Labour would end wage discount in immigration system and boost UK workforce training

Labour today pledges to scrap rules that allow overseas workers coming to the UK to be paid 20 per cent less than the going rate for that job. It comes as the party announces a plan to reform the points based system, pledging to "put skills and fairness at the heart of a properly managed and controlled immigration system”.

At Prime Minister's Questions today, Rishi Sunak refused to say whether he thought the rule - which the Migration Advisory Committee has recommended scrapping - has incentivised firms to hire from abroad.

Labour is calling for major changes to tackle growing skills shortages which are leaving employers reliant on increased overseas recruitment, and reform to the points based system.

Fresh analysis by the party reveals that some occupations such as nurses and civil engineers - have remained on the Shortage Occupation List for a shocking 15 years, without any concerted action to address the underlying causes, while work visas have gone up by 95% since before the pandemic.

Labour’s review of the points based system has found that there is a built-in incentive for employers to recruit from overseas in shortage occupations where they can pay 20% less than the “going rate” rather than training and recruiting in the UK.

It means that for example civil engineers who are currently paid on average £44,000 a year and where the official government “going rate” is £34,000 a year can instead be recruited from abroad at just £28,000 a year – undermining the incentives for employers to recruit, train or improve pay and conditions at home.

Labour plans to scrap this rule which means that where jobs are included on the Shortage Occupation List, overseas workers coming to the UK can currently be paid 20% less than the going rate for that job. Recommended by the Migration Advisory Committee, scrapping the wage discount would mean that businesses must instead either train or recruit from the UK or pay workers from overseas the going rate.

Labour’s reforms to the points based system would:

• Scrap the 20% wage discount on the salaries businesses are required to pay for jobs on the shortage list

• Introduce new training plans and requirements for key occupations on the Shortage Occupation List - including Labour’s plan for more doctors and nurses and Fair Pay Agreements for Social Care

• Reform of apprenticeship levy to support upskilling and skilling in key shortage areas including IT and engineering

• Limit access to the immigration system for employers who fail to provide fair pay for fair work, including stronger visa penalties for those found guilty of flouting labour and minimum wage laws

• Reform the Migration Advisory Committee to link it to the bodies setting out industrial and skills strategy - learning from the Australian approach to ensure that where skills shortages lead to a sector remaining on the Shortage Occupation List, that must be tackled with a plan to upskill workers in the UK.

These measures are informed by the party’s ongoing review into immigration reform, conducted by Shadow Immigration Minister Stephen Kinnock. Labour is consulting with business on the implementation of these combined reforms to training and the points-based system.

In a major speech delivered in November, Labour leader Keir Starmer made clear that “Any movement in our points-based migration system…will come alongside new conditions for business. We will expect you to bring forward a clear plan for higher skills and more training… For better pay and conditions… For investment in new technology.”

Ahead of the publication of the net migration statistics, Labour is urging the government to adopt its plans to link skills policy with immigration - and reform the points-based system.

Yvette Cooper MP, Labour’s Shadow Home Secretary, said:

“The Conservatives chaotic approach to immigration has led to endemic skills shortages and a 95% increase in work visas. In contrast, Labour will put skills and fairness at the heart of a properly managed and controlled immigration system.

“There are currently no proper links between the Points Based System and skills or workforce plans so some occupations spend decades on the shortage list without any proper skills plan in place. The Conservatives immigration system includes a built-in incentive in the shortage occupation list to reduce wages and recruit from overseas rather than training and paying the going rate here in the UK. That’s not good enough.

“Labour will tackle skills shortages and properly link the skills and immigration systems so they work effectively together, and end disincentives to training and recruitment here at home.”

Ends

Notes:

• On Thursday 25 May, the ONS is due to publish updated net migration estimates for the year ending December 2022. The Home Office is also due to publish updated visa statistics for the year ending March 2023

• Keir Starmer’s speech to the CBI, November 2022: https://labour.org.uk/press/keir-starmer-speech-to-the-confederation-of-british-industry-conference-2022/

• 20% discount: Under current arrangements, the general immigration route for work purposes is the Skilled Worker visa. Lasting for up to five years, an employer can recruit from abroad using this route providing (i) the salary offered is at least £26,200 and is at least the “going rate” for the occupation; (ii) the employer is licensed as a sponsor; (iii) the occupation is at the requisite skill level, RQF3+ (approximately A-Level or above); and (iv) the individual can speak English to the requisite standard.

• NOTE: the “going rate” for the job is calculated by the ONS as being the 25th percentile for that occupation/skill/experience level so it is already at the lower end of the salary scale. In theory the “going rate” provision is  designed to prevent undercutting, especially on pay and conditions.

• For jobs on the Shortage Occupation List the minimum salary threshold falls to a floor of £21,600 and people can be paid up to 20% less than the going rate. visa application fees are lower (alongside other exemptions).

• Labour would work with business to develop a timetable for the implementation of these combined reforms to training and the points-based system, as part of Labour's review into work-based migration led by Stephen Kinnock

• Data on average earnings and going rates for civil engineers are available here:

Employee earnings in the UK - Office for National Statistics (ons.gov.uk)

Skilled Worker visa: going rates for eligible occupation codes - GOV.UK (www.gov.uk)

• In their 2021 Annual Report, the Migration Advisory Committee recommended scrapping the ‘20% discount’ on the ‘going rate’: MAC Annual Report, 2021 - Migration Advisory Committee (MAC) annual report, 2021 (accessible version) - GOV.UK (www.gov.uk)

“The MAC has never supported lowering the salary threshold below the ‘going rate’ for an occupation. If there is a shortage in the occupation, it seems perverse that paying lower wages will address the issue. Furthermore, the ‘going rate’ thresholds are in place to prevent undercutting of resident workers and being placed on the SOL should not enable employers to avoid this constraint. In practice, few employers are using this advantage, with only 15% of applications for these select SOL occupations in the first nine months of 2021 paying below the ‘going rate’. The evidence that few are taking advantage of this suggests it is not helpful for employers either, and we would therefore recommend that the Government reconsider whether SOL occupations should be allowed to pay below the ‘going rate’ for the occupation.”