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Migrant workers - are businesses just taking the easy option?

Martin-Christian Kent - Executive Director, People 1st

It’s been just over 100 days since the EU referendum and the immigration debate is hotting-up in earnest.

At last week’s Conservative Party Conference, Amber Rudd, the new Home Secretary, reiterated the government’s commitment to reduce immigration from the hundreds of thousands to the tens of thousands and spoke about ‘examining whether we should tighten the test companies have to take before recruiting from abroad’.

She stressed the need to ensure ‘people coming here are filling gaps in the labour market, not just taking jobs British people could do’ as well as reiterating that firms should not get away with not training local people.

During the week she had some well publicised spats with a number of businesses she felt were overly reliant on recruiting foreign workers and by the weekend tempers were fraught with a number of ministers trying to calm the negative reaction from the business community.

All this and we are still yet to trigger Article 50 meaning employers are no clearer on what future migrant labour restrictions will look like.

The hospitality and tourism sector wasn’t mentioned explicitly but with nearly a quarter of its workforce made up of migrant workers, is it taking the easy option and not recruiting from the local labour force?

Currently, 38% of hospitality and tourism businesses are reporting hard-to-fill vacancies and it is getting increasingly challenging to fill vacancies as the labour market tightens.

Unemployment is currently 4.9% and has continued to fall since a peak in 2008. At the same time the percentage of migrant workers from other EU nations has gradually increased as businesses have found it harder to recruit. In looking at unemployment levels and employment of migrant workers from other EU countries there is a broad pattern: regions with lower unemployment have a higher percentage of migrant workers from other EU nations working in the hospitality and tourism sector.

Despite the contracting labour market, the hospitality and tourism sector has continued to invest in its staff. 1.5m hospitality staff received training last year, which based on an average investment equates to roughly £1.2bn per annum. These are considerable sums.

In 2015, the hospitality and tourism sector supported over 18,000 apprentices to complete sector specific apprenticeships. The latest government statistics suggest that nearly 87% of these apprentices are British nationals.

In fact, the hospitality and tourism sector has been one of the most active sectors, working with Jobcentre Plus and the Department for Work and Pensions to support people from welfare into work.

Our own work at People 1st to support 5,000 unemployed people into work over 18 months and the work of Springboard and the BHA’s Big Hospitality Conversation highlights the continued commitment from hospitality and tourism businesses to getting indigenous people into work.

This evidence largely suggests that hospitality and tourism businesses are actively targeting the indigenous population, but that the size of their employment needs and a contracting labour market are making it increasingly difficult to fill vacancies. As a result, migrant workers have become an increasingly important labour pool for hospitality and tourism businesses.

Restrictions are clearly going to be challenging for businesses and as yet we don’t know what form they will take. A points-based system taking into account skills (dismissed by Downing Street, but still muted by Amber Rudd last week) would cripple the sector, as the vast majority of the staff needed in the sector are at lower skill levels.

However, a work permits scheme similar to that in place before the points based system was introduced for non-EU nationals will have less of a negative impact. The challenge facing businesses will be proving that there is ‘market failure’.

And here we get to the nub of the problem – what is driving that market failure? Economists are likely to argue that the hospitality and tourism sector fails to attract sufficient talent owing to low pay, short-term contracts and largely unfavourable working conditions.

There is clearly some truth in this depiction. However, things are beginning to change.

Our research shows that with rising staff costs and a tighter labour market, hospitality and tourism businesses are increasingly focusing on retaining and progressing staff. As a result, we are not only seeing salaries rise, but seeing greater staff engagement, flexibility and progression opportunities, which in turn lead to increased pay. It is going to be a long journey, but one that many employers have started.

Looking at the issue from the sector’s perspective, employers would be right to suggest that the government has a critical role to play in creating the right environment to make it easier for businesses to attract local talent.

For too long, out-of-date careers support and competition with schools to hang on to students has meant too few people seeing the career opportunities available and too few starting apprenticeships or full-time programmes that would equip them with the skills to enter the sector.

In putting in place restrictions, the government would be better advised to work with businesses to ensure that the new system is fair and does not hinder continued growth. Equally, the sooner businesses understand what the government is proposing, the better they can start to plan.