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Q&A: Migration Advisory Committee report on post-Brexit salary thresholds and the ‘Australian-style’ points-based system

28 Jan 2020

By Denis Kierans and Peter William Walsh

The Migration Advisory Committee (MAC) has released a report on the post-Brexit immigration system, focusing on salary thresholds and the ‘Australian-style’ points-based system. This Q&A answers some key questions about the report.

What is the purpose of this report?

In December 2018, the government published its white paper on the UK’s post-Brexit immigration system. It proposed that:

  • The future UK immigration system would require all migrants, whether EU or non-EU, to have permission to come to live or work in the UK, as part of a single ‘skills-based’ system;
  • Some migrant workers, including those in the lowest-paid jobs, would only be able to come to the UK for strictly temporary periods of 1–2 years;
  • Migrants coming to work in the UK long-term or permanently would need to be sponsored by an employer and work in at least a middle-skilled job that pays a certain minimum salary.

The government asked the Migration Advisory Committee (MAC) to advise on what this salary should be, and whether there should be exceptions for some workers, such as young people, public service workers like nurses, or people in ‘shortage occupations’. In September 2019, the MAC was also asked to look at how an ‘Australian-style’ points-based system (PBS) might work in the UK. The January 2020 MAC report covers both of these topics.

What has the MAC recommended?

Among the key points from the report:

  • The MAC has recommended that most skilled workers should earn at least £25,600 to qualify for a long-term work visa, with lower rates for nurses, teachers, and various other health-sector workers. This is down from £30,000 under the current system for non-EU citizens.
  • In addition to meeting these thresholds, workers would also need to meet an occupation-specific one, which in many cases will be higher. The occupation-specific rate would be set at a level that would exclude the 25% lowest-paid workers within each occupation – an approach unchanged from the current system for non-EU citizens.
  • For young people under 26, both the general and the occupation-specific thresholds would be 30% lower than the thresholds for experienced workers. This means that in some occupations, young workers would need to earn only £17,920, as opposed to £20,800 in the current system. The MAC also recommends that they should be able to stay on this ‘new entrant’ rate for five years instead of the current three (though they may need much higher salaries to qualify for settlement after 5 years).
  • The MAC recommends against having lower salaries for jobs on the ‘shortage occupation list’ – something that the government proposed in its 2018 white paper – and against regional variation in salary thresholds.
  • The MAC suggests that an ‘Australian-style points system’ would bring little added value when deciding which workers could enter to the UK with a job offer. It recommends that entry visas should be allocated based on employer sponsorship, as currently happens for non-EU citizens.
  • However, the report suggests that a points-based system might be useful for deciding who gets permanent settlement rights after a few years. It also suggests that small numbers of people without a job offer could be admitted using a points system, if the government wishes.

Why £25,600?

The MAC says that there’s no obviously ‘right answer’ to what salary thresholds should be, and that reasonable people will disagree on whether it should be higher or lower. The £25,600 figure is the threshold that 75% of workers would meet in skilled jobs that are eligible for long-term work visas, based on 2019 data. Note that high-paying occupations will typically face a salary threshold that is higher than £25,600 because of the additional, occupation-specific threshold.

The MAC argues that a much lower threshold would be bad for public finances, because it would mean more of the migrants admitted on long-term work visas would cost the state more than they pay in taxes, especially if they have children or a non-working partner. It also argues that salary thresholds are needed to ensure that employers don’t use the visa system to bring in workers on salaries significantly lower than what they would pay British or other already resident workers.

What about nurses and other NHS workers? Will they be able to meet the new salary thresholds?

They wouldn’t have to. As things stand, not all non-EU citizens on Tier 2 visas have to meet the current £30,000 salary threshold (as we noted in a previous commentary). This is because there is an exemption for “public service occupations”, which includes, for example, nurses and secondary school teachers of certain subjects. The MAC recommends that this should continue to be the case, and that a longer list of NHS and education jobs should be exempt from the main threshold. Instead they would need to be paid according to national pay scales.

The health occupations that the MAC says should be exempt from the £25,600 threshold do not include social care workers.

How do salary thresholds affect the eligibility of low-wage occupations like carers and cleaners?

They probably don’t. The lowest skilled occupations, such as home care assistants and cleaners, are already expected to be ineligible for long-term visas because they do not pass the skill threshold. In addition to meeting a salary threshold, workers getting long-term work visas must be in a sufficiently skilled job. In its September 2018 report, the MAC recommended that this skill requirement be lowered from graduate level to any job requiring A-level education or above, which the government accepted. So even if there was no salary threshold, or if employers were willing to pay much more than usual for the workers, most of the lowest-paid jobs would still be ineligible for long-term work visas.

For more information on the occupations of EU citizens, see the Migration Observatory briefing, Migrants in the UK Labour Market: An Overview.

How then will employers be able to meet their demand for lower-wage migrant workers earning less than £25,600?

Employers who want to bring in migrant workers for low-wage jobs may have some other options, though these options will be more limited than for workers who meet the earnings threshold.

First, employers might use strictly temporary, short-term visa schemes that do not have any skills or salary requirements. This includes the 2-year Youth Mobility Scheme (Tier 5) visa, which is currently open to various nationalities including Australia, New Zealand and Canada, but may in future be extended to EU countries. The government’s December 2018 white paper also proposed a 1-year ‘short-term work route’, which would allow migrants to come to the UK to work in any job. However, Boris Johnson’s government has not confirmed whether it still plans to introduce this route.

A Conservative Party press release before the December 2019 election also raised the possibility of ‘sector-specific’ work visas in low-wage jobs. Such visas usually involve employer sponsorship and tie workers to specific positions. However, there is no available detail on how any such routes might work.

Some employers may also be able to hire young people on the lower, ‘new entrant’ threshold, discussed below.

Which occupations pay at least £25,600?

In general, the more highly skilled the occupation, the less likely it is that the general £25,600 threshold will affect it. For example, more than 90% of full-time civil engineers and programmers earned at least this amount in 2019 (Table 1). (Note, however, that high-paying occupations would in practice face a higher, occupation-specific threshold based on the 25th percentile of earnings in the occupation.)

For middle-skilled jobs that are expected to become eligible for Tier 2 after Brexit, the picture is more mixed. More than three quarters of full-time plumbers, for example, were earning at least £25,600 in 2019, compared to only 25-30% of laboratory technicians. (These figures exclude the self-employed.)

Table 1

Earnings and skill classification of selected full-time jobs (excluding self-employed), 2019

Skill levelOccupationEstimated number of full-time jobs in UK (all nationalities)Median annual salary, full-time workers25th percentile for annual salary, full-time workersPercent full-time workers earning at least £25,600 and meeting RQF3+ skills requirementPercent full-time workers earning at least £30,000 and meeting RQF3+ skills requirement
Graduate jobs (RQF 6+) – already eligible for Tier 2Civil engineers40,000£41,111£35,015>90%80-90%
Programmers and software development professionals196,000£42,984£33,318>90%80-90%
Accountants65,000£38,805£29,98380-90%70-75%
Middle-skilled jobs (RQF3-5) – newly eligible for Tier 2Office managers143,000£32,209£25,00070-75%50-60%
Plumbers, heating and ventilating engineers48,000£31,370£25,81375-80%50-60%
Roofers14,000£25,243£21,43850-60%40-50%
Managers and directors in storage and warehousing108,000£30,001£24,27370-75%50%
Laboratory technicians48,000£20,887£18,17925-30%<20%
Low-skilled (RQF1-2) – not expected to be eligible for Tier 2 regardless of payCare workers and home carers287,000£19,104£15,6310%0%
Sales and retail assistants321,000£18,164£15,4080%0%
Waiters and waitresses27,000£16,724Not available from ASHE 20190%0%
Source: Migration Observatory calculation of ASHE (2019) Earnings and hours worked, occupation by four-digit SOC: ASHE Table 14.7a and Home Office, Immigration Rules Appendix J: codes of practice for skilled work. Note: only includes employees who have been in their jobs for at least a year.

 

Will employers simply hire young people under 26, since they get a lower salary threshold?

Maybe, depending on the job.

In the current system, so-called “new entrants” to the labour market must earn a salary of at least £20,800. This group comprises non-EU workers under the age of 26 on the date of their visa application, as well as people switching from a study visa to a work visa. The MAC has recommended extending this to five years, in addition to lowering the minimum salary floor for new entrants to £17,920 and allowing middle-skilled jobs to be eligible.

This raises the question whether workers in middle-skilled jobs would see sufficient wage growth over time to enable them to stay permanently—especially if the settlement income requirements remain in place in the long term. In other words, it’s possible that the proposed rules will increase the number of young people who can qualify for entry, but then must leave because they don’t meet the requirements for settlement five years later. Settlement currently requires a salary threshold of £35,800, although the MAC has suggested that this should be reviewed.

The potential effects of relying on more temporary labour migration are complicated (see the Migration Observatory report, Exploiting the Opportunity? Low-Skilled Work Migration After Brexit).

What about self-employed migrants?

Based on what the government has said so far, most self-employed work is expected be ineligible for long-term work visas. Migrants wishing to come to the UK on a skilled work visa (Tier 2) require an employer to sponsor them. The remaining long-term routes available to the self-employed (Tier 1) are only open to the ‘exceptionally talented’, sponsored entrepreneurs, and investors. Some self-employed migrants may be able to come through temporary routes – say, if the 1-year short-term work route proposed in the 2018 white paper goes ahead – but only for a short period.

This raises big questions for certain industries that rely heavily on the self-employed, such as the skilled trades (including the iconic ‘Polish plumber’) – although some EU migrants who would previously have been self-employed might be diverted into employer-sponsored work in order to meet visa requirements.

What is an ‘Australian-style’ points-based system?

In addition to salary thresholds, the MAC was asked to look at how an ‘Australian-style’ points-based system might work in the UK.

Australia’s points system is used to rank applicants for certain shortage occupations based on their characteristics, such as age, education, language proficiency, and work experience. Within this system, applicants do not require a job offer (although many do have one). The Migration Observatory report, ‘The Australian points-based system: what is it and what would its impact be in the UK?’, provides more information.

The UK’s current system for admitting many non-EU citizens for work is also officially known as ‘the points-based system’. However, it differs significantly from the Australian system in that it relies heavily on employers, rather than the government, to select the workers they need and does not offer significant flexibility on how workers can meet the criteria.

Is the MAC endorsing the government’s plan to adopt an Australian-style points-based system?

Only to a limited extent. The MAC separately analyses three ways a PBS could be used: at entry to the UK with a job offer; at entry to the UK without a job offer; and at settlement for workers who have already spent several years in the country on a work visa.

For migrants getting a visa to take up a new job in the UK, the MAC essentially says that a points-based system would not bring much added value. It says that the government should continue to rely on employer sponsorship (as in the current system for non-EU skilled workers), and that there is no need to impose an additional ‘Australian-style’ points test that would scrutinise the worker’s personal characteristics. While the current system of work visa requirements (including the salary thresholds) could be repackaged as a points-based system without changing the actual requirements for eligibility, the MAC notes that this exercise would be cosmetic.

For migrants without a job offer, the MAC makes a more tentative recommendation that a PBS could be used to select small numbers of people. That said, the government has previously emphasised that most workers would require a job offer under its new ‘Australian-style’ system, so it is not clear whether it will find this recommendation attractive.

For migrants applying for permanent settlement after a number of years in the UK, the MAC also tentatively suggests that a PBS could be used instead of the current system, which is based primarily on an income requirement (currently £35,800). However, it suggests that the government’s already scheduled increases to the income requirement over the next few years be paused and a more detailed review take place to determine how such a system might work.

How would these changes affect the number of migrants coming to the UK?

Predicting future migration levels is an almost impossible task, even when the fine details of policy are known. Migration levels often change significantly without policy changes, and there is no guarantee that past trends will continue. As a result, it is very hard to say what the overall impact of the proposed changes would be.

Looking at both the MAC recommendations and what the government has said to date about the future immigration system, it is clear that the immigration rules for EU workers are likely to be considerably more restrictive than free movement. This would be expected to reduce the numbers of EU migrants coming to the UK and particularly the number staying long term, compared to the levels that the UK would otherwise have seen.

For non-EU citizens, the proposed system represents a liberalisation, specifically due to middle-skilled jobs becoming eligible for long-term work visas and the lower salary threshold.

Overall, the total impact on migration will depend on the extent to which any declines in EU migration (or net migration) are outweighed by any increases in non-EU migration. The MAC report does not attempt to quantify the impacts on numbers of either EU or non-EU citizens, but says that overall it would ‘expect the changes to reduce levels of immigration’. Currently, net migration from EU countries is relatively low, following a sharp post-referendum decline. This means that in absolute terms, restrictions on EU migration now would have less impact on numbers than they might have done four or five years ago. However, it is reasonable to assume that over the longer term, the proposed future immigration system could have a substantial impact on EU migration.

What happens next?

It is now for the government to decide how to proceed. In the past, it has accepted most, though not all, of the MAC’s recommendations but it is under no obligation to do so.

The Migration Observatory’s work on post-Brexit immigration policy is supported by the Joseph Rowntree Charitable Trust.

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