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Loss of wages due to immigration
16 Jul, 2018

True, but dwarfed by other effects

True: the poorest have lost wages due to immigration. But the effect is small - about one penny an hour off annual pay rises. Measures like increases in the minimum wage dwarf the wage loss. Ending freedom of movement is not a sensible solution to the problem - higher skills is. London4Europe Committee member and former HM Treasury senior civil servant Michael Romberg looks at the data.

How much have UK workers lost

Pretty well every study tells us that the overall impact of EU immigration on the UK is positive. But there is evidence to support the proposition that for those at the bottom of the income distribution wages have been depressed by immigration.

In 2016 Jonathan Portes of NIESR reviewed at the evidence and calculated the loss of earnings of the UK-born in the semi-skilled and unskilled services sector. Looking at data up to 2012, since 2004 the loss was about 1 percent, over a period of 8 years. Average wages in this sector are about £8 an hour. So that amounted to a reduction in annual pay rises of about a penny an hour.

So, in 2012 these workers would have been earning 8 pence an hour more in the absence of immigration. If we assume a 40 hour week that would give an extra £165 a year (before deductions).

That’s not nothing, especially if you are on the minimum wage – in my example total earnings would have been £16,500. But it is not much. 1% is 1%.

There is no reason to think that the effects in the subsequent years will have been radically different.

What else is going on

Technological change, decline in trades union power, changing consumer tastes, trade, domestic competition, in-work and other benefits, the level of subsidised rents – these are just some of the other factors that affect real pay and real effective incomes.

The Brexit-induced fall in the value of Sterling is one contributor to families being £900 worse off than expected in the Bank of England’s forecasts.

Look at changes in the minimum wage: in 2004 the adult rate was £4.85; in 2012 £6.19. For the 40 hour week that I assumed above, the annual increase would have been £2,800. Today the minimum wage is £7.83.

These effects dwarf the effect of immigration. NIESR make their point in a video.

More evidence

The Full Fact 2017 review of the evidence sets out more fully that effects of immigration on wages are small even when looking at particular groups. They also explain that effects are biggest on individuals who are themselves recent immigrants, rather than on the UK-born. Full Fact link through to the Migration Observatory, part of Oxford University (not to be confused with pressure group Migration Watch), who publish thorough research on all aspects of immigration, including this briefing on the labour market effects.

In January 2017, Sir Stephen Nickell, complained about Leave campaigners’ misuse of his research report. He said that the reality was: “They [low-skilled workers] lose out by an infinitesimally small amount.”

In September 2017 Vince Cable made a political statement about how during the coalition government Theresa May had blocked the publication of research showing that immigration had very little impact on wages.

And the solution is

Trying to solve the problem of low pay by ending immigration is not going to work.

The main solution is for the worker to rise up the productivity ladder from being un- or semi-skilled. That depends on personal attitudes and on an education and training system that equips people better for life-long learning for more productive work.

Using the effect on wages to justify a reduction in immigration is not grounded in evidence. It feeds a desire to find a category of individuals to blame for the problems of individuals and of society.

 

 

 

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