Migration Advisory Committee – Review of Tier 2: Analysis of Salary Thresholds Report

The Migration Advisory Committee (MAC) has today published their report on the Tier 2 analysis of salary thresholds. This report differs from their previous reports as it does not make any recommendations, instead it makes a summary of the analysis and conclusions.

The MAC’s summary and conclusions are as follows:

Economic rationale for setting new salary thresholds

• There was not much evidence of Tier 2 migrants salary undercutting skilled workers in the UK labour market;
• An increase in Tier 2 salary thresholds could be justified if it puts upward pressure on wages in sectors which are currently relying on migrants to fill skills shortages;
• Higher salary thresholds should reduce employer demand for skilled migrant labour and reduce inflows of skilled migrants and their dependents under Tier 2;
• In terms of the Government’s objective to reduce migration, the impact of increasing the salary thresholds is dependent on the reaction of business;
• If employers are unable to afford skilled Tier 2 labour and cannot source the appropriate labour from within the UK/EEA, then this could lead to bottlenecks constraining the growth of individual firms;
• Restricting Tier 2 inflows could limit UK productivity and growth because of the skill level of Tier 2 migrants;

Increasing the minimum salary thresholds for all occupations

• The original principles used to set the minimum threshold of £20,800 were relevant when the skill requirement was NQF3 and above. If the same principle is applied to the current skill level required of NQF6 the minimum salary threshold would need to be increased to £31,000 to £39,000;
• An immediate introduction of a salary threshold would be opposed by many employers and would cause serious problems in particular sections such as health as education;
• Setting the salary threshold level to the 10th percentile for all occupations skilled to NQF6 would mean a minimum threshold of £23,000;
• Setting the salary threshold level at the median earnings for all occupations skilled to NQF6 would mean a minimum threshold of £39,000;
• The £41,5000 threshold for long term ICT still seems appropriate. However, there may be rationale for increasing this if the Government’s aim is to reduce economic migration;
• In order to begin to have an impact on the long-term Tier 2 ICT route, the flat salary threshold would have to be raised to £50,000;
• Businesses were concerned that if the minimum salary threshold was increased it could lead to an increase in the cost of their services and the increased likelihood of business off-shoring their service;
• New entrants would be most impacted by any increase in the minimum salary threshold, also affecting graduate schemes and international students;

Increasing the occupational salary thresholds for each occupation

• The Government asked the MAC to assess the impact of increasing the occupation-specific thresholds for experienced workers from the 25th percentile to the 50th or 70th;
• An occupations-specific threshold set ay 50th percentile would affect 40 per cent of applications across Tier 2, 61 per cent for Tier 2 (General) in-country and 41 per cent for out of country applications;
• An occupations-specific threshold set ay 75th percentile would affect 60 per cent of applications across Tier 2, 76 per cent for Tier 2 (General) in-country and 59 per cent for out of country applications;
• For the 50th percentile increase, the Natural and Social Science Professionals would be most impacted, for Tier 2 ICT, the IT sector would be most affected;
• The Government also asked the MAC to assess the impact of increasing the occupation-specific thresholds for new entrants from the 10th percentile to the 25th or 50th;
• An occupations-specific threshold set ay 25th percentile would affect 45 per cent of applications across new entrant Tier 2, 61 per cent for Tier 2 (General) in-country and 33 per cent for out of country applications;
• An occupations-specific threshold set ay 50th percentile would affect 62 per cent of applications across new entrant Tier 2, including 58 per cent for out of country applications for Tier 2 (General);
• New entrants are currently expected to meet the threshold for experienced workers within three years, evidence suggests that this can currently be difficult.

The report concludes by stating that the MAC prefers occupation specific thresholds based on the nth percentile for each occupation, rather than flat thresholds which apply across all occupations. Their reasons being that this would take into account the different distributions of pay within each occupation and does not prevent certain occupations from being able to recruit.

The MAC also find that there is a good case for increasing the minimum threshold of £20,800 for Tier 2 (General), as it was calculated in 2009 when the skill requirement was NQF3, it is now NQF6.

We will continue to keep you updated.