8 December 2015 Dr Heather Rolfe The impact of free movement on the labour market: case studies of construction, food processing and hospitality

Introduction: research on free movement and the labour market Changes in labour market composition, particularly in low skilled work (MAC, 2012; Green et al, 2013) Little impact on jobs and wages measured statistically (Lucchino, Rosazza-Bondibene and Portes, 2012; MAC 2012; Wadsworth, 2015) Changes in labour market institutions (recruitment methods, contracts, training) particularly in low skilled/low paid work Research Questions To what extent are changes in labour market linked to changes in labour market institutions? What are the implications of any restrictions on mobility?

Introduction: research on free movement and labour market institutions Research aims: To look at longer term impact of free movement on employment practices Examine changes in labour market through in-depth research in 3 sectors : construction, food processing and hospitality Statistical analysis & evidence review Case studies of employers and employer stakeholders in construction, food processing & hospitality Focus on employer practices & implications of possible restrictions

Migrants in low skilled work: focus on construction, food/drink & hospitality EU migrants in labour force as whole increased from 2.2% in 2005 to 5.4% in 2014 In Food and drink increase from 2.3% to 27% wide geographical spread but concentration in meat industry (third are migrants) Non-EU migrants fluctuated between 7.1 & 12.5% In Hospitality 4.8% to 12% with heavy concentration in London and in restaurants & hotels. Non-EU migrants fluctuated 14.0 – 17.7% In Construction increase was 1.8% to 6.0% with heavy concentration in London (more than half are migrants) Non-EU migrants grew from 3.8 – 6.5% Source: LFS

Reasons for employment of EU migrants: Skills issues Skills shortages (‘technical’ and ‘soft’) o Shortage of technical skills, need sourcing from larger pool  Poor training infrastructure (C) (CIOB, 2015)  Insufficient employer investment as result of business size & uncertainty (C)  Labour turnover, poaching/loss to other sectors (Chan et al, 2008) (F&D, C) o Need for ‘soft skills’ – eg interpersonal (F&D, H) Labour shortages o Unattractive nature of the work/conditions, industry image, low pay (All) (Metcalf et al, 2008; Geddes & Scott, 2010; BIS 2013) o Limited career prospects (perceived & actual (All) o Temporary contracts (All) o Location issues, small towns & rural areas (F&D, H)

Reasons for employment of EU migrants: Non-skills issues Need for maximum flexibility, seasonal business demands, competitive and cost pressures (All) o Flexibility in hours, job function o Seasonal variation (Geddes, 2008) o Cost not a key factor (Meardi et al, C; CIPD, 2014) Mixed evidence on whether employers have a ‘preference’ for migrants o High quality workers in low quality jobs (Green et al, 2013) Explained by higher levels of general education (A8) (F&D, H) but variable o No evidence that employers seek migrants in preference (Green et al, 2013) Recruit for ‘no particular’ reason’ ‘Because are available’ (Ci Research, 2008; CIPD 2014) o Theory of ‘hiring queues’ (Collum & Findlay, 2015) and ‘ethnic queuing’ may not operate in practice (Markova et al, 2013)

Some disadvantages Language skills – need translators, provided ESOL in past, not now (All) Workforce cohesion – want to avoid all-migrant teams (All) (McCollum & Findlay, 2012) Image of company/local resentment (CIOB, 2015) Customer attitudes (H) (Metcalf et al, 2008) Costs where agencies are used (F&D, H) Labour turnover continues mobility among higher educated EU migrants (Markova et al, 2013) Similar to non-migrants (Janta, 2011), will move for small gains, have ‘labour mobility power’ (Alberti, 2014) (H) Exposed to any reverse flows (Chan et al, 2008) (C)

Recruitment methods Use of agencies is common but not universal (C, F&D) High proportion of agency workers in food production & hospitality are migrants Hopkins, 2011; Scott, 2013) Use of agencies outside the UK (F&D, H) (Jones, 2014) Downside of use of agencies is cost (F&D, H) Direct recruitment common – range of approaches Direct advertising, including website, banners Jobcentre plus Colleges Recruitment open days Word of mouth an important source & speculative applications. (Green et al, 2013; Giulietti et al, 2013; Batnitzky & Mcdowell, 2013) Recruitment methods aimed at widest possible pool – ‘choice’: ‘You need a fairly big pool to be able to select from to make sure you are always increasing your quality’ (holiday camp)

Employment contracts, terms and conditions – migrant effect? Types of contract vary across low pay/low skill sector Zero hours and temporary contracts common (All) Dual labour markets: o Temporary and permanent staff o Agency and directly employed staff (F&D) o Self-employed vs ‘on the cards’ in construction View that is ‘not because we can’ but led by business needs o Entire business model in Construction from late 1970s o Seasonal/variable demand for labour (all) o Employer preference for more stability, less fluctuation (H) o Flexible workforce has enabled business growth (F&D, H) Contracts more suited to migrants than to British workers (Green et al, 2013)

Future plans: implications of reduced supply of EU migrants All options under consideration Supply of migrants unpredictable. Two food employers experienced recent decline: ‘ It’s just the ebb and flow of the labour force really’ (Cheese producer) ‘This year has opened our eyes. Migrants were coming through the door but that’s completely changed this year, for whatever reason’ (Biscuit producer) Labour solutions: unemployed and young people Unemployed British workers/locals ‘saudization’: Unemployment currently low – less than 6%; Issues of quality/suitability; Welfare benefits seen as disincentive (Geddes, 2008; Scott, 2013); Periodic past supplies of workers from former industrial areas but not current (F&D, C) (Geddes, 2008) Young people/trainees: Sector not attractive (All); General supply too low (All) Need for more support for training, employers reluctant to fund apprenticeships; Employers doubt value of training (F&D, H) Lucas et al, 2008; UKCES, 2011)

Future plans: implications of reduced supply of EU migrants More labour solutions: Students: Around 2/3 students work part-time; offer flexibility & fit with sector (Atfield et al, 2011; Lashley, 2011) (H) but availability may not fit with business needs (F&D, C) Older workers: Compulsory retirement changes were short-term buffer. Suitable for less physical tasks (C, H) Loretto & White, 2006; Institute of Hospitality, 2011) but not seen as available (H) Other migrants: Continuing reliance (CIPD, 2014) but supply may reduce; potential of non-EU female migrants with low participation rate (60%); potential of refugees Non-labour solutions: Automation; sub-contracting; off-shoring; relocation of business; options but problematic

Early findings Immigration impacts on workforce composition have been long-term. Low paid sectors have high proportions non-EU migrants Low skilled/paid sectors have long-standing problems of labour supply and labour quality sourcing from various pools in the secondary labour market. Increased migration flows have not addressed these problems Migrants are not a ‘crock of gold’ (CIPD, 2014) but meet needs, some benefits, some disadvantages. Have enabled businesses to grow in sectors where flexibility is key to survival & success Debate framed as migrants vs British workers misses the point – for employers is about optimal staffing levels, flexibility and costs in highly competitive markets & sourcing labour to meet those needs Need to consider how non-labour pressures and strategies shape employer’s employment practices & affect migrant vs native workforce No easy solutions for low skilled sectors if migrant supply reduces