Bank Of England Report Finds Migration Negatively Impacts The Wages Of Lowest-paid Workers In Britain

A recent study by the Bank of England has found that increasing migration has driven down wages especially in sectors already experiencing low pay, such as catering, hotels and social care.

This follows Bank of England Governor Mark Carney’s warning in May that the current inflow of foreign workers was holding down wages.

There has long been widespread anecdotal evidence that mass immigration was holding back wage growth.

And controlling wage inflation was long given as a justification for the high rates of immigration experienced under the Labour Governments of 1997 to 2010.

However, many have consistently argued that there was not any 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 concentrated at lower pay levels and outweighed by a positive impact elsewhere.

For example in 2008 the National Institute of Economic and Social Research’s Jonathan Portes said that there was ‘little hard evidence that the inflow of accession migrants contributed to a fall in wages between 2004 and 2006’.

Meanwhile, Jonathan Wadsworth of the LSE, also a member of the government’s independent Migration Advisory Committee, noted: “There is still no evidence of an overall negative impact of immigration on jobs and wages…any negative impacts on wages of less skilled groups are small.”

However, the findings of researchers have evolved as data became available for more recent periods, enabling account to be taken of both the inflow to lower-skilled work by labour from Eastern Europe, and the impact of the recession that started in 2008 and economic recovery subsequently.

Evidence has started to emerge of an across-the-board reduction in wages, together with a larger impact on those who are already some of the lowest paid people in Britain.

The central finding of the Bank of England study now provides this.

As authors Stephen Nickell and Jumana Salaheen state: “We find that the immigrant to native ratio has a small negative impact on average British wages.”

They add that the biggest impact is in the semi and unskilled services sector.

“Closer examination reveals that the biggest effect is in the semi/unskilled services sector, where a 10 percentage point rise in the proportion of immigrants is associated with a 2 percent reduction in pay.”

These findings clearly suggest migration rates at high levels can have significant costs for British-born workers.

Advocates of unrestricted immigration should carefully consider the research that highlights the potential for detriment  to those who are already struggling.

To read the full report, click here.

23rd December 2015 - Economics, Employment

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