House of Lords - Economic Affairs

Select Committee on Economic Affairs Minutes of Evidence

Memorandum by Dr Stephen Drinkwater, University of Surrey

INTRODUCTION

1. Immigration is one of the most contentious issues on the contemporary political landscape. In the UK, debates surrounding immigration have grown considerably following the 2004 enlargement of the European Union (EU) because of the volume of immigrants that have subsequently entered the UK from the eight Central and Eastern European countries (collectively known as the EU8) that joined the EU in May of that year.[1] Much of the discussion has surrounded the costs and benefits associated with immigration, with many of the perceived benefits relating to the economy. These include increasing growth rates, filling labour market shortages (thus reducing inflationary pressures) and improving public finances (through increasing taxes and national insurance contributions). In this paper, I will present some background information on recent immigration to the UK, which should hopefully provide a useful vehicle from which these issues can be considered. To begin with, I will briefly discuss some sources of information on immigration to the UK that are currently available and then I will use one of these data sources to examine the demographic and labour market characteristics of recent immigrants to the UK.

2. In the discussion that follows, I will compare recent immigration from the EU8 group of countries with that from other parts of the world. This has been done because the nature of immigration from the EU8 appears to be quite different to that from other countries and this is likely to have different implications for assessing the economic impact of immigration. In particular, many recent immigrants from the EU8, especially Poland, have moved to the UK either on a short term basis or engage in circular or seasonal migration. For example, evidence from the Polish Labour Force Survey (LFS) suggests that 66% of Polish migrants to the UK in 2006 and 77% in 2005 were short term migrants (staying in the UK between 2 and 11 months).[2] In contrast, much of the immigration from the rest of the world, especially from New Commonwealth countries, has mainly been on a permanent basis.[3] An important factor in the change in immigration patterns to the UK is the relative geographical proximity of EU8 countries and cheaper travel costs including the growth of low cost air fares. Furthermore, whilst London has traditionally been a magnet for immigrants to the UK, with over 40% of Britain's immigrants living in London at the time of the 2001 Census, the location of recent EU8 immigrants has been far more dispersed. For example, only 13% of EU8 immigrants to the UK since 2004 have settled in London, compared to 15% in Anglia and 13% in the Midlands.[4]

SOURCES OF INFORMATION ON IMMIGRANTS TO THE UK

3. When considering the economic impact of immigration, it is important to take account of both the volume of immigration and the composition of these population movements. Although no one single source provides definitive information on immigration to the UK, several data sources exist that can provide an indication of these flows. The headline figures on the numbers entering and leaving the country each year come from the Total International Migration estimates produced by the Office for National Statistics (ONS), which are mainly based on information from the International Passenger Survey (IPS).[5] According to the ONS, around 565,000 people migrated to the UK in 2005. However, given that the IPS covers all migrants intending to stay in the country over a year, it includes students and individuals reuniting with their families but excludes short term (labour) immigrants, a group which has increased substantially in recent years. For example, the IPS data indicates that only 76,000 immigrants arrived in the UK from Poland in 2004 and 2005. In contrast, the Worker Registration Scheme (WRS) reports that around 200,000 Poles entered the UK in these two years and a further 160,000 during 2006.[6] Although the WRS should in theory provide a very accurate indication of the flow of EU8 immigrants to the UK it is likely to have underestimated the number of immigrants from these countries because it is thought that relatively high proportions have not registered on the scheme.[7] Therefore, perhaps the most reliable information on the number of labour immigrants entering the UK comes from the allocation of National Insurance Numbers (NINo) to overseas nationals.[8] In 2006-07, there were 713,000 NINo registrations by overseas nationals, which was an increase of over 50,000 compared to the previous year and more than double the amount seen in 2002-03. Almost 223,000 of the registrations in 2006-07 were made by Poles, whilst the next most important country group was Indians, with just under 50,000 registrations. However, none of these data sources contain very detailed information on the characteristics of immigrants to the UK.

4. The most reliable data source that provides detailed information on the characteristics of immigrants to the UK should be the Census of the Population.[9] This is because everyone resident in the UK is supposed to feature on a Census form by law. Unfortunately the most recent Census, which took place in April 2001, is now rather dated. With regards to the analysis of immigration, the impact of the time between Censuses has become even more acute in recent years given the large increases in immigrant flows to the UK following EU enlargement.[10] There are also some other difficulties in using Census data to examine the labour market characteristics of immigrants including that no questions are asked on the year of arrival in the UK or earnings from employment. Because of these issues, the LFS has become the most appropriate data source for examining the characteristics of recent immigrants to the UK.

5. The LFS is a nationally representative survey that is conducted on a quarterly basis and aims to obtain a sample of around 60,000 UK households every quarter. Given that the LFS only samples a relatively small proportion of the population in any given quarter, it follows that the data contain only a fairly low number of recent immigrants, especially if one wishes to compare different immigrant groups.[11] Therefore to obtain sufficient observations on different immigrant groups, successive quarters of LFS data need to be pooled together, especially as respondents should only be included in the sample once to avoid double counting. Thus the subsequent analysis is based on LFS data which have been pooled from 2004 to 2006 and just relates to those immigrants who entered the UK over this period. It is also possible to compare the characteristics of recent immigrants with those who had arrived in the UK previously and the UK born with cross-reference to another study that uses LFS data from 1979 to 2004 to examine the labour market performance on immigrants and natives.[12]

THE CHARACTERISTICS OF RECENT IMMIGRANTS TO THE UK

6. The upper panel of Table 1 reports the characteristics of post-2003 immigrants of working age (16-59/64) from Poland and Other EU8 countries. The table also presents information for three comparison groups—immigrants from Other European Countries, English Speaking Countries and Other Countries.[13] It can be seen from the table that recent immigrants are overwhelmingly young. This particularly applies to Poles, with over 85% of this group aged between 16 and 35. There is a slight over-representation of males amongst EU8 immigrants (especially again amongst Poles), whereas there is a higher proportion of females for the other three groups. Recent Other European migrants are the least likely to be married, whilst immigrants from the rest of the world have by far the highest percentage of married persons. As noted previously, it can be seen that recent EU8 immigrants are far less likely than immigrants from other countries (especially compared to immigrants from English Speaking Countries) to have located in London and its surrounding areas.[14]

Table 1

DEMOGRAPHIC AND LABOUR MARKET CHARACTERISTICS OF RECENT WORKING AGE IMMIGRANTS TO THE UK


	Poles	Other EU8	Other European	English Speaking Countries	Other Countries

Demographic Characteristics
% Male	59.4	54.6	49.3	46.6	48.1
% aged 16-25	41.6	45.9	37.0	32.5	34.2
% aged 26-35	43.9	33.6	44.1	44.4	42.5
% aged 36-59/64	14.5	20.6	18.9	23.2	23.4
% Married	41.1	35.6	28.7	44.7	57.9
% living in London	19.5	20.2	25.0	49.5	29.4
% living in East/South East	20.7	14.2	28.7	24.8	20.8
% living elsewhere in UK	59.9	65.6	46.3	25.7	49.8
Average age left FT education	20.3	18.6	20.2	20.0	20.0
Employment Variables (excludes full-time students)
Employment Rate	84.3	73.1	71.5	78.9	50.1
Self-employment Rate	4.4	2.8	8.6	8.5	3.3
% in Production industries	26.9	32.4	19.4	12.0	14.9
% in Construction industries	7.4	9.7	4.2	5.1	1.5
% in Retail/hospitality industries	24.9	19.9	24.0	17.1	20.8
% in Other Services	40.8	38.1	52.5	65.7	62.8
Managerial/Professional	9.8	7.4	41.6	62.9	37.0
% in Skilled/Intermediate occupations	15.7	14.8	21.5	16.3	17.9
% in Semi-routine occupations	31.5	25.6	15.1	12.2	26.6
% in Routine occupations	43.0	52.3	21.9	8.6	18.5
Average hours of work	41.7	39.7	39.2	41.7	37.1
Average earnings	6.01	5.88	9.75	13.14	8.57
Sample Size	421	253	408	311	881

Source: Drinkwater et al. (2008) op cit, taken from Table 2.

7. Before examining the labour market characteristics of the groups, it is important to discuss another key demographic variable, namely educational levels. Given that overseas qualifications don't map into UK qualifications very well, the measure of education is based on the age that the individual left full-time education. It can be seen from the table that the age left full-time education is highest amongst recent Polish immigrants but is by far the lowest for recent immigrants from Other EU8 countries. These differences partly reflect the fact that some immigrant groups have higher proportions of students, who have yet to complete their full-time education. School starting ages also vary by country but there is some debate in the educational literature as to the value of early age schooling.[15] Nevertheless, it appears that recent Polish immigrants to the UK are relatively well educated, particularly in comparison to Other EU8 immigrants.[16]

8. The labour market characteristics of each of these groups, which excludes full-time students, are reported in the bottom panel of Table 1. It can be seen that Poles have by far the highest employment rates for those arriving post-enlargement, followed by migrants from English Speaking Countries. For both of these groups more than three-quarters of individuals entering the UK after 2003 were employed at the time of their interviews. Employment rates are lower amongst the other three groups of recent immigrants. Some of these differences are due to inactivity amongst females, especially among immigrants from Other Countries, but there also appears to be relatively high levels of unemployment amongst immigrants from Other EU8 countries and the rest of the world. In terms of types of employment, it can be seen that the five recent immigrant groups all have very low rates of self-employment. Although this isn't so surprising given that it may be more difficult for these individuals to raise the capital required to start a business in the UK, much higher self-employment rates are observed for EU8 immigrants who arrived shortly before enlargement, probably because entry to the paid labour market was more restricted at this time.

9. Recent immigrants are mainly employed in the service sector. This is far less pronounced for other EU8 immigrants, since almost a third are employed in production industries. Around a quarter of recent Polish immigrants are employed in hospitality (retail/hotels/catering), which is the highest of any of the recent immigrant groups. For the recent non-EU8 immigrants, there is an over-representation of those from English Speaking Countries in finance and real estate, of Other Europeans in education and of immigrants from Other Counties in health. In terms of occupation, post-enlargement EU8 immigrants have mainly been employed in semi-routine and routine occupations, with around three-quarters of Poles and Other EU8 migrants holding such jobs. This contrasts sharply to the experiences of other recent immigrants since 63% from English Speaking Countries and 42% of Other Europeans have professional/managerial jobs, compared to less than 10% from EU8 countries.

10. Average earnings are around £6 an hour for recent Polish and Other EU8 immigrants.[17] This is far lower than the earnings of other post-2003 immigrants to the UK and well under half the amount earned by those from English Speaking Countries. There is also a lot less variation in the earnings of EU8 immigrants, with the vast majority employed in jobs paying around the National Minimum Wage. There are fairly small differences in terms of hours of work amongst the migrant groups but recent arrivals from English Speaking Countries and Poland work the longest hours. Therefore, it appears that Poles do work slightly longer hours to make up for their lower hourly earnings.

11. Drinkwater et al. op. cit. further examine earnings variations between the recent groups of immigrants. They generally report that the earnings differences are preserved when a range of personal and workplace characteristics are taken into account but that occupation is important in explaining earnings differences between EU8 and other immigrants to the UK. A possible explanation for this finding is the migration strategies employed by EU8 migrants, in particular the much higher proportions engaging in short term and circular/seasonal migration. However, differences in English language proficiency are also likely to play an important explanatory role but the LFS only contains very limited information on the language ability of immigrants so it is not really possible to examine the impact of this factor in any detail.[18]

CONCLUSION

12. Despite information on immigration to the UK being rather partial and incomplete, several data sources show the dramatic changes that have been witnessed in recent years. In particular, both the WRS and NINo registrations highlight the huge influx of EU8 immigrants to the UK over the past three years, especially by Poles, as well as their comparatively dispersed location patterns. In order to consider the composition of the recent flows, which is also important for assessing the economic impact of immigration, the LFS need to be examined. These data indicate that recent EU8 immigrants share some similarities with other inflows, both past and present, such as being predominantly young. Poles also appear to be relatively highly educated, even though the vast majority of EU8 immigrants have found paid low paying jobs. Some of this may be explained by the (short term) migration strategies adopted by immigrants from these countries but there is also evidence that many recent EU8 immigrants possess poor English language skills, although this is another area where data could be improved.

30 September 2007

1 The EU8 consists of Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia. Individuals from these countries were allowed to enter the UK labour market more or less freely from May 2004, whereas the immigration of Bulgarians and Romanians was restricted following the EU enlargement that took place in January 2007. Back

2 Kepinska, E, Recent Trends in International Migration: The 2006 SOPEMI Report for Poland, Working Paper No 15/73, Centre of Migration Research, Warsaw University, 2006. Further evidence on the importance of short term immigration patterns from the EU8 can be found in the Accession Monitoring Report since around 60% of new EU8 migrants to the UK in 2006 stated that they intended to stay for less than a year (55% said they would stay for less than six months), with a further 25% unsure of their length of stay. Back

3 Rendall, M and Ball, D, Immigration, Emigration and the Ageing of the Overseas-Born Population in the United Kingdom, Population Trends, 116, Summer, 18-27, 2004. Back

4 Home Office et al., Accession Monitoring Report May 2004-December 2006, A Joint Online Report by the Home Office, the Department for Work and Pensions, the HM Revenue and Customs and the Office of the Deputy Prime Minister, February 2007. Back

5 This survey consists of around 250,000 interviews, which is equal to 0.2% of all travellers, at major air, sea and tunnel ports in the UK. Given the relatively small number of migrants who take part in the survey, the results are subject to relatively high sampling variation, especially if one is interested in particular sub-groups of migrants. Back

6 Home Office et al, op cit All EU8 immigrants are supposed to register on the WRS within one month of taking up employment in the UK. Back

7 CRONEM, Polish Migrants Survey Results, mimeo, University of Surrey, 2006, http://www.surrey.ac.uk/Arts/CRONEM/CRONEM_BBC_Polish_survey%20_results.pdf; Anderson, B, Ruhs, M, Rogaly, B and Spencer, S, Fair Enough? Central and Eastern European Migrants in the Low-Wage Employment in the UK, COMPAS Research Report, University of Oxford, 2006. Back

8 These statistics have been produced by the Department of Work and Pensions. Back

9 Although the publicly released data from the 2001 Census mainly comes in tabular form, it is possible to examine a 3% sample of returns containing all the information that can be derived from the responses to the questions on the Census form. These data files are known as the Samples of Anonymised Records, which can be downloaded from the Cathie Marsh Centre for Census and Survey Research at the University of Manchester, and the Controlled Access Microdata Sample, which contains more detailed information on variables such as country of birth and can only be analysed by researchers at ONS offices. Back

10 As an indication of the dated nature of the 2001 Census, only around 60,000 Polish born people were recorded as being resident in the UK in 2001, 57% of whom were aged 65 or over. Back

11 Recent immigrants are also less likely to be included in the LFS compared to longer term migrants or UK born people. Drinkwater et al (2008) discuss this issue and the possible consequences for analysing such data. See Drinkwater, S, Eade, J and Garapich, M, Poles Apart? EU Enlargement and the Labour Market Outcomes of Immigrants in the UK, International Migration, forthcoming, 2008. Back