This week, Boris Johnson set out a post-Brexit vision in which the UK continues to enjoy access to the single market, whilst restricting EU immigration through an Australian style points-based system. The proposed deal was unlikely to ever be accepted by EU leaders – but this does not mean that the advantages of a points system over free movement should be dismissed. The government’s failure to meet the net immigration target of the ‘tens of thousands’ shows that further action needs to be taken. Additionally, the referendum result has created economic uncertainty for the UK. A points-based system has the potential to both control immigration and boost productivity – but how?
How can a points-based system reduce immigration?
Critics of the system have claimed that because Australia has a net migration per head which is around double that of the UK, a similar system would only increase UK net migration. But this argument ignores a blatant fact; Australia has more liberal policy goals, as it is likely to gain more from immigration in terms of labour productivity. Data from 2013 shows that of those immigrants in Australia who obtained citizenship since arrival, the labour participation rate was 77% – above the stable national average of around 65%. On the other hand, the average UK participation rate was already around 77%. Australia’s generous planned cap on visas would reflect this, whereas the UK could lower such caps to reflect its smaller net immigration target.
Critics also point to the failure of the 2010 reforms to reduce net immigration, which made the existing points system for non-EU immigrants more restrictive. However, as shown below, total non-EU immigration has decreased since 2010. Although the decrease is nowhere near the target, it would be wrong to assume that a points system is completely ineffective, as the significant increase in net migration since 2013 is largely from EU immigration. If the system was designed so that any relaxed criteria for non-EU immigrants (in the case of an overhaul of the system) did not outweigh tighter control for EU immigrants, net immigration reduction could be possible.
How can a points-based system increase productivity?
One key advantage of a points-system is that it could stop the current unfair discrimination against talented non-EU immigrants. With a standardised system, visas would be allocated on the basis of skills, rather than nationality. If free movement continues, the only way to reduce net immigration would be to impose further restrictions on non-EU citizens. The government’s Migration Advisory Committee has warned that this would bring a ‘significant risk [of] detrimental impacts on UK productivity, innovation and competitiveness’ by restricting access to talented non-EU workers and students.
Visas would be allocated based on labour market gaps, with the government setting the relative value of various skills in order to encourage labour market equilibrium. Evidence suggests that this may be needed to boost productivity; despite fears that immigrants are ‘stealing’ UK jobs, there is a skills shortage across a range of occupations. By also implementing a low-skilled worker programme, the UK can continue to benefit from EU workers filling the majority of such roles. One criticism of the system is that central planning may be inefficient, in that governments can fail to correctly predict skill shortages. However, this can be partially overcome by implementing a hybrid system that integrates real employer demand, such as by awarding points for job offers.
The merits of a points-based system should not be dismissed. Critics have failed to acknowledge that Australia’s system does not have to be replicated precisely – it can be adjusted to reflect the UK’s own needs. The government will be able to alter the cap on visas in order to meet net immigration targets, whilst being held responsible for the success or failure in doing so. A recent report identified a skills shortage throughout the EU, with 39% of EU firms having difficulties finding staff with the right skills. Accessing a pool of skilled non-EU immigrants can therefore boost our labour productivity at a time when economic uncertainty is vast. Overall it is clear that in post-Brexit Britain, the need to control immigration in an efficient way has never been more vital – and a points-based system is key for doing so.