Pulling power: Why are EU citizens migrating to the UK? (Pre-referendum)

As the debate over EU membership has intensified, a recurring question has been why the UK has been such an attractive destination. This commentary looks at factors that are often cited as ‘pull factors’ for EU migrants coming to the UK in media and policy debates.

Welfare benefits?

EU migrants’ access to the UK’s welfare state has dominated debates about the EU membership. The government has argued that the UK benefits system creates an ‘unnatural draw’ for EU migrants and some analysts have argued that the financial incentive to migrate could be decreased if these benefits were restricted.

Other analysts, however, have argued that welfare is not the major factor driving EU migration. This is because while there is no direct measure of the role of welfare in individual decision-making, most migrants are not receiving welfare benefits and even in the absence of benefits, significant pull factors would remain.

EU migrants are less likely to claim out-of-work benefits, such as Jobseekers’ Allowance and incapacity benefit, compared to their UK counterparts. In February 2015, people who were EU nationals when they registered for a National Insurance Number made up 2.2% of the total DWP working-age benefits caseload, but were about 6% of the working-age population.

By contrast, EU migrants are more likely to be claiming in-work benefits such as tax credits, which supplement the incomes of low-wage families, particularly those with children. Families that included at least one EU national made up 6.8% of those receiving tax credits in March 2013.

Most newly arriving EU migrants are either single or part of a childless couple, while in-work benefits entitlements are strongly targeted at people with children. In 2015, 12% of EU-born adults reported receiving tax credits, the main in-work benefit in the UK, compared to 10% of the UK born, according to the Labour Force Survey (LFS). The LFS is based on self-reported data and is thought to undercount tax credit claims, but these figures indicate that – even if the undercount is very significant – a relatively small fraction of EU migrants are likely to be receiving them.

Employment opportunities?

In the year ending September 2015, a majority (71%) of EU citizens coming to the UK for at least one year reported that they were coming for work and a majority (58%) of those people already had a job lined up.

People from EU countries tend to have high rates of employment in the UK – a trend driven primarily by people from new EU Member States (Figure 1). In 2015, men born in countries that joined the EU in 2004 or later had a 90% employment rate, compared to 78% among UK-born men, while women from new Member States had a 75% employment rate, compared to 70% among UK-born women.

Figure 1

Economic conditions in some EU origin countries are also likely to have contributed to the relative attractiveness of the UK.

Table 2 shows the EU countries of birth for which the number of people living in the UK increased most between 2011 and 2015: Poland, Romania, Spain, Italy, Hungary and Portugal. These countries made up only 40% of the total EU-born population in 2011, but were responsible for almost 80% of the growth in numbers over the subsequent 4 years. We refer to these countries throughout the rest of this briefing as the ‘recent EU countries of origin’.

Table 1 – Top 6 recent countries of origin for EU migrants, 2011-2015

	2011	2015	Change
Poland	615000	818000	203000
Romania	87000	223000	136000
Spain	63000	137000	74000
Italy	126000	176000	50000
Hungary	50000	96000	46000
Portugal	96000	140000	44000
All EEA	2580000	3277000	696000
Top 6 recent EEA sending countries	1037000	1590000	553000
% of top 6 recent EEA in all EEA	0.4	0.49	0.79

Two of the countries – Italy and Spain – are long-standing EU members with relatively high wages (though still somewhat lower than the UK – see Figure 3 below).

Record high employment rates and low unemployment in the UK contrast with continued weak labour market conditions in some Eurozone countries, such as Spain, where unemployment in 2014 was still well above 20% (Figure 2). Total employment (the number of people with jobs) has also increased considerably in the UK – by just over 1,000,000 between 2012 and 2014 – while in the same period employment fell in Italy (-425,000), Spain (-375,000) and Portugal (-68,000).

Figure 2

The UK’s flexible labour market is also thought to have contributed to the relative ease with which migrant workers have been able to find jobs in the UK, particularly when compared with countries with stricter labour market regulation.

Wages?

Empirical research has consistently found that wage gaps between countries are an important factor driving migration.

Incomes in the UK are considerably higher than in many other EU countries, particularly those in Eastern Europe such as Poland and Romania. Figure 3 shows Eurostat estimates of the median household’s disposable income, adjusted for differences in taxation and the cost of living across countries.

Disposable income by this harmonised measure is 1.8 times higher in the UK than in Poland, and 4.2 times higher than in Romania, although in both cases incomes have been converging. In the case of Poland, the gap in estimated equivalent disposable income has almost halved since the mid-2000s, with Poland moving from 30% of the UK’s level in 2007 to 56% in 2014.

Figure 3

By 2020, the minimum wage that employers must pay to workers age 25 and above is expected to rise from £6.70 in 2015-16 to around £9 as a result of the introduction of the ‘National Living Wage’ (NLW). Because a higher share of people born in EEA countries are in low-wage jobs, more of them are likely to be affected by the policy change. Table 1 shows approximate estimates of the numbers of people earning up to vs. more than £9 per hour in 2015, from the Labour Force Survey.

Table 2 – Age and estimated hourly earnings by region of birth, 2015

	18-24	25-64	Total	Share of 25-64 y/o earning £9/hour or less
EEA
Up to £9	158000	698000	856000	46%
More than £9	38000	828000	866000
Total	196000	1526000	1722000
Non-EEA
Up to £9	96000	774000	870000	37%
More than £9	42000	1326000	1368000
Total	138000	2100000	2238000
UK born
Up to £9	2191000	5350000	7540000	29%
More than £9	803000	12996000	13799000
Total	2994000	18346000	21340000

The effect of the National Living Wage on the attractiveness of the UK labour market for prospective EU migrants is difficult to predict, however. If higher wages encourage employers to restructure their workforce and reduce their reliance on low-wage workers—for example by mechanising production or hiring people with higher qualifications or skills—this could potentially make it harder for EU citizens to find low-wage jobs.

Indeed, In 2014 the Migration Advisory Committee pointed to the UK’s flexible labour market with low costs to employers as a key factor that is likely to have encouraged demand for migrant labour. It also pointed out that enforcement of minimum wages has been weak, and that based on the number of HMRC inspection visits conducted, a UK firm could, on average, expect a visit from inspectors every 250 years.

The interplay of all these factors makes the effect of the National Living Wage on incentives for EU citizens to migrate to the UK uncertain.

Other factors?

Other factors apart from the state of the economy are also thought to affect the attractiveness of the UK as a destination.

For example, the ubiquity of English as a global language of communication mean that many prospective migrants already speak some English (which is commonly part of compulsory education in EU countries), while others value the opportunity to learn it.

The UK’s 8 million foreign born residents – 3 million of whom are from EU countries – mean that there are already established communities that can facilitate further migration, by providing access to information about employment opportunities and advice about living in the UK.

There is tentative evidence to suggest that policies towards non-EU citizens might have affected UK employers’ demand for EU citizens by encouraging substitution from non-EU to EU recruitment. Measuring the extent of any such substitution and the reasons for it is difficult, as many different factors shape hiring patterns.

Finally, demographics in origin countries may play a role. The size of the youth population – the age group that is most likely to migrate – is shrinking in the top recent countries of origin for EU migration to the UK. Between 2006 and 2015, for example, Eurostat figures suggest that the 20-34 year old population in Poland, Romania, Spain, Italy, Hungary and Portugal has declined by 6.3 million, or about 15%.

In the case of Romania and Bulgaria, it is also possible that ‘pent up’ demand for migration following the opening of the UK labour market for the first time may be driving a level of migration that will not persist in the long term. Immigration from the ‘A8’ countries that joined the EU in 2004, which the ONS estimated at 60,000 people entering for at least 12 months in the year ending September 2015, is now well below the initial peak seen immediately after nationals of these countries gained access to the UK labour market, for example.

Conclusion: what happens next?

There is no one single “pull” factor that attracts migrants from the EU to the UK, but a combination of economic and social factors does appear to have made the UK an attractive destination.

How long will these factors remain in place? The short answer is that it is hard to know. Job growth in the UK and the strength of the economic recovery in southern European countries in the short to medium term—as well as gradual demographic shifts and the pace of income growth in Eastern European countries in the longer term—are all likely to influence the pressure for EU citizens to migrate to the UK. How these factors will change and interact over time remains uncertain.

Thanks to Alan Manning for comments on an earlier draft.

Commentaries in our Brexit series are funded by the Economic and Social Research Council’s The UK in a Changing Europe initiative.