Examination of Witnesses (Questions 315
- 319)
TUESDAY 27 NOVEMBER 2007
Professor David Blanchflower
Chairman: Good afternoon. It only seems
the other day that you were here before. You are very welcome.
I do not need to say to you that we ask everybody to speak up
and to speak clearly so we get an accurate record; I am sure you
know that perfectly well.
Q315 Lord Layard:
You have done an analysis that shows that the likelihood of eastern
Europeans coming here is related to life satisfaction in the country
and GDP per head. Also, I saw you quoted in another study which
showed that the stock of people from that country already here
is very important. If you put all that together, how do you think
that the future pattern or scale of migration will develop?
Professor Blanchflower: That is a really important
question. It is quite clear that the flows from eastern Europe
have been driven by relative living standards. So GDP in a donor
country compared with that of a host country is an important factor.
Actually, and I say in the paper, it turns out that happiness
data does predict it better in some cases. The problem is that
there are two parts to what we have seen. The first part is that
folks who are here have been going back and forth and the first
question is whether they are going to stay, whether they are going
to upskill and move from a low-paid job to a more highly skilled
job and whether there is going to be a second flow of less-skilled
workers coming. That is obviously the big question. The other
part is that as remittances are coming, what we are now seeing
is that the GDP levels and the happiness levels of these donor
countries are actually rising. Obviously these questions are on
the table. One of the big questions as well is whether the network
effects are developing here, whether the people who have initially
come and said they intend to stay for a short time and they go
back and forth, whether those factors are going to change. So
the questions on the table really are: as GDP rises in the host
countries, is that going to slow the flow? Are people going to
move up and basically find that now they have more human capital
relevant to here? Third, is there going to be a flow again of
less-skilled workers? The answer is that these are all questions
on the table, it is very hard to do the analysis and one of the
things that I have seen through all the work that I have been
doing is that there has not been enough analysis. We have tried
at the Bank to do some of this and these are really very important
questions and we do not have a very good answer. The other point
to say is that also it turns out that much of the analysis we
have done on output applies to Ireland as well. It turns out that
you can model the flow to Ireland. In fact another flow which
is interesting is actually going to be whether there is going
to be a flow of workers from eastern Europe who are currently
in Ireland, especially in construction. As construction there
has declined, are they going to come here? I hear the Irish think
that they are going to come here to help build the Olympic Games.
So the answer is that I do not know. It looks to me like the model
is going to keep sustaining itself but this is very speculative.
Q316 Lord Layard:
I am glad to hear your answer at the end. Is it not the case,
if you go back to the coming down of the Wall, basically ever
since the Wall came down, there has been an absolutely steady
movement of the European population westwards which one would
expect to continue for 20 years more?
Professor Blanchflower: I see no reason why
it should cease. The thing which is perhaps surprising is that
the flow has been primarily to English-speaking countries. I know
we have opened up the borders more than others have. Perhaps what
is interesting is to look at Sweden. Sweden opened up as we did
and has not seen a big flow, so it has something to do with the
flow West, but also the value of the English language turns out
to have been quite important. If you look at Sweden, it has only
had something like 60,000 who have come, whereas Ireland has had
330,000 and we have had 600,000 or so. It is an inexorable move
West. We may see, as other countries are opened up more, that
there will be another flow to Italy and Germany and so on. That
has not really happened and the expectation was that that was
where those folks would go and that has not happened yet. You
are right, there is an inexorable likely move West. How long that
will be, how sustained that will be, probably will depend upon
how these networks rise and the relative standard of living in
the donor and the host countries. The answer is that I agree but
the amount of stock is going to depend.
Q317 Chairman:
What about the question of people coming, mostly temporarily originally,
and then changing their minds and staying permanently? Have you
a view on that? There is not much evidence of that so far. What
do you think is likely to happen there?
Professor Blanchflower: That is a question I
have thought quite a lot about. The first thing is that we perhaps
did not expect the guest worker component of the flow, people
coming for a short time. Actually, on the surveys done in the
Worker Registration Scheme, people say that they are going to
stay for a short time. I talk about it in the paper regarding
communications I had with Barry Chiswick, whose view is that people
say that they are going to stay for a short time and then they
change their minds, perhaps as they understand rather more what
is going on in the labour market, they lose their origin-specific
human capital and get more destination-specific human capital.
Chiswick's view is, and he is probably right, that people may
come and say they are going to come for a short time; actually
what they are saying is that they are going to come for a short
time and check it out. What we are seeing is that people have
come and checked it out and my experiences from going around on
the MPC visits is that businessmen say to me that what they had
first was a young man who had come and then he would go back and
bring his brother, and then he would go back again and his brother,
and his mother and father would come, so you are starting to see
a slightly different flow. We are seeing these network effects
develop. It is obviously speculative to know exactly what it is
coming, but I do not see that flow stopping and the upping of
the numbers of the ONS is probably appropriate.
Q318 Lord Paul:
You have argued that migration from eastern Europe has created
a downward impact on wages by increasing the fear of unemployment.
Has this impact been confined to certain segments of the workforce
or does it occur throughout all occupations and sectors of the
economy? What other factors are relevant to fear of unemployment?
Professor Blanchflower: As part of the work
on the MPC, I have tried to understand why wage growth has been
benign and I have been fairly well known for saying that it was
going to be benign and was going to remain so, and that seems
to be what has happened. The question you ask yourself is why
that has happened. Part of it appears to have happened because
of an increase in unemployment which has occurred over the last
year or so, but there is a series that I report on in the paper
where actually the European Commission collects data on what I
call the fear of unemployment. It turns out that in two countries,
and only two, since about 2005 there has been a rise in what I
call the fear of unemployment. People think that unemployment
is going to rise. In the UK it has been associated with some rise
in unemployment but in Ireland what is interesting is that there
has been no rise in unemployment and people think that unemployment
is going to rise. That seems to have bid down wages somewhat and
I hear that when I go on my visits. I hear people say that workers
are aware that the company could move; they are aware that they
could be replaced by foreigners. There is some element of that
and we have tried at the Bank to do quite a lot of work, trying
to understand and trying to show whether these migrants have had
any effect on wages. Earlier in the year I published a paper where
I said I did not really see any evidence but actually the good
thing about empirical research is you can change your mind. I
actually find in the later version of the paper that there is
some evidence that the flow of workers from Eastern Europe, which
primarily has been in unskilled jobs but not necessarily of unskilled
people, has lowered the wages of the least skilled, so there is
some evidence of that. It is very hard in the data that we have
actually to show very many effects. In some sense this is fairly
speculative, this is data that we are trying to gather all the
time, but I take the view that fear of unemployment and actual
unemployment, especially fear of unemployment, have kept wages
down and especially pushed the wages of the least skilled down
but the effects are not enormous.
Q319 Chairman:
Assuming that your analysis is right, they are also likely to
continue as fresh waves of people come?
Professor Blanchflower: It really will depend
on whether the fresh waves of people are as productive as this
first wave. The thing that we have learnt is that the people are
in unskilled jobs, but they are not uneducated. Hence they have
been very productive and employers say to me that these people
show up on time and they work really hard and they are earning
so much more than they did at home. The question is whether that
is going to continue. If they maybe upskill and move to fill the
shortages that you folks are looking at, is the next flow of people
going to be as productive? I suspect not.
|
