Apprenticeship scheme would deter investment in the UK

The Labour Party is planning to introduce a requirement that employers bringing in a non-EU skilled worker under the ‘Tier 2’ immigration conditions will in future have to create a high-level apprenticeship for a UK youngster. Over a full Parliament, it is claimed, this would generate 125,000 apprenticeships, presumably based on the number of Tier 2 visas (which are capped annually) expected over a five-year period.

Further details of this proposal are yet to be provided, but there are some observations which can be made even at this early stage.

First, it is already very difficult and time-consuming to bring in overseas skilled workers, and business groups have been complaining bitterly about the delays and costs to their businesses. The new proposal will represent a substantial extra ‘tax’ on recruitment, and add to firms’ difficulties at a time when the economy is only slowly recovering from recession.

Second, it seems to be being suggested that we recruit non-EU people to fill gaps in our skill resources, and that this problem will gradually disappear as apprenticeships create a new generation of skilled workers. A shortage of engineers, say, will be less of a problem as new engineers are trained up to succeed today’s foreign recruits. But there is no necessary equivalence between jobs filled now and in the future. For one thing, technology changes requirements very rapidly these days and the traditional apprenticeship model, despite its enduring popularity with politicians nostalgic for metal-bashing, makes less and less sense – as the Germans have found. Who in 1990 could have anticipated a demand for computer game designers in 2013? And one group coming in via Tier 2 is academics: if a university recruits a Professor of Ancient Greek from the USA or Australia, what sort of extra job should be offered to a callow 18-year-old Brit? ‘One in, one trained’, the mantra we are apparently supposed to learn, doesn’t make a great deal of sense when examined close up.

A third concern is that, like all job creation schemes (see my post on Labour’s Job Guarantee scheme), the number of jobs ostensibly resulting from these new apprenticeships is likely to be far in excess of the net number of posts created. Firms will be able to present as ‘new’ posts apprenticeships they would have created anyway, while even genuinely new apprenticeships may be at the cost of other jobs which the firm may have offered instead. The government can never know this, however many questionnaires firms have to fill in and however many boxes they have to tick. When you add in the possibility that some of these apprenticeships may be taken by young people from other EU countries – or even by non-EU youngsters who arrive here by another route (for example family settlement or asylum ) – the effect on the UK’s young unemployed could well be a lot more limited than Labour thinks.

There are other concerns, such as the possibility that firms might dodge the new requirement by outsourcing to smaller companies (those employing less than 50 people are apparently going to be excluded from the rule).

Perhaps more fundamentally, there seems to be a naive assumption behind this that those coming in to help the UK economy are taking ‘our’ jobs in some sense. This ignores the fact that many of the jobs concerned are created by foreign-owned firms. An American bank or a Japanese car manufacturer may quite reasonably expect to be able to move staff between countries – a Tier 2 move – and of course hundreds of thousands of UK nationals benefit from this as they spend time working abroad themselves. A country which is open to movements of skilled labour is one which will continue to attract foreign investment and thus create more jobs in the future. If the UK makes it even more difficult and expensive for companies to recruit skilled workers from abroad, foreign companies (and British companies too, of course) may increasingly look to invest elsewhere. And who can blame them?

Editorial and Research Fellow

Len Shackleton is an Editorial and Research Fellow at the IEA and Professor of Economics at the University of Buckingham. He was previously Dean of the Royal Docks Business School at the University of East London and prior to that was Dean of the Westminster Business School. He has also taught at Queen Mary, University of London and worked as an economist in the Civil Service. His research interests are primarily in the economics of labour markets. He has worked with many think tanks, most closely with the Institute of Economic Affairs, where he is an Economics Fellow. He edits the journal Economic Affairs, which is co-published by the IEA and the University of Buckingham.