Effects of east European migration

The decision to open the UK labour market to immigrants from the former Soviet bloc  was “a stroke of genius.”  So says the MPC’s David Blanchflower in this new paper.
He shows that migrants from the A10 countries are much more likely to be in work than native Brits, and less likely to claim benefits; only 4000 of the 850,000 claimed Jobseeker’s Allowance, though 100,000 got child benefit.
Also, there’s “no credible statistical evidence that the arrivals from the A10 had any perceptible impact on unemployment.”
What they did do, though, is raise the fear of unemployment and so keep wage growth down. Which means they have improved the trade-off between growth and inflation.
What’s more, immigration might not slow down even as the UK economy weakens, says Blanchflower. The repulsion effect of weakening labour demand here is offset by the fact that the A10 economies are weakening too. What’s more, the fact that there are already big numbers of migrants here makes it easier for even more to come, as they have networks in place enabling them to find jobs and settle in.
All this is one reason - though not perhaps the main one - why Blanchflower has been alone on the MPC in calling for interest rate cuts. It’s because migration is a force for lower inflation.

Comments

[Phil]

"What they did do, though, is raise the fear of unemployment and so keep wage growth down."

Remind me again why this is a good thing.

[dearieme]

Perhaps, Phil, that could be phrased "remind me for whom this is a good thing".

[MJW]

How does this help areas struggling to absorb large waves of migrants?

[chris]

Phil - the conventional answer runs like this:
if wages are lower at any given level of unemployment/aggregate demand, firms will be inclined, at the margin, to take on more workers. Also, if a given level of unemployment produces fewer wage pressures, the Bank, less fearful of inflation, will hold interest rates down, again raising demand.
For both reasons, the result should eventually be a lower "equilibrium" level of unemployment - more jobs.

[georges]

1. If 100,000 got child benefit, then that means there must be no less than 100,000 extra children in the UK requiring state education, visits to the doctor etc. Has he factored in this cost into his assessment? What about the effects on housing?

2. What are the figures for non-A10 country migrants (eg Pakistani Mirpuris, Bangaldeshi Sylhetis)?

[Tom]

Depends on the skill level of the migrants. Borjas (2003) uses the approach of examining variations in supply shifts across different skill groups, but assumes workers who have the same schooling but different levels of experience are imperfect substitutes in production. He reaches the conclusion that, in the US, as well as harming the employment opportunities of native workers, overall, a 10% increase in supply of labour reduces wages by 3-4%, with the effects being comparatively worse for those of lower skill-levels.