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’?”
blarg1987
Can we see the raw data to see the 600,K and how much would people have to pout in and over what periodd of time add to that inflation as well as devaluation and bubbles, plus company liquidations (the computer industry in the 80’s) etc plus you can’t say if it was all invested in appl shares as that is hindsight.
LB
https://docs.google.com/spreadsheet/ccc?key=0AvnR4AGFSHkocEh3N2FreUtzUnpJbkUtXzdNNDktRlE&usp=sharing
It’s based on out of date numbers. FTSE is higher since it was updated.
I also notice today, that the ONS has published some figures for the cost of the state pension. That’s risen since (Gilt rates down)
I’ll get an update together when I’ve some time.
LB
Updated with the latest FTSE all share.
604,000 quid.
Annuity rates updated.
http://www.guardian.co.uk/money/2013/apr/23/falling-annuity-rates-cost-retirement
The Office for National Statistics says a man reaching state retirement age in March 2013 will need a pension pot worth £152,800 to buy an annuity paying out £5,000 for the rest of his life, up from £118,000 in December 2009.
blarg1987
Looking through your data their have been periods where their has been in fall notably late 90’s early 00’s. Now I accept overall the FTSE has gone up, but it is also of note that it has gone down, so it is not accurate to say people have lost 430K, add to that the factures such as fund managrs taking part of the fund as well s a such a large investor still buying in even if stovks keep falling will not necessarily mean that it will be succesful or the yield be as high as you suggest.
LB
I’ve no doubt. However you can look at what’s called maximum drawdown. What’s the worst percentage loss that the fund has suffered.
You then take that percentage, and apply it to the 604,000 fund. Now you compare that against the cost of the state pension.
It turns out that the state pension a rotten deal compared to the funded approach.
In practice, the solution in retirement is drawdown. You go into drawdown. If, and only if the money runs out does the tax payer help. I accept there will be a section of society, such as the disabled from a young age that will need help.
For the poor, this is a far better deal than redistribution. The reason is compound interest. There isn’t any with the state, and that is why its such bad value.
For poor, who also die young, I suggest that any remaining fund goes to their heir’s fund. That makes them richer.
Having a fund, means that rather than the paltry 2 billion of investment proposed by Osbourne, there is 80-100 bn of investment. That has huge knock ons for those not working.
On the fund managers, cut them out. Cap the level of charges. With large sums, the charges can be very low. It’s very simple. Do you want to invest the cash? On funds of this sort of size, 0.1% per annum is achievable.
As for the losses, they have lost 450,000 quid. It’s gone. That pushes them into poverty.
If the stocks fall and fall and fall, it means the economy is completely screwed. That means no tax. It means the state pension is completely screwed too.
What this also means is that it is in the interest of the public sector to not screw the private, or they kiss their pension good bye.
So what are your figures? I’ve posted mine. You can check them,.
It shows that the risk is the state. They give back 25% of the value of what has been paid in.
1. Is the 450,000 worth the cost of a 2K payout, if you are under 65, in bereavement benefit? Clearly not. A 2K insurance policy is dirt cheap.
2. Is it worth JSA? Again clearly not. 6 months of 71.70, and then being locked out of claiming until you’ve worked again for a period.
https://www.gov.uk/jobseekers-allowance/what-youll-get
So my conclusion is that the difference has been subverted for other purposes.
That has exactly the same effect as a huge tax on pension contributions. [Taken at the start] ,
That makes people poor.
On top you’ve got the next problem. All the state pensions, civil service included etc, has a present value of 5,300 bn. Taxes only raise 550 bn, and people want services other than pensions for other people.
2005-2010, that debt went up by 736 bn a year.
Your unlikely to even get the 5,100 a year state pension.