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.
40 Responses to “Did immigration really ‘depress the wages and job chances of working-class Britons’?”
OldLb
130K is what you get from the state
Close to 600,000 from the FTSE.
The risk is the loss of lots of money, and the risky option is the state.
OldLb
No. 40 years ago, based on average wage inflation that 26K a year was 700 a year.
26K is not average wage is median wage. Average wage is much higher.
When it comes to NI, its bereavement benefit, JSA, max 6 months at a time, for a pittance.
It’s a rip off. If you were on median wage for each of the 40 years, you would have had nearly 600,000 in the FTSE. The state pension costs less than 130,000 from a profit making private company.
If you want to disprove me, put up a spreadsheet showing what you would have got for all your NI contributions made in your name.
You will be quite shocked. I suspect however you won’t do it for fear of being proved wrong.
That loss has gone on the Philpotts of this world.
OldLb
It is redistrubutative.
Those on 26K a year have lost 15K a year, indexed linked off their pensions because it has gone to other people.
1. NI is not for the NHS. It does not entitle you to any NHS services.
The money may have gone there but then that is just the same as taxing your pension contributions.
The lost still remains hundreds of thousands of pounds lost.
2. You’ve missed off JSA. However that’s a small amount for just 6 months. It doesn’t affect the matter.
Put up your own numbers. You might educate yourself.
Richas
You are just making this up.
Nobodies working life is 40 years full time at the average wage. Income varies over people’s lifetime. NI contributions are not all pension contributions. You can work out what the pension element of NI is by looking at class 3 contributions.
Here is a PDF table of what they cost for each year – for 2006/7 it is £13.25 a week or £689 for the year.
http://www.pensionsadvisoryservice.o…%202012-13.pdf
The basic state pension is currently £107.45 p/wk and they are talking about taking it to £140 p/wk at today’s prices. It is also index linked to the higher of 2% or CPI or average earnings so as prices go up or earnings rise the state pension rises. Making up the contributions if you are below the 30 buys you 1/30 of £140 a week or £7280 a year for EVERY year beyond retirement (plus indexation).
140/30=4.66 so even without the indexation if you live for 3 years into retirement the one years contribution is paid back to you.
Providing a state pension and pension credits is great value for the low paid, it is redistributive so please stop being silly and pretending every penny of NI is for pensions not health, disability benefits, unemployment benefits, maternity pay and a host of other items and a bit to pensions.
Also please don’t assume that the FTSE returns of the past 40 years are achieved now and finally just where are you getting that indexed annuity for £7280 for £130k, that’s 5.6% close to the unindexed annuity rate but unachievable with even just CPI indexation.
To sum up you use a series of false assumptions that mean your figures are nonsense (the error estimate is in brackets)
include NI that is not pension related (60%+)
use 40 years not 30 (33%)
ignore real lifetime earnings patterns (unknown but likely 25%+)
assume FTSE returns similar to the high inflation and high interest rate past (unknown but big)
falsely use a flat rate annuity to value the state pension (about 45%)
ignore pension and investment charges on a private pension (about 45%)
ignore that most investment managers underperform the index (about 10%)
and frankly I don’t see why. We have had private index linked contribution based pensions since the 1980s and they have been an unmitigated disaster of misselling, high charges and terrible returns. Just who do you think you can kid on here by pretending that the basic state provision is a rip off compared to that?
OldLb
You’re being a tad decieptful. Why pick class 3? Why not look at all the NI?
[PS, I bet you will try and claim that no-one pays VAT because companies pay VAT for you as an angle]
http://listentotaxman.com/index.php
26K.
Total NI paid – 2,190.24 + 2,525.95 =4716.19
That’s for a median wage earner.
18.14% of wages going in NI
You are wrong on the indexation. It’s the max of wage inflation, CPI, or 2.5%.
So 40 years ago, on 700 a year, that’s 127 quid going into the FTSE. You make or lose on the capital. You get some dividends.
Next year, your wages go up or down in line with average wages (there isn’t a median wage index that I’ve been able to find). Repeat and add to the fund.
So do the analysis for a median wage earner, rather than trying to cherry picking a winner.
You could even do the analysis for someone on min wage to see if they would be better off.