinerant

16 Age

17 Renting Accommodation

18 Single

19 No Training Opportunities

20 More A8 Migrants Not Correlated with Increased Share of NEETs

21 Blanchflower – Evidence to Lords Select Committee The flow of workers from the A8 and the A2 appear to have increased the fear of unemployment, which tends to have a downward impact on pay especially in the non- union sector Evidence -. Consumers in each monthly survey are asked (Q7): How do you expect the number of people unemployed in this country to change over the next twelve months? The number will a) increase sharply b) increase slightly c) remain the same d) fall slightly e) fall sharply f) dont know

22 Immigration Adds to the Fear of Unemployment Consistent with a rise in the fear of unemployment, wage growth has been depressed in both the UK and Ireland since A8 accession. According to the UK Average Earnings Index (excluding bonuses), wage growth has fallen from 4.2% in 2004 to 3.9% in 2005, 3.8% in 2006 and 3.5% in 2007Q2. A rise in the fear of unemployment is the only realistic candidate explanation.

23 Employers See The Advantages of Migrant Workers Employers cited advantages of migrant workers in terms of their general attitude and work ethic. They tended to be more motivated, reliable and committed than domestic workers. For example, migrants were said to be more likely to: demonstrate lower turnover and absenteeism; be prepared to work longer and flexible hours; be satisfied with their duties and hours of work; and work harder in terms of productivity and speed. In the view of some employers, the more favourable work ethic of migrant workers encouraged domestic workers to work harder. (Dench, 2006)

24 Effect on Productivity? Immigration of higher skilled (or more productive) workers could temporarily raise the domestic rate of productivity growth; and that immigrant labour could lower the natural rate of unemployment, either by filling skill gaps (assuming that foreign-born workers are complementary to the domestic workforce) or by tempering wage demands, as wage bargainers become aware that they can be replaced more easily than in the past. OECD Economic Outlook notes that international as well as UK evidence suggests [that] immigration can serve to make the labour market as a whole more fluid and wages less sensitive to demand fluctuations (2006, p.68).

25 Migration and the Skills Strategy Crucial to objective of increasing rate of growth Discussion of Fresh Talent limited to discussion of access to quality courses in English for Speakers of Other Languages (ESOL) and better recognition of existing skills and qualifications. Migration not discussed

26 Amending the Skills Strategy? Migrant labour –will continue so long as there are significant gaps in GDP per head between the UK and A8 countries –Is low cost –Helps increase the productivity of the domestic workforce –Effect on the home country unclear –Has to be given more consideration in the Skills Strategy