From the TUC

Migration and wages

26 Feb 2009, by in International, Working Life

The IPPR report on migration and labour markets (trailed in the FT and the Guardian today) shows that the effect of migration on wages, if it exists at all, has been very small (0.3% for every 1% increase in the proportion of migrants in the labour market – ie from 9% to 10% of the labour force). And, although this may not be clear from the reports, it doesn’t mean migration has actually reduced wages – it means that they have been growing marginally less fast than they otherwise would (wages have – certainly until the recession – been growing consistently in real terms for years).

Since migration leads to growth, and it’s growth that drives wage increases (and exploitation and vulnerability keep wages down), the overall effect of migration is still likely to be positive at a macro-economic level, and of course indispensable if you want care for the elderly, a restaurant trade, a health service and fresh locally-grown vegetables.

Of course these are all economy-wide effects. It’s quite possible for specific cases of wage reductions driven by undercutting, exploitation, substitution of temporary workers for permanent ones and so on. And one way of minimising still further (or indeed reversing) the effect on wage rises would be to prevent the exploitation of migrant workers. So the case for implementing the Temporary Agency Workers Directive is still as strong as ever. And it’s not clear what the impact of migration would have been if we hadn’t had a national minimum wage providing – if enforced – a floor below which wages can’t drop.

And of course migrant workers and indigenous workers still need people to fight for their rights: without trade unions, wages would be lower than they are, and vulnerable workers more open to exploitation – and there’s clearly a lot still to be done.

2 Responses to Migration and wages

  1. Charlie Marks
    Feb 27th 2009, 8:28 am

    You cite “care for the elderly, a restaurant trade, a health service and fresh locally-grown vegetables” as benefits of mass migration.

    But many of these jobs are low paid – and what stops wages rising in these sectors is the abundant supply of labour that employers can bring in. So, no migration might not reduce wages, but it is a way for the bosses to hold them down.

  2. Owen Tudor

    Owen Tudor
    Mar 5th 2009, 3:36 pm

    Brief answer:

    Although I’m sure we’re arguing for the same objectives (decent work at decent wages), I don’t think I agree with the thrust of your argument. I know it seems initially self-evident that it’s the availability of cheap labour in these jobs that holds wages down, and thus makes the jobs unattractive to local workers. But I think the services I referred to would not necessarily be better paid without low waged migrant labour – I think they might not exist. (This is all in the short term, at least.)

    Much longer answer:

    Many liberal economists (eg Sam Brittain) claim that there’s no such thing as a skill shortage, and that all excesses of demand for labour over its supply can be dealt with by raising the price.

    Unfortunately equilibrium might result in a price so high it reduces demand to zero, or, to make this more concrete, makes it so much cheaper to import vegetables from Africa than source them locally that few people will pay the local-production premium. In reality, what low waged migrant labour has done is made it profitable to source more produce locally. Employment in agriculture has increased (and become more industrial, with huge packing warehouses for example). If the product is too much more expensive sourced locally using cheap migrant labour, then producing the product might well be outsourced to countries where the migrants came from in the first place!

    In terms of health care and elder care, the price of a service that would provide decent wages would be higher than current taxes (or private provision) allow for.

    The alternative to providing services through cheap labour is not providing the service at all. In elder care, that means forcing the responsibility back onto the family or leaving poor old folk to rot, in health care it means at least more rationing and longer waiting times.

    At least here we can campaign for higher taxes to pay for better wages (which as unions have argued would probably also improve the quality of service for care home residents).

    But that might not work in restaurants. There, increased wages would lead to higher prices (or possibly worse food – but in some parts of the sector that’s surely not possible!) And that might simply raise the price to a level where consumers don’t buy.

    There is a moral issue here about how far we are willing to use services made affordable only by low wages (when I first went to Australia, the bill for eating out on Sundays was higher than on weekdays to pay for the wage premium paid to staff for working on a rest day), and what would be the impact on jobs. We have a national minimum wage now which has not led to the job losses the CBI and the Tories said it would. But it is set very low – if it doubled overnight, it’s likely that there WOULD be an impact on jobs.

    So, what should trade unions do? Three things:
    * first, demand equal treatment for people doing equal work: social solidarity is vital to prevent undercutting, even more exploitation and effects like growing racism;
    * second, campaign for higher taxes so that we fcan raise social benefits that apply to all, and whose costs are externalised to individual employers (like the UK’s NHS for example, or tax credits for low waged workers), or provide scope for higher pay for caring staff (for example);
    * third, raise wages either through the national minimum wage or more importantly by negotiating collective improvements which trade increased productivity (or indeed higher prices if the ‘market’, which might be a social market, can stand that) for higher wages.