Right to reply: Why do so many “new jobs” go to foreigners?

On Monday, we published a post on George Osborne's "jobless recovery" — the point being that 90 per cent of the recent rise in employment can be accounted for by foreign nationals. Here's a counterpunch to it from the IPPR's Matt Cavanagh, who should already be familiar to CoffeeHousers from his previous posts and articles for us on matters military. We're hoping that this will be the first of a new series of "Right to reply" posts, giving outside writers the opportunity to take on your loyal baristas in mortal combat. Here goes:

One of the most frequently recycled statistics of recent years is the percentage of "new jobs going to foreigners". The first thing to say is that this is a bad way to phrase it. When newspapers like today’s Mail and Sun talk about "nine out of ten new jobs going to foreigners" that gives false despair to the average British-born jobseeker, making them believe there is only a one-in-ten chance of a British-born person getting any given job — when, in fact, the chances are the other way around.

Every year, many millions of jobs change hands, large numbers are created, and large numbers disappear. In good times, slightly more are created than disappear. Of all these jobs — those changing hands, and new ones being created — last year around 85 per cent went to those born here (down from 91 per cent in 1997) and around 15 per cent go to those born abroad (up from 9 per cent), according to the Labour Force Survey.

It is true, however, that across this churning labour market — in which every year many millions of jobs are vacated and filled, created or disappear — if we look only at the net rise in employment over the last year, of around 200,000 people, 90 per cent of this is "accounted for by foreign nationals". Even phrased like this, it is still a striking statistic, and as Fraser argued here, it is now proving a thorn in the side of David Cameron and George Osborne in the same way it used to for Gordon Brown.

But on closer inspection, this statistic is not that surprising, and also potentially misleading even when phrased correctly. If there is a net rise in employment in a given year, who is likely to "account for" this rise? We can disregard those in steady employment, and those moving in and out of "frictional unemployment". There could be a rise in the number of British nationals of working age — for example, if there are more young people entering the workforce than older people leaving — but we know that isn’t happening at the moment. So it must be down to either migrants entering the country for the first time, or those entering or re-entering the workforce from long term unemployment or inactivity.

I’m not saying it’s an uninteresting fact that 90 per cent of the net rise in employment is accounted for by migrants, as opposed to those entering or re-entering the workforce from long term unemployment or inactivity; but it’s a bit misleading to present it as if it is a comparison between foreigners and British workers as a whole. It’s also not a very surprising fact, since we know that unemployment and inactivity are not falling — given that known fact, it’s pretty obvious that the great majority of any rise in employment is likely to be accounted for by new migrants. It doesn’t need a ‘shock’ discovery of previously hidden figures to make the point.

The real question is, why does a rise in the number of available jobs not by itself reduce unemployment or inactivity? This is a good question, though hardly a new one — and note that it is possible to ask it in a way that doesn’t even mention immigration, or foreigners. Immigration may be a large part of the answer, or may not, but it doesn’t help to frame the question in a way that assumes it from the start. There are many other possible answers: it could be, for example, that the level of demand in the economy simply isn’t high enough yet to have a major effect on unemployment or inactivity; or it could be that many of the jobs being created are in different places to where the unemployed and inactive live; or that the jobs being created require skills or experience which the unemployed or inactive don’t have. Or it could be, as Fraser argues, that the tax and benefit system means the unemployed and inactive lack the incentive to take the jobs.

Whatever combination of these factors makes up the explanation, they all suggest that immigration should be seen as the effect of wider problems, not the cause. Conservative ministers need to straighten themselves out on this: back in April, Cameron adopted a position similar to Fraser’s, arguing that immigration was merely the effect, and welfare dependency the cause, and that only if welfare reform was successful would immigration fall. But come early July, Iain Duncan Smith had reverted to arguing that immigration was the cause, and that only if the Government cut immigration, would his welfare reforms succeed. I hope when Fraser had the chance to corner IDS for that Spectator interview two weeks ago, he made the important point he made here on Monday, that:

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“Without [the migrant workers] I seriously doubt the jobs Osborne talks about would be all filled by Brits. We’d just have fewer jobs, a smaller economy and a duller country.”

I agree. But it’s even more important to avoid blaming immigration for our problems given that much of the low-skill immigration we are now experiencing is from the Eastern EU. Since none of the major political parties advocate leaving the EU, there is little point in railing against this supply of low-skill immigration. Instead, we should focus on policies to accelerate our return to growth and our path to a full employment economy (defined as one in which 80 per cent of adults are in work), on policies to encourage and support existing residents to get into the jobs market, and — so far as immigration is concerned — on ways of reducing the demand for low skill immigration, rather than the supply.

  Leaving aside the bigger debate over policies to accelerate Britain's return to growth — on which the positions are well staked out — what about the path to full employment? We need a framework which will provide more incentive and support for those who are not working now, including people with no qualifications, but also mothers, older people and the disabled. Reforms to the tax and benefit system are part of the answer, but tax and benefit rates are just one element in the complex decision to enter or re-enter the jobs market. Families need affordable childcare to enable mothers to work; mothers, older people and disabled people need better quality part-time jobs; and people who develop long-term health problems need support to stay in work.

There is also the regional aspect: private sector job creation doesn’t seem likely to replace lost public sector jobs in some parts of the UK, so we’ll need alternative strategies in those areas. And as real wages continue to stagnate, why rely only on changes to taxes and benefits to increase the financial incentive to work? Rather than talking about Britain being "addicted to immigration", as Damian Green did last week, why don't we confront the deeper problem that too many British firms are stuck in low-skill, low-value business models, employing millions of people on chronically low wages?

Britain’s employment challenge is too big to be reduced either to an immigration problem, or to a tax and benefit problem. The causes of low employment rates in some areas and some groups need wider reforms, alongside a modern regional policy and industrial strategy capable of driving investment, innovation and growth.

Matt Cavanagh is an Associate Director at IPPR