Experts predict lower growth in jobs and output if flows of people from EU are restricted

Restricting immigration from Europe after Brexit is very likely to lead to lower growth in total jobs and in the output of the UK economy, the government’s official migration advisers have said.

The labour market experts even cite official projections that zero net EU migration post-Brexit could not merely halt population growth in parts of northern England, Scotland, Wales and Northern Ireland but actually lead to falls in the next 20 years.

However, the migration advisory committee (MAC), whose members are appointed by the home secretary, says cutting EU migration will “not necessarily mean lower growth in output per head, which is most closely connected to living standards”.

The economists challenge employers over the role of wages in their decision to hire migrant workers, saying they are too reluctant to discuss the issue and some deny that low wages were part of their “image problem” among UK-born workers.

The MAC’s interim report on the impact of EU migration on the British labour market was commissioned by the home secretary, Amber Rudd, who has made clear that its final report this autumn will be used to design the government’s post-Brexit immigration policy.

The report provides strong evidence that many employers, particularly in lower-skilled sectors, greatly fear new post-Brexit restrictions to recruit EU migrants, saying it will “make a hard job harder”.

The MAC says businesses employ EU migrants not because they are prepared to accept lower pay and conditions but because they are prepared to do work that British workers won’t. The vast majority do not deliberately seek to fill vacancies with migrant workers.

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“Why does business employ EEA migrants? The simple answer is because they are the best available candidates. Understandably, employers are unenthusiastic about the prospect of restrictions on the pool of possible workers,” concludes the report, which cites 40% lower absenteeism rates for EU migrants compared with UK-born workers in some lower-skilled sectors.

However, the committee says employers are too reluctant to discuss the role of wages when explaining why they employ EU migrants.

The MAC report points to a big pay differential between western European migrants who are paid on average 12% more than UK-born workers and eastern European workers who are paid, on average, 27% less. But the labour market experts say the differences can be largely explained by differences in age, region and industry.

They do, however, add that they do not think it credible for some employers to argue that they couldnot increase the number of UK-born workers they employ by offering higher wages.

“Individual employers would almost always be able to recruit resident workers if they paid wages sufficiently above the going rate,” they say before adding that it is more credible for employers to argue that higher wages were unaffordable because of small margins and other cost pressures.

The labour economists are quite firm that the financial crisis and not EU migration has been the principle reason for the fall in real wages for UK-born workers since 2004. They note that the fall in real wages has not been confined to the low-skilled where the rise in EU migration has been the most marked.

The MAC says migrants from new member states since 2004, such as Poland and Romania, seem to be lower paid than UK-born workers, but that does not imply EEA migration has suppressed the wages of UK-born workers.

“Some employers, mostly in lower-skilled sectors, felt they had an image problem among the UK-born with jobs in their sector being viewed as an unattractive career. Employers denied that low wages were part of the image problem but when, for example, 95% of jobs in hospitality pay below average hourly earnings, we were not always convinced by this argument.”

The MAC’s conclusion that lower EU migration will “very likely lead to lower growth in total employment and lower output growth” contradicts statements made by Andrew Green, the chair of Migration Watch, on Monday that there was “simply no evidence” to support employers’ claims that a reduction in immigration, particularly among low-paid workers, would harm the economy.

The MAC’s chair, Prof Alan Manning, saidnothing in the interim report should be used to pre-judge the committee’s conclusions on the impact of EU migration on wages, unemployment, prices or the provision of public services.

“Some think a greater sense of urgency is needed, that action is needed now,” said Manning. “We do understand the importance of migration policy, but coming to the right, rather than a rushed conclusion is what matters. Our work is for a system coming into force in 2021.”