Migrant labour & British jobs

In light of the widespread protests about foreign workers at Lindsey oil refinery, three recent papers on the impact of migrant workers are especially timely. They all reach similar conclusions - that the effects of migrants upon wages and jobs of indigenous workers are small:
1. A survey (pdf) by Christian Dustmann and colleagues shows that there is no evidence that immigrants reduce British wages on average. Yes, there’s pressure on unskilled wages. But this is offset by higher wages for more skilled workers.
2. David Card estimates (pdf) that the effect of recent immigration upon relative US wages has been “small”.
3. A survey of the impact of migration from new EU member countries to older EU countries finds that “any negative effects in the labour market on wages or employment are hard to detect.”
So, as I say, if you’re looking for a group of people who are threatening the jobs and pay of British workers, look at bankers, capitalists, governments - pretty much anyone rather than foreigners.
But why do immigrants have so little effect upon indigenous workers? Here are some reasons:
1. I don’t have any effect upon Cristiano Ronaldo’s wages.  Why not? Because I’m a very poor substitute for him. Similarly, new immigrants are on average poor substitutes for native workers. What they are a good substitute for, though, are less recent immigrants. For this reason, there’s evidence that it is the latter that suffer most from migration.
2. Immigrants can be complements for native workers, in which case they can raise the latter’s wages. Say you’re an electrician. If migrant workers help build more new houses, you can earn more as you wire them up. Or if you work in a fruit freezing factory migrant fruit-pickers will increase the supply of fruit and allow you to pack more. Or if you’re a saleswoman an immigrant nanny or housekeeper might allow you to network with clients at night and so win more business. And so on.
These effects might apply to Lindsey oil refinery. The sooner this is expanded, the sooner it will be able to hire British workers to operate it. And insofar as a lack of refining capacity has caused high fuel prices, so greater capacity might benefit the whole economy.
3. In well-functioning labour and capital markets, any fall in wages should be only temporary, because firms should respond to them by taking on more staff.
4. Even if employers do make high profits from exploiting cheap foreign labour, these profits get spent, creating jobs elsewhere.
5. Even if foreign workers stay at home, they can depress British wages - if they produce cheap goods that compete with UK ones. Migration, then, makes no difference to wages.
So let’s be clear. On average migrant workers do not jeopardize British jobs or wages. Shouldn’t politicians and trades unionists be saying this more loudly and clearly?

Comments

[Chris]

I'm not sure if politicians CAN say them, but I guess that's the point, eh?

[john b]

Unlike capitalists, bankers, trade unions, disgruntled local builders, etc, migrant workers don't vote in general elections. Do we really need any more explanatory force than that...?

[Mike Woodhouse]

The politicians are going to say nothing that might sound like "no jobs for British people". Of course, pointing out that "British workers" would probably turn up their noses at these jobs in times of plenty doesn't play well politically - one just has to tacitly agree that "they" should have kept the jobs lying around in case a good old British worker happened to want one. And to heck with EU freedom of movement, when times get tough, Johnny Foreigner better watch out.

[Wei Xingnong]

You knob jockey, it's about effective black-listing of local workers by manipulating the sub-contracting system and general precariousness. Shove your studies up your arse.

[a very public sociologist]

I take it, Wei, you don't think it's useful to have a series of studies that very effectively show up the baselessness of xenophobia?

[Linda]

Yes, but facts and figures will have no effect on the herd mentality! They've made their mind up the Italians should eat their Spaghetti Meatballs on their own home turf!

[CharlieMcMenamin]

For what it's worth I read your blog daily and I think this is one of your most focused and helpful posts for some time. Since I'm a teckkie ignoramus I have no idea how to replicate on my blog the 'top blogging' side-bar you use but, if I did, then this post would certainly be there....it is informative, authoritative and well referenced without simplifying the questions at hand.

[FX]

You wanted to form the European Union which comes with the good and bad. Only now it seems you only want the good, and let somebody else have the bad.

[Bob B]

Well done, S&M, but rational argument has again passed out of fashion.

Thanks for many reasons to the bankers, here and abroad, we've reverted back to the times of that immortal classic: I'm all right, Jack:
http://www.youtube.com/watch?v=ZAii8tPrwtQ

Of course, most are sensibly a bit coy about openly blaming the bankers - for fear they might stop lending again and make the recession worse.

In Britain, as per our usual tradition of industrial relations, there's a long, benighted history to contracting.

In olden times, like 30 years ago, the state-owned Coal Board used to bring in external contractors for mine development work. The contractors would typically bring in their own work teams of highly skilled - and highly paid - British workers to do the job, which was hugely resented by the regular NUM members employed by the Board. The reason for this arrangement was that the Coal Board reckoned it got the job done more efficiently and more cheaply in the end.

Similar factors apply in the case of the successful British contracting companies which win contracts abroad and take their own specialist work teams abroad to do the work. It worries the government - as well as the companies - in case unions abroad start taking a protectionist attitude too and object to British work teams coming in to do the contracting jobs.

Looking ahead, there's the upcoming issue of building a new generation of nuclear powerstations in Britain. It's reported that the government is planning for 8 and there's talk in the wind of French contracting companies coming here to do the work because of the hugely successful experience of pressure water nuclear powerstations in France, where these provide 79% of electricity generation - and with little of the fuss and demos that we experience.

The last nuclear powerstation built in Britain, Sizewell B, in Suffolk, is also a pressure water reactor, completed in 1995. It took 8 years to build at a cost of just over £2bn, nearly £400mn over budget. At the time, there were legion reports during the construction of continuing IR issues and Spanish practices.

Who is paying for all that? You and I, dear reader, one way or another.

[Tommo]

So it's "on yer bike" then as Tebbit would have it, and now Lord Mandy. Whatever the local community has sacrificed in order to bring unsightly and often polluting industry into our neighbourhood, our councillors persuaded it would be good for jobs locally, we can all move off and leave our families behind to find a subcontractor of our choice. And it will be several years down the line when a different study is produced using more accurate statistics to show what our eyes and ears had been telling us all the time. Listen again to Mandelssohn interviewed by John Humphries and ask yourself just where the insincerity and bluster clicked in.

[Bob B]

To post the stark, staringly obvious, if we import into Britain the oil already refined, there will be no need to have unsightly and polluting refineries here, or the jobs that go with them for their construction or operation, or another cause for mindless strikes and demos. Some will doubtless hail that as a great victory.

[Will]

"Yes, there’s pressure on unskilled wages. But this is offset by higher wages for more skilled workers"

Optimistically, it can be said that there is scope for acquiring skills.

But your statement is consistent with a finding that immigration detrimentally affects the earning capacity of the least-bright in the country receiving the immigrants.

To the individuals concerned, it might be cold comfort to be assured that, even though you are now unemployable, the country's overall living standard is not diminished.

[Bob B]

As for the least bright, these quotes came from recent news reports prior to the wildcat strikes:

"Government figures show only 15% of white working class boys in England got five good GCSEs including maths and English last year. . . Poorer pupils from Indian and Chinese backgrounds fared much better - with 36% and 52% making that grade respectively."
http://news.bbc.co.uk/1/hi/education/7220683.stm

"White working-class pupils are the lowest-achieving group in English schools because they have low aspirations and do not do their homework, an official study shows."
http://www.independent.co.uk/news/education/education-news/white-workingclass-pupils-are-lowest-achievers-801765.html

[Bob B]

News update:

I can't believe that news about the scale of the developing global recession has yet reached all the parts it needs to reach.

In stark terms, consider this news from America on what is happening to the car sales of the leading automotive manufacturers:

"SAN FRANCISCO (MarketWatch) - The auto industry's historic meltdown showed no signs of relenting in January, with Ford Motor Co., General Motors Corp. and Chrysler on Tuesday posting US sales declines of more than 40% -- below even the lowest of Wall Street targets.

"Toyota Motor Corp., on the brink of posting its first-ever operating loss, fared only slightly better as the entire global auto industry continues to suffer.

"With the majority of automakers having reported, the annualized sales rate for the month is poised to break below 10 million cars and trucks. Analysts had predicted an annual sales rate of 10.2 million."
http://www.marketwatch.com/news/story/detroit-trio-post-sales-declines/story.aspx?guid=%7b3620260F-F472-470F-B9FF-2E956BD730C5%7d&dist=msr_2&print=true&dist=printMidSection

[Tom James]

@Will:

"To the individuals concerned, it might be cold comfort to be assured that, even though you are now unemployable, the country's overall living standard is not diminished. "

Yeah. And that's the problem: if there are low-skilled workers who really do lose out what can you do for them?

Nevertheless this is an excellent post: calmly rational and evidence-based. Such a relief to hear.

[Bob B]

In some respects, not much has changed since George Orwell wrote this in 1936:

"And again, take the working-class attitude towards 'education'. How different it is from ours, and how immensely sounder! Working people often have a vague reverence for learning in others, but where 'education' touches their own lives they see through it and reject it by a healthy instinct. The time was when I used to lament over quite imaginary pictures of lads of fourteen dragged protesting from their lessons and set to work at dismal jobs. It seemed to me dreadful that the doom of a 'job' should descend upon anyone at fourteen. Of course I know now that there is not one working-class boy in a thousand who does not pine for the day when he will leave school. He wants to be doing real work, not wasting his time on ridiculous rubbish like history and geography. To the working class, the notion of staying at school till you are nearly grown-up seems merely contemptible and unmanly."
http://www.george-orwell.org/North_And_South/0.html

[georgesdelaotour]

A full cost-benefit analysis of immigration cannot just compare the migrant worker with the British worker in terms of their labour inputs and stop there. If the migrant has a family she/he adds to the demand for schools, housing, medical services, pensions for retirement etc. The migrant worker will add at least something to tax revenues, but will this be sufficient to cover all the additional costs? Are there any analyses which look at all these factors?

[chris]

Georges - there's a paper by Bob Rowthorn in the latest Oxford Review of Economic Policy on the fiscal impact of immigration. It estimates that, for most developed economies the impact of immigration on budget balances is within 1% (plus or minus) of GDP. "There is no strong fiscal case for or against sustained large-scale immigration. The desirability or otherwise of mass migration should be decided on other grounds" he says.
Sadly, I can't find a non-gated online version.

[Tom Addison]

Here's a good paper on the fiscal impact of migrants:

SRISKANDARAJAH, D., COOLEY., L and REED, H., 2005. Paying Their Way: The Fiscal Contribution of Immigrants in the UK Available at: www.ippr.org.uk/members/download.asp?f=/ecomm/files/Paying%20Their%20Way.pdf&a=skip

The above study concludes that, “…the relative net fiscal contribution of immigrants is stronger than that of the UK-born, and has been getting even stronger in recent years.” Of those in employment, immigrants are on average higher paid than natives (which when disaggregated is found to be because they are overrepresented in the top income band) implying a greater contribution to the public purse. Their contribution is also growing. In 1999-2000, they accounted for 8.8% of Government tax receipts and 8.4% of Government spending, whereas in 2003-2004 they accounted for 10% of Government tax receipts and 9.1% of Government spending.

[georgesdelaotour]

Thank you Tom and Chris for those fiscal studies. I still fear we're not getting to the heart of the issue. The Sriskandarajah et al study only mentions those in work - not their dependents. If those new to the UK are more fecund than their indigenous counterparts, they will add greatly to the need for extra school facilities, housing, child support payments, GPs, hospitals, midwives etc. Going by the "pub bore" rhetoric I hear, much WWC resentment of immigrants is about this sort of thing - competition for scarce social resources, rather than one-to-one competition in the jobs market.

I remember the controversy surrounding Margaret Hodge's Observer article of 20 May 2007. She pointed out that allocating social housing by need meant very recent arrivals to the UK (mostly Somali and Bangladeshi families, I think) were immediately getting council homes, while WWC residents who had been on the waiting list for many years went to the back of the queue. And she feared this would drive the WWC into the arms of the BNP. Was she being hysterical, or was there something to her argument? What evidence do we have?

[Bob B]

There's an understandable presumption that these issues are amenable to rational analysis. Arguably, this is unwarranted in the case of Humberside.

From 1974 through 1996, there was a single county of Humberside, which stretched from territory south of the Humber estuary to the north and which included the city of Kingston-on-Hull.

Sadly, mutual aversions and animosities within Humberside became so uncontainable that the county was eventually abolished and separated into four, independent unitary authorities to minimise future need for cooperation between the constituent parts:
http://en.wikipedia.org/wiki/Humberside

I have encountered both online and in the outside world, sober and apparently serious folk who believe these tendencies historically stem from viking and norse raids and settlements in and around Humberside prior to the Norman conquest of England and Wales in 1066.

This is not a novel hypothesis. Daniel Defoe - more usually renown as the author of Robinson Crusoe (1719) - makes reference to it in his celebrated satyrical poem: The True-Born Englishman (MDCCIII):

The Romans first with Julius Cæsar came,
Including all the nations of that name,
Gauls, Greeks, and Lombards, and, by computation,
Auxiliaries or slaves of every nation.
With Hengist, Saxons; Danes with Sueno came,
In search of plunder, not in search of fame.
Scots, Picts, and Irish from the Hibernian shore,
And conquering William brought the Normans o'er.
All these their barbarous offspring left behind,
The dregs of armies, they of all mankind;
Blended with Britons, who before were here,
Of whom the Welsh ha' blessed the character.
From this amphibious ill-born mob began
That vain ill-natured thing, an Englishman.
. . .
These are the heroes that despise the Dutch,
And rail at new-come foreigners so much,
Forgetting that themselves are all derived
From the most scoundrel race that ever lived;
A horrid crowd of rambling thieves and drones,
Who ransacked kingdoms and dispeopled towns,
The Pict and painted Briton, treacherous Scot,
By hunger, theft, and rapine hither brought;
Norwegian pirates, buccaneering Danes,
Whose red-haired offspring everywhere remains,
Who, joined with Norman-French, compound the breed
From whence your true-born Englishmen proceed.

http://www.luminarium.org/editions/trueborn.htm

[tony]

What have the Lindsey workers got to do with immigration? Nothing. These aren't migrants, they're salaried subcontractors who pay their taxes in their own country.

[Bob B]

"What have the Lindsey workers got to do with immigration? Nothing. These aren't migrants, they're salaried subcontractors who pay their taxes in their own country."

Absolutely. They would most likely return to the EU country from whence they came when the subcontract job is complete - just as British workers, working for a British contracting company abroad, would return home to Britain when a contract is completed.

What all this has done is to increase the likelihood of unions abroad objecting to British contract workers working on jobs in their country.

[F0ul]

The results of these studies are not surprising. There is an element of the working population who will not accept that unions are just troublemakers who will feed up on any populist idea and make a meal of it.

We already know that not only is it illegal in the EU to prevent people of a certain type from getting a job, it is also a requirement for all tenders to be made available to all who are interested in them.

The story, as I understand it is that a company won a tender, got their staff together and went abroad to work.
Where is the difference between that and Auf Wiedersehen Pet?

There is no use in protesting that you didn't get the job after the contracts have been awarded! However, the company knows this, the government know this and the unions know this - however, the unions are not telling their members how it really is!

The people who lose out are always the semi skilled. The smartest of the thickos are never smart enough to realise that they only got the job through luck and circumstances! As soon as that process can be automated, they are back on the scrap heap - unwilling to retrain because that would be degrading for them!

Well done for a great post!

[Bob B]

According to the 2001 Census, 97.5% of the resident population of North East Lincolnshire were born in the UK and 98.6% were white:
http://www.statistics.gov.uk/census2001/profiles/00FC-A.asp

Things were a little different for Kingston-upon-Hull, north of the Humber - only 97% were born in the UK and 97.7% were white:
http://www.statistics.gov.uk/census2001/profiles/00FA-A.asp

[Peter Schaeffer]

It turns out that this issue (the economics of immigration) has been studied in the UK. Let me quote from the Guardian.

"The £6bn fallacy
There is no evidence that net immigration can generate significant economic benefits"

http://www.guardian.co.uk/commentisfree/2008/apr/01/immigrationpolicy.immigrationandpublicservices

"Whenever a minister is asked about high levels of immigration, the same answer is trotted out: migrants boost the economy, fill jobs that Britons cannot or will not do, and pay taxes that benefit the exchequer. Last December the home secretary, Jacqui Smith - a former economics teacher - talked of "the purity of the macroeconomic case for migration".

Yet an inquiry by a House of Lords committee into the economic impact of immigration - which I chaired, and reports today - found fundamental flaws in these claims. We found no evidence that net immigration (immigration minus emigration) generates significant economic benefits for the existing UK population.

The government told the inquiry that migrants contributed £6bn to Britain's GDP in 2006. Sounds great, but it's completely meaningless. Smith will no doubt have taught her economics students that the key measure of a country's standard of living is GDP per head, not total GDP. In percentage terms, immigration has increased Britain's population almost in step with the impact on GDP. So the effect on GDP per head has been roughly zero.

The government also claims lots of migrants are needed to fill vacancies created by Britain's booming economy over the past 15 years. This is beguilingly simple, but badly flawed. Once migrants fill some vacancies they spend some of their earnings. This increases demand for goods and services, which leads companies to produce more. But to increase production, companies need more staff, creating more vacancies and so defeating the objective of reducing vacancies. The total number of vacancies has remained at about 600,000 since 2001 despite high net immigration.

Surely immigration is needed for jobs Britons refuse to do, the government argues. But they refuse to do these jobs only at current pay rates. In many cases, higher wages - never popular with employers - could solve the "shortage". In other cases increased mechanisation could bypass the need for migrant labour. Many employers today rely on the skills and hard work of migrants. But in the longer run, when wages can be increased and production methods changed, there is no valid argument for continued high net immigration.

Related to this is the effect on wages. While immigration was found to deliver a small gain in the wages of the highly paid, it has a slightly negative effect on the wages of the lowest paid, as many migrants compete for relatively low-skilled jobs. Any negative effect for people earning little more than the minimum wage must be taken seriously.

The third plank of the government's argument is that migrants' net tax payments (taxes paid minus consumption of public services) are greater than those of UK-born citizens. Such conclusions depend on who counts as a migrant and what is included under costs and benefits; some estimates show migrants contributing slightly less than the UK-born. But even on the government's preferred calculations, the fiscal impact is too small, relative to the size of the economy, to justify high net immigration.

Housing is something else the government has not addressed. It is projected that if net immigration were zero, house prices would be 10% lower in 20 years' time - an important issue for those struggling to get on the property ladder.

The government's central projection is that Britain will continue to have high net immigration of 190,000 a year. If correct, Britain's population would rise by more than 10 million to 71 million in 2031, with just over two-thirds of the increase due to net immigration. The government should review the implications, though any changes in policy would essentially concern those outside Europe as most EU citizens have the automatic right to work in Britain.

While the government has overstated the economic benefits, it is important to stress that we did not find large losses, and we recognise the valuable contribution migrants make. Our points are about high net immigration, which sharply increases population, not immigration per se. Since many people continue to emigrate, there could still be substantial immigration without an overall population increase. The committee hopes its report stimulates much needed debate on the amount and type of immigration that is desirable. But to assert, without rigorous evidence, that high net immigration brings huge economic benefits is simply unacceptable."

The bottom line is simple. In a country as densely populated as the UK (or many part of the U.S.) mass immigration is big loser.

[rolex submariner]

And a lot of it reflects a switch from bank deposits to securities; foreigners “other investments” in the UK, http://www.watchgy.com/ mostly bank deposits, fell by £143.2bn in Q1. And of course there’s no guarantee such buying will continue.
http://www.watchgy.com/tag-heuer-c-24.html
http://www.watchgy.com/rolex-submariner-c-8.html