Labour Research (July 2014)


Challenging the myths around migrant workers

What is the actual impact of migration on UK employment and the UK workforce? Labour Research investigates.

The run-up to the European Parliament election in May saw an increased focus on the impact of migration on the UK labour market, with the United Kingdom Independence Party (UKIP) making it a central issue of its campaign.

UKIP was tapping into commonly-held views that migration drives up unemployment for the native UK-born population while also driving down wages.

Surveys have shown that both of these views are held by more than half the British public. However, research studies on the impact of migration on the labour market do not really back up these popular perceptions.

Migration and unemployment

The view that migration has led to increased unemployment among UK-born workers has also been promoted by Conservative government ministers.

In 2012, Home Secretary Theresa May claimed that there was a clear association between immigration and employment in the UK. She referred to a study for the government’s Migration Advisory Committee which estimated that between 1995 and 2010, for every additional 100 migrants, 23 British workers would not be employed.

These figures were disputed by a number of academics, researchers and think tanks, including the National Institute of Economic and Social Research (NIESR) and the Institute for Public Policy Research (IPPR). They pointed to a number of nuances in the report which the government had not mentioned.

The report found no evidence of a link between migration and the employment of native UK workers when considering EU migration only. And when it came to non-EU migration, the impact was only significant when the period after the UK entered into recession was included in the analysis.

A further study was commissioned after other government departments also raised concerns. A new report was published in February 2014, following claims by the BBC that the government had been seeking to avoid releasing it. The authors of the new study concluded that there was relatively little evidence that migration had caused significant displacement of UK natives in periods when the economy was growing.

While there was some evidence of labour market displacement when the economy was in recession, this was likely to be short-term and dissipate as the economy recovered. Again, this related to non-EU migration only. There was no significant impact from EU migration, even in times of recession.

The director of NIESR, Jonathan Portes explained to Labour Research that the general expectation of labour market economists is that the impact of migration on unemployment rates dissipates over time. This is because a rise in net migration increases demand in the economy and therefore leads to the creation of new jobs.

“Basically migrants increase demand as well as the supply of labour,” he said. “We’d expect there to be a lag between the increase in demand relative to the supply of labour, but in the data we have — which is not perfect — that lag appears to be quite small.”

In the case of migration between 1997 and 2007 when the economy was growing, the labour market adjusted quickly and the demand for labour expanded. There was thus no discernible impact on the unemployment rate.

Recession after 2007 meant that there was more of a lag between the entrance of new migrants and the creation of new employment opportunities created by expanded demand.

While labour market theory suggests that the overall unemployment rate should not be affected, this does not rule out the possibility that a UK worker will be displaced by a migrant worker. However, if this happens, expanded demand will lead to jobs being created elsewhere. However, Portes stresses that improved education and skills policies which enable British workers to adapt to changes in the labour market are essential to prevent them losing out.

Work done by migrants

Migration can also fill gaps in the workforce that would not otherwise be filled. The NHS is a case in point. Around 26% of NHS doctors and nearly half of all new nurses come from outside the UK.

Migrants are, on average, better educated than the native UK workforce, and a higher proportion are employed in professional roles than UK-born workers.

This feature is particularly marked for those originating from the EU15 — the member states of the EU prior to 2004. Close to 40% of EU15 workers in the UK are employed in professional or managerial roles. Conversely, migrants from the A8 eastern European states are over-represented in low-skilled manual work. Nearly half of all A8 migrants in work are employed in roles defined as “processing” or “elementary” in the Labour Force Survey.

Impact of migrants on pay

Much political and media discussion has focused on the impact of A8 workers in particular. While some employers claim they are unable to find UK workers willing to fill certain unskilled and low paid roles, concerns have also been raised about UK wage levels being undercut because of the added competition of migrant workers.

A recent briefing by the Migration Observatory at Oxford University, The labour market effects of immigration, summarises the available research. This is less conclusive and sometimes contradictory. One study suggested that migration increased wages on average by 1%, while another suggested that it caused a slight decrease of 0.3%.

Researchers from University College London found that migration raised average pay levels — although the benefit was enjoyed only by higher and middle earners. Wage rates were reduced for those at the lower end.

A 1% increase in the share of migrants in the UK-born working age population was estimated as leading to a 0.6% decline in the wages of the 5% lowest- paid workers.

Other research indicates that any adverse wage effects of migration are likely to be greatest for other migrant workers. The skills of new migrants are likely to be closer substitutes for the skills of migrants already employed in the UK than for those of UK-born workers.

The NIESR’s Jonathan Portes points out that most of this research is out of date, focusing on various periods up to 2005, but that whatever the effects on pay rates, they are “pretty small” when compared to other driv ers of wage levels. The “huge, historically unprecedented fall in real wages since 2008” predominantly relates to other factors, he says.

Intervention in the labour market required

Although the positive overall economic impact of immigration has been emphasised in research studies, a recent report from IPPR, A fair deal on migration for the UK, argues that the benefits are distributed unevenly, with some groups, “competing directly with migrants for work or access to services” and experiencing “clear economic losses from immigration”.

The report calls for improvements to skills and training policy to enable UK workers to take up new opportunities in the labour market, together with intervention to eliminate abuses by employment agencies and create more secure and better-quality jobs.

A more interventionist approach to the labour market is also advocated by the TUC. It is calling for proper implementation of the EU agency workers’ directive, action against zero hours contracts and better protection of casualised and vulnerable workers of all nationalities.

TUC migration policy officer Rosa Crawford told Labour Research: “Unscrupulous employers keen to undercut their competitors often choose to take on migrant workers because they think they can get away with employing them on the worst pay and conditions possible.

“Toughening up employment protection and a regular enforcement of the law is the best way to tackle these exploitative bosses, not blaming vulnerable migrants.”

The TUC is also calling for modern wages councils to ensure minimum pay rates in certain sectors as well as better enforcement of the minimum wage.

More broadly, recruitment and organisation of migrant workers to protect them against abuses and to build solidarity among all workers is central to the TUC approach.

EU Freedom of movement

Freedom of movement for workers is a founding principle of the EU. It applies across the EEA European Economic Area — the EU plus Iceland, Liechtenstein and Norway.

The principle was fairly uncontroversial in the UK prior to the expansion of the EU to include the so-called A8 eastern countries in 2004.

The number of A8 workers in the UK had risen to an estimated 723,000 by the end of 2013.

Research from University College London last year showed that recent EEA migrants made a net fiscal contribution of about £22.1 billion in the period 2001-2011.

Recent agreements for states joining the EU allow existing members to impose transitional controls for up to seven years on migration from the new members. The Labour government did not exercise this option in 2004 but did so when Romania and Bulgaria joined in 2007.

These transitional controls ended at the end of last year, amid predictions of a huge influx from these countries. Around 144,000 citizens of these countries were already working in the UK. The number has actually fallen slightly since January.

David Cameron has made renegotiation of the free movement provisions central to his promised renegotiation of UK membership of the EU.

But indications from other EU member governments so far suggest there will be little or no support for this option.

Around 2.4 million non-UK EU citizens live in the UK. But an estimated 2.2 million UK citizens live elsewhere in the EU.

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