<ul><li>The Economic Impacts of Migration on the UK Labour Market </li></ul><ul><li>Howard Reed   </li></ul><ul><li>Landma...
Introduction <ul><li>Over the last 10 years, net inward migration to the UK has increased </li></ul>
Introduction <ul><li>At the same time, immigration has become one of the leading public issues in the UK </li></ul><ul><li...
Introduction <ul><li>Right-wing populism </li></ul><ul><li>Newspapers (e.g.  Daily Mail ,  Daily Express ) </li></ul><ul><...
Introduction <ul><li>Recession has intensified the debate </li></ul><ul><li>e.g. Protests at power stations, January 2009:...
Economic theory <ul><li>Theoretical impact of migrants on wages and employment is unclear </li></ul><ul><li>Predictions th...
Economic theory <ul><li>Whereas, in economic models with more realistic features, things are more complex: </li></ul><ul><...
Existing empirical evidence <ul><li>Wage effects – UK evidence </li></ul><ul><li>Recent papers: Dustmann  et al  (2008), M...
Existing empirical evidence <ul><li>Employment effects </li></ul><ul><li>Manacorda, Manning and Wadsworth (2006) </li></ul...
Methodological problems <ul><li>Empirical work on migration effects tries to construct the ‘counterfactual’ – what outcome...
Our empirical work <ul><li>Uses UK Labour Force Survey (about 60,000 households per quarter) and administrative data (at l...
Wage trends in the UK: migrants and UK-born
Employment trends in the UK: migrants and UK-born
New migrants and wage trends at local level
New migrants and employment trends at local level
Evidence from regression <ul><li>Effect of migration on wages in UK </li></ul><ul><li>Data: UK Labour Force Survey </li></...
Evidence from regression <ul><li>Results </li></ul><ul><li>A 1 percentage point increase in migrants as a share of the wor...
New empirical evidence <ul><li>Checking the results </li></ul><ul><li>Previous work by Dustmann, Frattini and Preston (200...
Conclusions <ul><li>Economic theory suggests  that it is unlikely increased migration into the UK will have a substantial ...
Conclusions <ul><li>Two important qualifications:  </li></ul><ul><li>Data used for this research predates the recent econo...
<ul><li>The Economic Impacts of Migration on the UK Labour Market </li></ul><ul><li>Howard Reed   </li></ul><ul><li>Landma...
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The Economic Impacts of Migration on the UK Labour Market

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The Economic Impacts of Migration on the UK Labour Market

Howard Reed
Landman Economics and ippr

20 May 2009 in Stockholm, Sweden

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  • The Economic Impacts of Migration on the UK Labour Market

    1. 1. <ul><li>The Economic Impacts of Migration on the UK Labour Market </li></ul><ul><li>Howard Reed </li></ul><ul><li>Landman Economics and ippr </li></ul><ul><li>20 May 2009 </li></ul>
    2. 2. Introduction <ul><li>Over the last 10 years, net inward migration to the UK has increased </li></ul>
    3. 3. Introduction <ul><li>At the same time, immigration has become one of the leading public issues in the UK </li></ul><ul><li>e.g. Ipsos/MORI poll on ‘the most important issues facing Britain today’: % of respondents who named immigration as one of the four most important issues: </li></ul><ul><li>1998: 6% </li></ul><ul><li>2003: 27% </li></ul><ul><li>2008: 42% </li></ul><ul><li>2009: 29% (overtaken by concern about economy) </li></ul>
    4. 4. Introduction <ul><li>Right-wing populism </li></ul><ul><li>Newspapers (e.g. Daily Mail , Daily Express ) </li></ul><ul><li>Anti-migration pressure groups (Migration Watch) </li></ul><ul><li>Argue that migration is reducing wages and employment prospects of UK-born workers </li></ul><ul><li>Particular focus on immigrants from EU accession countries (Poland etc.) – UK allowed free movement to 2004 accession countries’ workers </li></ul>
    5. 5. Introduction <ul><li>Recession has intensified the debate </li></ul><ul><li>e.g. Protests at power stations, January 2009: “British jobs for British workers” </li></ul><ul><li>(a phrase previously used by British Prime Minister Gordon Brown...) </li></ul>
    6. 6. Economic theory <ul><li>Theoretical impact of migrants on wages and employment is unclear </li></ul><ul><li>Predictions that migrants will lower wages and displace existing workers from employment tend to be grounded in simplistic models of the labour market, e.g.: </li></ul><ul><ul><li>Fixed number of jobs </li></ul></ul><ul><ul><li>Labour supply shifting without demand shifting </li></ul></ul><ul><ul><li>Short-run response examined only </li></ul></ul><ul><ul><li>Constant price differentials between UK and ‘sending’ countries (e.g. Accession countries) </li></ul></ul>
    7. 7. Economic theory <ul><li>Whereas, in economic models with more realistic features, things are more complex: </li></ul><ul><ul><li>Economy is flexible and number of jobs adjusts to demand </li></ul></ul><ul><ul><li>Long-run response includes changes in capital stock as well as labour market </li></ul></ul><ul><ul><li>Price levels between accession countries and UK narrowing over time </li></ul></ul><ul><ul><li>Migrants possibly exploited, in the informal sector of the economy </li></ul></ul><ul><li>Overall, no strong prediction either way – too many conflicting factors </li></ul>
    8. 8. Existing empirical evidence <ul><li>Wage effects – UK evidence </li></ul><ul><li>Recent papers: Dustmann et al (2008), Manacorda et al (2006) </li></ul><ul><li>Either no effects or very small positive effects of migration on wages overall </li></ul><ul><li>(small) negative effects on certain groups of workers: </li></ul><ul><ul><li>The low paid </li></ul></ul><ul><ul><li>Existing immigrants </li></ul></ul>
    9. 9. Existing empirical evidence <ul><li>Employment effects </li></ul><ul><li>Manacorda, Manning and Wadsworth (2006) </li></ul><ul><li>Immigration has small (negative) impact on existing migrants </li></ul><ul><li>No measurable impact on natives </li></ul><ul><li>Overall – small impacts or no impacts </li></ul><ul><li>Fits with evidence from OECD countries (Longhi et al , 2005) </li></ul>
    10. 10. Methodological problems <ul><li>Empirical work on migration effects tries to construct the ‘counterfactual’ – what outcomes for workers in the UK would have been in the absence of migration. </li></ul><ul><li>Divide labour market into geographical areas which experience different amounts of migration; wages and employment levels compared across these. </li></ul><ul><li>But this is not a good ‘identification strategy’: </li></ul><ul><ul><li>Immigrants are likely to ‘self-select’ into areas where jobs are available. </li></ul></ul><ul><li>Can divide labour market by education or occupation instead but many migrants are ‘downskilled’ into jobs which do not utilise their full qualifications. </li></ul>
    11. 11. Our empirical work <ul><li>Uses UK Labour Force Survey (about 60,000 households per quarter) and administrative data (at local level) </li></ul><ul><li>Based on data from 2000 to 2007 </li></ul><ul><li>Descriptive statistics and regression analysis </li></ul>
    12. 12. Wage trends in the UK: migrants and UK-born
    13. 13. Employment trends in the UK: migrants and UK-born
    14. 14. New migrants and wage trends at local level
    15. 15. New migrants and employment trends at local level
    16. 16. Evidence from regression <ul><li>Effect of migration on wages in UK </li></ul><ul><li>Data: UK Labour Force Survey </li></ul><ul><li>Time period: 2000-2007 </li></ul><ul><li>‘ Cell’ level: occupation/region </li></ul><ul><li>Control variables: </li></ul><ul><li>Education levels in each cell (proportions at different levels) </li></ul><ul><li>Average age of UK-born and foreign workers in working age population </li></ul><ul><li>Equation estimated in first differences </li></ul>
    17. 17. Evidence from regression <ul><li>Results </li></ul><ul><li>A 1 percentage point increase in migrants as a share of the workforce is associated with a decrease in wages of around 0.3 per cent. </li></ul><ul><li>Over the period 2000-07, migrants increased from about 8% to 11% of UK workforce </li></ul><ul><li>Therefore (if this result is reliable) wages have fallen by about 1% due to increased migration </li></ul>
    18. 18. New empirical evidence <ul><li>Checking the results </li></ul><ul><li>Previous work by Dustmann, Frattini and Preston (2008) shows a small positive impact of migration on wages. </li></ul><ul><li>Why the discrepancy? </li></ul><ul><li>When we run Dustmann et al ’s model on the more recent data (2000-07 instead of 1997-2005) we get very similar results to ours (i.e. a small negative effect) </li></ul>
    19. 19. Conclusions <ul><li>Economic theory suggests that it is unlikely increased migration into the UK will have a substantial negative impact on either wages or employment in the UK in aggregate. </li></ul><ul><li>Empirical evidence backs this up. The effects of migration on wages (using the most recent data) seem to be negative, but very small. Effects on employment appear to be negligible. </li></ul><ul><li>The view of several UK newspapers that migrants ‘take our jobs’ and ‘cut our pay’ is almost completely misplaced. </li></ul>
    20. 20. Conclusions <ul><li>Two important qualifications: </li></ul><ul><li>Data used for this research predates the recent economic downturn. </li></ul><ul><li>This work looks at aggregate labour market effects – there might be more serious local effects, particularly in the short run. (But the UK data are not good enough to analyse this). </li></ul>
    21. 21. <ul><li>The Economic Impacts of Migration on the UK Labour Market </li></ul><ul><li>Howard Reed </li></ul><ul><li>Landman Economics and ippr </li></ul><ul><li>20 May 2009 </li></ul>
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