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The impact of immigration on UK wages

Immigration to the UK has made a positive contribution to the average wage increase experienced by non-immigrant workers, according to a new report published by UCL’s Department of Economics and Centre for Research and Analysis of Migration (CReAM). The report was commissioned by the Low Pay Commission as part of its ongoing evaluation of the National Minimum Wage.

The research looks at the period from 1997 to 2005 and finds evidence of an overall positive impact of immigration on the wages of native born workers, although the magnitude of the effect is modest. Immigration during these years contributed about one twentieth of the average three percent annual growth in real wages.

Prof. Christian Dustmann of UCL’s Department of Economics said: “Economic theory shows us that immigration can provide a net boost to wages if there is a difference in the skills offered by native and immigrant workers. However, across the whole spectrum of wages it is impossible for everybody to benefit. Some workers will see a gain, others a loss.”

The report goes on to say that although the arrival of economic migrants has benefited workers in the middle and upper part of the wage distribution, immigration has placed downward pressure on the wages of workers in receipt of lower levels of pay. Over the period considered, wages at all points of the wage distribution increased in real terms, but wages in the lowest quarter would have increased quicker and wages further up the distribution would have risen more slowly if it were not for the effect of immigration.

These estimated wage effects mirror evidence on the location of recent immigrants in the non-immigrant wage distribution. “Our study showed that during these years immigrants tended to be more concentrated than natives below the first quartile of the native wage distribution, in exactly the same place that we found evidence of wages being held back,” said Professor Dustmann. “They were less concentrated from there upwards, which is where we found wage benefits.”

The research also shows that, although, on average, immigrants to the UK have higher levels of education than their UK counterparts, these recent immigrants ‘downgrade’ considerably, working in jobs that are less skilled and pay lower wages than would a typical native worker of similar level of education.

The research was conducted by Prof. Christian Dustmann, Prof. Ian Preston and Tommaso Frattini, from UCL’s Centre for Research and Analysis of Migration (CReAM).

For their analysis, researchers used the British Labour Force Survey, the Annual Survey of Hours and Earnings (ASHE) and the UK Census. Findings are consistent across datasets.

These findings are specific to the particular pattern of immigration over the period considered and should not be regarded as a reliable guide to the effects of immigration inflows over different periods.

David Weston | alfa
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