Fact Check: does immigration have an impact on wages or employment?

Posted by Olderiswiser Editorial

Liberal Democrat leader Vince Cable claims there is no evidence that immigration impacts wages. Is he right? Ian Preston questions his reasoning.

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When I was business secretary there were up to nine studies that we looked at that took in all the academic evidence. It showed that immigration had very little impact on wages or employment. But this was suppressed by the Home Office under Theresa May, because the results were inconvenient.

Vince Cable, leader of the Liberal Democrats, in a statement on September 6.

There is quite a lot of evidence that if we have too many low-skilled workers coming in, one of the effects is to depress the wages of those at the bottom end of the wage scale.

Damian Green, first secretary of state and minister for the Cabinet Office, speaking on BBC Radio 4’s Today programme on September 7.

The effect of immigration on wages and employment has been the subject of numerous studies, both in the UK and internationally. Research for the UK points to no convincingly large negative effects of immigration on average wages of British-born workers. This is largely in line with the predominant (though not uncontroversial) finding of studies done in other countries.

Some studies have pointed to the possibility of effects on the distribution of wages, holding wage growth back at the lower end and pushing wages up at the higher end. However, authors of studies which have suggested this have emphasised that the negative effects are small. While recent immigrants as a whole have typically been highly qualified relative to the skill level of the UK labour force, the location of such effects may have to do with the fact that they tend to work initially in lower paid jobs.

Evidence for harmful effects of immigration on employment is also slim. Most studies have failed to find clear evidence of a link.

One exception, sometimes cited by advocates of tighter immigration policy, is a 2012 Migration Advisory Committee report that found some association in particular of non-EU migration with employment of non-immigrants during one period of downturn, though the study itself emphasises that the evidence is not very robust.

Overall the Migration Advisory Committee itself concluded: “Evidence to date suggests little effect on employment and unemployment of UK-born workers, but that wages for the low paid may be lowered as a result of migration, although again this effect is modest.”

Impervious political debate

Despite the weak evidence, harmful labour market effects continue to be emphasised in political debate, for example by Theresa May both when she was home secretary and now as prime minister. (The same is true in the US).

Some may feel it is obvious that the expansion of labour supply that follows from immigration must harm competing workers. But this ignores the many ways in which immigration can also lead to expanded labour demand – through immigrants’ spending on goods produced locally, through the complementary skills they bring into the country, through encouraging changes in the pattern of production or encouraging inflow of capital, and so on. For all of these reasons, it is quite compatible with standard economic theory to find that immigration might have little or no effect on wages or employment.

Verdict

Vince Cable’s understanding of the preponderance of academic evidence on the labour market effects of immigration is accurate. There is little persuasive evidence that immigration has substantial harmful effects on average UK wages or employment. Damian Green is correct to identify effects on the least well paid as being of greatest concern but evidence suggests these effects are not large.

Review

Jonathan Wadsworth, professor of economics at Royal Holloway, University of London

According to standard economic textbooks, the purported effects of immigration on the existing workforce are undoubtedly negative – like the minimum wage. How so when the academic evidence – as accurately outlined in this fact check – does indeed suggest that, contrary to standard texts, immigration does not have any large significant effect on employment either in aggregate or among groups supposedly most at risk? Nor does immigration appear to depress wages of native-born Britons much. The recently resurrected study, cited by politicians and the media could not determine whether its findings of a small negative wage effect apply to UK-born people or immigrants or both.

Politicians and the media making disingenuous, selective or, at best, misinformed interpretations of academic studies do not help. There is also a lot of dross out there and sifting through it is not always easy, for anyone, politicians and the media included. Ultimately, continued dialogue and engagement between academia and the outside world can only help understanding and inform policy making.


The ConversationThe Conversation is checking claims made by public figures and prominent commentators in public debates. Statements are checked by an academic with expertise in the area. A second academic expert then reviews an anonymous copy of the article. Please get in touch if you spot a claim you would like us to check by emailing us at uk-factcheck@theconversation.com. Please include the statement you would like us to check, the date it was made, and a link if possible.

Ian Preston, Professor in the Department of Economics, UCL

This article was originally published on The Conversation. Read the original article.

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