Brexit pay boost for Britons likely to be outweighed by downturn

How mass migration ‘made skilled workers £440 a year worse off’: Plumbers and electricians among those hit hardest by drop in wages

  • Electricians and plumbers among those whose wages are lower
  • Claims made in report by the Resolution Foundation think-tank
  • Net immigration is running at more than 300,000 a year in the UK

By Helen Warrell/ Financial Advisor

A fall in the level of immigration due to the Brexit vote could offer a small pay boost to native Britons in some low-paid jobs but this is likely to be offset by a far larger weakening of wage growth across the country, economists have predicted.

Research by the Resolution Foundation has found that, while the boom in net migration during the past decade has had no impact on the wages of British-born workers overall, it has depressed earnings in some occupations, including cleaning, sales and security.

The Foundation’s report analysed the impact of migration on the labour market between 2004 and 2014, during which the share of migrants in the population increased from 10 per cent to 16 per cent. The authors found that, over this period, the downward pressure in the employment rate for natives with the lowest levels of education was 0.16 per cent per year and 0.24 per cent for those with intermediate qualifications.

The supply of low-skilled workers from EU “accession” countries such as Poland and Latvia had helped drive down wages, with their average earnings at £8.33 per hour, £2.76 below that of natives.

The Home Office had been striving to reduce net migration by two-thirds to under 100,000 ever since the Conservative-led coalition came to power in 2010. If the government is empowered to place restrictions on new EU migrants as a result of the Brexit vote, this goal would become more achievable. According to the most recent figures, 257,000 of the total 617,000 immigrants to the UK during the past year came from within the EU.

However, the report warned that an immediate post-Brexit wage boost was unlikely given that reducing migration to the tens of thousands would only increase the salaries of British workers in sectors most affected by migration by between 0.2 and 0.6 per cent within the next two years. These small increases would be dwarfed by the 2 per cent downgrade to average wage growth made by the Bank of England following the referendum result.

Stephen Clarke, of the Resolution Foundation, said that reducing migration may not have a huge impact on the pay and job prospects of British-born workers, but would create “major new challenges” for many UK employers.

“The government must use its new industrial strategy to support these firms, such as food and clothing manufacturers, who have hitherto relied heavily on migrant workers,” Mr Clarke said. “These firms will need to invest in skills and new technology if they’re to stay afloat in a changed labour market.”

Currently, more than 30 per cent of the workforce in food manufacturing, clothing manufacture and domestic personnel services are migrants. The report warned that simply replacing migrant workers in these jobs with British-born workers was unrealistic given the large pay differences between the two. Instead, it suggested that employers must consider new labour-saving technologies to replace low-paid roles.

But any new migration policy would need to be properly enforced in order to prevent abuse, Mr Clarke said. “We currently have just one labour market enforcement officer for every 25,000 working age migrants. In future a new single enforcement unit, with more resources, will be needed to prevent new risks of migrants illegally overstaying their visas and the undercutting of pay and conditions that could follow.”

However, Jonathan Portes, of the National Institute of Economic and Social Research, suggested that enforcement alone would not work. He suggested that the government must also reform the regulatory framework for low-skilled workers.

“The abuse of self-employment in sectors such as construction is more of an issue than enforcement against illegal overstayers when it comes to undercutting wages,” Mr Portes said. “With such a huge proportion of low-paid labourers being self-employed, that’s a far bigger problem.”