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Migration and wages in London

There is a lot of interesting stuff in a paper out today from the LSE on the impact of migration on the London economy (PDF format, 832K), including a detailed look at the London labour market (also see the press release).

According to the Annual Population Survey, a third of employed residents in London are either immigrants or working visitors, of whom four-fifths are established migrants and the other fifth have been in the UK for less than 3 years.

Foreign-born residents perform around 60% of the jobs in hotels/restaurants and domestic services but other sectoral trends are less stereotypical, with migrant workers doing almost a third of London jobs in financial and business services.

Here are some of the findings on pay:

Migrants from rich counties tend to earn as much or more than non-migrants especially if they have been in the UK for a few years, but those from poor countries get substantially lower average earnings than non-migrants – despite the fact that their average qualifications are higher than those of the average Londoner.

While the authors conclude that there is not any evidence that migration has depressed wages for existing workers in most of the labour market, they think that this may have happened for the bottom 20% of workers. The evidence presented for this is that since the mid-1990s, the wage differential between London and the rest of the country for those in the bottom tier of jobs has been very substantially eroded. In 1995, London wages were on average 23% above those for the same set of jobs in the rest of the UK: by 2001 the difference was down to 6%. This didn’t happen for jobs higher up the scale, nor was it very evident early on, when migration levels were lower. The authors conclude that:

There must therefore be, at the least, a very strong suspicion that the real wages of those working the worst paid set of jobs in London have been substantially reduced as a consequence of the influx of new migrants, many of who, though formally qualified for better jobs, have been unable to access them at the point of arrival in London.

The upside, however, is that the positive knock-on effect has been more jobs – 20% more at this level by 2001 in fact. So the conclusion seems to be that migration has resulted in more jobs in catering, cleaning etc, but lower wages.

Sarah Welfare | |

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Comments (1)

David Shepherd:

It would be against the basic laws of demand and supply if the spectacular growth in the number of migrant workers from poorer countries had not helped keep wages from rising as fast as they otherwise would have done. This report provides more evidence to back up Monetary Policy Committee member David Blanchflower's view that migration has exercised a downward pressure on wage rises.

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