Restrictions on immigration: what’s their impact on HR?

Jul 23, 2020

9 mins

Restrictions on immigration: what’s their impact on HR?
Laetitia VitaudLab expert

Future of work author and speaker

There’s historically been two simple positions linking immigration and the world of work. In the industrial paradigm, the position of companies and employers was traditionally open to more immigration because it meant more access to a cheap workforce willing to take jobs that are otherwise hard to fill and because it puts downward pressure on local wages. Conversely, the position of unions and workers was often hostile to more immigration because it threatened their bargaining power.

In today’s world, however, the dichotomy between the first and second positions isn’t as clear-cut anymore. The world is increasingly fragmented. Populism is rising in those countries, like the US and the UK, that are usually a magnet for immigrants in search of new opportunities. In Europe too, more populist governments (in Poland and Hungary, to name only two) have sought to put more restrictions on immigration, even on intra-EU migration since the pandemic. It’s become apparent since the election of Trump and the Brexit referendum: we’ve entered a phase that’ll make life harder for migrants and those who need them.

In the UK, the ‘hard’ Brexit looming (December 2020) will put an abrupt stop to EU migration and thus shrink the talent pool for many industries that have become dependent on EU workers: health care (the NHS), elderly care, childcare, restaurants, construction… and knowledge-based industries (startups, financial sector…). In 2019, there was an estimated 2.31 million EU nationals working in the UK. Many of them will remain in the UK under the “Settlement Scheme”, but very few new EU people will be able to come work in the UK from now on. This will dry up the pool of workers for all recruiters, even if more migrants from outside the EU make it to the UK in the coming years. Nothing will be as easy for recruiters as hiring EU nationals was in the single market. The increased friction will be costly.

In the coronavirus-stricken USA, Trump passed radical executive orders to put all immigration to a complete (temporary?) halt. He used to make a distinction between the “deserving”, high-skilled migrants whose “brain drain” was still deemed desirable, and the “undeserving”, low-skilled migrants who were deemed less desirable (which bears no relation to the reality of employers’ needs since the highest needs are in low-skilled jobs), but Trump’s recent moratorium on H-1B visas (skilled workers) will affect companies in need of engineers, data scientists, researchers (particularly Silicon Valley).

Coronavirus has erected more walls between nations. Many countries imposed unprecedented curbs on immigration and may use the ongoing economic crisis to prolong these curbs beyond the pandemic. Beyond the short term—many people are still unemployed and the pandemic is far from over—this could have long-term consequences on the world of employment.

As far as low-paid work is concerned, restrictions on immigration will create more polarisation

Several industries simply can’t function without a constant inflow of new immigrants because the jobs they offer are extremely low-paid, dangerous, and/or unattractive. The pandemic has made some of these jobs much more visible and highlighted some of the problems that will develop in the future.

  • The production of food will be less safe and more expensive

Meat plant workers, for example, are almost exclusively immigrants. Often described as “modern slaves”, meat plant workers are particularly exposed to the virus, as was seen in the US or in Germany. In both these countries meat production factories have caused coronavirus outbreaks (notably because of bad working conditions). In the US, the CDC (Center for Disease Control) estimated that half of all covid cases can be traced back to meat plants.

Likewise, agriculture workers are overwhelmingly composed of migrant workers in the US. As explained in this New York Times article, “the vast majority of people who harvest America’s food are undocumented immigrants, mainly from Mexico, many of them decades-long residents of the United States. Often the parents of American-born children, they have lived for years with the cloud of deportation hanging over their households”. If there aren’t enough migrant workers, then crops can be left to rot in fields.

Logistics and delivery workers, many of whom are also migrant workers, make sure we have food on the table. For food companies and retailers, they are the last critical link in the chain. With fewer immigrants, it will be harder to recruit them, which will make logistics and delivery more expensive. Last but not least, restaurants depend completely on immigrants to hire their cooks, dishwashers, and waiters.

With less access to these migrant workers involved in producing and bringing food to consumers’ tables, production and distribution may become less safe (even worse conditions in meat production factories, for example), less reliable (food shortages or surpluses could happen more frequently, as they have during the pandemic), and ultimately more expensive.

  • Female workers will pay a high price and the talent pool will shrink for all employers

In all Western countries, health care, elderly care, and child care rely overwhelmingly on immigrants. “Even as a shortage of U.S. workers who care for the elderly and disabled grows, proposed limits on immigration may worsen the situation”, researchers say. The same is true about housekeeping and maintenance. In the UK, the social care sector (professionals “who look after those who cannot look after themselves, such as the disabled or the elderly”) depends almost entirely on EU workers and immigrants.

The UK’s post-Brexit immigration plan will make it excruciatingly hard for organizations in that sector to be able to continue to recruit the people they need. Under the new plan, people who want to work in the UK will be assigned points based on qualifications and whether or not they speak English… so there will be a lot fewer workers to recruit. The dearth of workers will have two effects. First, in the private sector, some workers may be paid more and the price of those services will be significantly more expensive. These private childcare and elderly care solutions will be affordable to the rich only. Secondly, in the public sector, there will be a constant shortage of staff which will degrade the quality of service and therefore the working conditions of the workers concerned (which will make it all the harder to recruit them).

A shortage of immigrants, therefore, will further amplify the polarisation between private care and public care. As childcare and elderly care become increasingly unaffordable (or terribly bad), more workers will have to quit their jobs to look after a child or a parent. Among those workers who leave the workforce to do (unpaid) care work, a majority are women. This will increase the gender gap and further reduce the talent pool. Indeed the workers who leave the workforce to look after someone else work in all sectors.

In short, restrictions that concern low-paid immigrant workers have a double impact on recruiters: it’s harder to recruit low-paid workers, and it’s harder to recruit all kinds of workers as more of them must leave paid work to do unpaid work. Furthermore, it causes the GDP and tax revenues to shrink as paid work is replaced by unpaid work. This in turn puts more fiscal pressure on the remaining taxpayers.

  • Robots vs slaves: less immigration means more automation and more human exploitation

Faced with labor shortages and higher costs, more employers have the incentive to pursue automation. This is not necessarily bad news as the low-paid work that’s automated is usually very hard work. Up to now, a lot of tasks that could be automated have not yet been automated for the sole reason that human work was too cheap (cheaper than the investment required to automate a task). Higher wages usually come with increased automation. But in some sectors, like the restaurant industry, not that many tasks can be automated. Some can be performed by consumers, which is why self-service restaurants and food courts are developing (you don’t need as many employees when you don’t have to serve clients at the table).

In proximity services, food production, childcare, and elderly care, there are many tasks that can’t be automated. Cleaning a house or a factory is hard to automate, for example. So employers will continue to rely on human workers, more of whom will be illegal immigrants. (When you put more restrictions in place, there’s usually a higher percentage of illegal immigrants among those who do continue to work in your country). Employers of illegal immigrants face legal risks, of course, but they are also in a position of complete power over their illegal workers.

Illegal immigrants are at the complete mercy of their employers who can denounce them to authorities (and pretend they didn’t know they were illegal) and threaten them with deportation. These workers have none of the usual protections afforded workers. They aren’t protected from sexual harassment, low wages, and all forms of exploitation. They are in no position to bargain collectively. They have no unions, no social security, no healthcare. In many ways, these workers are modern slaves.

  • A lack of highly-qualified workers will force companies to adapt or accept decline

When it comes to immigration, the usual distinction between “qualified” and “unqualified” workers is more artificial than it seems as all worker pools are interconnected. A shortage of care workers causes a shortage of workers in other sectors as more of them are forced to leave the workforce to look after a child or a parent. The distinction is artificial and politically convenient. It’s been made often by politicians even though it makes little economic sense.

Recently however, new restrictions have been placed on “qualified” immigration too. Brexit will make it harder for employers to access qualified EU workers. The pandemic has caused restrictions on the free movement of workers within the EU. And Trump has put all visas on halt, including H-1B visas for qualified workers, until at least next year. The executive order caused quite a stir, particularly in Silicon Valley. In tech companies, as many as one in two engineers are not born in the US. “Trump’s worker visa ban will hit Silicon Valley hard”, titled Silicon Valley media Techcrunch: “This would be a blow to very early-stage tech companies trying to get off the ground”.

  • Visa restrictions will create difficulties for Silicon Valley and provide other regions/countries with new opportunities

“Immigration has contributed immensely to America’s economic success, making it a global leader in tech, and also Google the company it is today,” Google CEO Sundar Pichai said on Twitter. An intensive “brain drain” has fuelled the development of Silicon Valley firms. Indian engineers working in tech companies took up a majority of all H-1B visas issued in the country. Without them, tech firms like Google or Apple would not have had the brain power to build global empires.

A dearth of talent has long been a bottleneck for Silicon Valley tech companies. Engineers are significantly more expensive there than anywhere else in the US. And recruiting requires venture capital funds and ingenuity. Up until recently the abundance of VC money made it possible for these companies to continue to recruit the best talent. But the new restrictions will come with unprecedented challenges.

The same can be said about London’s City. Banks and fintech startups rely on talented workers from all over the world who are paid higher wages than they would be in the rest of the world. But the new bottleneck and the shortage of low-paid workers will make it much harder for Silicon Valley or the City to compete. Fewer childcare options and less convenience (caused by a shortage of low-paid staff) will make the proposition less appealing to those qualified workers who may still consider applying for a visa.

As a result, other countries that offer more convenience, better infrastructure, and affordable childcare may have new opportunities to compete with the old powerhouses. Estonia, for example, is working hard to attract global IT talent to generate new revenues and opportunities. Canada wants to lure in the tech workers blocked by Trump.

As far as recruiting talent goes, there are five options:

  1. Outsource more: many IT services companies across the world (in India or Romania, for example) may benefit from the restrictions placed on immigration in the US or the UK. For many companies, as recruitment in-house becomes unaffordable or complicated, more projects and tasks will have to be outsourced to external IT companies, more and more of which will be abroad as prices increase.

  2. Automate more: even though IT is “high-skilled” work, a lot can be automated or crowdsourced. More companies will rely on open-source software. More engineers will be encouraged to automate more and more of their work. The most innovative companies face the challenge of labor shortages with ingeniousness.

  3. Expand abroad: it isn’t in the DNA of Silicon Valley tech companies to open a branch in foreign countries, as they seek increasing returns at scale. But opening up new branches and recruiting locally may be the only solution to conquer new markets and recruit global talent. Tech companies will be divided into two groups: those that make do with the US domestic market and abandon the rest of the world, and those that invest resources locally.

  4. Go remote: remote work and a new organization of work (like the one championed by Jason Fried and David Heinemeier Hansson in Remote) makes it easier to continue to work with engineers and developers abroad. However, there are legal, linguistic, and cultural barriers. What type of local contracts do you need to draft to have an Indian employee in India, or an EU employee in the EU, if you don’t have a branch there?

  5. Diversify your domestic recruitment: for lack of foreign candidates, you may have to look at your domestic pool differently. Many more talented people may be recruited among women and minorities, provided they are given new opportunities to train. Some companies may consider creating recruiting or training programs to better tap into previously unexploited candidate pools. If you can’t recruit foreigners, diversify your domestic recruitment!

In conclusion, restrictions on immigration will make the life of HR professionals much harder. Many sectors are likely to face severe labor shortages. The impact will be felt most acutely in proximity services (and care work) and cause many (mostly female) workers to abandon paid work. On the bright side, the shortage of talent in yesterday’s US or UK powerhouses may also come with new opportunities for ingenious companies that come up with innovative solutions to counter the shortages. It will accelerate the rise of remote work, and the transformation of management, and contribute to the development of new parts of the world.

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