Scrap the Cap: Why it’s time for the Tier 2 immigration cap to go

18 September 2018

Today, the Migration Advisory Committee confirmed what many employers have been asking for - that the immigration cap should be removed altogether.

This follows major concessions made by the Government on the Tier 2 limit, which caps the number of visas issued to non-EU nationals, after the cap prevented employers from hiring the skilled workers they needed for a six month period earlier this year.

The increased demand for non-EU nurses and doctors to be sponsored to work in the NHS (a direct response to the exodus of EU healthcare staff and the drop in new EU entrants following the Brexit vote) resulted in the cap being oversubscribed. The design of the cap criteria then meant that only those migrants paid high salaries (£60,000 plus in March and June 2018) could obtain visas. All of these signals had been made clear in late 2017, yet the Government chose to ignore the inevitable increase that this drop-off would create. (See FT article, subscription required.)

Policies that place an arbitrary cap on the numbers of skilled workers, a longstanding mantra of the Prime Minister, do not sit well with changing demands in the labour market and the wider economy.  The MAC have now clearly come out against the cap. In their report, they recommend its removal as it “constrains inflows of a group of migrants which the evidence suggests are the most economically beneficial” and creates unpredictability which “imposes a cost on employers by preventing them from planning ahead.”  We could not agree more.

If further reason were needed for the cap to be scrapped, then we can also point out the flaws with the design of the Tier 2 limit’s allocation system. Salary is used as a proxy for skills - the higher the salary on offer for the role, the more deserving a sponsored migrant is deemed to be and the more points they score. This creates a number of issues.

The first is that the system gives preference to employers in industries which have traditionally paid higher salaries, such as financial and professional services, while penalising industries such as architecture, engineering  and SMEs who are not able to offer the larger salaries associated with global firms.

Secondly, it also penalises younger workers, who will typically be on lower salaries. Recent graduates were not able to meet the £60,000 salary threshold required to be allocated a Tier 2 visa. While this has dropped to previous levels now the doctors and nurses are outside the limit, any upward shift in response to increased demand impacts first on these graduates.

Thirdly, it can create wage inflation, where employers are having to increase the salary on offer in order to secure candidates with the key skills they need - which can also lead to imbalances in the internal wage structure of firms and create resentment that migrants are being paid more than locals.

Finally, the salary penalises businesses located outside London and the southeast and make no allowances for geographical location to reflect the lower salaries paid in the regions.

The limit is badly designed and not fit for purpose. It should be scrapped. Leaving the EU will create significant economic shifts which may affect trade, services and the UK’s labour market and which will require significantly greater flexibility in our immigration system. Maintaining any form of fixed numerical limit on skilled visas in this changing environment makes little sense. 

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