If Brexit reduces immigration it will NOT mean higher wages - Warwick Business School
Despite what Prime Minister Theresa May and prominent Brexit campaigners might think and argue recent research finds that EU immigration has not fed into lower wages for low-skilled workers.
The evidence seems clear that EU immigration (or migration generally for that matter) does not impact low-skilled workers, so why does the view, as articulated by the UK Prime Minister, that low skilled workers have had their wages suppressed persist?
The low-skilled sectors are to be found in industries like agriculture, construction and hospitality, where technology is rarely a substitute – only hands will do – so let’s take a closer look at agriculture, which employs four million people in the UK of which 80,000 are EU seasonal workers.
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One of the reasons for the misconception, is the search for answers arising from problems due to a rapid change in demographics in a few concentrated areas, both geographically and sectorially.
The skewed perception arises from emotional aspects of change, typically with perceptually significant numbers of people who speak a different language and have different customs and practices.
Such emotions include fear and anxiety and a step change in immigration can induce this, but people tend to focus on real life, personal experiences to form their view. In this emotional social and political matrix, reasons alight on the nearest thing – immigrant workers and solidity of real numbers such as wages.
The perception held by many people is that EU immigrants are willing to work for the national minimum wage or living wage and therefore suppress the wages of low-skilled workers.
This might be true if EU immigrants and UK workers were fighting for the same job, however this does not seem to be the case; EU workers are not substitutes for UK workers.
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In other words, EU immigrants are competing with other EU immigrants, and so their wages are sensitive to inflows from other overseas workers entering the country. As research has found, a consequence may be that the only people suffering from immigration are immigrants themselves – which leads to wages forced to the lowest possible legal levels.
A Resolution Foundation report found UK workers enjoy an average hourly pay which is 15% higher than immigrants from the 2004 accession countries (typically from Eastern Europe).
EU immigrants need the support of trade unions and trade bodies, with a National Farmers Union (NFU) survey revealing that 31% of businesses have seen a reduction in EU nationals, with 47% of employers saying their EU national workers were considering leaving the UK.
Are these jobs to be replaced with UK workers? The answer appears to be no, as they are looking for jobs elsewhere especially in a time where UK unemployment rates are at record low levels.
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This is further supported by the NFU report, which shows that of the agriculture workers recruited in the first quarter of this year only 0.001% or 14 individuals were of UK origin. Thus, the NFU are calling for an “attractive and effective migration system”.
The research shows that EU immigration has not impacted job prospects or the wages of UK workers – there has even been a slight increase in real wages.
What does this mean for agriculture and the UK as a whole? We can look at a parallel process occurring in the US where economists have warned that a proposal to drastically reduce legal migration in agriculture will not preserve jobs for US citizens or increase wages.
One can lose sight of why EU immigrants are found working in agriculture in areas like Lincolnshire; they are seeking work – the answer is so obvious that it may not even be perceived.
Other facts of EU immigration may be ignored, such as EU immigrants are more likely to be working and less likely to claim benefits than UK citizens; in short, they are net contributors to the economy.
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Perhaps focusing on the emotional and behavioural aspects related to immigration may help assuage feelings about suppressed wages, and open up a debate based on research to produce a fact-based view of EU immigration.
There are real consequences for both EU immigrants and the UK population – there is some anecdotal evidence that a reduction of EU seasonal workers in agriculture is finding its way into an increase in food prices. It is a reminder that immigration policies have consequences and costs, which in real terms means food price inflation.
Harminder Singh is a Senior Teaching Fellow at Warwick Business School and a consultant, who has worked with the United Nations.