Why we need a more contributory-based system for skilled migration - Ryan Shorthouse

Most immigrants have integrated well, often much more successfully than in other European countries.

Yes, there is tension and ghettoisation in some areas: but generally migrants have become more dispersed across the country, mixed-race families have become more common, and British attitudes towards people of different ethnicities have become more relaxed.

There are, admittedly, some negative economic impacts. There is some older evidence suggesting that high rates of low-paid migration can depress the wage growth of the lowest-paid Brits, albeit temporarily. A rising minimum wage, properly enforced, should have countered that somewhat.

The Office for Budget Responsibility has also modelled the lifetime fiscal impact of low-wage migrant workers, which is increasingly negative until the age of life expectancy, where it reaches -£617,000. But, since the end of EU free movement, there have been hardly any legal visa routes for low-wage work, other than the capped schemes for youth mobility, seasonal workers and domestic workers.

However, there is inevitably increased pressure on public infrastructure, since providing more housing, schools and hospitals obviously has democratic delays and fiscal constraints which means there will always be periods of time where demand outstrips supply.

But everything has changed in the 2020s: we have entered a completely new era of mass immigration. Since the end of the pandemic, net migration has skyrocketed to a peak of 906,000 in the year to June 2023, according to the Office for National Statistics. This has been dubbed the ‘Boriswave’, thanks to the introduction of the post-Brexit immigration system which liberalised entry for non-EU migrants.

The final Conservative Government made effective changes to reduce the levels of skilled workers. These included raising the general salary threshold to £38,700 from £26,200 per annum and disallowing care workers from bringing dependents with them on their visas.

Despite these measures, the level of net migration remains eye-wateringly high.

The available evidence suggests that it is beneficial to the UK to have reasonably high levels of high-skilled migration. Considering this, as well as the democratic case for lower levels of overall migration, there is a case for designing an even more contributory-based skilled migration system. This would mean a system where we have fewer but more highly skilled migrants on work visas, with an expectation of greater contribution from them both economically and socially to the UK. There are several policy changes that could help achieve this.

First, the minimum salary threshold for all new skilled workers should continue to rise each year, at least in line with wage inflation.

But there is another way for calculating what this threshold should be. If we had better data on the earnings and public service consumption of migrants, we might be able to more accurately predict the lifetime net fiscal impact of different skilled workers.

The Immigration Health Surcharge is a sensible policy, both in terms of the principle behind it – that immigrants should contribute a catch-up payment for use of a free service they have instant access to – and because it raises revenue for the health service.

We could also introduce a new, additional employee and employers’ National Insurance (NI) band for migrants, which raises revenue for a broader suite of public services that migrants have instance access to, such as schools.

These changes will lead to a reduction in the number of skilled workers, the scale of which will be dependent on how high the new minimum salary threshold and NI rates are. As with most policy changes, there will be downsides; policy always has trade-offs. In particular, those only intending to migrate temporarily – but nonetheless could contribute substantially even in the short period they are here – may well calculate that it just isn’t worthwhile to move to the UK. Young people, who receive lower wages in the earlier part of their career, may fall short of the new threshold, depriving the UK of huge potential talent.

These downsides could be rectified, in part, by the extension of the Youth Mobility Scheme to more countries, first and foremost the EU.

We need to strike a balance on skilled migration. Skilled migrants can bring significant benefits to the UK, but only if they contribute considerably, both economically and socially. Let’s have fewer overall, but with those who do come contributing much more.

Ryan Shorthouse is the Executive Chair of Bright Blue. This is an extract from a recent book by Bright Blue called 'A positive contribution: a honest and detailed plan for improving our immigration system’