As expected, E.U. immigrants pay more into the public purse than they take out from public services. Non-EEA immigrants take more from the public purse than they put in (Financial Times, 2019).

A study by the Bank of England, however, found that the difference in supply shock was less than 2% on the composition of EU to non-E.U. natives; that immigration is immigration, and the types of immigrants applying for these jobs matters little (Nickell and Saleheen, 2015).



Competitive Advantages of Populations and Effects on Wages



Let’s now consider what the literature says on immigration, and why we examine (here) the educational levels of immigrants. Dustmann et. al. (2005) explains that an immigrant population that differs from the local population has a greater effect on the labour force; I’ll provide an example to explain why.

A country who is primarily educated at a university level will have a shortage of unskilled labour for its size. As such, the unskilled labour would enjoy bargaining power due to this shortage, and be able to enjoy better wages and benefits. As the unskilled labour would also be in greater demand, and the wages therefore higher, there would be no shortage of employment.

However, introduce an unskilled immigrant supply, and while they would have no effect on the wealthy and educated (the data from the Migration Advisory Committee finds it actually boosts their wages! More on that later), they would likely to be willing to work for less money. Companies will naturally flock to these workers, and the bargaining power of the native unskilled labour is weakened.

Similarly, educated people in poorer countries do a great amount of good for the economy, as unskilled labour does not create massive amounts of jobs or innovation.

Therefore, in this article, we shall be examining what we (comparatively) do not have: unskilled and semi-skilled labour. This is born out in the actual numbers; Indians, Pakistanis, and Polish overwhelmingly either very lowly educated, or simply finished High School (more on that here). They naturally move into the low-wage work that their education is suited for, and compete there. More on that later.

Wages of Natives:



The need to suppress wages via migration is well-known; it’s a policy recommendation by many central banks to prevent inflation, lower costs of production, and generally keep the economy chugging. The Central Bank of Ireland (Byrne and McIndoe-Calder, 2019) state that a scarce labour supply to demand naturally increases wages (and prices). It also asks if immigration to Ireland to be increased to prevent this, and keeps the costs of production low.

How? As labour becomes scarce, workers have more bargaining power, and therefore can ask for higher wages as they cannot be replaced. But as wages rise, prices must rise to keep profits, and so the inflationary spiral begins.

Not just the Central Bank of Ireland; the Bank of England found that a larger immigrant to native ratio lead to a negative impact on wages (Nickell and Saleheen, 2015). Gianmarco et. al., (2012) found that there was an ‘imperfect substitution between the natives and the immigrants’, that you could not perfectly substitute these two labour pools.

Gianmarco et. al. (2012) found that immigration has a long-run positive relationship with native wages (+0.6%) as the economic growth across ALL of society compensates; but Bratsberg and Raaum (2015) found that immigration had a 0.06 elasticity with native wages within the industry that the immigrants enter; for every additional 10% of immigrants employed, native wages dropped by -0.6%/ applied to real numbers, for every 1% of immigrants in the employment pool shared, natives could expect a 0.8% drop in their wages.

In other words, it’s good for the people who do not compete for jobs with the immigrants; bad for those who do.

Wages of Previous Immigrants



When we say native population, we also include other immigrants who have settled here long-run, and become to all intents and purposes, British. Their skill set remains the same, however, and therefore, they are competing with the newer fresher immigrants. Gianmarco et. al. (2012) has an extremely negative long-run relationship with the wages of previous immigrants (-6.7%).

Dustmann et. al. (2005) found that initially, there was little affect on wages by immigrants in the U.K., but as immigrants assimilated into the local population, the downward pressure on wages was felt as the labour pool expanded. The Bank of England found that immigration would affect the wages of semi-skilled and low-skilled labour; often previous immigrants would be affected (Nickell and Saleheen, 2015). This was also established in Bratsberg and Raaum (2012) where, due to the interchangeability of skills (making the population substitutable), there was a downward pressure on the wages of previous immigrants by new immigrants.

So immigrants who have already settled here? They face perhaps the greatest reduction in wages from immigration.

Wages of the Poorest



The reason we have considered the education level of immigrants to the United Kingdom is that, in low- and medium- educational fields and industries, immigrant and native labour is nearly perfectly substitutable (Bratsberg and Raaum, 2012). Borgas (2003) found that as immigration into an area increased, weekly wages decreased over time.