The UK labour market can deliver better jobs that free people from poverty

The new immigration system will profoundly change the UK’s labour market. Here’s what needs to happen to create better jobs

An ‘Australian style points-based immigration system’ is that rare thing: a policy which has achieved cut through with the public. This week we got a first look at what it will mean in practice when the Home Secretary, Priti Patel, set out the system that will take effect on 1 January 2021, as freedom of movement for people within the European Union comes to an end. This is first and foremost a political project, meeting public concern about immigration (despite its falling salience) and delivering campaign promises. The motivation may be political, but the economic impacts will be profound.

If the new policy does significantly reduce the number of people coming to do jobs which are low paid and don’t require much in the way of formal qualifications there are two parts of our economy which will be most affected. First, social care. Not currently included in those sectors to receive special treatment, heavily dependent on EU nationals, with limited scope for automation, and pay constrained by government funding. The absence of a serious plan for social care is very concerning.

Second, sectors such as wholesale and retail trade, hotels and restaurants, which employ large numbers of EU nationals. These sectors are also rife with low pay and lack of progression. More than a fifth of workers in accommodation and catering are locked in poverty. Businesses in these sectors are understandably worried about how they will make up for a lack of EU migrants in their workforce. The Government argues they should invest in UK staff and better technology. This speaks to a bigger shift that is needed in the UK’s economy.

Record high employment rates have been accompanied by rising in-work poverty. Work no longer provides a reliable route out of poverty, especially for families with children, disabled people and carers. Workers are held back by a lack of progression routes, the failure of businesses and the government to invest in training for low-paid workers, and weak local economies with too few good quality jobs in many parts of the country. A growing number of workers in poverty can’t find enough hours of work, or are held back by the cost and inflexibly of transport and childcare. Workers who need part-time or flexible work are trapped in low-paid jobs even when they have the skills to move up because too many employers fail to design better paying jobs so that they can be done flexibly.

To right the wrong of in-work poverty we need employers to change. More need to pay the real living wage, offer secure and predicable working hours, invest in training low-paid staff and create routes for them to progress up. This is a crucial part of delivering on the Government’s promises to ‘level up’ and offer economic opportunities across the UK. Done well, the new immigration policy might become another part of this drive to redesign our economy to deliver more opportunities for people and places too long locked out of them.

However, the Government must ensure that policy and investment supports employers to deliver better jobs that free people from poverty. This means using investment in skills to retrain low-paid staff, especially those likely to see their jobs disappear through coming automation or post-Brexit economic changes. It means focusing business support on helping employers up-skill and retain staff, make better use of technology and shift away from a low-pay, low-skill, high-turnover business model towards one which is more productive and delivers better pay and conditions for workers. It means incentivising employers to invest in people, just as we incentivise them to invest in Research and Development.

The Government should also grasp the potential of the new Employment Bill to address many of the outstanding recommendations from the Taylor review, which have been consulted on through the Good Jobs Plan. It should address one-sided flexibility, increase parity with agency and other workers, and increase employment rights from day one.

Finally, the Government must provide much better support for people who want to work but are shut out. The Home Secretary’s mention of 8 million potential workers available to fill the jobs which EU nationals would have done does not stack up. But there are many disabled people and carers who would like to work but face barriers to finding jobs, including the attitudes of many employers, inaccessible transport and childcare. There are also many workers who would like more hours and better jobs.

Bringing potential workers into the labour market and helping others to increase their hours are positive goals. However, they cannot be achieved by the blunt instruments of conditionality and sanctions, or by a new immigration system. The Government must focus on removing the structural barriers that hold people back and providing high quality support. This will take sustained and coherent action to improve transport, childcare, skills and healthcare. It will also require real partnership with business and a drive to push more employers to adopt a business model which puts good jobs front and centre.