Scotland and free movement of labour

Currently there is ‘free movement’ of labour into Scotland from the EU (though not from the rest of the world – a point to which will be returned to). What will be the consequences for the Scotland’s economy and its people if this free movement from the EU ends?

Scottish government figures on immigration indicate that between 2001 and 2011 about half of Scotland’s immigrants came from the EU. By 2015, the number of non-UK nationals in employment in Scotland was 166,000 of whom 115,000 came from the EU. The biggest numbers were from Poland, Ireland and Romania. Non-UK EU nationals made up 3.4% of the total population as against 4.9% for Britain.

In terms of occupation, non-UK nationals are over-represented in ‘elementary occupations’ like farm workers, cleaners, and process workers in food preparation (almost a third of all non-UK EU nationals). At the other end of the spectrum, 17% of non-UK EU nationals were in professional occupations (chemists, professional engineers, pharmacists). In terms of sectors, they are particularly under-represented in clerical and administrative posts and the civil service and over-represented in tourism (mainly distribution, hotels and restaurants), being 10.8% of the total. In public administration, education and health (but principally health,) it is non-EU non-UK nationals who tend to predominate (providing employment for almost a third of all non-EU nationals) while EU nationals make up only 2.6% of the health workforce.

So, what happens if migration from the EU is no longer on the basis of ‘free movement’? Let us make the hopeful assumption that it is the Labour Party’s policy that is implemented – the only party to have advanced relatively detailed proposals for an immigration policy outside both the EU and the EU single market.

Its 2017 manifesto stressed three points. First, all existing non-British nationals have the right to remain. Second, immigration policy will not ‘discriminate between people of different races or creeds and … will be transparent and fair to everybody’. And, third, that the new policy would involve ‘working with businesses, trade unions, devolved governments and others to identify specific labour and skill shortages to institute a new system which is based on our economic needs, balancing controls and existing entitlements’. It continues, saying Labour will ‘take decisive actions to end the exploitation of migrant labour undercutting workers’ pay and conditions … crack down on unscrupulous employers … stop overseas-only recruitment practices, strengthen safety-at-work inspections and increase prosecutions of employers evading the minimum wage’.

As a policy it matches, and is to some extent contingent upon, the manifesto’s other pledges to transform the labour market and the economy itself through the introduction of sectoral collective bargaining and an active industrial policy.

The past year has seen plenty of warnings about the adverse consequences for Scotland of ending EU free movement. These concern particularly agriculture, fish processing, hotels and catering and health services – and, more generally, the need to offset the economic consequences of an ageing population.

In agriculture, there are roughly 26,000 employees of whom 6,000 are classed as casual and these are concentrated overwhelmingly on Tayside. Though there is some regulation through the Agricultural Wages Board, wages are very low – set for 2016 at the same level as the legal minimum wage of £6.70 an hour for those over 24. Hospitality and construction tend to follow the same pattern – though currently with even less regulation. Information is lacking on how far EU migrants are paid less or suffer greater discrimination – though those from Black and Minority Ethnic (BAME) backgrounds in Scotland do suffer somewhat higher levels of unemployment (particularly women). However, overall median gross hourly earnings for EU nationals in 2015 were £9.00 as against £12.20 for UK nationals. This reflects the degree to which EU nationals are disproportionately in low paid jobs – though interestingly the median for non-EU nationals from outside the UK was £15.40 reflecting the higher proportion in professional occupations, particularly in the health service.

On these figures, it would be difficult to claim that the Scottish economy is critically reliant on EU nationals – it is certainly less so than Britain as a whole – or to argue that the future viability of the Scottish economy is dependent on free movement as prescribed by the EU. On the contrary, there is a bigger, and much more worrying, picture which a narrow focus on free movement obscures. This is the wider crisis of the Scottish economy which stems – in part – from the current character of its labour market.

The latest edition of the Fraser of Allander Economic Commentary (41/2) describes the position of the Scottish economy as ‘precarious’: total growth over the past two years has been 1.2% as against 3.5% for Britain. Partially, this has been because of the decline in the oil and gas sector but to a greater degree it stems from more fundamental and underlying factors.

Scotland is at the bottom of the league for business investment: thirtieth out of 31 OECD countries. Research and development expenditure is little more than half that for Britain and a quarter of that for Finland, Sweden and Germany. Productivity remains alarmingly poor with almost no increase for a decade, worse even than Britain’s. And largely as a consequence Scotland’s exports are equivalent to only 12% of its GDP as against 22% for Britain and over 40% for Germany.

Correspondingly Scotland’s employment profile reveals a hollowing out of skilled employment and a greater reliance on unskilled and temporary labour. The Chartered Institute of Professional Development (CIPD) submission to the Scottish Parliament in 2015 outlined the detrimental consequences of Scotland’s ‘ flexible labour market which permits and sometimes promotes the use of low tenure jobs’. Cheap, flexible employment provides a temporary, but only temporary, alternative to investment.

For the future, these trends are a matter of acute concern not just for international competitiveness but also for Scotland’s workforce in a wider world where many routine and repetitive tasks will be automated. Scotland’s ‘labour intensive’ employers will go to the wall.

It is precisely these problems which Labour’s activist industrial policy seeks to address. It aims to use three main levers: public procurement, public ownership and public investment. All would, to a greater or lesser degree, be incompatible with the EU’s competition rules which disallow state aid, state ‘monopolies’ and interference in the labour market. EU rules would equally prohibit the use of public procurement as a tool to require union recognition or local sourcing – steel for infrastructure or pharmaceuticals for the NHS.

Even mandatory sectoral collective bargaining would run foul of the latest decision by the EU/EFTA Court of Justice in the Holship case (November 2016) in defence of freedom of establishment. This ruled that the Norwegian government’s dock labour scheme was acting illegally in seeking to set uniform wage rates and that the LO union federation was acting illegally in seeking to enforce them.

It is for this reason that the Labour manifesto correctly notes the need for access to, but not membership of, the EU single market.

In terms of free movement, however, there is another and perhaps more compelling reason for ending with the EU’s requirement for free movement. This is that enforces an immigration system that is institutionally racist. Those from the EU are ‘free to come’ – even though usually driven by economic compulsion. Those from anywhere else are not. The wives, husbands, children of those settled in Scotland from Africa and Asia are excluded.

Today, EU governments have a legal obligation to search for and deport ‘illegals’. The number of such deportations run to tens of thousands annually. Under EU regulation 2016/1624 the EU Border and Coastguard Agency, FrontEx, is to take responsibility for uniform enforcement across the EU. Last year, it forcibly deported 10,000. This year the figure is likely to reach 20,000. If your skin is black or brown, you are suspect. Those who support the EU’s free movement should reflect on this. It is in its application a ‘whites only’ policy and is today felt as such by the one in ten of existing Scots who came to this country from Asia and Africa.

This is why the Labour Party is correct to stress that its policy will not discriminate on the basis of race. Outside the EU’s single market, there will be the opportunity to establish non-discriminatory labour market regulation integrated with sectoral collective bargaining to redress current power imbalances. Equally, there will be the freedom to develop an industrial strategy that will invest in high quality jobs and stop the haemorrhaging of industrial employment. It is precisely the result of not having such a policy that so many of these manufacturing jobs have been lost.

We should remember the neo-liberal principles of EU law – well expressed by the European Trades Union Congress in 2012:

Running as a red line through the programme of Economic Governance is the idea of turning wages into the main instrument of adjustment: currency devaluations (which are no longer possible inside the Euro Area) are to be replaced by a devaluation of pay in the form of deflationary wage cuts. To achieve this wage ‘flexibility’, labour market institutions which prevent wages from falling are perceived as being a ‘rigidity’ which should be eliminated.

This is the real logic for the EU’s free movement. We need a non-racist immigration policy instead – one in which the trade union movement has a say and which matches our economic needs.

John Foster is Secretary of Radical Options for Scotland and Europe (ROSE)