Abolishing the Shortage Occupation List: The next stage in the evolution of UK labour immigration policy?

It may seem counterintuitive that, in a time of ongoing labour shortages in the UK, the Migration Advisory Committee has recommended abolishing the use of the Shortage Occupation List which allows employers greater leeway to bring in overseas workers into shortage positions at a salary discount. Jonathan Thomas, SMF Senior fellow and migration expert, explains what is going on and highlights existing aspects of the UK’s system which could be adjusted to help better address shortages while supporting wages and working conditions.

As we noted in our recent extensive report on UK labour immigration policy:

“The Migration Advisory Committee is concerned that addressing labour shortages through immigration policy has particular risks for wage levels and for exploitation of workers … The takeaway is that the recent expansion of the Shortage Occupation List might not only come to an end, but reverse.”

It is for these very reasons – the lowering of wages, which the MAC views as a “perverse” approach to trying to ease a labour shortage, and the greater risks of exploitation of low-wage workers – as well as the availability of workers through other routes, that the Migration Advisory Committee (MAC) has, in its Review of the Shortage Occupation List, now recommended to the Home Secretary such a reversal. Only eight occupations now remain on the MAC’s recommended UK-wide Shortage Occupation List. But the MAC has also gone further, recommending the abolition of the use of the Shortage Occupation List altogether going forward.

In its place, the MAC suggests an alternative, more holistic approach. This would see it being commissioned to examine specific acute shortages, potentially in collaboration with other bodies, “on a cross-departmental basis with a wider skills and training lens”. In the case of each such shortage, looking not just from the angle of the extent to which immigration policy may, or may not, be helpful in addressing these, but also with a “focus on changes to wages, terms and conditions, training and education and investment in technology that are likely to be a more sustainable response to the problems”.

Separately though, there are a number of existing aspects of the UK’s system which could also be adjusted to help better address shortages, in a way which can support improved wages and conditions rather than risk undermining them.

Labour market enforcement is one. Concerns around worker exploitation are a core animating rationale behind the MAC’s thinking around how best to manage the challenge of labour shortages through immigration policy, and the MAC’s ongoing challenge to employers over how they use migrant labour. The MAC sees particular risks of worker exploitation arising from specific aspects of the design of the immigration system where overseas workers are specifically tied into specific sectors or employers and lack bargaining power and awareness of their rights. But the MAC also acknowledges that exploitation is not solely an issue affecting migrant workers. Both major parties have talked about a properly funded, single labour market employment rights enforcement body in the UK – an area where the UK lags most other OECD countries. But still we don’t have one.

The interplay of salary and skills thresholds in the immigration sponsorship system is another pinch point. There are some roles where hiring migrant labour would not undercut local wages – this was the case during the HGV driver shortage – but still cannot be hired under the current system because of the separate skills threshold applied. A system where skills were simply judged by what employers were willing to pay for them, would be less interventionist and could be more efficient and flexible in adapting to fill labour shortages. If shortages were sufficiently material, employers could then choose to pay higher wages to fill the shortage. This would also allow for differential regional approaches by employers across the UK trying to fill hard to fill roles, but while keeping the clarity and certainty of one central rule set. It could also be more supportive of actual, as opposed to mere rhetorical, ‘levelling-up’.

Alongside the use of migrant workers, both the reality and the public perception of investment in the domestic skills base is also important to secure public acceptance of the immigration policy required to deal with the shortages of today – but also to head off the shortages of tomorrow. The UK has an existing mechanism to do this – the Immigration Skills Charge; a charge paid by employers to hire each sponsored foreign worker today which is then meant to be used by the government to fund the training of the local workforce of tomorrow. The result should be that the hiring of migrants is generating an investment pot for local skills investment that can target shortage areas. We recently highlighted that the charge has raised nearly £1.5 billion since it was instituted in April 2017. However, in practice there is zero transparency or accountability for how the proceeds of the charge are used. And the public are entirely unaware of it. This seems a terrible waste.

Finally, the UK benefits from a huge pool of potential migrant workers already in the UK who are not subject to the same systemic risk of exploitation nor constraints on roles, skills and salary through the immigration system. This includes dependants of those on other visas, those with permission to stay under the EU Settlement Scheme, overseas students, and those entering the UK through humanitarian routes such as Ukraine, Hong Kong and refugee resettlement. Such groups may not be coming to the UK specifically to work, but many do so once here. They hugely contribute to the UK workforce over the longer term, often ending up filling shortage occupations.

The MAC points out that “the number of foreign workers in the UK is currently the highest it has ever been”, at nearly 5.5 million, and estimate that in the UK, in the year to June 2023 alone, “approximately 800,000 individuals were granted a visa with some work rights who are not already assigned to a specific job role and therefore represent a potential labour supply for occupations in shortage”. But we need to think much more holistically about how to better connect these groups with employers and shortage roles.

The MAC is saying that the question around labour shortages needs to be broader than just about immigration policy, and that the answer to the question needs to be more joined up. It is arguing that the emphasis should be further shifted from how immigration policy can help in a given situation to whether it should help. And, if so, how this should best tie into, and intersect with, overall skills, training and resourcing planning, opportunities for increased use of technology, as well as fair pay and conditions. This is a huge challenge. But one that could not be more timely to address.

Most recently we have been used to the government upping the ante on various aspects of immigration policy. But suddenly, in this technical but important corner of immigration policy world, the tables have been turned. It is the MAC that has upped the ante here, challenging the Home Secretary, in this area of immigration control at least, to put her money where her mouth is. How will she respond? If she does not agree with its recommendation, the Opposition stand waiting in the wings, having already indicated that they are ready to seriously engage on these issues.


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