Does migration trigger wage compression or unemployment?

The economic case for Britain’s EU membership always seemed obvious, even before it had been confirmed with evidence from virtually every major economist, independent study and international body, plus data from the Bank of England, UK Statistics Authority, and HM Treasury. For a while, Vote Leave’s only available response was to throw mud at this formidable wall of evidence. When even their own supporters noticed how silly this looked, they did, finally, back off.

So now the accepted consensus, widely reported last week, is that the Leave camp has lost the economic argument — hence Vote Leave’s sudden retreat into a far more familiar anti-immigrant stance in recent days. But, even here, the Brexit brigade’s increasingly shrill claims are already being undermined by inconvenient facts.

Their big argument is that allowing EU citizens to work in the UK either reduces British workers’ wages, or increases unemployment, or both. In fact, neither is borne out by the evidence.

In a detailed piece of research published at the weekend, the London School of Economics is crystal clear:

Many people are concerned that immigration reduces the pay and job chances of the UK-born due to more competition for jobs. But immigrants consume goods and services and this increased demand helps to create more employment opportunities. Immigrants also might have skills that complement UK-born workers. So we need empirical evidence to settle the issue of whether the economic impact of immigration is negative or positive for the UK-born.

New evidence in this report shows that the areas of the UK with large increases in EU immigration did not suffer greater falls in the jobs and pay of UK-born workers. The big falls in wages after 2008 are due to the global financial crisis and a weak economic recovery, not to immigration. There is also little effect of EU immigration on inequality through reducing the pay and jobs of less skilled UK workers. Changes in wages and joblessness for less educated UK-born workers show little correlation with changes in EU immigration.

Researchers at the University of Oxford have also published a useful analysis of many different studies. On unemployment, their findings are telling:

Research by the Migration Advisory Committee (MAC) studied the impact of migrants on the employment of UK-born people using data from the Labour Force Survey for 1975-2010. The study suggests that, overall, migrants have no impact on UK-born employment. However, the MAC also analysed the specific impacts of EU and non-EU migrants and also distinguished between two sub-periods: 1975-1994 and 1995-2010. It found that non-EU immigration was associated with a reduction in the employment of UK-born workers during 1995-2010. No statistically significant effects were found for EU immigration.

In other words, across the board, EU citizens working here do not increase UK unemployment, nor do they reduce UK wages. On the contrary, because of the economic damage that would be inflicted by leaving the EU, wages are likely to drop (trade unions say by about £38 a week on average). In the one specific case where researchers found that overall migration did affect job availability, this effect was limited to the impact of non-EU migrants — an issue which is, of course, totally irrelevant to the referendum debate. (Or at least it should be. Perversely, some Leave campaigners seem to be suggesting that they want to increase this kind of migration!)

Faced with clear evidence, we might hope that the Leave campaigners will once again be forced to withdraw their spurious claims. But with only three weeks to go, I’m not holding my breath. The strategy of blaming every economic and societal difficulty on foreigners living in Britain has been a fruitful one for the right for years, and the fact that their anti-migrant narrative is entirely fact-free has not reduced its prevalence, or, sadly, its effectiveness.

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3 Comments

  1. There is no ‘economic argument’. You even refer to it as ‘evidence’ but evidence not about future events, by definition.

    Whatever happens economically (whether remain or exit) is just a prediction of the future for which economists are no better qualified to make than anyone else. Can they know who will be in government in even 10 years, or what will be the ideology of the day? Can they predict any other changes in the next 20 years that would be the equivalent of the internet over the past 20 years?

    We need to see what the astrologers have to say about the economic future. Or tea leaves, or whatever. But economists are not the right people to know.

    • The UK’s share of global exports since 1980 has fallen from 6 per cent to under 3 per cent and we still export more to Ireland (population 4 million) than we do to China (population 1.3 billion). And this has nothing to do with the EU repressing our trading dynamic: we are a country whose productivity per head is 20 per cent below that of France and which unlike our main European neighbours – Germany, France and Spain – is unable to construct high speed rail or extensive tram networks. These are existing verifiable facts that we’d be foolish to brush aside when considering the shape of a future outside Europe.

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