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.
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’?”
Ash
“Somewhere between the two, there is a line. Those above are good for the UK. Those below aren’t.
11K a year.”
Two glaring problems with this:
One: that’s the *average* spend per person. It’s skewed upwards by the much higher spend on people who are more heavily reliant on public services and benefits – roughly speaking, people who are too young, too old, or too sick/disabled to work. (If you’re in school or claiming a pension, that’s £6,000 a year being spent on you even before you account for child-focused benefits/tax credits and age-related health and social care. If you’re a working-age adult in good health – as most immigrants are – the ‘net contributor’ line is going to be far lower.)
Two: you’re assuming that each worker receives, in cash, the full fruits of his labour, so that the only way to tax the value of what he produces is to tax his personal income. That’s not right; only 50-odd percent of what we collectively produce is paid out in the form of wages, but that doesn’t mean none of the other 40-odd percent adds (directly or indirectly, e.g. through investment) to tax revenues.
In the crudest terms, if I produce widgets to the vaue of £40,000 and my employer pays me £25,000 and takes £15,000 profit for himself, the contribution I’m making to the national coffers is not just whatever tax I pay on my £25,000 salary; it’s that plus whatever tax my employer pays on his £15,000 profit. Then there are knock-on effects to take into account – e.g. if my employer invests £1,000 of the profits I generate for him this year in a new widgetmaker that enables me to produce 10% more widgets per day next year, his profits will rise and so will the net contribution I make (indirectly) to the tax system (even if he freezes my salary).
LB
Well, that’s one possible test. However, it’s not the best.
I’m in favour of saying a migrant has to pay more tax than the average government spend. That way its absolutely clear that migrants are not a burden on others. They pay their way.
Enforced via the tax system, which is already in place, it means its a cost effective test.
Only addition what do you do for the first, say, 5 years? I would say that you pay the tax up front, or your company enters into a bond to pay it.
That means no benefits. No one else has to pay for migrants to live and work in the UK. It restricts low skilled migration, because that goes with low wages.
For those on benefits, that means their low skills become more valuable and in demand. They get jobs and wages for the low skilled go up. The benefits bill goes down.
For property, low skilled migrants leaving means more cheap housing available to deal with any housing shortage at very low cost.
Ah yes, we have to have migrants here because of the EU. That’s a lie. Freedom of movement of goods and services, people and capital. Except that Cyprus has just torn up the freedom of movement of capital because Germany told them to steal people’s money. That means the freedom of movement of people isn’t sacrosanct.
LB
Question. As a guess I would say your on over 26K a year.
How do you feel about a loss of well over 430,000 pounds from your pension?
domestic extremist
“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.”
Correct me if I’m wrong, but as EU citizens have the right to move around the Union at will, how could that aspect of immigration be anything but beyond the control of national governments?
Tom Walker
“The first misunderstanding here is that the economy has a fixed number of jobs, sometimes known as the ‘lump of labour’ fallacy.”
How pathetic that a self-described “Left” blog should be parroting the dumbed-down version of Say’s Law.