The impact of Brexit on the unskilled labour market

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The latest UK200Group blog post- In preparation for Brexit, Charlotte Wills and Neil Shanghavi, Fragomen LLP, discuss how a significant potential labour shortage problem might be dealt with.

As the UK government continues to negotiate the country’s exit from the European Union, one of the most important questions for small to medium-sized enterprises (SMEs) is how to fill unskilled labour positions currently held by EU nationals.

UK immigration rules currently cater for migrants whose jobs are skilled to a certain level, but they make no provision for unskilled and seasonal workers that sectors like hospitality and agriculture heavily depend on.

At the moment, it is still unclear how the UK government proposes to fill this gap in the labour market, though the American system may provide a solution.

So how does the US manage unskilled labour?

In the US, the H-2 visa is used to fill employment shortages caused by increased seasonal demand. The H-2 visa was created for agricultural and non-agricultural temporary workers and is only available to nationals of certain countries. Common H-2 industries include landscaping, food processing, lodging and construction. The H-2 programme has two sub-categories:

• Temporary agricultural workers (no cap)
• Temporary non-agricultural workers (subject to a cap)

Discouraging employers from looking elsewhere

The cap is one of several tools used to dis-incentivise employers from looking outside of the local labour market. There are also strict reporting requirements imposed on employers that are required to justify hiring a migrant worker. Employers must demonstrate that there are not enough US workers in the area that are able, willing and qualified for the role and that hiring a foreign worker will not adversely affect the wages and working conditions of US citizens.

Despite these discouragements, employers in the US still rely heavily on the H-2 visa category and the 2016 annual total of cap-based visas was exhausted by July last year.

Could the US system work in the UK?

The American model could provide the basis for UK policy after Brexit, but there are several factors to consider. In the US, many small businesses hail the H-2 system as an efficient means of accessing a temporary labour market that can quickly address labour shortages. But other parties, such as labour unions, want mechanisms in place to ensure that foreign workers do not displace or undercut the wages of US workers. There is also concern about the potential for exploitation and human trafficking in a seasonal, unskilled labour force. All of these points will need to be considered by the UK government when deciding the path forward after Brexit.

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