The new British immigration system: some initial thoughts from an Australian

Boris Johnson’s post-Brexit immigration system has just been announced. For politically astute reasons, Johnson has sold his system as the ‘Australian points-tested’ approach. This is done for rhetorical reasons, and is intended to signal the U.K. Government will have full control over who enters the United Kingdom. It is not done to copy Australia’s approach to immigration. John Howard’s catch-cry, ‘We will decide who comes to this country and the circumstances in which they come’, has migrated to the United Kingdom, albeit in different circumstances.

The most ‘Australian’ aspect of the new British approach is the insistence on speaking English. In Australia, you must be able to speak English to be granted a skilled visa (family members of applicants are excepted). For an Australian observer, it is striking that this is the part of the new system which British Labour appear most concerned by. This is worthy of some self-reflection. Looking at other aspects, it is rather ‘unAustralian’ to require the vast majority of new economic migrants to have a job offer. In Australia, the single biggest cohort of new economic permanent resident visas each year are awarded to people without a job offer. This is a stark difference to new British approach. The policy document references a small, unsponsored route for a select number of high-skilled individuals yet these people are the mainstay of Australian policy.

Regardless of why Johnson is introducing this new system, and whether it does replicate Australia accurately or not, I see a number of long-term policy issues for the new British approach based on Australian experience. These are just initial thoughts after reading the policy document, and do not touch on the biggest immediate challenge which will be the large transition costs as the labour market moves from one system to another.

  • A single national framework and no built-in concessions for employers outside of big cities

The policy document explicitly states the new approach will not have regional concessions for different parts of the United Kingdom. Yet in practice, where salaries, industries, and occupations differ, this is hard to achieve without some level of flexibility. The salary threshold, combined with the 20 points for the in-demand skilled occupations, will have disproportionate effects on non-urban employers.

In Australia, this has led to a two-decade carve out of regional interests, a combination of trying to nudge people to regional areas while also attempting to incentivise people not to move to large urban cities, such as Sydney and Melbourne. While there will be lots of employers in London immediately affected by the new immigration approach, employers reliant on EU migration outside of big cities will be, comparatively, much more affected. Over time, these pressures will most likely manifest in a series of new visa categories or concessions designed to funnel people into non-urban communities. I imagine some type of ‘regional’ bonus points will be tacked onto the approach as these issues become apparent.

One thing in particular to watch will be those areas in the ‘Red Wall’, in northern England, traditionally Labour voting but much more Conservative in 2019. If these areas are motivated by anti-migration sentiment, yet also are most negatively affected by changes to the immigration system, it will be interesting to see how they respond over the next 3-5 years as the effects of the changes work through local labour markets.

  • The ‘going rate’ income criteria for new migrants

The new British approach has a somewhat complicated approach to salary thresholds. Unfortunately, complicated regulatory approaches often mean malicious employers are able to use work within the system, with poor outcomes for workers. Employers had a big win with the revision of the salary threshold down from the initially proposed £30,000 to a minimum salary of £20,480. More points are available for higher salaries (above £23,040, and £25,600, respectively). This will mitigate the worst fears of British employers in the post-Brexit environment, while still pricing a decent share of jobs out of scope.

However, as in Australia, employers are also required to pay prospective new migrants in line with the market rate of pay for the occupation. This is known as the ‘going rate’ requirement (or the ‘market rate’ in Australia). So if the going rate is established at £30,000 for an occupation, then the new migrant will require a salary of £30,000, regardless of the minimum salary of £20,480.

However there important exemptions to this. The most prominent will be whether the Migration Advisory Committee (MAC) has determined if there is an occupational shortage in relation to the job being applied for, resulting in a 20 per cent reduction available for the ‘going rate’ salary threshold. So as above, if the going rate is £30,000 for a computer scientist and the MAC has determined computer scientists are in shortage, then the new migrant could be paid £24,000 (a 20 per cent reduction from £30,000) and receive a visa.

In Australia, this is strongly discouraged. Ensuring new skilled migrants are paid the going rate (market salary) is a key policy regulation, designed to prevent exploitation and undercutting of prevailing wage and conditions. Why? In a system where migrant employees are tied to their employers via sponsorship rules, the employer has significant power in their relationship. Allowing discounts in the market salary can exacerbate this power imbalance with broader enterprise and industrial level effects.

Perhaps supporters of the new British approach may say these demands pale in comparison to EU free movement as a whole. Yet I think we underestimate the effects of employer-employee relationships, particularly in the migration context if migrants are motivated by large economic gains through the act of migration. Allowing businesses and sponsors to reward new migrants at sub-market rates and, *and then*, tying new migrants to these employers is bound to have unintended and negative consequences, particularly in relation to incentivising bad faith employers to use the immigration system. This sets a dangerous precedent, particularly in low-margin, high-labour intensive industries (such as horticulture, retail, construction, tourism, accommodation). While perhaps not many occupations should be expected to be in shortage for these industries, labour markets have a funny way of manifesting themselves, such as the never-ending claims of shortages in relation to poorly paid care work.

  • Pushback from businesses to transition costs will result in reactive and ad-hoc policy ‘solutions’

Australia set out on a pathway to a skilled migration system in the mid-1990s. Skilled labour was congregating more prominently in urban areas, while simultaneously regional labour markets were losing their Australian-born populations in a greater number. In addition, the Howard Government (1996-2007) had a policy aversion to formal, low-skilled migration pathways, famously resisting Pacific countries for a decade over their push for Pacific citizens to work in Australian horticulture.

Yet the demographic, geographic, and economic changes transforming labour markets in Australia generated a strong push from employers in the labour market who missed out on the turn the skilled migration. Farmers, tourism, retail, and hospitality each sought various avenues to address their labour demand (noting the term ‘shortage’ should be used with an abundance of caution and not as a proxy for a failure to raise wages).

This resulted in a number of reactive policy decisions in response vested interests. Farmers won a carve out by enticing backpackers into fruit picking. The boom in international students resulted in many more young workers in urban industries characterised by excessive churn. The mining boom resulted in tighter labour markets as workers were attracted by high salaries and relatively straight forward entry occupations. By themselves, the extra migrants likely would not have had great effects. Yet in a policy framework devoid of careful consideration, regulation exacerbated employer-employee dynamics, resulting in structural exploitation. These tweaks and responses to vested interest lobbying were often not publicly debated and flew under the radar until the facts became apparent years later. There is already a hint of this in the new British system, with seasonal workers expanded from 2,500 to 10,000. The United Kingdom can expect a few more special carve outs along this line over the next few years.

The United Kingdom is different from Australia, especially with the effects of EU movement over the past decades. Yet as this unwinds, there will be significant pushback from employers seeking easier access across a number of geographic, occupational, and industry domains. Free movement meant employers often did not have to rely on occupation codes, salary thresholds, and qualifications of their prospective hires. Being untied to employers, EU workers were not artificially restricted in their labour mobility. This will change, bringing with it a different set of political economic norms. In Australia, small tweaks in policy direction by the administrative department or government of the day can have serious consequences and disruption. This won’t really matter to multinational firms, elite universities, and government sector employers, many of whom might actually see aspects of a more generous immigration framework. Yet many others will struggle to comply and adjust to the day-to-day of a more tightly managed migration system.

To finish, I think it’s worth reflecting on how this will, and won’t, change public debate in the United Kingdom. Immigration debates will continue in a post-Brexit United Kingdom. I imagine many of those who are not disposed to new migrants will not clearly see the effects of this new approach immediately. This will not meaningfully change the current population of migrants in the United Kingdom. Instead it will change the future composition of who comes to the United Kingdom and stays. This means those who believe migrants have caused and exacerbated social, economic and cultural change in the United Kingdom over the past 20-30 years, will not suddenly wake up in a new Britain as they are expecting. This, perhaps more than anything else, will have future effects on how governments will administer post-Brexit immigration policy.

(A note for any British readers, particularly those with small budgets to commission research. If you are after more information about the Australian experience, please get in touch. My contact details are here)

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