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, Source: ONS/Labour Force Survey

UK unemployment rate, Source: ONS/Labour Force Survey

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

Employment rates by age and birthplace,

Total migration, Source: Home Office

Foreign born working age population as % of working age population,

‘Migrants’ are a diverse group Asylum-seekers & those granted refugee status EU labour migrants pre-2004 EU labour migrants from A8/A2 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, 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

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 A8 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