Slide 1

Inactive Labour Market Policy and Migration in Scotland

November 2007

David BellDepartment 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 2004-2006

• Population of Working Age

• Employment, Self-Employment Up• Inactivity, Unemployment Down

  Jan-Dec 2004 Jan-Dec 2006 Change

Employees 2,096,400 2,112,300 15,900

Self-Employed 225,500 239,000 13,500

Unemployed 134,600 132,600 -2,000

Inactive 656,400 624,900 -31,500

Total 3,112,900 3,108,800 -4,100

4

Drop in Proportion of Inactive Wanting to Work

2005 2006

% Who % Who Level Level

All Inactive

want to want to want to Do not want

work work work to work

29.80% 28.60% 178,500 446,300 624,900

5

NEET

• Number aged 16-19 not in education, employment or training

 

2005 2006

Proportion ProportionLevel

NEET

Scotland14.00% 12.40% 32,000

6

The Distribution of Pay

£0

£100

£200

£300

£400

£500

£600

£700

£800

£900

1 2 3 4 5 6 7 8 9 10

Earnings Deciles

Wee

kly

Pay

ScotlandUK

Median Weekly Pay = £346.9

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

Proportion of New Entrants by National Insurance Number Registrations

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Poland India

Slovak Rep Australia

China Peoples Rep Rep of Ireland

Pakistan France

Czech Rep Rep of Lithuania

Spain Nigeria

USA Germany

Rep of Latvia South Africa

Hungary Canada

New Zealand Italy

Philippines Malaysia

Netherlands Portugal Sweden

Rep of Estonia

ScotlandUK

10

Number of A8 Workers Registering in Scotland/UK

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Total Total Q1 Q2 Q3 Q4 Q1 Q2

2004 2005 2006 2007

Sco

tlan

d

0

50,000

100,000

150,000

200,000

250,000

UK

11

Wages Are Generally Low Scotland (May04-Mar07)

0

5,000

10,000

15,000

20,000

25,000

30,000

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 Don’t Know How Long They’ll Stay

Intended Length of Stay of A8 Migrants Scotland (May04-Mar07)

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Less than 3months

3-5 months 6-11 months 1-2 years More than 2 years Do not know

14

Most Work Full Time Scotland (May04-Mar07)

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

<10 10-15 16-21 22-29 30-34 35-40 40+

15

Labour Force Survey

• Sampling difficulties– Most are young– Itinerant

16

Age

17

Renting AccommodationProportion of Workers Renting Acommodation by Nationality

0

10

20

30

40

50

60

70

80

90

100

18

SingleProportion of Workers that Are Single by Nationality

0

10

20

30

40

50

60

19

No Training Opportunities

Proportion Never Offered Trainiing Opportunities

0

5

10

15

20

25

30

35

40

45

Ir

eland

UK

Wes

t Ind

ies

A

us/N

ew Z

eal

A

frica

EU25

S

ub C

ontin

ent

USA/C

anad

a

China/

HK/Mal/

Phil

A8

20

More A8 Migrants Not Correlated with Increased Share of NEETs

Aberdeen CityEdinburgh, City of

Glasgow City

Perth & Kinross

Dundee City

Highland

West Lothian

Stirling

Argyll & Bute

Aberdeenshire

Scottish Borders

AngusRenfrewshireMorayFife

Dumfries & GallowayNorth LanarkshireEast Lothian

South Ayrshire

Falkirk

Midlothian

South Lanarkshire

East Renfrewshire

West Dunbartonshire

Inverclyde

East Dunbartonshire

North AyrshireEast Ayrshire

0%

2%

4%

6%

8%

10%

12%

14%

16%

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5%

A8 Migrants as Share of Population

NE

ET

S a

s S

hare

of

Age

Gro

up

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) don’t 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