EU immigration does push down wages for the low-skilled—but only very slightlyby John Springford / April 28, 2016 / Leave a comment
Brexit would sink the pound
Brexiteers, after a difficult start to the campaign, are trying to push the EU debate onto immigration. On the Today programme on Monday, Iain Duncan Smith said: “An awful lot of people come here and compete hugely with lots of British people who are in job centres… and they drop down the salary levels; they damage the poorest people in society, because they’ve seen their incomes fall.” When he was work and pensions secretary, Duncan Smith had some of the best labour market wonks working for him. As a politician not known for cautious empiricism, perhaps he didn’t ask them whether this commonplace view was right. Had he done so, they would have said: “Well, minister, you’re not wrong exactly, but in the grand scheme of things, this isn’t much to get worked up about.”
The economics of immigration is a bitterly contested subject—not so much among economists themselves, who exhibit a fair degree of consensus on the matter—but among politicians and the ecology of journalists, think tanks and pressure groups that swim alongside them. And, of course, it is central to the Brexit question, which was always going to boil down to: are you willing to be poorer to have fewer migrants from Central and Eastern Europe around?
For the Centre for European Reform’s report on the economics of Brexit, I took all the reputable studies that had been conducted on the effects of immigration on UK wages and employment. With some simple digging about in the statistics, I used their estimates to calculate the impact of immigration from the EU—rather than all immigration—since 2004, when the new member-states joined. The results? Perhaps a very small rise in unemployment in the short term, which goes away as the labour market adjusts and displaced workers are re-employed. There was no clear effect on average wages—but most economists think that immigration from the EU raises average incomes of Britons a little, by bringing in new skills and raising productivity. There is an effect on the wage distribution, with higher-skilled workers gaining and lower-skilled ones losing. But the effect is small. According to the most recent and robust estimate, by Stephen…