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The impact of immigration on the UK labour market

Market Inspector


The impact of immigration on employment and wages is one of the core concerns in the open UK labour market debate. Questions like “Has immigration been harmful to UK economy?” arise and causes controversy.


Various considerations and empirical data analysis show consistency and concludes that the impact of immigration on the UK labour market is statistically poorly determined and probably small in size, if any.


Nonetheless, when it comes to the impact of the immigrants on the UK market, the widely accepted assumption for the negative employment and wage effects on the resident population, is not easily justifiable. Perceptions such as: immigrants take away jobs from UK-born population, immigrants contribute to large increases in unemployment and they depress wages of existing workers, are neither supported or receive any confirmation from any data analysis.


Theoretically, the impact of immigrants on the UK labour market depends crucially on assumptions regarding economic flexibility. For example, if the UK economy is characterised by a heterogenous traded goods sector, employment and wages would be insensitive to immigration (at least in the long run). However, if there is little flexibility in the traded goods, then we can expect the impacts of immigration in the long run on both employment and wages.


Taking into account the UK economic characteristics, this theory is quite compatible, meaning there should not be any long run wage or employment effects. Yet, until the economy adjusts to the changes, effects are typical in the short run.


However, in reality, the results of many studies on the subject conclude, more or less, the same thing: The negative outcome of immigration in the UK labour market is not only inconsistent, but higher immigration has, in fact, increased overall national income (i.e., more workers generate more GDP).


Certain conclusions like EU immigrants are more educated or they have younger average working age compared to UK-born population, would suggest that, if anything, immigrants have put downward pressure on the wages on higher waged workers—thus reducing inequality. Of course, a concern arises when it comes to the lower waged workers—the more educated immigrants are willing to accept low paid jobs than the less skilled UK-born population.


Referring to data analysis results, we can make certain assumptions on the post-Brexit future of the UK labour market. We cannot be precise about the size of the losses from restricting immigration, but based on a variety of data analysis, we can confidently say that EU immigration has not had a significantly negative impact on average wages, employment, and inequality. Further, the same thing is effective for the positive impact of immigrants.


However, falls in EU emigration are supposed to lead to lower living standards for the UK-born, based on the fact that immigrants help the economy by reducing the country`s deficit.


Moreover, data analysis reflects a wide consensus that foreign investments and trade will also fall after Brexit, both of which would reduce UK incomes. The fall of immigration rates is a third channel that will push UK living standards even lower.


Infographic courtesy of Market Inspector


Photo (top right) courtesy of Shutterstock.com

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