Salary thresholds and an 'Australian-style' points-based immigration system: our response

Scotland’s reliance on migration

Introduction

32. EU and non-UK nationals are making a vital contribution to Scotland’s economy. They are driving our population growth and ensuring that we have workers to meet the needs of businesses and the public sector. In 2018 there were 198,000 non-UK workers in Scotland, 141,000 of which were EU nationals, across low, medium and high skilled jobs^[3].

33. The vast majority of EU citizens in Scotland are of working age (78.3%) and in employment (81.2%)^[4]. Indeed the employment rate for 16-64 years was the highest for EU nationals at 81.2%, versus 74.5% for the UK. Many are also highly educated – more than a third (38.4%) have a degree level qualification, compared to 28.7% of UK citizens in Scotland^[5].

34. Migrant workers in the UK also contribute more to the economy than their UK equivalent in terms of hours; the average EU-15 and EU-10 employee works around 5% more than their UK-born equivalent^[6].

35. The Employer Skills Survey 2017 found one in five employers (19%) employed at least one member of staff from an EU (non UK) member state. The survey results suggest 7% of the Scottish workforce in establishments with two or more staff were non-UK EU nationals^[7].

36. Ensuring ongoing access to labour from across the EU under the free movement of persons rules is of fundamental concern to many businesses across the Scottish economy, as highlighted in our paper Brexit: What's at Stake for Businesses.^[8] Businesses have repeatedly told us how they worry that any restriction on the free movement of EU labour could negatively affect their businesses, especially if it were to involve new administrative or bureaucratic requirements that would impose financial and/or other costs.

37. For many smaller businesses, in particular, such restrictions make the recruitment of essential staff impossible. By applying the same restrictive rules to EEA migrants the UK Government are removing another valuable source of labour from smaller businesses and adding significant cost and bureaucracy to recruitment for all businesses.

38. There are concerns that negative rhetoric in the UK against migration may already be having an impact both on the willingness of individuals already in Scotland to stay, and on those who may be interested in moving to Scotland. The Scottish Government is committed to making it clear that we welcome those who make a positive contribution to Scotland and we have developed and run our We Are Scotland ^[9] campaign on social media to emphasise our positive position on migration. However, we know that some employers are already seeing a downturn in recruitment from the EU.

39. There are particular sectors, regions and occupations that have higher than average (> 6%) concentrations of EU nationals – leaving them particularly vulnerable to the impact of Brexit^[10]. Sectors, regions, and occupations with existing skills challenges are likely to see shortages and gaps exacerbated by a decrease in the availability of EU labour^[11].

Figure 1 - Percentage employed by industry sector and nationality (aged 16 and over), Scotland, 2018

Source: Annual Population Survey (Jan18-Dec18)

** Estimates suppressed

Employment of non-UK nationals in Scotland

40. Nearly two-thirds of all EU nationals in employment in Scotland worked in the distribution, hotels and restaurants, public administration, education and health and banking, finance and insurance industry sectors. For non-EU nationals, the proportion was even higher with nearly three-quarters of total employment concentrated in these three sectors (see Figure 1).

41. As Figure 1 shows, of the 42,000 EU nationals employed in the distribution, Hotel and restaurants sector (29.5% of all EU nationals employment), 14,000 were employed in food and beverage service activities and 8,000 in accommodation. There were 18,000 non-EU nationals employed in the distribution, hotels and restaurants sector, 32.4% of all non EU nationals in employment.

42. There were 28,000 EU nationals employed in the public administration, education and health sector (19.% of all EU nationals employment) and an additional 15,000 non-EU nationals (25.8% of all non-EU nationals employment).

43. 19,000 EU nationals employed in the banking, finance and insurance sector, 13.7% of all EU nationals in employment in Scotland. A further 8,000 non-EU nationals were employed in this sector, 14.5% of all non–EU nationals in employment.

44. Health and social care employs an estimated 16,000 non-UK EU nationals, 11.2% of all EU nationals in employment. EU nationals represent 3.9% of all employment in this sector. A further 10,000 non-EU nationals were employed in this sector, 18.4% of all non-EU nationals in employment and 2.6% of all employment in this sector^[12].

45. Education (includes primary, higher and secondary education) employs 7,000 EU nationals, 5.3% of all EU nationals in employment and 3.3% of all employment in this sector. There are an additional 3,000 non-EU nationals employed in the Education sector, 5.7% of all non EU nationals in employment and 1.4% of all in employment in this sector^[13].

Concentration of non-UK nationals by industry

46. While non-UK nationals (aged 16 and over) account for 7.5% of all employment in Scotland, there is greater representation in some industry sectors than others (see Figure 2).

Figure 2 – Non-UK nationals as a percentage of all sector employment in Scotland, 2018

Source: Annual Population Survey (Jan18-Dec18)

** Estimates suppressed

47. The industry sectors which show the greatest reliance on non-UK workers are distribution, hotels and restaurants (12.0% of workers have non-UK nationalities), transport and communication (9.9%) and manufacturing (9.7%) (see Figure 2 above).

Employment of non-UK nationals in growth sector

48. Tourism: There were 30,000 non-UK Nationals (21,000 EU Nationals and 9,000 non EU Nationals) employed in tourism, 16.5% of all employment in the sector. 14.8% of all EU nationals in employment work in tourism, which corresponds to 11.5% of the workforce in that sector. For non-EU nationals, 16.2% of all those in employment work in tourism, which is 5.0% of this sector’s workforce.

49. Finance and business services: There were 10,000 non-UK Nationals (6,000 EU Nationals and 4,000 non EU Nationals) employed finance and business services, 5.3% of all employment in the sector. 4.2% of all EU nationals in employment work in finance and business services, a 3.2% share of the workforce in this sector. 7.2% of non EU nationals in employment work in this sector, which is 2.2% of the workforce.^[14]

50. Creative industries: There were 9,000 EU Nationals employed in creative industries, which is 6.5% of all EU Nationals in employment and 7.2% of all employment in the sector.^[15]

51. Food and drink: There were 11,000 EU Nationals employed in food and drink, 14.0% of all employment in the sector. 8.0% of all EU nationals in employment work in the Food and drink sector Within food and drink, Scotland’s food processing sector (which includes the processing of fish and meat) employs 8,000 EU nationals, 29.1% of its workforce.^[16]

52. Life sciences: There were 3,000 EU Nationals employed in life sciences, 12.4% this sector’s workforce. 2.2% of all EU nationals in employment work in this sector. ^[17]

53. Energy: There were 4,000 EU Nationals employed in energy, 3.5% of all employment in this growth sector. 2.8% of all EU nationals in employment work in the energy sector. ^[18]

Employment by occupation

54. The highest number of EU nationals (36,000) were employed in Elementary Occupations, followed by Professional Occupations (25,000) and Skilled Trades (17,000).

55. Figure 3 compares the proportions of UK, EU and non-EU employees within each Major Occupational Group.

• 25.4% of all EU nationals in employment worked in Elementary Occupations (which includes cleaners, hospital porters and labourers). This compares with 14.4% of non-EU nationals and 10.1% of UK nationals.
• For non-EU nationals, 25.4% were employed in Professional Occupations (including IT, teaching and health professions) while 20.9% of UK nationals and 17.7% of non-EU nationals were employed in this Occupational Group.

Figure 3 - Proportion employed by occupation and nationality (aged 16 and over), Scotland, 2018

Source: Annual Population Survey (Jan18-Dec18)

Health and Social Care

56. Health and social care as a whole is a sector widely recognised to be at significant risk due to the impacts of Brexit, both in terms of workforce and disruption to supply lines of medicines and other medical supplies. It is included here as an example of an area heavily reliant on EU, and a wider international, workforce.

57. The health and social care workforce in Scotland benefits enormously from the contribution made by staff from across the European Union. Evidence from the European Commission EC Regulated professions database (97 – 2016) demonstrates that in this period, across the whole EU 72,314 doctors applied to work elsewhere within the EU, of which 24,945 came to the UK. The equivalent proportion for nursing was equally high with 73,067 nurses moving within Europe, of which 34,678 came to the UK.

58. Robust estimates of the contribution of EU-nationals to the social services workforce indicate that 5.5% of adult social care staff in Scotland are from other EU countries^[19]. However, Scottish Care believe that the proportion of non-UK EEA workers is likely to be significantly greater in some areas.

59. 16.8% of all doctors currently practising in Scotland have a primary medical qualification from out-with the UK (3,920/23,392) with 5.8% from the EEA (1,351/23,392).

60. Within the UK Nursing and Midwifery workforce, 15.2% of staff are registered outside of the UK. This includes 4.7% registered in EEA countries, and 10.5% international nursing and midwifery graduates.

61. The Nursing and Midwifery Council report that number of people from the EEA on our register decreased by 2,080 (5.9%) between March 2018 and March 2019. The numbers of Nurses joining the UK register for the first time from the EEA are down almost 90% between 2015/16 and 2018/19.

Differentiated approach to Salary Thresholds

62. The Scottish Government established an independent expert advisory group on population and migration and commissioned them to consider the impact of the UK Government’s immigration proposals on Scotland’s economy, population and society. The Expert Advisory Group’s report examined the impact of a salary threshold on Scotland on different sectors of the economy as well as the geographical, age and gender impact. A copy of the advisory group’s report is attached.

63. The Expert Advisory Group found that around 63% of all employees in Scotland earn less than £30,000 with significant differentiation by sector and geography.

64. Even reducing the salary to £27,500 or £25,000 would make little difference; 58% and 53% of Scottish employees respectively earn less than these figures. Even at this level, it is unlikely that many jobs in secretarial work, textiles, social care, leisure and travel, sales and elementary occupations would qualify. Less than 10% of roles in caring personal services occupations in Scotland earn above £25,000, and none earn £30,000.

65. There are also significant salary differentials across Scotland’s local authorities. Only 16% of employee earnings in Na h-Eileanan Siar earn above £30,000, ranging to 50% in East Renfrewshire.

66. The lack of access to migrants in areas that already experience low levels of productivity (as evidenced by their low wages) will further exacerbate economic and social inequality within the UK.

EARNINGS AND NON-UK NATIONALS EMPLOYMENT FOR ALL MAJOR OCCUPATIONS SCOTLAND AND THE UK

Table 1 - Major Occupation Group -Annual pay - Gross (£) - For full-time employee jobs¹ and employment of non-UK Nationals², 2019

		Number	Annual percentage		Annual percentage		Percentiles		Number of non-UK nationals in employment (16 years and above)2
		of jobsb
Major Occupation Group	Code	(thousand)	Median	change	Mean	change	25	75
SCOTLAND
Managers, directors and senior officials	1	167	42,381	4.7	51,122	1.5	29,462	61,742	13000
Professional occupations	2	366	37,663	3.8	42,769	-0.1	30,819	47,817	39000
Associate professional and technical occupations	3	230	32,076	1.9	36,962	-0.3	25,571	41,175	17000
Administrative and secretarial occupations	4	132	22,899	1.0	25,683	-0.6	19,218	29,120	13000
Skilled trades occupations	5	143	28,530	3.2	30,437	3.8	22,050	36,298	21000
Caring, leisure and other service occupations	6	98	20,725	-0.1	21,822	-0.2	17,259	24,888	19000
Sales and customer service occupations	7	72	20,240	3.7	22,242	1.2	17,169	25,272	13000
Process, plant and machine operatives	8	94	25,052	-3.5	27,225	-0.4	20,059	32,723	19000
Elementary occupations	9	94	20,060	1.6	21,247	1.7	16,655	25,591	44000
UNITED KINGDOM
Managers, directors and senior officials	1	2,182	44,597	2.1	61,610	1.6	30,097	69,869
Professional occupations	2	4,010	39,384	2.3	44,367	0.7	30,928	50,584
Associate professional and technical occupations	3	2,826	33,051	0.9	39,171	-0.6	25,581	43,722
Administrative and secretarial occupations	4	1,608	23,487	2.2	26,852	3.9	19,180	30,224
Skilled trades occupations	5	1,503	28,273	3.4	30,133	2.9	21,782	35,965
Caring, leisure and other service occupations	6	1,041	19,385	4.4	20,489	4.7	16,041	23,805
Sales and customer service occupations	7	792	20,402	2.4	22,828	3.9	16,900	25,887
Process, plant and machine operatives	8	1,118	25,751	2.2	27,805	3.1	20,448	33,068
Elementary occupations	9	1,138	20,579	3.7	21,976	3.9	17,110	25,985

Source: Annual Survey of Hours and Earnings 2019 (Shaded estimates are considered reasonably precise, all other estimates are considered precise).
https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/datasets/regionbyoccupation4digitsoc2010ashetable15
2. Annual Population Survey 2018 (Jan-Dec), In total 198,000 non-UK Nationals were in employment. Employment is all employment (full-time and part-time) https://www2.gov.scot/Topics/Statistics/Browse/Labour-Market/Publications-Topical/NonUKNatJD18
Major Occupation Group SOC 2010

Table 2 – Median full time gross annual pay by region (2019)

Description	Number	Annual percentage		Annual percentage		Percentiles
	of jobsb
	(thousand)	Median	change	Mean	change	10	20	25	30	40	60	70	75	80		90
United Kingdom	16,216	30,353	2.7	37,428	2.3	17,189	20,327	21,870	23,483	26,698	34,583	39,591	42,642	46,485		60,890
North East	615	27,187	3.2	31,852	2.4	16,627	19,137	20,356	21,608	24,308	30,682	34,972	37,380	40,231		49,967
North West	1,771	28,137	2.8	33,479	2.4	16,573	19,273	20,609	21,895	24,895	32,019	36,844	39,693	43,041		53,513
Yorkshire and The Humber	1,277	27,835	3.5	32,653	2.9	16,521	19,294	20,541	21,949	24,634	31,322	35,823	38,125	41,613		51,615
East Midlands	1,113	28,000	4.8	32,639	3.4	16,477	19,210	20,508	21,848	24,760	31,560	35,962	38,833	41,884		52,507
West Midlands	1,340	28,536	3.1	34,247	3.6	16,597	19,517	20,955	22,503	25,459	32,477	37,345	40,043	43,481		54,339
East	1,399	30,345	4.1	36,143	3.4	17,212	20,475	22,072	23,705	27,000	34,348	39,198	42,127	45,940		59,929
London	2,595	38,992	2.2	53,100	0.9	20,000	25,000	27,299	29,544	34,145	44,624	52,526	58,082	65,478		93,870
South East	2,207	32,120	4.1	38,715	4.6	17,669	21,168	23,049	24,820	28,220	36,438	41,888	45,123	49,477		64,515
South West	1,289	28,654	2.5	33,543	2.1	16,869	19,791	21,099	22,513	25,436	32,148	36,540	39,607	42,451		53,659
Wales	702	27,500	4.4	31,251	3.0	16,638	19,205	20,447	21,762	24,353	31,418	35,871	38,163	40,411		48,426
Scotland	1,394	30,000	2.4	34,916	0.9	17,374	20,431	21,808	23,290	26,479	33,726	37,964	40,452	43,591		54,886
Northern Ireland	515	27,434	1.2	32,083	3.0	16,600	19,208	20,504	21,788	24,677	31,221	35,886	38,202	40,740		49,992

a Employees on adult rates who have been in the same job for more than a year.
b Figures for Number of Jobs are for indicative purposes only and should not be considered an accurate estimate of employee job counts.
Shaded estimates are considered reasonably precise, all other estimates are considered precise

Source: Annual Survey of Hours and Earnings, 2019 Office for National Statistics

67. As Table 2 above shows, at median full time gross annual pay, Scotland is the fourth highest region in the UK (after London, the South East and the East), with a median of £30,000.

68. Clearly, even at this level, the proposed £30,000 and £20,800 salary thresholds (of general entry and graduate entry respectively) are far higher than current pay statistics would support. In Scotland salaries of full-time employees do not reach the £30,000 threshold until around the median, or 50^th percentile.

69. Data from the 2018 Annual Survey of Hours and Earnings (ASHE) also shows that median pay for the following occupational groups is below £30,000 at a UK level:

• Administrative and secretarial occupations
• Skilled trades occupation
• Caring, leisure and other service occupations
• Sales and customer service occupations
• Process, plant and machine occupations
• Elementary occupations

70. The only three groups with median pay above £30,000 at a UK level are:

• Managers, directors and senior officials
• Professional occupations
• Associate professional and technical occupations.

71. The proposed salary threshold of £30,000 would therefore exclude nearly half of jobs in Scotland and would thus severely restrict the ability of employers to recruit to key sectors of the Scottish economy.

72. Migration policy should support fair work, protecting workers rights, pay and access to employment, and the potential advantage of a reduced salary threshold for Scotland could contribute to a labour market distortion in future of lower wages in some cases relative to other parts of the UK. A “London weighting” in the salary threshold for this route could remove that risk; however, approaches that are designed to encourage and facilitate migration to Scotland are more likely to be successful and meet Scotland’s needs than approaches that are designed to discourage migration to other parts of the UK.