Employment and Welfare

Employment & Welfare: MW 428

Economic characteristics

1. In July 2015 Migration Watch produced a paper on the economic characteristics of migrants in the UK in 2014. It showed significant differences in the economic profiles of migrants from different countries. For example migrants from Western European countries had higher wages and lower rates of claim to key benefits than the UK-born population, whereas those from Eastern European countries had lower wages and higher rates of claim. Similarly, migrants from India had higher employment and lower rates of claim to key benefits than the UK-born population, whereas those from Pakistan and Bangladesh had lower employment and higher rates of claim. Our findings have been confirmed by other researchers including the European Commission-sponsored EUROFOUND (see here) and the Migration Observatory (see here).

Impact on employment

2. It is difficult to isolate the impact of immigration from the impact of wider economic factors in a large economy such as our own, particularly over the period leading up to and following the recession. However, evidence of displacement of UK-born workers has been found by the Migration Advisory Committee (MAC). They reported that for every 100 non-EU migrants employed 23 UK born workers might have been displaced during the recession. (To read the full MAC report click here)

3. The MAC also observed that some employers preferred to employ migrants in low-skilled roles over young British people. The IPPR also noted this phenomenon in a 2012 report ‘Learning to Earning’, reporting that:

Employers have also become increasingly reluctant to hire teenagers, particularly in London. Only 6 per cent of UK employers, and just 3 per cent of employers in the capital, recruit straight from school. As a result, school-leavers compete with more experienced workers for the same jobs, in addition to competing with more highly qualified young people. Despite the vibrancy of London’s economy, the inward flow of migration from other regions and abroad has resulted in a highly competitive environment at the lower end of the labour market. Many of these relatively well-skilled new residents take on low paid jobs while they finish their studies or look for something better, leaving those with the weakest skills and experience more likely to be ‘squeezed out’.

(Click here for the IPPR report)

4. Since 2010 the number of people in employment in the UK has increased by 2.7 million (between the third quarter of 2010 and the corresponding quarter in 2017). However, the majority of this employment growth has been due to jobs being filled by people born abroad. In fact, two thirds of the growth in employment in the UK since 2010 has resulted from an increase in the number of foreign-born workers. Today there are almost 900,000 more British born people in employment than in 2010, however, British born employment is just 500,000 higher than its pre-recession level in 2008 so a considerable amount of the growth since 2010 has simply been the return to work of those who had lost jobs in the recession.

The Impact on wages

5. It is uncontested that, in theory, increases in the supply of workers are likely to bear down on wages. Indeed, academic research has found some negative impact on the wages of lower-paid workers. (See here) However, some claim that there is no real evidence that immigration had a negative effect on wages overall and that, if there were any negative impact, it was on the wages of previous migrant workers or was concentrated at lower pay levels and outweighed by a positive impact elsewhere.

6. A 2015 study conducted by the Bank of England found that migration caused a downward pressure on average wages. The largest effect was observed in the semi/unskilled services sector including hotels and social care where a 10 percentage point rise in the proportion of immigrants was associated with a 2 percent reduction in pay. This suggests that immigration reduces the wages of those already in low wage jobs.

7. The Institute of Education at UCL found that, where companies employ 10% of their workforce from the EEA, average wages were 0.75% less than a similar employer with no workers from the EEA. Where employers employ 10% of their workforce from outside the EEA the negative impact on average wages was larger - 1.9% lower than a similar employer with no non-EEA workers. (See here).

Welfare Claims

8. Large amounts are paid out to EEA nationals in state benefits. In 2014/15 a total of £4.4 billion was paid in working age benefits (primarily tax credits, child benefit and housing benefit). This bill may well now have risen further, as since free movement was fully extended to nationals of Romania and Bulgaria, the number of immigrants from these two countries working in the UK has increased by over 200,000.

9. It is often said that immigrants pay more in tax than they claim in benefits. Narrowly, that is true, as it is also true for the UK-born population. But this is to ignore the extent to which tax raised has also to be spent on services consumed by the immigrant population including health, and education and additional infrastructure required. These elements must be included to give the overall fiscal balance, as the UK continues to run a budget deficit. In 2014 the net fiscal cost of all migrants in the UK might have been as much as £17 billion, and whereas the working-age UK-born population was in fiscal credit, the working-age immigrant population was not. (For more on this see our Economics overview here).

18 December, 2017

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