What are the impacts of economic migration to the UK?

1 Jul 2008

Employment Studies Issue 8

Rachel Marangozov, Senior Research Fellow

This is a question that has scarcely been out of public debates over the past few months, with many questioning the extent of social and economic gain to the UK from immigration. However, despite these questions, economic migration has presented, and continues to present, great opportunities for the UK, particularly in economic terms.

Key trends and characteristics

One of the most high-profile trends of recent economic migration is the higher numbers of migrant workers from the EU accession states. Immigration levels in the UK have risen significantly over the past 10 years, driven by sustained economic growth in the UK and the opening up of the labour market to the new EU accession states since 2004. For example, in 2006/07, there were 713,000 new National Insurance number registrations (required to work, pay taxes or claim benefits in the UK), of which 321,000 were from EU accession countries (’A8’ countries). This was a significant increase on the 12,000 new registrations from EU accession states in 2002/3 (DWP, 2007).

Analysis of foreign labour inflows by route of entry in 2005 and reveals that over half were accounted for by those coming in from A8 countries (registered under the Worker Registration Scheme [WRS])[i] (Salt and Millar, 2006). Indeed, opening up the labour market to EU accession states in 2004 has led to what has become the largest single wave of in-migration that the British Isles have ever experienced, with Poles replacing Indians as the largest single national group of entrants (ONS, 2006).

The increased in-flow of labour migration has expanded the stock of economic migrants in the UK from around 1 million in 1998 to around 1.5 million (or 5.4 per cent of the total in employment) in 2005 (Salt and Millar, 2006). Experts estimate that 2005 saw the largest ever entry of foreign workers to the UK, totalling just over 400,000 economic migrants – the highest officially recorded figure in Europe except for Germany (Salt and Millar, 2006).

There has also been more ‘churn’ among economic migrants. Available data shows that economic migration from the A8 countries is largely short-term. Just over half of the A8 nationals registering with WRS in 2007 were on temporary employment contracts and around 60 per cent indicated that they intended to stay in the UK for less than three months (Home Office, 2008).

There are varying skill levels among economic migrants: those migrating to the UK are typically more skilled than the domestic population (Kyambi, 2005). For example, EU15 nationals, and particularly those from France, Germany and other northern EU countries, are typically more skilled, as are those from South-East Asia, North America and Australasia. However, this has changed in recent years, with the proportion of economic migrants in the professional and managerial group falling because of the entry of A8 migrants into lower-skilled occupations (Salt and Millar, 2006). Despite the fact that many A8 migrants possess high levels of qualifications and skills, the vast majority are concentrated in low-skilled occupations and this trend has remained stable since 2004 (Home Office, 2008). However, there is every possibility that this trend could change yet again, given the emphasis that the new points-based migration system has placed on more skilled migrants.

Migrant workers are also spread across a wider geographical area. In 2005, 45 per cent of economic migrants were located in Greater London (compared with just 10.4 per cent of UK nationals). However, the latest data shows that East Anglia had around 15 per cent of the total of A8 migrants registering to work, followed by the Midlands (13 per cent) and London (12 per cent) (Home Office, 2008).

The impacts of economic migration

The evidence on the social impacts of migration indicates that economic migration has had very few adverse effects on UK communities.

The national picture of community cohesion remains a largely positive one, even after large-scale immigration from eastern Europe. Far from wrecking our communities, it would seem that new arrivals are making a positive contribution to the economic, cultural and social fabric of many towns. The final report of the Commission on Integration and Cohesion found that 79 per cent of people across the country agreed that ‘people from different backgrounds get on well together’ in their local area (the current indicator by which community cohesion is measured). The latest data from the same survey shows that this figure increased to 81 per cent in April-December 2007.

Given that recent immigration from eastern Europe has been the largest single wave yet of inward migration to the UK, it is remarkable that such social change has seen so little public hostility or violence.

In those areas where migration can be linked to poor community cohesion, it is often as a contributory factor alongside more powerful drivers such as unemployment, deprivation, crime, anti-social behaviour and rapid population turnover. Indeed, evidence from the Joseph Rowntree Foundation demonstrates that the impacts of immigration at the local level vary significantly, depending on the prevalence of such factors, and how these factors inter-relate (Robinson and Reeve, 2006).

The economic impacts of migration are as hotly debated as the social impacts. When it comes to pressures on public services, the evidence remains anecdotal. While local authorities, such as Peterborough and Slough, may be struggling to deliver services to growing and changing populations, this does not mean that these pressures are widespread, outweigh the benefits of migration, or that they can be easily distinguished from other pressures at a time when many public services are already overstretched. According to the evidence, migrant workers are less likely to consume many key services (Audit Commission, 2007), and on average, more than pay their way in terms of fiscal contributions to the public purse (Sriskandarajah et al., 2005). Less than half of the national average claim state benefits and there is no evidence of unfair priority being given to migrants over the allocation of social housing (EHRC and LGA, 2008).

The lack of high-quality, robust data on migration makes it difficult to paint a full picture of economic impacts. As a result, many studies have had to rely on lumping together both migrant and settled communities to draw their conclusions about overall impacts. However, the overwhelming majority of evidence on the economic impacts demonstrates that overall, the recent arrival of migrant workers has helped the UK become a more vibrant, competitive economy in two key ways.

First, migration has plugged gaps in the labour market and sustained the delivery of key public services (Coats, 2008; CRC, 2007; Ernst and Young ITEM Club, 2006; European Commission, 2006). In late 2003, there were about 700,000 unfilled vacancies in the UK – just one indication of how many British businesses would have struggled to survive without migrant workers, being forced either to offshore or to shrink their business. Moreover, government studies suggest that the arrival of migrant workers has had no overall adverse impact on wages or unemployment for local workers (Lemos and Portes, 2008; Gilpin et al., 2006).

Second, migration has brought benefits to UK business, particularly in terms of new working practices. Recent evidence submitted to the House of Lords Economic Affairs Committee confirmed the value of migrant workers to British business – something IES reported on in 2006 (Dench et al., 2006). The UK supermarket chain Sainsbury described its East European employees as industrious and conscientious, which in the long term, ‘could have a positive effect on their domestic colleagues’.

However, the benefits for the British economy go beyond just plugging gaps in the labour market, and the benefits to business. It is also worth considering a host of other factors – for example, the thousands of jobs created by migrant entrepreneurs or the number of migrant workers needed to boost our shrinking working-age population.

Conclusion

Despite recent public concern about the levels and impacts of recent immigration, economic migration continues to present great opportunities for the UK, particularly in economic terms. However, a preoccupation with the impacts of migration threatens to cloud these benefits as well as the ‘bigger picture’ of a shrinking working-age population and intensified competition for global talent.
The phenomenon of greater population churn and mobility is here to stay. As such, there is a need to not only investigate the impacts of migration, but ensure that our public services, local authorities and managed migration policy are flexible enough to cope with greater population movement.
Finally, it is perhaps ironic that at a time when the debate on economic impacts of migration seems to be fiercer than ever, recent evidence has revealed that around half of A8 migrants who have arrived in the UK since 2004 have already left (Pollard et al., 2008). As things improve back home, as the value of the pound falls and as other EU labour markets open, the UK looks less attractive to the recent wave of young, hardworking migrants. Should this trend continue, the UK will have to either reduce domestic production and export jobs, or import workers from outside the EU. We could then see a very different kind of debate on the impacts of migration – one centred not around having too many migrant workers, but around not having enough.

[i] Nationals from the A8 states are allowed to come and work in the UK provided that they register with the UK Government’s Worker Registration Scheme (WRS). It is important to note that WRS data only shows gross inflows into the UK, as de-registration is not required upon leaving the UK. Additionally, registration is not required for accession state nationals working for periods of less than one month, or if resident in the UK for more than a year, or if in self-employment.

References

Audit Commission (2007), Crossing Borders. Responding to the local challenges of migrant workers. Audit Commission

Coats, D (2008), Migration Myths: Employment, Wages and Labour Market Performance. The Work Foundation

Commission for Rural Communities (CRC) (2007), A8 Migrant Workers in Rural Areas. CRC

Department for Work and Pensions (DWP) (2007), National Insurance Number Allocations to Overseas Nationals Entering the UK – 2006/07. DWP

Dench S, Hurstfield J, Hill D, Akroyd K (2006), Employers’ Use of Migrant Labour. RDS Online Report 04/06, Home Office

Equality and Human Rights Commission (EHRC) and Local Government Authority (2008), Briefing: Social Housing and Migrants. EHRC and LGA

Ernst and Young ITEM Club (2006), Economic Outlook for Business: Spring 2006, Issue No. 35, Ernst and Young

European Commission (2006), Report on the Transitional Arrangements set out in the 2003 Accession Treaty (period 1 May 2004 – 30 April 2006), COM(2006) 48, Commission of the European Communities

Gilpin N, Henty M, Lemos S, Portes J, Bullen C (2006), The Impact of Free Movement of Workers from Central and Eastern Europe on the UK Labour Market, Department of Work and Pensions Working Paper No. 29, Department of Work and Pensions

Home Office (2008), Accession Monitoring Report May 2004 – May 2008. Home Office, Department for Communities and Local Government, HM Revenue and Customs, Department for Work and Pensions

Kyambi S (2005), Beyond Black and White: mapping new immigrant communities. Institute for Public Policy Research (ippr)

Lemos S, Portes J (2008), The Impact of migration from the new Eastern Union member states on native workers. Department for Work and Pensions

ONS (Office for National Statistics) (2006), Travel Trends. International Passenger Survey 2005. ONS

Pollard N, Latorre M, Sriskandarajah D (2008), Floodgates or turnstiles? Post-EU enlargement migration flows to (and from) the UK. Institute for Public Policy Research (ippr)

Robinson D, Reeve K (2006), Neighbourhood Experiences of New Immigration: Reflections from the Evidence Base. Joseph Rowntree Foundation

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Sriskandarajah D, Cooley L, Reed H (2005), Paying Their Way. The fiscal contribution of immigrants in the UK. Institute for Public Policy Research (ippr)