The influx of EU migrants can lead to pay reductions of nearly two per cent in some industries including catering, hotels and elderly care, the research showed.
Campaigners last night seized on the document as official confirmation that EU migration is undermining the living standards of the UK’s least paid workers.
Lord Green of Deddington, the chairman of the pressure group Migration Watch, said: “For many years the immigration lobby have claimed that there is no evidence that immigration has any significant effect on the wages of British workers.
“This new research by the Bank of England blows their claims out of the water. It has found a significant negative impact on those in the lower skilled services sector in which six million UK born are working. This amounts to nearly a quarter of all British workers.”
Ukip MEP and migration spokesman Steven Woolfe said: “We must start to discuss and fully understand the impact, directly and indirectly, that mass migration has on our economy and jobs sector.
“Net migration at over 300,000 per year is preventing wages rising in line with inflation for native, British workers.
“This level of migration is compressing the low skilled jobs sector which is bloated to bursting point.”
The Bank of England report, entitled “The Impact of Immigration on Occupational Wages”, was written by Oxford academic Stephen Nickell, who is a member of the Office for Budget Responsibility, and Bank of England economist Jumana Saleheen.
They argued that the impact on wages was “small” in terms of the overall UK economy but was also “statistically significant”.
“The biggest effect is in the semi/unskilled services sector, where a 10 percentage point rise in the proportion of immigrants is associated with a two per cent reduction in pay,” the authors wrote.
>What should we make of this finding? Our earlier investigation into the facts about
immigration unveiled that low-skill occupations, such as semi-unskilled services, had witnessed the largest increases in immigration in recent years. If immigrants in these occupations earn less than natives, the 1.88 percent negative impact of immigration on wages reported above could simply reflect compositional changes within the occupation, towards a higher share of (lower paid) immigrants. The compositional effect will be determined by the wage differential between immigrants and natives within occupations.
>A simple hourly wage equation suggests that, in semi/unskilled services, immigrants earn 5.4 percent less than natives (Table 6).17
>In other words a 10% rise in immigration alone, would lead to a 0.54 percent fall in wages — that is the size of the compositional effect. It is striking that the compositional effect is small when compared to the large impact of 1.88 percent reported above. From this we conclude that the impact of immigration on wages in semi/unskilled services is much larger than can be accounted for by purely compositional effects, suggesting that the vast majority of this effect refers to the impact on native workers.
>The same cannot be said for skilled production workers. Here a 10% rise in immigration lowers wages by 1.68%, but the compositional effect is in the same ball park, around 1.13%. So for skilled production workers the impact of immigration on wages can largely be accounted for the compositional effect.
So, worth noting that, since natives make more on average than non-natives, the effect on Britons is somewhat less than 2%, and near 0 for skilled workers. That's still a significant decrease.
Interesting. As they note in the introduction, this is still an open question. Also, apparently there was no difference between EU and non-EU immigrants.
Well, remember that they're both producers and consumers. Increasing the population means increasing aggregate demand, while will increase prices and therefore wages. The question is whether that effect is enough to counteract the effect of the increased workforce on aggregate supply, and therefore wages.
I would draw a picture showing how both AS and AD increase with an increase in the quantity of people in the economy, but no images on /news/. Sorry
>That implies that the number of immigrants make a proportional amount of people that are hiring
I don't follow. What do you mean by "people that are hiring"?
If you mean employers, it doesn't matter who the actual job creators are. Existing firms can and will expand (via a mixture of adding jobs and increasing wages) if demand increases, which it necessarily will when there are more mouths to feed.
The issue is purely about the degree to which increased demand for goods by immigrants will offset the increased supply of labor by immigrants.
But there's a smug left wing middle class distased for working class people, which makes people think there's something wrong with not going to university and going straight into work.