June 2007 - Migrant workers flex their wings

Just when the Trades Union Congress told us last week that migrant workers are good for the UK economy, the first signs are appearing that the influx of Central European job seekers may have peaked.

Home Office figures monitoring the number of people from European Union accessions states applying for work in the UK show a decline in applications in the first quarter of 2007 compared with the last quarter of 2006.

John Philpott, chief economist at the Chartered Institute of Personnel and Development, speaking at a seminar at Cass Business School in London last week, said that the statistics could be pointing to a levelling off of migration although the fall off could be explained in part by seasonal fluctuations. Nevertheless, other indicators suggest that it may be only a matter of time before the shift begins to reverse.

The Home Office statistics show that more than half of central European migrants who applied for work in the year up to March 2007 said they intended to stay less than three months. This is reflected in the high proportion – again about half – of migrants who take temporary work, much of it in low paid jobs.

Many of these people are students undertaking short-term work before returning home. Others are biding their time until the jobs market improves in their home country.

The same phenomenon happened among British construction workers and tradesmen who moved East to find work in Germany during the manufacturing recessions of the 1980s.

An experience that was reflected in the fictional adventures of a gang of North East builders in the TV series Auf Wiedersehen, Pet, ended when the UK economy began to improve, providing new employment opportunities closer to home.

Home Office statistics show that 427,000 people from the eight nations that joined the European Union in 2004 successfully applied for work in the UK between May 2004 and June 2006 alone. If those who are self-employed and who do not need to registered for work are taken in to account the Government believes the figure could be nearer 600,000.

These include people from the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Slovakia and Slovenia. But more than half of the officially recognised migrant employees are Polish.

The Centre for Economics and Business Research, an economic think tank, has described the economic impact of Polish workers, in terms of spending, as the equivalent of adding the consumer demand of Liverpool to the economy in just two years.

The impact has extended now to a shortage of £50 notes in circulation as Polish workers send home cash to their families.

There is a knock on effect from this employment flow running far beyond the borders of the UK, and, for that matter, the EU. The shortfall in Polish construction workers, plumbers and labourers has been filled by workers from the Ukraine. Meanwhile, employers in the Ukraine are filling their shortages with labour from Turkey, creating a snake-effect in employment supply and demand that finds its tail in the poorest countries.

These economic flows should be beneficial in the long term, helping the poorer countries improve their economies and creating new markets for wealthier countries. But employers in the UK - a country that has benefited from a labour market that has proved more flexible than those of most of its European partners - need to prepare for a receding tide of migrant employment.

Polish workers have sustained parts of the British economy that would be suffering without their support. It’s difficult, for example, to find a medium to large sized hotel in Wales that is not employing Polish or other Central European staff.

While some of these people may settle in the UK, the majority will return to their home country, leaving behind them the prospect of chronic skill shortages in the years ahead.

To what extent are employers preparing for skill shortages that may grow even more acute in future than they are at present?

The depth of employee concerns is apparent in a study*, carried out by Ipsos MORI on behalf of Vedior, the staffing group, and launched at the Cass seminar. Researchers interviewed human resources directors and managers from 200 employers across the UK economy, including services, manufacturing and public sectors.

The feedback revealed serious concerns over skills shortages, particularly in engineering, skilled manual work, the financial sector and among managerial grades. Nearly two fifths of the HR managers questioned in the research thought that existing skill shortages would grow worse in the next few years.

Up to now many employers have responded to such shortages in the time honoured way by buying labour where they can find it at the cheapest price. But rising salaries in offshore labour markets may be deterring those who are engaged in longer term labour force planning. The managers canvassed in the Ipsos MORI survey viewed offshoring as one of the least likely solutions to growing skills shortages.

The strongest response favoured concentrating on retaining people. The next most popular strategies among large companies are to employ more foreign workers, more older workers and more temporary workers.

In the traditional labour market, skills, whatever they may be, are commodities that attract a market value. Gluts and shortages can arise in any profession and it is becoming increasingly difficult as an individual to plan ahead for market scarcity.

Jim Murphy, the employment and welfare reform minister, told the seminar that the “shelf-life” of skills in the UK had gone from seven to eight years down to three to five years. This means that people will need to keep on their toes if they want to avoid their skills becoming obsolete.

It can happen to the best of us. Only two weeks ago a heart surgeon sent me his curriculum vitae, complain that demand for his specific skills in heart-by-pass surgery had fallen due to new methods increasingly employing the use of balloon-like stents to keep arteries open and working.

In recent speeches Mr Murphy has highlighted the dwindling number of opportunities for low skilled work in the UK. While today the UK has some nine million highly skilled jobs, by 2020 the need will have risen to 14 million. Today while, there are 3.4 million unskilled jobs current estimates suggest that the number will have dwindled to 600,000 in the same period.

The future for employers seems clear. They need to view migratory employment as a windfall rather than as a permanent feature of employment – although a regular supply of student workers is likely to be maintained in low skilled service jobs.

The only solid way to an economically successful and high skilled workforce is to increase the delivery of job-relevant skills and abilities and this has to be a joint effort, not just among employers and the Government. Individuals too must work at ensuring that the work they do remains in demand. Keeping up to scratch has become a full time job.

*The study: Is The UK up to the job? Can be downloaded from the HR portal at www.vedior.com

See also: Temporary workers