Labour Market Trends and the Impact of Migration

Labour Market Trends and the Impact of Migration Howard Reed Chief Economist Ippr 28 February 2008

Outline • Recent labour market performance • Facts about migration and migrants • Impact of migration on labour market – Basic statistics – More sophisticated empirical work • Things we still don’t know

UK employment rate, 1992 -2007 Source: ONS/Labour Force Survey

UK unemployment rate, 1992 -2007 Source: ONS/Labour Force Survey

Unemployment by age group, 2001 -07 Source: ONS/Labour Force Survey

Employment rates by age and birthplace, 2001 -07

Total migration, 1996 -2006 Source: Home Office

Foreign born working age population as % of working age population, 1997 -2006

‘Migrants’ are a diverse group • • • Asylum-seekers & those granted refugee status EU labour migrants pre-2004 EU labour migrants from A 8/A 2 countries EU secondary migrants – Congolese and Tamils from France, Somalis from Netherlands. Work permit holders and dependents Family reunion cases Overseas students and dependents – 309, 000 primary entrants in 2006 Irregular migrants: clandestine entrants, asylum and visa overstayers, ‘Returning’ British nationals, for example from Zimbabwe.

Labour market experiences differ widely by country of origin e. g. Economic activity: Canada 85% employed, 2% unemployed and 13% inactive UK 78% employed, 4% unemployed and 18% inactive Nigeria 76% employed, 7% unemployed and 17% inactive Somalia 19% employed, 10% unemployed and 71% inactive.

Diverse Prior Education Qualifications by Country of Birth • UK 36. 2% higher level qualifications. • Somalia 11. 8% higher level • Poland 19% higher level • USA 58. 8% higher level • Nigeria 53. 5% higher level

Average gross hourly pay from main job of economically active population aged 16 -59/64 by country of birth, 2005/06 • • • • USA - £ 17. 10 Australia - £ 15. 20 Uganda - £ 13. 40 Kenya -£ 12. 50 Italy - £ 11. 90 Jamaica -£ 11. 60 UK - £ 11. 10 Nigeria - £ 10. 80 Ghana -£ 9. 40 Bangladesh - £ 9. 30 Turkey - £ 8. 20 Somalia - £ 7. 90 Poland - £ 7. 30 Source: Labour Force Survey

Average wages of UK and foreign-born workers, 2001 -06 Source: Labour Force Survey

Has recent migration affected wages or employment in the UK? Part (a): ‘Eyeballing’ the data…

Unemployment vs migrant concentration, local area districts

Wage growth vs migrant concentration, local area districts

Are migrants pushing UK workers out of jobs? Vacancies and % of foreign born workers in industry sectors

Average gross hourly pay in lowest paid industry sectors 2004 -07

Has recent migration affected wages or employment in the UK? Part (b): More rigorous empirical evidence…

Dustmann et al (2007): • Many recent immigrants ‘downgrade’ considerably – lower wage jobs than their qualifications suggest • Immigration has had overall positive effects on UK wages but negative effects on the low-paid. Both effects are small. Manacorda et al (2007) • Increase in immigration has lowered wages of immigrants, but little impact on UK born workers.

Blanchflower et al (2007) • Migration has reduced inflationary pressure in the UK economy and (therefore) reduced the sustainable level of unemployment Gilpin et al (2006, DWP) • “no discernible statistical evidence to suggest that A 8 migration has been a contributor to the [modest] rise in claimant unemployment in the UK”.

Conclusions • Recent UK employment performance impressive (and remains so, so far) • Some increase in youth unemployment since 2005 • Large increase in foreign born workforce as % of overall • Migrants highly diverse • No evidence of any large impact of migration on wages or employment in the UK • But there is much we still don’t know…

There is much we still don’t know • Effect of immigration at low-skill vs high-skill levels (data doesn’t measure migrant skills well) • Local area effects (data poor – hard to get hold of, survey samples not big enough) • How long do immigrants stay? How many return home or go to another country? (data poor) • ippr’s new project on the economics of migration will look at some of these questions in more detail