The release yesterday of an interim policy on population control gave official confirmation to the view promoted frequently through this blog, that finance has made a significant positive contribution to the social welfare of Jersey including limiting population growth.
This news may be counterintuitive for some so it's important to explain why finance benefits population numbers and the wider beneficial consequences for Jersey as a whole.
Firstly overall highlights of the population paper:-
- Over the next 20 years Jersey’s over 65s population will double and over 85s population nearly triple
- The working age population will decline by 13% if we have no net migration
- The current unemployment rate is highest for people born in Jersey
- Currently seeing a change in the type of migrant coming to Jersey with it being increasingly high value
- The paper only sets out Governments interim direction, applicable to 2014 and 2015
- Planning assumption being adopted is +325 migrants per year
- If average net migration is +325 per year this will give a population of 110,000 by 2035
- Migration will be enabled that adds the greatest economic and social value and where local talent is not available
- A business may wish to relocate to Jersey or expand, and as part of creating jobs locally, they may need some permission for migrant workers. Such a business may bring a range of benefits to Jersey, and it would not be sensible to refuse those permissions even if the target for a single year was to be exceeded, especially with high unemployment
- It is for the Chief Minister through the Housing and Work Advisory Group and Population Office to decide what licences should be granted for registered and licenced staff – generally support activities which have a high economic and social value, and granting permission for licensed and registered staff only where entitled or entitled to work persons are clearly not available for these businesses.
- Business that have more permissions for migrant workers than an average competitor should, as a rule, only be able to recruit entitled/entitled to work people. Unused permissions for migrants should be removed
- The inherent tensions between limiting migration and the needs of employers and consumers should be recognised
Content in terms of the financial services industry;
Finance industy employment statistics;
Proportion of registered and licensed of total = 11%
Of the migrant workers in the financial and legal activities sector half are licenses employees, i.e. they are deemed highly skilled and essential
Economic growth in the period up to 2000 was strong driven by growth in high value financial services. This took place alongside growth in the population and working age population.
The finance industry requires specialist skills, but levels of pay are high, attracting many local residents, including those leaving education or seeking alternative careers. However, other industry with lower economic values often cannot compete for staff on pay. Arguably a culture and popular perception has grown around this, such that some industries are seen as ‘not for local people’.
Where a business has a high economic value, permissions for staff would usually follow where it was demonstrated that all possible efforts to recruit entitled and entitled to work staff had been undertaken, including engagement with the back to work team. Alongside the granting of these permissions, conditions may be applied, for example the permissions may be temporary and/or name the specific person who may be employed. In addition there may also be a requirement for entitled and entitled to work staff to be recruited for other positions and/or assurance that proper training programmes were in place. High Value – any worker who generates a value of above £60,000 being the average value of each worker in our economy. Enterprises that create social value are looked at on an individual basis.
The McKinsey report is referenced in terms of forming the basis for the Finance Industry Strategy linked to the Government objective of ‘Getting people into work’.
Commentary on the report:
Over the last decade global economic growth has flattened, and the absolute size of the financial services workforce in Jersey levelled off. The all time high for employment in the finance sector was around 13,350, and is currently around 12,400. Finance employment has in fact fallen during the same period the population surge of the last few years has become evident. There is a high prevalence for finance workers who came from the UK to return in these circumstances. As a consequence the year on year growth in finance employment seen in the 90's and early 2000's has ceased, as the workforce found a level, tempered by increased competition from lower cost centres, new emerging players and tougher market conditions.
During the downturn it is largely the very high revenue value per employee of the finance industry that has allowed public finances to be sustained and the real growth in population in the workforce has come from non finance related sectors. The chart illlustrates the point:-
Without the contribution of finance more immigration would likely have been needed if public finances were not to suffer. Without some immigration and the increase of the 65+ population something has to give. There have been some increases in taxation, some cuts in public services and more immigration that published policy allows. The circle may well have been squared by above plan immigration which is an issue going forward that government have expressed a determination to address.
The alternative of increasing general taxation would make Jersey uncompetitive giving rise to increased unemployment whilst the prospect of deep cuts in public services is equally unattractive. The missing piece from this puzzle at least so far as the interim report is concerned is government itself. There appears to be little analysis of the growth of government headcount and its impact on population growth, nor any analysis of the impact on immigration. It isn't easy to identify the overall headcount in government reports as not all functions seem to be included with quasi government agencies sitting outside the numbers.
A review of the 2013 government labour report reveals that public service headcount grew from 5,970 in 2000 to 6,920 by 2013. But this is not the complete picture as some quasi official bodies such as the JFSC and Competition regulator sit outside government figures. This adds another 1,320 heads to increase the total to 8,240. Given that some of this growth will have been recruited from off island these figures would seem to be sufficiently material to be worthy of analysis and inclusion in the report. It may be that I have not picked up the relevant information in my first 'scan' but if restraint is the order of the day, transparency in terms of governments approach would seem to be a sensible strategy, although I fully acknowledge this information may be published elsewhere.
The main learning from the report so far as the finance industry is concerned is that not only has it not been a driver of population growth in recent years, it has helped limit the number of new migrants needed to come to the Island in order to balance the books, and remains the best option for high value low impact growth for the future.