The LSE Migration Studies Unit have published a new paper of mine, looking at the long term economic effects of migration in British cities.
In a nutshell, I find migration is good for productivity and wages, less good for low skill workers’ employment. Let’s explain why …
The paper takes stock of the UK’s last big ‘migration cycle’ – from the mid-1990s to 2008. During this time net migration spiked up from 30-40,000 people per year to around 198,000 by 2007 . Most of those people ended up in urban areas, although some rural areas saw rapid growth too.
We’d expect this kind of shift to change both the size and the composition of cities’ population and workforce. We’d also expect a mix of short term ‘shocks’ to labour supply, and more subtle changes to urban economic structure.
Sure enough, I find:
1) Net migration to UK cities helps raise the productivity and wages of British-born workers, especially the higher skilled
2) Net migration is linked to lower employment rates, especially among lower skilled UK-born workers.
I think I can interpret these as causal effects. (For the econometricians, results survive a battery of robustness checks, including a shift-share IV specification.)
For policymakers, there are two big stories here.
The good news is that the diversity migrants bring is good for UK productivity, and helps raise average incomes. A number of things are probably driving this – high skilled migrants, diversity-innovation effects, and the benefits of diasporic communities in trade links.
The bad news isn’t about migrants taking British jobs – that’s too simplistic. My research and other evidence suggest various things are happening here. It’s partly about deindustrialisation. Established migrant communities went where the jobs were in the 1960s and 70s, and have stayed in old industrial towns as jobs have gone. And it’s partly about employer behaviour – during the 1990s the UK has seen increasing numbers of low-quality entry-level jobs, plus increasing use of employment agencies, many of whom use largely migrant labour. As a result, low-skilled Britons face a combination of poor jobs, limited access and competition. In effect, the labour market locks them out.
Like a number of others, I think migration is good for UK plc, and good for British cities. Policy should be encouraging high-skill migrants in – through universities and workplace channels. At the same time, we need tougher regulation of poor employers and employment agencies, as well as restrictions on lower-skilled workers.
That needs a more sophisticated system than a migration cap – although the Coalition’s latest proposals suggest they are trying to introduce some flexibilities into what most businesses and experts think is a basically flawed idea.
Now, these findings are significantly different from most (but not all) research in this field. It’s worth explaining why, and why I think this paper adds value.
First, I’m looking at the long term – I have a 16-year panel, rather longer than most other studies in the field.
Second, I’m looking beyond the labour market – I’m able to identify some short term wage and job ‘shocks’, but I’m also able to look at dynamic effects on urban economies, such as productivity and cost of living effects.
Third, I pay careful attention to space – most research on the local effects of migration compares outcomes across regions or local authority districts, which are either too big or too small to represent functioning economic zones. By building a new dataset of real urban economies, I’m able to pick up effects other studies might have missed.
This is work in progress. So as ever, I’d welcome your comments.