Wednesday, 27 February 2013

Immigration and the UK labour market

Tomorrow's immigration statistics (Thursday 28 February) will be pored over for evidence of whether the government is making progress towards its "target" of reducing net migration to the "tens of thousands". The contradiction between the government's claims that the UK is "open for business" and the policy measures required to meet the target - essentially, measures to reduce the number of skilled workers from outside the EU and foreign students - has been highlighted elsewhere (for example, by the Conservative MP Gavin Barwell in the Telegraph).  For a longer explanation of why a flexible immigration policy is an essential part of any serious growth strategy, see my article here

However, when looking at immigration and the labour market, the most relevant statistics are not tomorrow's but the quarterly Labour Force Survey data on employment of the foreign born.  And the Home Office took the opportunity to claim last week that these figures showed that migration policy was ""working":
"New figures released today show the number of UK nationals in employment in the three months to December 2012 had risen by 521,000 compared to the same period in the previous year - a rise of two per cent, compared to 0.6 per cent between 2010 and 2011...over the same period, employment for non-UK nationals was 2.64 million, up 75,000 on the previous year. This represents an increase of 2.9 per cent compared to a 6.8 per cent rise between 2010 and 2011.  Immigration Minister Mark Harper said: 'These figures show we are building a better immigration system that works in the national interest and is supporting growth. The rise in numbers in employment has benefited British citizens first, but our system is still allowing skilled migrants to come to the UK where they are needed by British businesses."

Let's leave aside the rather odd claim that the "better immigration system" is supporting growth.  Growth over the last two years has been almost non-existent.  What about the assertion that the rise in employment is benefiting British citizens first? This chart shows the proportion of the working age population, and the proportion of those in employment, who were born abroad 



[Note: most analysts prefer to use foreign born, rather than foreign nationals, to analyse migration in the labour market, because while an individual can change their nationality, they can't change their country of birth. Apparently this government, like the previous one, prefers to look at nationality, presumably because it makes the number of "immigrants" in the labour market look smaller.]

What does it show? Perhaps the most striking feature here is the degree of continuity: a gentle but fairly steady upward trend in the share of those born abroad both in the potential workforce and those in employment. This trend accelerated somewhat after the accession of new EU member states in 2004 and came to a brief halt in 2008-09 as a result of the recession, but now appears to have returned roughly to the pre-recession trend.  Over the past year, the number of those in work born abroad rose by about 200,000, as did the number of residents of working age; this is pretty much the average for the last fifteen years. It is difficult - or at least certainly far too early - to see any significant change in the long run trend here. It is therefore difficult to see how changes to the immigration system could have had any substantial impact, as yet, on the employment of the UK born. 

What is certainly true is that despite continued significant immigration, there has been a substantial increase in the number of UK born workers.  As I argue here, this mostly reflects the remarkable flexibility of the UK labour market. But two other factors may explain why the employment of the UK born has risen over the past year: first, the continued increase in the number of older workers, and second, as I argue here, the impact of welfare reforms, which have required - for better or worse - a large number of  those who were previously claiming either lone parent or incapacity benefits to look for work. Both groups are much more likely to be born in the UK than the working age population as a whole. But neither trend has much, if anything, to do with immigration. 

What should we conclude from this?  No matter how many times it is debunked, the myth that immigrants "take all/most of the new jobs" persists. But the experience of the last year suggests that, just as many of us have long argued, healthy job growth for the UK born is perfectly consistent with continued migration - for both economic and other reasons - at levels well above the "tens of thousands". Equally, there's still plenty to worry about in the UK labour market - unemployment overall is still 700,000 above what it should be if the economy was roughly on trend and youth unemployment in particular is a huge concern both in the short and long term.  But no-one should pretend that those problems are either caused by, or can be solved by, immigration or immigration policy. 





6 comments:

  1. Good post about immigration it is very useful information

    Canada Immigration Basics

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  2. If only we had much higher net migration then there would be no unemployment, the deficits would become surpluses, we would all be richer, the housing crisis would disappear, and the energy crisis would be solved.

    What changes to the Immigration Rules would you suggest?

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    1. I see you've given up on rational argument here. Perhaps you should set up your own blog if you think you have something to say on this topic other than assertion.

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  3. Good post. Unfortunately immigration policymaking seems to be driven purely by political forces, without any regard to the economic argument that has been made several times.

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  4. the problem with using foreign born rather than foreign nationals is that it includes many Brits born abroad [including English cricket players] which historically included many children of uk's armed forces and others abroad when UK used to have an empire. It also includes those who were foreign nationals but may have obtained uk natonality decades ago. so using foreign born compared with uk-born certainly doesnt give any measure of recent migration effects on the labour market and it's therefore unsurprising the two lines shown in the graph are moving in similar ways. migration anually is small compared with the stock of foreign born or previous migrats already here.

    much more useful would be to look at the lfs data filtered by those who have been foreign nationals who were not resident in the uk 1 year previously....yes the data exists albeit with smaller sample sizes. why dont you ask for it and plot that instead of presenting results that compare two stocks that tell us little about the impact of recent migration on labour markets.

    just relying on data as published routinely by ons is like trusting the gdp figures to tell the whole truth and ignoring changes in income distributions [as pointed out for the us in the stiglitz report]

    as my former economics professor would have said ... good but try harder thinking about what the data you have chosen actually measures before plotting it

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    1. You're missing the point (and the "Brits born abroad is a red herring - small numbers). This post deliberately looks at high level trends; not trying to do econometrics here.

      However, more broadly you're right and NIESR research has looked at this issue in much more detail using NINO data, which is much better suited than LFS data for looking at short-term local labour market impacts, eg here:
      http://www.niesr.ac.uk/pdf/090112_163827.pdf

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