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
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