Examination of Witnesses (Questions 158
- 159)
TUESDAY 23 OCTOBER 2007
Professor Christian Dustmann and Professor Ian Preston
Q158 Chairman:
First of all, you are very welcome; thank you very much for coming.
I guess you are both old hands at this business anyway and there
are some questions which you know we are going to ask you on our
inquiry. Do either of you feel you want to make an opening statement
or are you happy to go straight into the questions?
Professor Preston: Go straight to questions.
Q159 Chairman:
Thank you. If I may start, the study you both produced for the
Low Pay Commission earlier this year found small but positive
overall wage effects from immigration, with native high earners
making marginal gains but the lowest paid losing out. Would you
say the impacts of recent immigration on wages and unemployment
have been in line with what labour economists generally expected?
Professor Preston: I think what labour economists
would generally expect would be that you would find wage effects
that were most strongly negative amongst those competing most
directly with immigrants and wage effects would be positive amongst
those whose productivity is raised by their complementarity with
immigrant labour. What makes the pattern of the effects that we
found in that report particularly convincing is, if you look in
the same data at where the immigrants are in the wage distribution,
the immigrants appear to be most concentrated at precisely the
same points where we find the most strong negative wage effects.
So the pattern of wage effects, I think, is fairly convincing
and in line with what you would expect. As regards the overall
positive effects, if immigrants are paid less than the value of
what they contribute to production, then that generates a surplus
which may find its way back to labour, it will find its way back
to the various inputs and it may find its way back to labour.
There is a standard argument for why that happens in terms of
immigrants moving the economy down the labour demand curve, which
causes wages to go down, and therefore on average they are paid
less than they contribute. I do not think that is very plausible
to explain the sort of magnitude of effects that we are finding,
but if there are skills shortages in certain parts of the economy
where immigrants are heading, where their productivity is higher
than the wages that they receive, that could be an explanation
for the surplus. Getting that to go back to labour in the form
of higher wages depends a lot on what you assume about the flexibility
of other inputs. If capital is perfectly mobile internationally
then you would not think that the return to capital could be much
affected and the surplus would go to labour, but if it is less
mobile it is more difficult to see exactly why this is shown up
in higher wages, so I think more research is needed on that. As
I say, the pattern of wage effects that we found is very convincing
and plausible. The overall positive effect is a bit more challenging
to explain but there are possible explanations and other studies
in other countries are beginning to show positive wage effects
there as well so we are not alone in finding that.
|
