Did immigration really ‘depress the wages and job chances of working-class Britons’?

It's increasingly becoming accepted, even on the left, that immigration to Britain under the previous government had some negative consequences, one of which was to depress wages and increase job scarcity for the indigenous population.

It is increasingly accepted, even on the left, that immigration to Britain under the previous government had some negative consequences, one of which was to depress wages and increase job scarcity for the indigenous population.

Tim Montgomerie has repeated the claim today in a piece for the Times (£). Under Labour, he writes, “immigration rates soured, depressing the wages and job chances of working-class Britons”.

The first misunderstanding here is that the economy has a fixed number of jobs, sometimes known as the “lump of labour” fallacy.

In reality, just as immigration may increase competition for jobs it can also create new jobs.

A 2008 study found that an increase in the number of migrants corresponding to one percent of the UK-born working-age population in the years 1997-2005 resulted in an increase in average wages of 0.2 to 0.3 percent.

The same study did find evidence that the five per cent of lowest paid workers experienced a small short term squeeze on wages as a result of migration. For each one per cent increase in the share of migrants in the UK-born working age population there was a 0.6 percent decline in the wages of the five per cent lowest paid workers.

We are talking very small percentages here, however, and the study also found that migration led to a rise in the wages of medium and high paid workers. Most of the published evidence has also found no correlation at all between immigration and depressed wages.

Another study carried out in the same year by Jonathan Portas of NIESR found “little hard evidence that the inflow of accession migrants contributed to a fall in wages or a rise in claimant unemployment in the UK between 2004 and 2006 (when the study was carried out)”.

And as Jonathan Wadsworth, of Royal Holloway College and the government’s independent Migration Advisory Committee, has said:

“It is hard to find evidence of much displacement of UK workers or lower wages, on average.”

The below chart shows the correlation between wage growth at the 10th percentile (ie very low paid workers) and the proportion of migrants from the new EU member states at local authority level. As you can see, it’s hard to see any link between the number of migrants in an area and wage depression.

Wage growth

Concerns about wage depression must also be offset against the benefits migrants bring in terms of the social welfare pot. A 2009 study found that A8 immigrants – that is those from the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Slovenia, Slovakia, and Poland – paid 37 per cent more in direct or indirect taxes than they received in public goods and services.

Another study, carried out by researchers at UCL, found that new migrants were 60 per cent less likely than natives to receive state benefits or tax credits, and 58 per cent less likely to live in social housing.

Overall in 2008/9 migrants contributed 0.96 per cent of total tax receipts and accounted for only 0.6 per cent of total expenditures

Of course, low wages should be a concern for all progressives, and we should not shy away from talking about immigration and objectively assessing its costs/benefits.

However considering the paucity of evidence suggesting migration depressed “the wages and job chances of working-class Britons”, there are far more pressing concerns such as ensuring minimum wage legislation is enforced and where possible that employers pay a living wage.

Fear-mongering implying that immigration under the last government was in any way a serious problem or worse “out of control” should simply be ignored: the figures don’t support such concerns.


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40 Responses to “Did immigration really ‘depress the wages and job chances of working-class Britons’?”

  1. Richas

    Good article.

    The impact of the minimum wage and tax credits should also be mentioned. Enforcing and increasing the minimum wage plus increasing working tax credits for those with kids higher up the income scale was highly redistributive. These measures certainly helped the low paid.

    This excellent article shows how much government redistribution helped the poor, including the low paid:

    This is the IFS presentation:

  2. OldLb

    Of course it does.

    For a start, someone has to pay for Abu Hamzah. He’s a migrant. He’s good for the UK according to Labour. All migrants are good, so we have to let them in.

    What you’ve missed is that with the average government spend per person being 11K a year, a single (no dependents) migrant needs to be on over 40K a year, or they are taking money from other people, including those on min wage.

    Now why would you omit the subsidy and the spending of people’s pension contributions from the analysis?

  3. OldLb

    But you have missed out the biggy. Pensions.

    For a 26K a year worker, if they had invested their NI over 40 years in the FTSE (risky) they would have a fund of nearly 600,000 pounds.

    The safe option was the state. So how much do they give back? State pension costs less than 130K (from a profit making company).

    You’ve redistributed 470,000 pounds from someone who can hardly be described as rich.

    You’ve made them poor

  4. Cole

    What a crass, cheap and stupid comment about Abu Hamzah. As for LB’s figures,who knows what on earth he’s burbling on about?

  5. justsaying

    I personally would like newer figures/research, alot of have changed since those studies and therefore i think those figures are not relevant to 2013

Comments are closed.