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Migration data shows Johnson's Brexit will not result in a high wage economy

·Finance Reporter, Yahoo Finance UK
·3-min read
Boris Johnson/Brexit
British Prime Minister Boris Johnson said Brexit would turn Britain into a high wage economy. Daniel Leal/Reuters

The UK’s shift towards a more restrictive migration regime after Brexit will not deliver the “high wage” economy promised by prime minister Boris Johnson, a report shows.

The analysis from the Resolution Foundation says the restricting freedom of movement will drive change in the labour market but will not have a big impact on the UK’s economy in terms of wages.

Immigration has significantly altered the size and composition of the UK labour force over the past two decades.

Between 1994 and 2019, the UK labour force grew by 18% (4.9 million), with migrants comprising over three-quarters (77%) of this growth, and EU workers alone accounting for over a third (34%) of total labour force growth.

Read more: UK wage growth lags behind inflation as cost of living squeeze continues

Over this period, EU migrants have become increasingly over-represented in lower-paid occupations. By 2019, EU workers were significantly more likely than UK-born workers to work in low-paid jobs such as plant operatives or elementary roles.

The report argues that the impact of the new migration regime on the economy as a whole is likely to be small.

“The prime Minister’s claims that controlled migration is the key to a new high wage economic strategy are overdone,” the report said.

“While the shrinking of low-productivity, migrant-reliant sectors like farming and food manufacturing could boost average productivity, the new regime is unlikely to have a big impact on the UK’s economy-wide productivity problem, as there is no strong relationship between changes in the share of workers that are migrants across countries and productivity growth.”

Lower migration will also not improve public finances as previously claimed.

“Although the Office for Budget Responsibility find that the new migration regime could result in £2 billion savings to the public finances by 2024-25, this figure is small in comparison to other expenditures, like the £8.7 billion on Covid-19 related personal protective equipment (PPE) that the Department for Health and Social Care recently reported writing off,” the report states.

Read more: COVID puts more than one million workers on universal credit

Lower-paying industries such as food manufacturing, warehousing and accommodation will also struggle as they rely on migrant labour and typically see high staff turnover.

For example, one-in-five workers (20%) in food manufacturing in 2017-19 were from the EU and would be ineligible for the new ‘skilled worker visa’ (SWV), meaning those industries will need to adapt or shrink in the years ahead.

The food and accommodation sectors who rely on EU-workers in SWV-ineligible roles for 10% of their workforce have seen vacancies double as the economy reopened.

Kathleen Henehan, senior research and policy analyst at the Resolution Foundation, said: “Despite claims from both sides of the debate, the UK’s new migration regime will do little to change the UK’s economic trajectory, or its central low investment, low productivity challenges.

“Ultimately, a migration strategy is not a substitute for an economic strategy.”

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