The Labour Market Effects of Immigration

This briefing discusses the impacts of immigration on the labour market in the UK, focusing on wages and employment.

Theory does not predict exactly what the labour market effects of immigration will be

Immigration affects the number of workers in the economy, increasing ‘labour supply’ in certain occupations and industries. This means there are more people looking for jobs. However, immigration can also expand the demand for workers and thus create new jobs. For example, migrants themselves buy goods and services, increasing demand. Employers may increase production in sectors where migration allows them to employ more people (e.g. in the agriculture or care sectors) or use more labour-intensive production methods.

In other words, immigration may increase competition for existing jobs in certain occupational sectors, but it can also create new jobs. This is because there is not a fixed number of jobs in the economy (the so-called “lump of labour fallacy”). As a result, it is not obvious from theory alone whether migration will have a positive or negative impact on the job prospects of existing workers in the labour market—or no effect at all. To understand the impacts in practice, we need to look at statistical studies.

The impacts of migration in the labour market are expected to vary depending on the time, place and type of migration. For example, migration into high-wage jobs that require long periods of training will have different impacts from migration into low-wage positions—and on different people. For example, migration into childcare occupations may increase competition for childcare jobs while increasing employment among working women. In general, workers in low-skilled occupations are expected to face more competition from migrants because the skills needed for those jobs are easier to acquire and are less specialised.

More information on the jobs that migrant workers do in the UK can be found in the Migration Observatory briefing, Migrants in the UK Labour Market: An Overview.

Research shows that the impacts of migration on wages and employment prospects for UK-born workers are small

Several studies have examined whether immigration leads to higher unemployment or lower wages among existing workers, and most have found either small or no effects.

In 2018, the Migration Advisory Committee reviewed the results of studies conducted between 2003 and 2018 and drew three conclusions. First, immigration had little or no impact on average employment or unemployment of existing workers. Second, where an impact was found, it was usually concentrated among certain groups – i.e. a negative effect for those with lower education and a positive effect for those with higher levels of education. And third, the impact may depend on the economic cycle; some—though not all—studies have found adverse effects on employment or unemployment, specifically during downturns.

Similarly, the MAC review concluded that immigration had had little impact on average wages, according to previous research. Some studies had found a small negative impact on average wages, while others found positive average effects.

Low-wage workers are more likely to lose out from immigration, while medium and high-paid workers are more likely to gain, but the effects are small

Empirical research on the labour market effects of immigration in the UK has found negative effects on low-paid workers and positive effects on high-paid workers, but both effects are small. In other words, immigration is not one of the major factors that shape low-wage workers’ prospects in the labour market.

For example, a 2022 study found that immigration to the UK from 1994 to 2016 reduced the hourly wage of UK-born wage earners at the 5^th percentile (i.e. the lowest earners in the labour market) by around half of one pence per year. The gains for top earners were also small: 1.7p per year for people at the 90^th percentile of wage earners. Another study focusing on wage effects at the occupational level found that, in low-wage service sector jobs, a 1 percentage point rise in the share of migrants reduced average wages in that occupation by about 0.2%. These results are broadly similar to findings from other studies.

The wage effects of immigration are likely to be greatest for resident workers who are migrants themselves

Research suggests that any adverse wage effects of immigration are likely to be greatest for resident workers who are themselves, migrants. This is because the skills of new migrants are likely to be closer substitutes for the skills of migrants already employed in the UK than for those of UK-born workers. For example, one UK study concludes that the main impact of increased immigration from 1975 to 2005 was on the wages of migrants already in the UK. The finding that negative impacts on wages fall primarily on people who migrated themselves is consistent with earlier research from the United States.

Evidence gaps and limitations

Different types of migration are likely to have different impacts, although research has usually grouped migrants together into large categories, e.g. by their level of education or whether they come from EU or non-EU countries. In reality, there are substantial differences between groups of people who come to the UK on work visas, as family members, as students or as refugees. For more information on different types of migration to the UK, see the Migration Observatory briefing, Who Migrates and Why?

Measuring the labour market effects of immigration is difficult. Migrants often go to areas of the country that are experiencing economic growth and strong labour demand. This makes it difficult to know whether differences between areas with high and low migration result from migration or from other factors. Similarly, it is possible that international immigration into a certain area may cause some workers to leave that area and migrate to other parts of the country or abroad. If this happened, the labour market effects in a certain area would be dissipated across the country, making correct measurement through local labour market analysis more difficult.

Finally, a lack of data precisely measuring the earnings and locations of migrants and UK-born workers means that existing studies likely have significant measurement error.

Empirical research has employed various methods and econometric techniques to address these issues, but none of them is perfect, and some difficulties and caveats always remain.

With thanks to Jonathan Wadsworth and Cinzia Rienzo for their helpful comments on an earlier version of this briefing.