Immigration and Hospitality industry

Introduction

Immigration legislation of a country plays a significant role in the hospitality and tourism sector of a country. The study of the current immigration legislation of United Kingdom and its impact on the hospitality & tourism industry comprises of the critical analysis of existing immigration legislation of United Kingdom. The study also comprises of the situation analysis of the United Kingdom border agency followed by the analysis and assessment of its impact on hospitality and tourism industry. The positive and negative impact of the legislation on the hospitality and tourism are detailed in the dissertation. The immigration process in United Kingdom is motivated by the factors like education, travels for tourism and work. United Kingdom legislation provides different visa rules for the immigration of the students, workers and tourists.

Immigration may be defined as a process of movement of people into a country for various purposes like education, tourism, job etc. The most significant immigration movement may be observed as the tourists’ movement for the purpose of leisure and holiday. A very important aspect associated with the immigration process is the enrichment of the culture.

However there have also been the instances of the unauthorised movement of the refugees into a nation. This is a drawback. Immigration process has a positive impact on the developed economy like United Kingdom. Hospitality and Tourism sector contributes to as much as 6% in the GDP of the nation. The significant contribution is due to the availability of the business opportunities for the facilities like hotels, tour planners, business events organizers, motels, outings planners, etc. The people, who are involved in rendering these services to the tourist, serve the need of the people in a foreign nation and at the same time generate the employment opportunities as well.

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Immigration figures reveal that the Europe has recorded largest number of immigrant’s viz. 70.6 million in year 2005. United Kingdom has witnessed the major immigration since World War II. The prisoners and the workers who were brought into the country to help to rebuild the post war situation have remained in the nation and become an integral part of the nation.

Research Objectives:

The objectives of the dissertation are to study the effects of immigration in the United Kingdom & identify its Impact on the Hospitality and Tourism Industry.

Rationale of the project:

The rationale of the project is to study the previous and current Immigration Legislation of United Kingdom & identify its Impact on the Hospitality and Tourism Industry. The research also undertakes the motivation related aspects to drive the people interest towards United Kingdom tourism, which is highly cost effective, and impacts of the achievement of these objectives. For several decades, the hospitality industry has been plagued with the challenge of finding competent employees to adequately staff the business in order to accommodate the needs and services of guests. Due to this challenge, employers often turn to immigrants to staff their business. Employers prefer to hire newly arrived immigrants because they are different from the local work force and the right attitude toward low wage and difficult jobs which are common in the hospitality industry (Waldinger et al, 2003). In addition, the labor force is aging and birth rates are below the replacement rate (Taylor et al, 2009). Labor shortages are impacting most of the high-income countries of the world and the USA is one of the countries most affected by these population trends (Hansen, 2003). While many companies have relied upon legal programs to staff their businesses, such as guest worker programs, a labor shortage still exists which had led employers to hire immigrants that may not be here legally.

Restaurants have a high turnover rate and need to hire workers to fill a constantly rotating kitchen staff. In many cases, illegal immigrants can end up on their roster (Bowman, 2010). With an estimated 12 million immigrants in this country and an estimated 1.4 million immigrants working in foodservice operations alone, (Frumkin, 2009), immigration reform, may have a major impact on the hospitality industry.

This paper looks at the scale of immigration and its economic contours. It highlights a number of issues that regional, sub-regional and local organisations need to address if they are to promote sustainable economic competitiveness, in the context of large-scale international labour flows:

• successfully filling vacancies in high-skilled sectors to drive productivity – by ensuring the necessary amenities are in place to attract and keep mobile workers with skills that are in demand

• maintaining the competitiveness of businesses – by incorporating the learning and practices of migrant workers

• making the most of the mix of complementary skills that in-migration brings – so that people concentrate their time on the activities they are most suited to

• using migrant workers’ skills to the maximum effect in order to raise productivity and minimize competition for low paid/low skilled work – often involving support in speaking English and gaining access to social networks with up-to-date job information

• developing a similar work ethic among all parts of the labour force – employers often cite migrant workers’ work ethic as a reason for employing them over United Kingdom-born workers

• developing strategies for the long term viability of firms and sectors that appear to be reliant on a supply of low-paid, low-skilled workers from overseas.

Literature Review

Immigration in United Kingdom

Gaining economic advantage is one of the main objectives of migration for both individual workers as well as for states. Individual workers migrant for better economic conditions whereby states attract migrants’ in order to fill labor shortages in their states as well as for filling gaps for skills workers in their states. Migration is rapidly increasing worldwide due to globalization and due to cheap and easy travel. There are around 80 million migrants worldwide as estimated by International Organization of Migration. It has become important for the country to implement effective immigration policy in order to satisfy individual workers as well as the states requirements (House of Lords, 2005).

In United Kingdom immigration is one of the most important political issues in order to control the number of asylum seekers that are increasing in United Kingdom. The Government of United Kingdom also aimed to implement the policy of “managed migration” in order to benefit the economy of United Kingdom. Illegal migration is one of the major concerns in United Kingdom due to exploitation of migrant workers like as seen in 2004, death of 21 Chinese migrant workers while picking cockles and the strict policy of government to control migrants (Wright & McKay, 2008). In the year 2005 in United Kingdom there are 1.5 million migrants’ workers working in United Kingdom organization. The immigrants account for 5.4 percent of all employees in United Kingdom. Over a period of 10 years the number of immigration in United Kingdom has been increased rapidly by 600,000. A research by OECD stated that the ratio of immigrants from 1994 to 2001 has been increased rapidly in al western countries except Belgium (Peracchi & Depalo, 2006). Around two third of migrant workers in United Kingdom live in England, 45.3 percent in London & 18.5 percent in South East. In the year 1990, around 45 percent of new immigrants settled in London but it however fell down in the year 2005 to 40 percent (Salaheen & Shadforth, 2006). Majority of immigrants are younger than the native population and are mostly found in professional and routine jobs compared to intermediate jobs.

People living & working in the United Kingdom by Socio-Economic classification, 2005

There is a huge growth in the share of immigration in United Kingdom. As shown below there has been huge growth in the working age immigration population in United Kingdom. Over the period of 15 years there has been an immigration of about 6.8 million people in to the United Kingdom. But in the year last quarter of 2008 UNITED KINGDOM has experienced decline in the number of immigrants due to economic downturn.

The data on immigration comes from two sources: the Labour Force Survey (LFS) and International Passenger Survey (IPS). As per LFS the rate of inflow immigrants in United Kingdom has been falling from 2006 where as according to IPS the immigrants flow in United Kingdom is stable from 2006 to 2009. And the net inflow of immigration in United Kingdom is decreasing from 2007 from the highest inflow level of 200,000 to the current level of 147,000.

The level of immigration depends on two factors economic performance of the country and its immigration policy. In United Kingdom immigration basically depends on its economic performance and its immigration policy. The immigration policy of United Kingdom follows a points-based immigration system that is United Kingdom aimed to restrict immigration from outside EU and encourage those people that are skilled. But in practice the number of people that comes in United Kingdom is for study or family reunion rather that work related reasons. Today immigration has increased in all countries over a period of time. The level of immigration has increased from 10.7% in the year 1998 to 13.8% in the year 2007. There are many countries that have experienced growth in their immigration level like Spain, Austria, Ireland and US (OECD, 2009). United Kingdom is ranked on the average level in terms of immigration i.e. the number of immigrants that come in United Kingdom. In United Kingdom the level of immigration has increased in all regions. London is one of the countries in United Kingdom that has experienced a high level of immigration.

Hospitality Sector of United Kingdom

The hospitality sector of United Kingdom is very diverse in various aspects like the types of customers served by them, the nature of people employed by them, and so on. The hospitality sector of United Kingdom is dominated by restaurants, public houses & small hotels that employ 8 to 10 people. Some of the important features of hospitality sector in United Kingdom that drive huge employment in this sector are high and predictable demand for hospitality services, high level of customer contact, low labor productivity, low wages across different occupations, high labor turnover, high skills required for jobs. The hospitality sector of United Kingdom consists of 14 different industries like hotels, restaurants, pubs & nightclubs, contract food service, gambling, membership clubs and so on. The hospitality sector of has a combined turnover of £135 billion a year and employ 1.9 million people in this sector. The following are some of the characteristics of United Kingdom hospitality sector.

Hospitality and Tourism sector of London

In order to study the impact of immigration on the hospitality and tourism industry we are targeting only one area of United Kingdom in our research in order to make our research work more comprehensive and valuable that is London. The hospitality and tourism sector is the most important sector of London. It is the large employer for immigrants in United Kingdom. The hospitality and tourism sector currently employ more than 130,000 workers and among them 30 percent are immigrants (autumn 2007). The number of immigrants employed in this sector is more than double the entire Ireland economy. In the year 2004 Ireland invited immigrants in their labor market and majority of immigrants are from Eastern Europe. In hospitality sector there has been a massive increase in immigrants from 5,700 in 2004 to 22,500 in the year 2007.

While the stock of immigrants has risen in all regions over time, it has raised most in London. Although there is some evidence to suggest that new immigrants are more regionally dispersed than in the past, immigrants constituted 39% of London’s population in 2009. The geographical dispersion of immigrant share across local areas is much larger. Around 60% of the working age populations of Brent and Westminster were born overseas compared with less than 3% of the populations of Knowsley or Redcar & Cleveland.

The hospitality sector of London consists of small and medium sized properties. There has been an increase in the room capacity of London hospitality industry of around 5000 rooms from the year 2001 (Failte, 2005). There are 2,542 licensed restaurants in London in the year 2005 (Failte, 2005b).

In the year 2003 Tourism policy Review group was established in order to view the economic growth of hospitality and tourism Industry of London due to increased number of visitors from million in the year 2003 to 10 million visitors in the year 2012 as predicted by Tourism Policy review group. The aim objective of establishing this group is to attract and recruit skilled workers in London and enhance the economic condition of London (Fáilte, 2005d). As stated by Failte in the year (2005d), Immigration in London was lead to various changes like in demographic factors of London like changes in the age structure of population, immigration also lead to tough competition for domestic workers and shortage of laborers for the hospitality sector (Failte, 2005d)

2004

(000s)

2005

(000s)

2006

(000s)

2007

(000s)

Hotels and restaurants

United Kingdom Nationals

98.2

97.2

91.0

91.2

Non United Kingdom nationals

17.8

23.2

29.6

38.8

Total persons in hotels and restaurants

116.1

120.4

120.6

130.0

(Non national s as a % of total)

(15.3)

(19.3)

(24.5)

(29.8)

Total employment

United Kingdom Nationals

1779.1

1830.6

1873.6

1893.0

Non United Kingdom nationals

114.5

159.1

199.6

248.0

Total employed in United Kingdom

1893.6

1989.8

2073.3

2140.9

(non nationals as % of total)

(6.0)

(8.0)

(9.6)

(11.6)

Employment and nationality in hotels and restaurants 2004-2007 Source CSO (2007) from QNHS

As Stated above the total employment in hotel and restaurants grew from 112,600 in the year 2004 to 130000 in the year 2007. This shows that there has been increase in the employment rate of 15 percent. From the above diagram we can say that the total employment grew from 1894,000 to 2,141,000 i.e. an increase of 13 percent can be seen in the employment rate in London area only. The growth in the employment rate was rapid in this sector other than any other sectors. From the above table we can also see that the number of native population employed by this sector is reducing whereby the number of other nationalities people employed by this sector is increasing rapidly and hence the number of migrants employed by this sector is increasing rapidly. As shown in the above figure the number of immigrants employed by this sector has been increased from 18 percent in the year 2004 to 30%. The total number of migrants employed by London alone has rise from 6 percent in the year 2004 to 12 percent in the year 2007.

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Immigration has become of the most important factor in United Kingdom due to increased foreign born population in United Kingdom over the past 40 years. The rapid increase in the level of immigration has challenged the domestic labor market due to increase number of foreign born workers in United Kingdom. Immigration has also resulted into various benefits like eliminating the shortage of labor supply in the market, enhancing the work ethic and raising the productivity level, helps in developing good trade relations with their home countries.

The hospitality sector of United Kingdom consists of various industries like hotels, restaurants, and public houses. Today migrant labors play an important role in hospitality sector of United Kingdom due to availability of huge number of migrants that are motivated to work for longer hour at a lower cost and that is the reason why immigration laws play an important role in hiring labor in the labor market. Today many employers are concerned with the immigration law because tightening of immigration laws will have a negative impact for employers to utilize the capabilities of low cost workers and will affect their profits.

The turnover of United Kingdom hospitality sector from their 14 industries is around $ 135 billion every year. The number of people employed by hospitality sector of United Kingdom is around 1.9 million people. Majority of people are employed by the private sector of hospitality industry and around 500000 people provide their hospitality serves in other sectors like education, and other sectors. (People 1st 2006a). The workforce of 1.9 million people employed by this sector of United Kingdom represents 7 percent of overall population in United Kingdom. In United Kingdom restaurants employ huge number of people and 57 people employed by them are women. The workforce of hospitality sector of United Kingdom consists of young people, women, ethnic and migrants (Lucas, 2004).

The availability of cheap airline travel has enabled free movement of people across the globe. Over a period of 10 years there has been a huge immigration in European Union. The huge membership of immigration in European Union and relatively strong economy of United Kingdom has resulted into large inward immigration in United Kingdom. Over the period of 15 years there has been a huge inward immigration in United Kingdom. The rise in immigration in United Kingdom started from 1997. From the year 1991 to 2000 the net inward migration in England of nearly 1.9 million and the migration in United Kingdom was on its peak in the year 2004 that is of 2,36,000 migration.

The impact of immigration on Employment Policy of London

The growth in the employment rate was rapid in this sector other than any other sectors of London. From the above table we can also see that the number of native population employed by this sector is reducing whereby the number of other nationalities people employed by this sector is increasing rapidly and hence the number of migrants employed by this sector is increasing rapidly. As shown in the above figure the number of immigrants employed by this sector has been increased from 18 percent in the year 2004 to 30%. The total number of migrants employed by London alone has rise from 6 percent in the year 2004 to 12 percent in the year 2007.

The impact of immigration on trade union membership

The trade union membership in London is decreasing. The drop in the trade union membership is faster among men than women and the reduction of trade union membership is faster amongst non-United Kingdom employees.

Trade Union membership in United Kingdom, 1994-2002

Trade union density

1994

2004

All employees

45.8

34.6

Men

47.1

34.9

Women

44.1

34.3

United Kingdom nationals

46.2

36.0

Non United Kingdom nationals

30.2

15.5.

Hotels and Restaurants

21.0

9.9

Union members

432,900

521,400

Trade union density – Source (CSO – Quarterly national household survey, Union membership 1994 to 2004,

As shown above the trade union membership is falling among all employees from 1994 to 2004. Traditionally the density of trade union is higher in London than any other part of the country but now it is lower in London. As stated by Grainger & Crowther, (2007), the data on trade union membership on London shows that trade union membership is higher by women than men and the membership rises with the employee’s qualifications & with their occupations. In hospitality & tourism sector of United Kingdom, the trade union membership in 1994 was over one fifth of all employees but from 2004 it was decreasing drastically. And in hotels & restaurants the fall was largest in the same period.

Trade Union Membership in Hospitality sector in 2006

Male

Female

All

United Kingdom Nationals

14.9

9.0

11.1

Non United Kingdom nationals

5.4

1.6

3.5

All

11.6

7.3

9.0

Trade union members as a percentage of each category Source – QNHS 2006

The micro-data survey of QNHS stated that in 2006 overall trade union membership has decreased to 32.2 percent. It also stated that the overall trade union membership in hospitality sector of London was merely 9 percent which is the lowest amongst the entire sector other than agriculture. The table shows that in hospitality sector the density of trade union membership is lower among women that among men in hospitality sector and the immigrant’s women membership were only 1.6 percent.

Pay and Occupational Structure of hospitality sector of London.

Some jobs in hospitality sector of London are well paid jobs. The below table shows the wage structure all the sectors of London.

The above table shows that the average weekly earnings of hospitality sector is lowest than the entire service sector. The analysis done by QNHS shows that this sector has a large number of low skilled workers and have limited professional and limited number or administrative workers in this sector.

Hotels & restaurants: Occupational structure 2001 & 2006

2001 Hotels and restaurants (%)

All sectors (%)

2006 Hotels and restaurants (%)

All sectors (%)

Managers and administrators

21.3

12.0

18.9

15.5

Professional

0.6

6.5

0.4

11.7

Associate professional and technical

0.2

5.6

0.2

8.5

Clerical and secretarial

11.9

8.5

5.5

12.3

Craft and related

10.0

9.0

0.4

14.2

Personal and protective service

50.0

7.3

53.4

10.8

Sales

2.5

6.0

4.2

8.8

Plant and machine operative

0.3

7.9

0.4

8.3

Others

19.6

37.3

16.5

9.8

Total

100

100

100

100

Source – QNHS 2001 Q2 (2nd quarter) and 2006 Q2 (2nd quarter) micro data

The above table shows that majority of jobs in this sector are classified as personal & protective sector and other services are managers & administrators, professional and all.

The Cost of Turnover

Labor expense is the largest expense in hotels, motels, clubs and many restaurants. (Schmidgall, 2006). Labor costs are a key issue for everyone (including presidents and senior managers), but the challenge of sustained profitability is felt most strongly by owner-operators (Enz, 2004). Not only does labor include hours worked, taxes, bonuses and benefits, but it also includes overtime, payroll violations and training dollars that incur when an operation is not properly staffed. Turnover is very common in the hospitality industry. This is a serious problem because the money invested in recruitment, selection, training, and compensation of a new worker becomes a financial loss for the organization (O’Connell & Kung, 2007). The hospitality industry has reported annual turnover rates ranging from 32 percent to 300 percent. (Cho et al, 2006). Along with high turnover, comes the high cost of replacing these former employees. The averages may range as little as 3,000 GBP for an hourly employee to as much as 50,000 GBP for a manager. (Woods et al, 2006). In the United Kingdom, estimates for employee turnover costs are 5 trillion GBP annually (Journal of Business Strategy, 2003).

According to Aksu (2008), there are several factors that are included in the replacement of a terminated employee. Communicating job availability is the first expense that occurs when a job becomes available. Some businesses may choose to utilize a contract service to assist in attracting qualified employees and the cost may run upwards of $3,000 per hired employee. Pre-employment administrative functions, such as accepting applications and checking references are the next step in the cost-chain. Some companies spend more money due to extensive background checks or aptitude analysis. Entrance interviews are soft costs that are difficult to measure and would vary depending on the extent of the interview process. Testing or other types of assessment procedures cost companies that have established competencies prior to employment and may have a pay per use system to evaluate the relevance of the candidate. Employee meetings costs would vary depending on the pay rate and the resources required presenting an effective meeting. Regardless of the formula or the exact figures used to calculate the cost of recruiting, hiring and training new individuals, turnover is extremely costly to employers.

Immigration in hospitality sector of United Kingdom

The hospitality sector of United Kingdom is very diverse in nature. This sector comprises of 14 industries that includes hotels to catering services to cleaning services. The turnover of hospitality sector of United Kingdom is around 135 $ billion every year. This sector employs 1.9 million of people in more than 180,000 establishments. Most of the people are employed by private sector and around 500,000 people provide their hospitality services to other sectors like education and all (People 1st 2006a). Most of the small enterprises that employ ten people account for 75 percent of hospitality industry of United Kingdom and among them most of the enterprises are part of large organizations (Lucas 2004). The labor employed by the hospitality sector of United Kingdom account for 45 percent of labor market (People 1st 2006a).

The 1.9 million of people employed in the hospitality sector represent 7 percent of overall working population of United Kingdom. Among 1.9 million of people most of the people are employed by restaurants of United Kingdom. The workforce of hospitality industry in United Kingdom consists of young people, student, women, ethnic groups, and migrants (Wood, 1997). Anderson et al, (2006) stated that Most of the immigrants stay in a country for a limited period of time like most of Eastern European migrants stay in United Kingdom for a limited period of time and returns to their home countries and thereby affecting the hospitality and other sectors of United Kingdom. In order to correct this situation Minister David Lammy stated that British employers should only impact proper training to their employees rather than developing reliance on their workers (Caterer, 2007).

Earlier migrants in United Kingdom usually worked in back of functions like kitchen services, and other services where in they have to limit their interaction with their customers like room service or cleaners (Anderson et al, 2007). Most of non-British people in hospitality sector are hotel porters rather than mangers. As shown in (LFS, 2007) survey there are around 23.4 non-British hotel porters and 8.6 percent of hotel managers. Migrants in hospitality sector of United Kingdom share commonalities with British workers in their long working hours, minimum pay or holiday allowances and other employment practices. (Wright and Pollert, 2006).

The Labour force survey, (2006) stated that 18 percent of immigrants are involved in illegal activities like student that lives in United Kingdom more than their work permit, then most of the immigrants works more than legal working hours, there are many immigrants that have entered in the country illegally. Most of the migrants are from Middle East and Asia and Europe. Most of them are young people as 64 percent of migrants in United Kingdom are young people under the age of 39. As observed these young workers are students that are employed on causal basis to earn money in their gap years.

As stated by McDowell et al, (2006) Migrants in United Kingdom are mostly concentrated in London as 60 percent of migrants in United Kingdom works in London hotels and restaurants. But today these migrants are spread all over the country and are employed in rural as well as in urban areas (Warhurst et al, 2006). Migrants play an important role in filling in the vacancies available in both rural as well as in urban areas and today employers in hospitality sector rely on migrants’ for their jobs (Dench et al, 2006).

Benefits of Immigration

Immigration leads to various benefits. It helps labor to move across the borders and ensure to do good job at good place. Immigration helps to reduce shortage of labor from the market. United Kingdom is a huge market and therefore it attracts huge labors. In United Kingdom there are labor shortages in some areas like in retail and hospitality sector due to huge turnover and high demand for skilled workers.

The other advantages of immigration are immigrants are typically younger and are expert in some niches and helps company to balance their pension provision. Immigration also helps economy to grow through producing goods and services for the economy. Some experts stated that immigration leads to reduce the wage of workers that are in direct competition with them. Immigration on the other hand leads to high cost due to huge demand for their housing, health and other welfare facilities.

Immigration has become one of the most important issues in United Kingdom. There has been rapid growth in the population of United Kingdom due to immigration from the year 1990. It was predicted that the population of United Kingdom will grow at rapid level from 60.6 million in the year 2006 to 71.1 million by 2031(ONS, 2006) and two third of the population growth in United Kingdom will be from immigration in United Kingdom. Immigration in United Kingdom in the year 2006 has achieved a high record of 591,000 people coming in United Kingdom. Immigration is not the only issue seen in United Kingdom. Today due to growth in global migration immigration is the main important factor of population growth in various countries. The growth of migration has resulted from various factors like changes in political factors, availability of cheap communication, and availability of opportunities in various countries. The major factor of movement of population is due to cheap air travel which encouraged many people to travel easily at various parts of globe for business visit purpose or leisure trips.

In United Kingdom, Immigration and hospitality are associated directly and contribute towards the GDP of the nation. The association is mutually beneficial and helps the legislation planners in making appropriate provisions. Till now, this factor has been absolutely ignored by the planners, as the critical relationship that exists between hospitality and the immigration was not given adequate focus.

As per the recent data published by the United