The return of unskilled migration will do nothing to solve the productivity crisis

The pound has taken a beating. The gilts market has gone haywire. The mortgage market has stalled, and support for the Government has evaporated at the polls. To put it politely, the ‘plan for growth’ announced by the Chancellor last Friday has not gone exactly according to plan.

Still, never mind. Right now it looks like Kwasi Kwarteng, or at least the Prime Minister Liz Truss, will switch straight to Plan B. Give in to the demands of big business, and open the doors to another round of mass immigration.

And to an extent, this makes sense. We can understand that many businesses are desperate to fill vacancies. And we can understand as well that an embattled government is looking around desperately for a way to boost growth, no matter how short term that might be.

But a return to mass, low-skilled immigration is not the answer.

All it does is allow companies to fix every problem with more cheap people instead of investing in training, automation and efficiency. And it absolves the welfare and tax system of responsibility for making sure work pays.

It is absolutely right that the UK opens its doors to skilled immigrants, but hundreds of thousands of visas for waiting on tables, washing cars and picking fruit are just a short-term fix. It hasn’t worked for the last 20 years and it is not going to work now.

The economic drama of the last few days may, as it turns out, have been overdone. The pound ended the week much where it started against the dollar, and had hardly moved against the euro, and while bond yields rose more sharply than elsewhere, the rest of the market was in turmoil too.

In fact, in the long run, a return to the Blairite policy of mass, low-skilled immigration is likely to be far more significant than these temporary ructions.

According to leaks, the Prime Minister is set to review the immigration rules, loosening restrictions and widening the scope of the government’s ‘shortage occupation list’ so that a far wider range of industries can bring in as many people as they want.

True, it is possible there may not be many takers with the pound so weak. Even so, if we go back to the open door policy on immigration that we witnessed for most of the first two decades of the century there is no doubt that will have a huge impact. It will provide an immediate boost to growth at a time when the government needs something to lift the economy off the rocks.

Hardly surprisingly, many industries are clamoring for that. In industries such as hospitality, care homes and agriculture, as well as great swathes of manufacturing and distribution, companies have been struggling to fill vacancies.

We have all started to grow used to ‘closed’ signs at cafes or restaurants that were previously always open, and it has become harder and harder to book any kind of work.

At a time when businesses are already struggling with soaring energy bills, currency volatility, and a looming global recession, it is tempting to simply offer them anything that will fix their immediate problems. The trouble is, it is still a mistake to go back to mass unskilled immigration.

First, it doesn’t raise productivity. Investing in more machinery, upgrading skills and shifting to higher value output is all hard work. If companies can just throw minimum wage labor at a problem then they will.

Migration makes it too easy for companies to just bring in people instead of raising output from their existing team. But if we can’t work out a way of getting productivity moving again it will be impossible to grow the economy.

Next, it stops work from paying. True, we have been steadily raising the national living wage to put a floor under what employers can offer. However, you don’t need to spend very long with the supply and demand chapter of an economics textbook to understand that if you increase the supply of something — in this case people — the price will go down.

We were hoping for higher wages, but an increase in unskilled migration will push them back down again.

Finally, it stops us from working out the solutions to our labour market issues. To take just one example, the Office For National Statistics reported last week that 386,000 over-50s had left the workforce since the pandemic, the equivalent of losing a city the size of Coventry

Over 70pc of them were willing to go back to work, but were deterred by the pay, the conditions, or were stuck on NHS waiting list.

Likewise, more than half a million more people are on Universal Credit, and only required to put in 15 hours a week before they can refuse more work. There are lots of people who could be working more in the country. We just need to figure out how to get them back into full-time employment.

In reality, one of the (very) few things the Johnson administration got right was its post-Brexit immigration policy. The points system meant the UK was still a country that welcomed people with talent from all around the world.

Despite the catastrophising of the hardcore Remainers, in the year to June the UK issued 330,000 work visas, more than any other year on record — but they were skewed towards people with skills.

Even better, we opened our doors to anyone wanting out from Hong Kong, as well of course to an estimated 83,000 Ukranians. But we stopped companies from simply relying on cheap labour to fix every problem.

The very worst thing we could do right now is go straight back to a policy that has failed consistently for two decades — no matter how tempting it appears as a way of getting the government out of the mess it finds itself in.