Immigration and low-paid jobs: the facts
Ed Miliband’s press conference last week marked a real shift for Labour. On that, its supporters and opponents can agree. Yet a number of responses to the speech, though giving a nod to Miliband’s complex and sensitive exploration of the economic and cultural impacts (both positive and negative) of immigration over the last ten years, have sought to question one basic assertion: that immigration was bad for the lowest-paid.
As Ed said in response to one of the questions following his speech, most studies on the effect of immigration during the Blair and Brown years show a clear pattern. While the aggregate effect on both wages and employment was neutral across the economy as a whole, ‘people don’t live in the aggregate’. When you examine the data between income groups, it shows the poor suffered – both existing workers and their new competition – as employers and consumers profited.
Jonathan Portes (and in particular his Independent article from last year) is often cited by those challenging this hypothesis, but he is selective about his quotation and interpretation of data. For instance, he quotes this UCL report that shows new migrants make ‘a substantial and disproportionately positive contribution to the public finances’. True. But it also found that ‘each 1 percent increase in the immigrant/native working age population ratio led… to a 0.5 percent decrease in wages at the 1st decile, a 0.6 percent increase… at the median, and a 0.4 percent increase… at the 9th decile’. 1st decile, incidentally, means ‘the lowest-paid 10%’.
In other words, immigration is good for putting more tax in the coffers, but it reduces the wages of those at the bottom of the pile (the waiters, waitresses and construction site workers), while boosting those at the top (those who employ the waiters and builders). It makes sense – if you don’t have to pay out as much in wages, you can pay yourself more.
Portes also fails to account for the hidden economy: Afghans in the Midlands picking asparagus for £3 an hour; Russians in Bedfordshire putting up dormitory semis in the day, going home to a 10-man flat let by a criminal landlord at night. In his own study (also quoted in The Independent article above), he writes:
‘We found little evidence that the inﬂow of accession [Eastern European] migrants contributed to a fall in wages or a rise in claimant unemployment in the UK between 2004 and 2006. … One explanation here is that as accession migrants overwhelmingly compete with low paid workers, and as these workers were protected by a concurrently increasing minimum wage, more adverse wage eﬀects may have been mitigated or oﬀset.’
Guess what Jonathan, a lot of people aren’t paid the minimum wage!
As Ed himself said, the ‘hidden stories’ of working people are at least as important as the analysis of Whitehall economists. He cited a Labour constituency meeting attendee who saw a chicken processing plant in Doncaster go ‘overnight’ from employing mainly local people to being largely staffed by Eastern European workers, paid ‘less than the minimum wage’.
Let me provide one final bit of evidence – an LSE report from 2010 that refers to a huge wealth of primary data. It summarises the position in bald terms:
‘Recent empirical research… finds little evidence of overall adverse effects of immigration on wages and employment for people born in the UK. Nevertheless, there may be some downward pressure in the low wage labour market where (despite their higher relative education levels) many new immigrants tend to find work. There may also be a positive effect on wages in the high wage labour markets where it may take more time for the skills that immigrants bring to transfer.’
The debate about immigration is far from over. Even the studies I have quoted are not universally certain about its effect for the poorest in British society. But let’s start with an understanding that the position outlined in Miliband’s speech – that wages and employment were pushed down at the very bottom – is supported, on balance, by most of the available evidence.