CWS 3.0: December 10, 2014

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Rising wages in Central and Eastern Europe to worsen skills shortages in the UK

Jobseekers and politicians in Western Europe have long grumbled about rising migrant numbers and falling job opportunities. Political parties such as the UK Independence Party have been formed on the basis of “local people first,” pushing immigration to the heart of the political agenda.

The latest figures from the UK’s Office for National Statistics show that immigration increased in the year through June 2014, compared with the previous 12 months. 583,000 people immigrated to the UK, up from 502,000 last year. There were 45,000 more EU immigrants and 30,000 more non-EU immigrants than in the prior year period.

Romania and Bulgaria joined the EU in 2007 but their citizens were prohibited from working freely in western member states until Jan. 1, 2014. By the end of June 2014, 32,000 Romanians and Bulgarians immigrated to the UK, up from 18,000 the previous year.

In comparison, an estimated 323,000 people emigrated from the UK during the same period.

While more people entered the UK than left it, companies are still crying out for skilled workers.

 “In the longer term, skills shortages could jeopardize delivery of major infrastructure projects announced in [the government’s] Autumn Statement,” said Kevin Green, CEO of the Recruitment and Employment Confederation, in a recent report.  

As companies in the UK struggle to balance business demand with public outcry, skilled workers from Central and Eastern Europe may soon be incentivized to return home.

The Economic Pulse 2014 survey from KPMG found that 69 percent of business leaders in the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania and Slovakia (known collectively as CEE8) plan to increase salaries in 2015 — half by as much as 5 percent.

“According to the survey results, the CEE8 economies are following a path of healthy GDP growth and low inflation; but as skilled labor and the ability to export are the key drivers of economic competitiveness, the focus in the surveyed companies is increasingly on the quality of employees,” explained Serban Toader, senior partner at KPMG Romania.

This will not halt immigration to the West, though. Better wages will not be offered to everyone and many people will still see greater opportunities in other countries. What it may do, however, is limit or slow the migration of skilled workers.

After Poland joined the EU in May 2004, there was a significant increase in the number of Polish workers migrating to the UK. And while there are still large numbers of Polish workers immigrating today, there is also a significant number of workers returning to Poland, where the cost of living is much cheaper and wages are on the rise.

Skilled workers from Central and Eastern Europe are faced with a choice; immigrate to the UK for more money but a higher cost of living, or remain at home or in a neighboring country for less money but cheaper costs.