The impact of immigration on unemployment and wages in Britain

There is little evidence that immigrants raise unemployment rates or lower wages in the regions of Britain where they concentrate, according to new research by Professor Christian Dustmann, Dr Francesca Fabbri and Professor Ian Preston, published in the November 2005 issue of the Economic Journal. Their study investigates the effects of different rates of immigration on regional unemployment rates across the whole of Britain.

They reason that if immigrants do (as some people believe ) compete head-to-head with existing workers, undercutting their pay and pushing them out of jobs, then unemployment should be higher in just those places where immigrant inflows loom larger. The researchers find that these effects are typically small; indeed, one cannot be confident that there is any impact at all. Why are these effects so small and imprecise? One possibility is that employment levels of immigrants and non-immigrants are only maintained in the face of greater competition by lower wages. But these researchers find no adverse wage effects either. Instead, they argue, immigrants create their own jobs by expanding employment as a whole. To the extent that immigrants bring different skills to a locality, that locality specialises more in goods and services that are intensive in the use of those skills, selling them in competitive markets at home and abroad. One way of viewing the phenomenon is to say that it is the goods market that does the adjusting to immigration rather than the labour market.

”The Impact of Immigration on the UK Labour Market” by Christian Dustmann, Francesca Fabbri and Ian Preston is published in the November 2005 issue of the Economic Journal. Christian Dustmann and Ian Preston are at University College London. Francesca Fabbri is at the University of Munich.

Christian Dustmann

Research and Analysis of Migration (CReAM) at University College London | +44-20-7679-5832 | c.dustmann@ucl.ac.uk