The economic impact of immigration - Interview with Dr Brian Bell, Associate Professor of Economics, University of Oxford
In part one of this three part series, Brian discusses the impact of immigration on wages, employment & public services.
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If you look at national trends in wages, there is no relationship between those trends and the number of immigrants that are coming into the country. If you look at the occupational evidence, it is similarly difficult to find evidence that, in the occupations and industries in which immigrants typically work, wages have risen more slowly than within industries where there aren't many immigrants.
- Dr Brian Bell, Associate Professor of Economics, University of Oxford
In part one of this three part series, Dr Bell discusses the economic impact of immigration to the UK and the impact of immigration on wages, employment and public services.
Can you tell us a bit about your role and your background, and how this relates to some of the current issues surrounding the immigration debate?
This is partly because of the age-old issue that faces economists when examining immigration; we can’t find any significant negative effects of the process. ‘Natives’ don’t seem to have poorer wages because immigrants have arrived, there is no evidence that they have caused more unemployment or anything like that, yet in spite of this when you look at surveys of the general public, many people say that immigration is a problem.
So it is partly an attempt to answer the question ‘If we can’t find any negative economic impacts of immigration, why is it that people are so worried about the issue?’. The impact of immigration on crime is one of the more obvious elements which could cause people concern, so we made a decision to focus some of our attention on the relationship between immigration and crime.
The myth that ‘Immigrants cause low wages’ is a popular one, even among trade union members who would regard themselves as ‘pro immigration’. What does your research say about the impact of immigration on wages?
This is one of the areas where people simply don’t believe the results that economists discover! If you look at national trends in wages, there is no relationship between those trends and the number of immigrants that are coming into the country. If you look at the occupational evidence, it is similarly difficult to find evidence that, in the occupations and industries in which immigrants typically work, wages have risen more slowly than within industries where there aren’t many immigrants. One way to test this is to look at areas of high immigration, like London, and areas which have seen less immigration, say Cumbria for example. If you ask the question ‘has immigration had an impact on the rate of wage increases in London compared with Cumbria?’ then there is no evidence to support that.
Where there is some evidence about the impact of immigration on wages comes when you look at the impact of more immigration on immigrants already living in the UK. The main group of people who seem to suffer in terms of wages as a result of immigration, if indeed anyone suffers at all, are those immigrants who are already here, as new immigrants tend to increase competition for the same sort of jobs, in the same sort of areas.
There is a small amount of evidence to suggest that those natives within the lowest pay scales in the UK; those without formal qualifications working for minimum wages are negatively impacted by increased immigration, but we are talking about one or two percent impact on rates for wages over a ten year period so the impact is very small.
So it is hard to find any significant negative impacts on wages, and when it comes to unemployment, it is just not true to say that in areas where there is higher immigration, there are higher levels of unemployment among ‘natives’. In fact, if anything, the reverse is true. Generally speaking, immigrants move to areas where there is greater economic opportunity so actually the economy tends to be doing well in areas that are subject to high levels of immigration.
In terms of immigration and employment specifically, do you have figures about employment rates comparing migrants to ‘natives’?
The British Labour force Survey which is the Government’s official survey of the labour market enables you to work out the employment rates for individual groups. The most recent figures for early 2014 show that 73% of British-born people are in employment compared to 69% of non-British. Digging a bit deeper, the figure is 81% for those from the EU countries that joined in 2004 (i.e. Poland, the Baltics etc.) and the employment rate for Romanians and Bulgarians is 76%, so also higher than for British-born. In general, immigrants from the EU tend to have the highest employment rates.
Sections of the media have run with headlines stating that 9 out of 10 new jobs are taken by migrants. Is there any truth in this?
To be honest, I haven’t looked at the figures recently, however it used to be commonly acknowledged that in the boom before the financial crisis, something like 50% of new jobs created went to foreign nationals, however this was at a time of high national employment, so it is only natural that new jobs were given to people who had recently entered the country, given that large number of people already living in the UK already had a job. As I mentioned before, almost every migrant entering the country is looking for a job and has the skills to work so to a certain extent it is unsurprising that they would take a good proportion of new jobs created. However, I don’t think a figure of 9 out of 10 is or has ever been accurate. (Note: In the last 12 months, employment has risen by 741,000 in the UK and 76% of that increase was for British nationals).
A more interesting question is ‘how do employment rates compare between migrant workers and British workers?’ and on average, across all immigrant groups, the rates are roughly the same; about 70-75% of British people and migrants are in employment.
What about the impact of immigration on public services? Obviously that is another area which has received a lot of coverage.
There is a certain amount of weak evidence that suggests that in certain areas, some schools and GP’s surgeries are overwhelmed during certain periods by new immigrant arrivals. I think that there are two reasons for this. It is really a phenomenon of the last 10 to 15 years due to the expansion of the European Union. Very few people predicted the size and the speed with which migrants would come to the UK, with large numbers arriving in specific areas so there wasn’t an even spread across the country. Some towns which perhaps hadn’t seen much immigration previously suddenly found a couple of hundred new people arriving and certain services just couldn’t handle that.
It was a short term issue of course. You can’t build a new school or a new GP surgery quickly, so the only immediate response is to try and stretch the service to accommodate greater population growth. There is some evidence which suggests that this short term impact was quite bad for a small number of areas in the UK.
Longer term, this will cease to be a problem. Just like with any growth in population, more schools and GP surgeries will be built to accommodate new arrivals and the system will adapt accordingly.
The other area of focus tends to be on housing. The economics are very simple; if you don’t build more houses, and more people arrive then house prices go up. To what extent is immigration responsible for rising house prices? This is much more difficult to answer. If you look at the picture nationally, then you can draw the conclusion that immigration has a negligible impact on house prices. What is sometimes forgotten is that certain areas have suffered as a result. Sometimes this is part of the problem for economists and in turn for policy makers. Policy makers are often only interested in the biggest scale impacts which mean that on a local level, sometimes issues are ignored.
Part two and three of the interview to follow.