New data on low wage migration

New data shows that we are not on track

To recap:

• I’ve written before about why we should aim to be the grammar school of the western world, reducing immigration and making it more selective, to make it more economically beneficial.

• I posted a couple of days ago about the way recent changes have undermined this idea, taking us instead in the direction of low skill, low wage migration - precisely the direction mainstream politicians generally say they want to avoid. The Times has run a feature on this.

Jonathan Portes reacted to my article, in particular to object to some data I showed (below) which compares the earnings thresholds for the SOL to the median earnings in those occupations:

Jonathan has tweeted about this around 20 times now. He claims the chart above is “entirely fictitious”. He wants to imply that it is wrong, when clearly it isn’t.

I never said everyone comes on the threshold. I said the thresholds “let people come to the UK even if they are earning quite a lot below the median salary in that occupation.”

In fact, thanks to some new data - highlighted by Jonathan himself - we can now see that is exactly what is happening.

The Oxford Migration Observatory have recently obtained some data on migrant earnings by occupation via a Freedom of Information request. The Home Office don’t publish this data, and had refused to answer my Parliamentary Questions on it.

So hats off to the Migration Observatory for extracting this data from the Home Office, and kindly sharing it with me. They have published a bit of it, but I think this post is the first time the full dataset has been used. What does it show us?

This should be the most beneficial aspect of migration

The FoI data released by the Home Office to the Migration Observatory covers salaries stated on Certificates of Sponsorship issued to people applying from out of country, under the Skilled Worker route, between 1 July 2022 and 30 June 2023.

We can match these average salaries to Home Office data on the number of sponsored work visas by occupation and industry. The data covers applications from main applicants (not dependents) made outside the UK.

Over that period we issued 69,160 Skilled Worker visas, plus 120,292 Skilled Worker: Health & Care visas, making 189,452 Skilled Worker visas in total.

Although the data from the FOI only covers the new / out of country applications, rather than in-country visa extensions, it gives a picture of the most recent cohort of people arriving in the country as skilled work migrants.

Skilled work visas are obviously only a relatively small part of the migration picture. The Home Office publishes data on the total number of entry clearance visas.

In total, in the year from Q3 2022 to Q2 2023 we issued:

• 1,472,062 Total non visitor visas, of which

• 538,887 were for workers & dependents;

• 657,208 for study & dependents;

• 195,049 humanitarian & other;

• 80,918 family and dependents

So the 189,452 sponsored skilled worker visas for which we have earnings data would represent 12.9% of the total entry clearance visas - just over one in eight.

(If we flip over to look at net migration rather than visas, about 15% of non-EU net migration over the last five years has been for work.)

Those coming as “skilled workers” should represent the most beneficial type of migration from an economic point of view.

As well as being more likely to be in work, we’d expect them to earn more than those who arrive as refugees, or those who come for study, or those coming for family reasons.

Immigration inevitably puts more pressure on housing, infrastructure and things like GP surgeries. We can build more of these things over time, but supply is not elastic and our stock has been built up through investment over a very long period. Migrants can bring skills, but not buildings or railways, so our capital stock get diluted between more people.

To offset these negative economic effects, we should make sure our migration intake is high skilled and making a big net fiscal contribution. Skilled workers should be the part of the system that does that.

What do their earnings look like?

Just as the Migration Observatory has in their piece, I have matched the salaries for each occupation to the numbers coming over the relevant period on skilled worker visas. Like them, I have removed healthcare occupations where the Home Office has provided multiple salaries by bands for NHS workers, which means we can’t get a single median to match to the codes for visa numbers.

Far and away the biggest group is care workers. While the highest earning group “Chief executives and senior officials” saw median salaries of £200,000, care workers were on around £21,200.

Given that someone working 40 hours a week on the National Living Wage earns £21,670, it shows how close most care workers are to the minimum legal rate.

The charts below stack up the occupational groups, ranked left to right from the lowest to the highest earning groups, so that we can get a sense on how many people came as skilled workers at different pay rates overall.

We can then compare those coming on these visas to the earnings of the wider population, from the Annual Survey of Hours and Earnings (ASHE) Table 1.7a.

For the population as a whole, median gross annual pay for full time employees was just under £35,000, while the mean average was £42,000.

• 68% of those on skilled worker visas came to occupations where the median salary was less than the median earnings of full time workers

• 72% of those on skilled worker visas came to occupations where the median salary was less than the mean earnings of full time workers

• 73% of those on skilled worker visas came to occupations where the salary at the 25th percentile was less than the median earnings of full time workers

• 85% of those on skilled worker visas came to occupations where the salary at the 25th percentile was less than the mean earnings of full time workers

The first graph below truncates the scale so you can see the detail - the second is the same data with the axis stretched to include the top earners:

Have a look at what you could have won

The chart above makes me think of Jim Bowen’s brutal catchphrase in top 1980s darts-based-quiz show ‘Bullseye’, where the odd contestant who didn’t win would be shown the speedboat, caravan etc that they could have won.

Some skilled migrants are earning loads, and doubtless paying loads of tax. If all immigration was like that, it really would be rocket fuel for growth.

But sadly many others are not, and they are unlikely to be net taxpayers over their lifetime.

In 2022 only the top 40% of households were net taxpayers, and the rest net recipients. So having the majority of (non-health) skilled migrant visas going to people coming in below average full time earnings will mean many of those arriving even via this route are net recipients, not net taxpayers.

The Shortage Occupation List

Skilled migrants should be the most economically beneficial bit of migration, and should offset the effect of those who come as destitute refugees and so on.

One thing the government is doing to make the system a bit more selective is its plan to get rid of the 20% discount on the salary threshold and to review the SOL. Together these should help push up the average earnings of those who come.

The average person coming on a skilled worker visa is paid more than the SOL floor, but raising the floor will tend to increase the average.

Of the occupations on the SOL where we have data from both ASHE and the new FoI data, only about 5 out of 30 occupations saw the people coming on skilled worker visas earning more than the mean average salary in that profession.

Not only does the low threshold let people come to the UK even if they are earning below the median salary in that occupation - in fact the majority of these occupations see the median person arriving on a skilled worker visa earning less than the median person in that occupation - exactly the point I made, and which Jonathan Portes has been objecting to.

But as the charts higher up show, unless we do something bigger on social care, fiddling with the SOL won’t make much difference to the overall picture for skilled workers: as I said in my last piece, the reforms the government plans are only expected to reduce migration by about 15,000.

Conclusion

This piece is focused on the most economically beneficial aspect of migration - skilled workers. We are not looking here at people who come to work via the graduate route, or as destitute refugees, or as dependents, or for family reunification.

But even within skilled migration, there are large numbers of people coming on quite low wages, who are unlikely to be net contributors. The data the Migration Observatory have got hold of is very helpful, but sadly it confirms we are not on track to be the grammar school of the western world.

I think it is a bit mad that we have to rely on academics submitting FOI requests to get the kind of data discussed in this article.

I hope that the new Home Secretary can bring a new era of glasnost to the Home Office, and get us away from the Douglas Adams approach to transparency.

Lots of the UK debate is focussed on “is immigration good or bad” - a question which makes about as much sense as the question “is drinking stuff good or bad?”

It totally depends what you are drinking. Life saving medicine or hemlock? A nice cup of tea, or vodka for breakfast?

As we enter the season of New Year resolutions, we often vow to eat more greens and fewer burgers.

The availability of more granular data makes it clear we could also improve our current migration intake, and our long term economic health.