Immigration and its Effect on the UK Labour

Market and Economy

Introduction
Immigration has been and is an integral part of the globalised world today.
It is generally defined as the process in which people move from their
native country to another country in order to earn better wages, have
access to better education or simply reside there. The United Kingdom has
been one of the fastest growing economies, that has made it one of the
more popular countries which attract people to migrate in order to search
for better opportunities. Indeed, one of the major reasons explaining the
sudden increase in the UK population since the 1990s can be attributed
to the inflow of migrants. Since there is a definite increase in the
population of the UK, it is logical to conclude that this increase would have
had a significant impact in the country and on its various systems. This
essay will attempt to prove that the influx of migrants has been beneficial
to the UK economy and labour market.

The population of the United Kingdom has been increasing steadily since
the 1990s.The migration policies of the United Kingdom have resulted in
an astoundingly large amount of migrants coming into the country. Since
2004, the citizens of 8 countries belonging to the eastern and central
parts of Europe that had joined the EU (also known as A8), have been
given permission to reside and work in the UK. Due to this, a large number
of persons have migrated to find jobs in the UK. The UK was one of the
few countries that had removed barriers to labour market. This has
provided a great surge of immigrants entering the UK. Although the
migrants coming from Europe do make up a sizeable percentage of total
migrants, it is the migrants who come in from countries outside the EU
that make up for almost 60% of migrant population (Economic Outlook,
2006, p.23).
The most common reason as to why people migrate is to achieve better
job opportunities and higher pay, although a sizeable portion also migrate
in order to avail of the quality educational facilities. This is in turn very
beneficial to the UK economy as the migrants who enter the UK with the
purpose of education tend to remain and search for jobs in the UK even
after they complete their higher studies.
It has been found that migrants are willing and have no qualms working
for lesser wages as compared to their UK born counterparts. The reason
why they are prepared to accept the lower wage offered by the

manufacturer is because even the minimum wage offered by the

manufacturers would be far more than they would have ever earned had
they worked in the same job position back in their home country. This very
opportunity of being able to earn more money is the main inducing factor
that lures people to migrate out of their home country. However, it should
be noted that the process of migration is not cheap. Immigrants have to
incur the costs of traveling as well as residence and relocation. Once
settled, a majority of the immigrants do not immediately report to work
and as a result have to be in a position to bear the costs of income given
up during that period of inactivity. Thus, according to Richard Barwell
(2007, pp.50-51), if the migrants believe that the cost of immigration and
relocation to be too high or not worth the benefits reaped, they may
decide against migration at all. Therefore, it can be seen that other factors
apart from higher pay influence the decision of immigration.
The regional distribution of different sectors such as commerce, trade,
agriculture, etc. has a significant impact on where the migrants work and
live. While London continues to be the most desirable hub or destination
for the international migrants, it has been found that the A8 citizens are
spread out more fairly across the UK. This could in part be due to the fact
that agriculture and its derivative sectors have come to rely rather heavily
on the labour supplied by the A8 immigrants whereas the international
migrants tend to prefer work in the industrial, manufacturing and
hospitality sectors ( Economic Outlook, 2006, pp.22-23).

Effect of Immigration on the UK Labour Market

According to Wadsworth, the supply of labour to the labour market will
definitely increase unless increasing immigration is offset by emigration
out of the country (2010,p.35). A majority percentage of the immigrants
are workers which would naturally increase or add to the supply of the UK
labour market. In the past, manufacturing firms had been greatly plagued
by recruitment problems when trying to expand their business. According
to Economic Outlook (2006, p.23) :
Over the past ten years, approximately 70% of firms on average have
tried to recruit, but over two - thirds of them have had difficulties. Since
the second quarter of 2004, when Eastern European were able to enter
the UK labour market, firms reporting recruitment difficulties have fallen
to just over 40% even though only slightly fewer firms have been trying to
recruit than before.

This proves that the inflow of migrants has been beneficial to the
manufacturers as there are less labour shortage problems, a wider choice
of applicants to select from and also because migrants are prepared to
work for lesser wages as compared to their UK born counterparts. This is
due to the fact that although the wage which the manufacturer may be
offering them could be low according to the UK standards, it is still far
more than they would have earned had they remained in their home
country. Added to this, migrants are prepared to work for longer hours
(Barwell, 2007, p.53) and are more highly skilled - leading to gap caused
by skills shortage to be reduced or eliminated entirely (Economic Outlook,
2006, p.23). Moreover, the gains received from skilled workers are more
than that of the gains received from unskilled migration (Kim, Levine and
Lotti, 2010, p.9). This is beneficial as majority percentage of the migrants
is highly skilled.
Barwell says (2007, p.52) that there are two ways in which the inflow of
migrants can affect the supply of the labour market. Firstly by increasing
the overall aggregate supply of labour to the factories by adding to the
size of the population and second by having a greater advantage over the
native workers if the migrants happen to have a different methods as to
how they search for jobs, i.e., by offering to work for more hours, lesser
pay, effective job pitch, etc. On the other hand however, the migrants are
at a disadvantage in terms of not being eligible to enjoy the certain
benefits provided by the UK government to its citizens. But this very
handicap may fuel them to search for jobs harder and more extensively
(Barwell, 2007, p.52).
While it cannot be disputed that migration does have several benefits, it
also does have a few disadvantages. An increase in the supply to the
labour force may be very beneficial to the labour market but it also tends
to apply a downward pressure on the wages of workers (Wadsworth, 2010,
p.40). Due to the abundant supply of labour and the willingness of
migrants to work for lower wages, manufacturers are unwilling or
reluctant to pay higher wages. This could be beneficial from the
perspective of the manufacturers as they are able to get labour for cheap,
but on the other hand it is not a positive situation for the workers as they
have to settle for working for less than their expected wages or not work
at all.
Due to skilled migrant workers willing to work for less, the competition for
the local UK born workers has increased, making it more difficult
especially for the less skilled worker, to find a job (Wadsworth, 2010,
p.41). And while it is true that migrants are more highly skilled and
educated compared to the native workers, it has been noted that majority
of them work in jobs below their skill and educational capacity (Kim,

Levine and Lotti, 2010, p.8). On the other hand however, Coyle (2005,
p.54) states that
Immigrants to the UK have consistently been either very highly skilled or
less skilled than average, so it is most probable that they are filling
shortage areas in the labour market rather than competing directly with
native-born labour.
From this, we can see that immigration has had a mostly positive effect on
the labour market. Though there is no lack of disadvantages, the effects of
these negative aspects are moderate and have not had a drastic influence
on the labour market.

Effect of Immigration on the UK Economy

The inflow of immigrants has also had a significant effect on the UK
economy majority of which has been positive. With the entry of migrants,
the aggregate supply and demand levels of the United Kingdom have
increased (Barwell, 2007, p.54). The consumption levels have also
increased as immigrants would undoubtedly require necessities such as
food, clothing, accommodation, recreation, etc. which would add to the
overall spending of the UK economy. An inflow of migrants would increase
the total population of the country, which would in turn increase the
demand for products, leading to the manufacturing having to start
producing more of goods and services. This would then increase the
potential output levels of the country (Slater and Mehta, 2008, pp. 7-8)
which is beneficial to the growth levels of the economy. On the other
hand, there could also be cases where migrants may spend less.
According to Barwell (2007, p.54) :
Migrants may plan to return home at some point in the future, so they
may save a large fraction of their income to allow greater consumption
when they return home.
Migration has also been helpful in terms of reducing or controlling inflation
levels (Barwell, 2007, p.55). Due to the immigrants earning lower wages,
the total cost of production is not as high as it could have been. This
results in the price of the good or service not increasing as much as it
would have had the workers earned higher wages thus helping reduce
inflation rates. According to Coyle (2005, p.54), interest levels have also
been mostly stabilised largely due to immigrants. This is due to the
reduction in tax burden because of the increasing percentage of the

population who are a part of the working class and are able to earn and
provide for themselves.
Migrants have enormously benefited several significant sectors of the UK
economy including manufacturing, IT, health and infrastructure by
bringing with them their knowledge and skills (Economic Outlook, 2006,
p.26). Migrants, with their foreign knowledge and perspectives, have
different methods and approaches to completing their tasks which could
prove to be more efficient and economical. Furthermore, migrants have
helped to reverse population decline (Economic Outlook, 2006, p.25).
While migrants are coming into the country, people are also emigrating
out of the United Kingdom. This would have definitely proved to have a
negative impact to the UK economy had it not been for the immigrants
who filled in the shortage gap. Several industries would have had to face
heavy decline due to emigration of the younger generation out of the UK.
Thus it can be seen that the increasing number of immigrants coming into
the UK have helped avert an economic decline. According to Economic
Outlook (2006, p.25):
If such populations (immigrants) continue to grow, this potentially marks
a dramatic reversal in regional policy: from mitigating economic decline to
one of managing economic growth.
According to Kim, Levine and Lotti (2010, p.9), all workers regardless of
their status as immigrant or native, would gain in terms of real GDP due to
the increased levels of returns to capital and tax revenues and increased
levels of wages and remittances. This is beneficial to the UK economy in
the long run.
Another way the UK economy would benefit due to the immigrants is
through the increase in the size of capital stock. Since the net inflow of
migrants would increase the size of both the population as well as the
labour force, the value attached to new capital goods by the companies
would increase. The larger population would demand more goods which
would in turn increase the companies demand for capital and labour. This
would therefore
eventually lead to an increase in the size of the capital stock and
therefore the supply capacity of the economy (Barwell, 2007, p.53).
An inflow of migrants would also improve technological progress,
although the type and pace of progress depends majorly on the
composition of migrants (Barwell, 2007, p.53).

Conclusion
Immigration is not a new phenomenon. It is a practice that has been going
on for thousands of years from the early man moving from place to
place in search of food and shelter, to the modern man moving from one
country to the other in search of a better job or education opportunities.
The goal is the same the attainment of a better way of life. The main
difference between then and now is that with new policies and systems,
with governmental bodies and globalisation, immigration tends to have a
great and significant impact.
The same is true for immigration in the United Kingdom. Immigration has
had a significant impact on nearly all sectors of the UK economy including
manufacturing, agriculture, trading, healthcare, hospitality, administration
and many more. In the case of the United Kingdom, the inflow of migrants
has had a strong positive effect especially in the labour market and
economy. That is not to say however that it does not come without its
disadvantages.
In the case of the UK labour market, it was seen how the inflow of
immigrants greatly helped by increasing the labour force supply and
eliminating shortages. Wage inflation was reduced and manufacturers
were able to benefit from this. UK had a serious problem of skills shortage
which was also overcome due to the immigrants who were found to be
more highly educated and skilled compared to their UK born counterparts.
On the other hand, immigrants have been a major cause of the downward
pressure on wages and increased competition for the local workers. These
effects, however, have been moderate and have not affected the labour
market in drastically negative manner.
In the case of the UK economy, it is undisputable that the immigrants
have had an extremely positive impact on the country by increasing the
levels of aggregate demand and supply, increasing the consumption
levels, reducing inflation levels, stabilising interest levels, reversing
population decline and several more.
From the provided arguments and facts, it cannot be disputed that the
inflow of migrants has had a positive effect on the UK labour market
and economy. What needs to be studied further is whether this positive
effect would continue in the future and if so, to what extent.

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