Employment Effects of Migration to the UK

CEPR Research Fellow, Christian Dustmann, will talk about the effects of migration on economic outcomes of the resident population. He will first illustrate opinions of UK residents to gauge what people expect regarding the consequences of immigration, and how they assess movement of labour, drawing on the 2003 European Social Survey. He will then talk about the predictions of economic theory. According to Dustmann, economic theory suggests that workers who compete with immigrants may lose from immigration in the short run, but economic theory is ambiguous whether there are long-run effects of migration. Economic theory also suggests that immigration may generate a surplus for the resident population, but this will mean that some residents lose, while others gain. Together with Fabbri and Preston, Dustmann has conducted the first analysis to estimate the effects that immigration flows have on employment levels in the UK. This study uses data from UK Census for 1971, 1981 and 1991 and the UK Labour Force Survey for 1983-2000.

The main findings can be summarised as follows:

• Data from the European Social Survey 2003 show that about one in three UK residents believe that immigration brings down wages. 45% of the low educated share this opinion, but only 23% of the highly educated.

• Opinions relating to the effects of increased migration vary between different social groups. In the UK, 59% of the low educated believe that migration harms the poor more than the rich, compared with 37% of the well educated.

• About 3 in 4 UK residents believe that all countries benefit if individuals can move where their skills are needed.

• Economic theory suggests that in the short-run, and if the skill composition of the immigrant inflow differs from that of native workers, migration may have adverse wage and employment effects for those workers who compete with immigrants.

• Immigration may have no effect if the composition of the migrant population resembles that of the resident population. Economic theory is also compatible with no long-run effects of migration, if the industry structure can adjust.

• Research for the US and other European countries finds, with very few exceptions, modest or zero effects of immigration on employment and wages of residents.

• The levels of education for native born and foreign born workers that arrived in the UK between 1995-2000 were found to be roughly the same: 15% of both native-born and foreign-born workers had high levels of education; while 16% of native workers had low levels of education compared to 13% of immigrants.

• Dustmann's study for the UK estimates that an increase in migration of 1% of the native population will lead to an increase in 0.18% of the rate of unemployment for native-born workers. This effect is, however, not statistically different from zero.

• The largest estimated effect is with respect to semiskilled workers. The study finds no statistically significant effects for other skill groups of workers.

• One key conclusion is that more work and better data is needed to assess immigration effects on UK residents.

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