Impacts of Immigrants to UK and UK Immigration Policy on its Labour Market - Essay Example

 Impacts of Immigrants to UK and UK Immigration Policy on its Labour Market Introduction International migration is not a recent phenomenon, but a social phenomenon that has prevailed throughout the history of humanity. In the contemporary world, international migration has grown to be a major factor that influences the intricate space-time dynamics in the global and national socioeconomic systems (Zorlu and Hartog 2005; Venturini and Villosio, 2006). Numerous nations are progressively being affected by international migration. According to OECD, (2009) the countries that host the immigrants and the countries where the immigrants move from are both greatly affected by the immigration. The composition of the of the incoming immigrants is usually very different from that of the population of the receiving country on matters pertaining to demographic, cultural and socioeconomic attributes (Okkerse, 2008). As a corollary, the demographic and socioeconomic effects of international migration have become very apparent in the contemporary world and this has gained the attention of policy-makers and the society in general. This has consequently made the immigration process a playing field for numerous studies in the 21st century (e.g. Clark and Drinkwater, 2010; Macura et al. 2005) In theory, the effects of international migration on earnings and jobs for the population in the host country is critically contingent to the extent to which migrants’ skills are complements or substitutes to the skills of the population in the host country, and on how immigration impacts the demand for labour in the host country (Hatton and Tani, 2005). Apart from changes in salaries and employment Dustmann et al, (2008) asserts that there are at least two other adjustment mechanisms in which an economy acts in response to immigration. Besides enlarging labour supply, immigration has the propensity to increase the demand for labour (Saleheen, and Shadforth 2006). Immigrants increase the consumer demand for goods and services in the host country and in the long run, immigration can lead to more investment in the host country (Schmitt and Wadsworth 2007). As a result, this paper aims at identifying the effects of immigration to the UK and UK immigration policy on its labour market. Impacts of immigration to the wages and employment in the UK An empirical and experimental research by Dustmann et al (2013) on the labour market impacts of immigration in the UK shows that immigration has a moderately insignificant impact on the average earnings and salary distribution low, medium, and high paid employees. Dustmann et al (2013) conducted their research on the period 1997-2005 when the UK had momentous labour related immigration. Dustmann et al (2013) established that the increase in the numeral value of immigrants was 1% in proportion to UK-born working-age residents. They established that the 1% increase of immigration led to an increase in average earnings in the UK from 0.1 to 0.3% Another study by Reed and Latorre (2009), which focused on the period 2000-2007, established that a 1% increase of immigration in the UK reduced the average earnings in the UK by 0.3%. These two studies were conducted for different time intervals, hence the relatively contrasting conclusions. However, both studies agree that the impacts of immigration on average earnings in the host country are moderately low Dustmann et al (2013) findings showed that for each 1% increase in immigrants in the labour market a 0.6% decline is observed in the earnings of the 5% UK born employees who are lowly paid and to an increase of the same proportion in the wages of the UK born employees who are highly paid. Correspondingly, another study that researched on the wage effects at the occupational level in the period between 1992 and 2006, revealed that, the unqualified uneducated and semi-skilled employee's earnings reduce by about 0.5% after a 1 % increase of immigrants in the labour market (Nickell and Salaheen 2008). The studies done on this field further show that any adverse salary impacts of immigration are likely to mostly affect the workers who are not original residents of that country (i.e. the immigrants). This is can be attributed to the fact that the skill sets of new immigrants are likely to be closer substitutes for the skill sets of the immigrants who are already in employment in the host country for the employees who are original residents. Manacorda et al (2012) analyse data from 1975-2005 and assert that the major impact of augmented immigration is in the earnings of immigrants who are already in the UK than the employees who are UK original residents. The findings of Manacorda et al (2012) are illustrated in the figure below Impacts of immigration to the employment in the UK Lemos and Portes (2008) assert that, just like the impact on earnings, the impacts of immigration on employment are different in the short and long run. Drawing reference from the same argument, Jean and Jimenez (2007) conducted a study on the impact of immigration on the employment of local employees in OECD countries (including the UK). Jean and Jimenez (2007) revealed that an increase in immigrants in the labour force leads to an increase unemployment in the short and medium term (around 5-10 years) but has no noteworthy impact in the long run (10 years and above). Dustmann et al (2005) conducted a systematic study using data for the period between 1983-2000 to evaluate the changes on employment and labour market participation due to an increase in immigration levels in the UK. Drawing reference fro the data for the period 1983-2000, Dustmann et al (2005) affirmed that immigration had no noteworthy statistical impact on the general employment status of UK-born employees. The study did, nonetheless, identify some considerable statistical impacts on specific educational groups of UK-born employees. Dustmann et al (2005) revealed that immigration had adverse effects in terms of employment and labour market participation to UK-born employees with intermediate education (i.e. O-level and below) and an assenting impact on employment statuses of UK-born employees with higher education levels (A-levels or higher education degrees) as illustrated in the figure below. Source: Manacorda, Manning, and Wadsworth (2012) Two recent studies have presented supplementary insights on the effect of immigration on employment in the UK when by analysing the period in latest financial recession. Lucchino et al (2012) analysed the National Insurance Number (NINO) registrations statistics as of 2002 to 2011 to investigate the effects of immigration on claimant unemployment rates (i.e. a proxy for joblessness) in 379 local establishments in the UK. The findings of their study imply that there is indeed increasing rate of immigration has no effect on the claimant unemployment. This assertion is observed throughout the period of low economic growth and financial slump. In the year 2012, The Migration Advisory Committee (MAC) researched on the effects of an increase of immigrants on the employment of UK-born population by analysing statistics from the Labour Force Survey for the period between 1975 and 2010. According to the findings of the Migration Advisory Committee, (2012) it is evident that immigrants have no significant effect on UK-born populations employment. Nonetheless, MAC also evaluated the specific effects of EU and non-EU immigrants in the period between 1975 and 2010, which was divided into two sub durations: i.e. 1975-1994 and 1995-2010. This investigative venture revealed that non-EU immigration led to a decline in the employment of UK-born employees during 1995-2010. On the other hand, no noteworthy statistical impacts were realised for EU immigration. The study by MAC also brings into perspective the perception that there is a probability of the negative effects of immigration on employment of UK-born employees during major financial recessions. Evidence gaps and limitations of this analysis It is essential to acknowledge that the evaluation of the impacts of immigrants to the UK and UK immigration policy on its labour market faces several of procedural obstacles. For instance, immigrants who come to the UK usually go to areas that are experiencing economic development and high labour demand and this implies that immigration can be both a cause as well as an outcome of changes in earnings and employment. As a result, the process of establishing causality becomes very intricate. Another hindrance is that international immigration into a specific region might make some of the employees based on that region to leave that locale and move to other parts of the nation or even outside the country. In such a scenario, the labour market impacts in that specific region are dispersed across the country or the globe, which makes accurate measurement of the local labour market evaluation more intricate. The third procedural obstacle is the questionable quality of statistics on immigrants, and particularly the statistics of specific immigrants, which are usually based on very few samples of the population and can consequently bring about noteworthy measurement errors in the analysis. Most empirical studies, including all those analysed in this paper, usually employ a variety of methods and econometric procedures to deal with these obstacles. There are three major types of procedural techniques of dealing with these obstacles. These include the spatial correlation technique, which divides the national labour market in several sub-markets by geographical regions, then evaluating wage changes in these regions (e.g. Dustmann et al 2005). The second is the factor proportions technique, which entails coming up with a simulation of the effects of immigration on the labour supply and the ramifications for earnings and employment (e.g. Borjas et al., 1997). The third is the skills cells technique, which splits the national labour market in terms of skills group instead of geographic regions (e.g. Manacorda et al., 2012). Conclusion The study of the impacts of immigrants to the UK and UK immigration policy on its labour market is very imperative in modern day politics. Furthermore, the predicament of immigration in the UK will remain pertinent in the future, with an expected influx of approximately 7.7 million immigrants in the period between 2008 and 2060. The policy makers and society of the UK hold the perception that immigrants reduce opportunities for jobs from native-born employees and increase pressure on wages and resources. However, an analysis of the UK literature on the topic of impacts of immigrants to the UK and UK immigration policy on its labour market show that there is no evidence to support this perception. In fact, it is the immigrants who are adversely by in the increase of immigration in the country. As a result, the UK’s policy makers should not impede immigration processes that may help in improving the country’s productivity in the name of making UK’s labour market an even field for UK-born employees. References Borjas, G. J., R.B. Freeman, and L.F. Katz. (1997). “How Much Do Immigration and Trade Affect Labor Market Outcomes?” Brookings Papers on Economic Activity 1 pp. 1-90. Clark K, Drinkwater S (2010). Recent trends in minority ethnic entrepreneurship in Britain. Int Small Bus J 28: pp 136–146 Dustmann, C., Glitz, A. and Frattini, T. (2008). “The Labour Market Impact of Immigration.” Oxford Review of Economic Policy 24, (3) Dustmann, C., Frattini, T.and Preston, I. (2013). “The Effect of Immigration along the Distribution of Wages.” Review of Economic Studies 80, (1) pp 145-173. Dustmann, C., Frattini, T.and Preston, I. (2005) “The Impact of Immigration on the British Labour Market.” Economic Journal 115, (507) F324-F341. Hatton TJ, Tani M (2005). 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