House of Lords - Economic Affairs

Select Committee on Economic Affairs First Report

CHAPTER 2: KEY FEATURES OF IMMIGRATION AND IMMIGRANTS IN THE UK

9. This chapter reviews key features of the scale, characteristics and demographic impacts of recent migration to the UK. Although necessary to understand the economic impacts of immigration, the discussion comes with a strong health warning: the existing data about gross and net immigration flows to the UK, and about the stock of immigrants in the UK, are seriously inadequate. The National Statistician, Karen Dunnell, told us that "there is now broad recognition that available estimates of migrant numbers are inadequate to meet all the purposes for which they are now required. They are the weakest component in population estimates and projections in the United Kingdom, both nationally and at local level" (p 35). The Statistics Commission, which monitors official figures, described the available statistical information on immigration as "weak" (p 505).

10. Among the numerous reasons for the inadequacy of the current data, four stand out. First, there are insufficient data about people leaving the UK. The available annual emigration estimates are based on annual samples of fewer than 1,000 migrants leaving the UK. Second, very few data exist on short-term migration to the UK. The available data on gross and net immigration flows include only those immigrants who say they intend to stay for longer than 12 months (defined by the Office for National Statistics (ONS) as "long-term migrants"). The ONS has only very recently started to publish experimental data on short-term migration.[10]

11. Third, existing data do not allow for an accurate measurement of the stock of immigrants at national, regional and local levels. Labour Force Survey (LFS) data, the main source of data for measuring the annual stock of immigrants in the UK, exclude people who have lived in the UK for less than six months. People who do not live in households, such as those in hostels, caravan parks and other communal establishments, are also excluded. Councils across the country, but especially in the south of England, claim that the current data on the numbers of immigrants in their areas are significant under-estimates. In their evidence to us, Hammersmith and Fulham Council described the latest ONS revisions as "plainly wrong" (p 470), while Slough Council declared that the official methodology is "not fit for purpose" (p 273).

12. Fourth, as is the case in most immigration countries, we know very little about the scale of illegal immigration and illegal employment of immigrants in the UK. According to Home Office estimates, there were about 430,000 migrants residing illegally in the UK in 2001. This estimate comes with a number of caveats. Describing the difficulties with measuring illegal immigration, Professor John Salt of University College London told us that "no country in the world knows how many people there are who are living or working illegally, with the probable exception of Australia where they count everybody in and they count everybody out" (Q 599). Dr Bridget Anderson of Oxford University's Centre on Migration, Policy and Society, pointed out that the Home Office estimate excludes immigrants who are residing in the UK legally but breaching the conditions (including any employment restrictions) attached to their immigration status, a situation Dr Anderson described as "semi-compliance" (Q 223). For example, some immigrants on student visas work more than the 20 hours legally allowed during term time (Q 223). It can be extremely difficult and contentious, in practice, to define and draw a clear line between "legal" and "illegal" in the employment of immigrants.

Past and future net immigration and population growth

13. Between 2001 and 2006, the UK population grew by 2.5% (about one and a half million people in total), which is the fastest rate of growth since the first half of the 1960s when the birth rate was much higher than today.[11] Most of the recent population growth has been driven by rising net immigration of foreign nationals (see Table 1 and Figure 1). There has also been a long term trend of net emigration of British nationals from the UK. During the period 2001-06, total net immigration accounted for almost two thirds of the UK's population growth (see Appendix 5).[12] This figure does not take account of the positive impact of immigration on fertility rates which, if included, would make the role of net immigration in accounting for population growth even bigger. According to the Home Office, in both 2002 and 2005, the fertility rates of foreign-born mothers (2.3 and 2.5, respectively) were 0.8 higher than that of UK-born mothers (1.5 and 1.7) (p 47).

TABLE 1

Average annual migration 1997-2006 (Thousands)

	Non-British	British	Total
Gross Immigration	391	98	489
Gross Emigration	158	170	327

Net Immigration*	234	-72	162

Source: ONS Total International Migration (TIM) tables

Notes: Net Immigration and Total figures do not add up exactly due to rounding errors.

* A positive number indicates net immigration; a negative number shows net emigration

14. The rise in net immigration has increased the share of foreign-born persons in the UK population. Foreign-born persons currently account for about 10% of the population (and about 12% of the working-age population aged 16-64), up from just over 6% in 1981 and just over 8% in 2001. Appendix 6 shows that the current proportion of foreign-born persons in the population in the UK is still significantly smaller than in Australia (24%), Switzerland (23%), and Canada (19%) and just under those in the United States (13%), Ireland (11%) and the Netherlands (11%). However, it is higher than in France (8%) and Denmark (7%).

FIGURE 1

Total long-term immigration to the UK, 1991 to 2006

Source: Total International Migration estimates, ONS

15. Table 2 below, based on data from the Labour Force Survey, shows the share of all immigrants and new immigrants (defined as those who entered the UK up to two years ago) in the UK's working-age population by country of birth. In 2006, the largest numbers of immigrants were born in Africa and the Middle East (3% of the working-age population) and the Indian sub-continent (2.5%). Those born in the A8 countries—Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia—made up less than 1% of the working age population, just over 7% of the total immigrant population of working age. However, A8 immigrants account for one in three of new immigrants since 2004 (Bank of England p 394).

TABLE 2

Share of immigrants in the working age population (aged 16-64) by country of birth

Notes:

Based on individuals aged 16-64.

'New' immigrants are those who entered the UK in the survey year or the (calendar) year before the survey was carried out.

Country of birth data by all A8 countries are only available from 1998. For 1995, Poland, Hungary and Czechoslovakia (which account for 80% of those in the A8) are used to proxy the A8.

Rest of Europe includes countries not in the EU15 and A8.

pp =percentage points

Source: Bank of England (p.2) based on data from LFS.

PROJECTIONS

16. Under the principal variant of the most recent (2006-based) population projections of the Government Actuary's Department (GAD), the UK population is expected to grow from 60.6 million in 2006, to 71 million in 2031 and 85 million in 2081 (Table 3 and Appendix 7 show the latest projections). That is equivalent to an annual growth rate of 0.6% during the period 2006-2031, which is faster than the 0.5% per year growth experienced from 2001 to 2006. Just under half of the projected UK population growth during the period 2006-2031 is from net immigration. The remaining half is accounted for by natural increase—births in excess of deaths—of which 31% would occur in the absence of immigration and 23% arises from the positive effect of net immigration on natural change. GAD thus concludes that, in total, 69% of the UK's population growth during 2006-2031 in the principal projection is attributable, directly or indirectly, to future net-migration.[13]

17. In the long term, all of the projected growth in the UK population is attributable to net immigration. If there was no migration (that is, zero immigration and zero emigration), the projected population in 2081 would be 3.3 million lower than in 2006. Professor Robert Rowthorn of Cambridge University calculated that, with zero net immigration or "balanced migration" (i.e. when immigration equals emigration), the population would be 3.7 million higher by 2081 (p 27). Balanced migration increases population growth because immigrants are, on average, younger than emigrants and are thus more likely to have children (p 2).

TABLE 3

Projected changes in UK population, 2006-2081 (millions)

Source: Government Actuary's Department (GAD 2007), 2006-based projection database; except for "balanced migration" which is taken from written evidence by Robert Rowthorn (p 27).

18. Projecting future population growth depends critically on the underlying assumptions about future natural change (births minus deaths) and future net immigration. The estimates for future net immigration are projections based on past trends rather than results of forecasting models. Consequently, GAD's projections of net immigration, natural change and population growth involve a high degree of uncertainty. GAD's assumptions about future long-term net immigration changed three times over the past five years (130,000 per year in 2003-based projections; 145,000 in 2004-based; 190,000 in 2006-based).

19. Net immigration is extremely difficult to predict because of the complexity and variability of its determinants. The scale and patterns of immigration are determined by a range of economic, social and political factors. These include differences in economic conditions (e.g. wages and unemployment) and life satisfaction between the UK and other countries; employer demand for immigrant labour in the UK; national and international recruitment agencies that help connect employers in the UK with immigrants abroad and/or already in the UK; immigrant networks (immigrants' contacts with family and friends abroad and in the UK); and government policy in the UK and other immigration countries. The increase in immigration since the late 1990s was significantly influenced by the Government's Managed Migration policies. These encouraged labour immigration through, first, an expansion of the work permit system (the annual number of work permits issued to non-EEA nationals increased from fewer than 30,000 in the mid 1990s to an annual average of over 80,000 in the early 2000s),[14] and then the decision to grant nationals of the A8 countries immediate free access to the British labour market when their countries joined the European Union in May 2004 (over 750,000 A8 nationals registered for employment in the UK during May 2004-December 2007).[15] The much larger then expected immigration of A8 workers since May 2004 is a good example of the difficulties in predicting and measuring migration flows and migrant stocks in the UK (see Appendix 9).

20. The development of future immigration, including from Eastern Europe, is uncertain. On the one hand, net immigration may decline due to a slowdown in the British economy, economic growth in the A8 countries and the opening up to A8 workers of other EU countries' labour markets, most notably Germany and Austria, in the coming years. Professor Rowthorn told us that the experience of Irish immigrants into the UK showed that if the economy of the sending country "develops dramatically then emigration flows dry up—in fact they may go into reverse" (Q 12). He added that A8 immigration "might take 10 or 15 years to tail off but my guess is that the net flows will tail off and probably … faster than people think" (Q 32).

21. On the other hand, we received evidence from Professor David Blanchflower, an external members of the Monetary Policy Committee (MPC), and from the Institute of Directors, that the experience of other countries has shown that immigrant networks may perpetuate immigration even when the economic factors that triggered immigration in the first place, such as large differences in the standard of living between migrant sending and receiving countries, decline[16] (Blanchflower p 197-198). Referring to immigration in general, rather than immigration from Eastern Europe in particular, Mr Martin Wolf of the Financial Times said he "would be extremely surprised if the demand from immigrants to come into this country … did not remain pretty strong". This was based on the "extraordinarily large" number of people gaining an education throughout the world and the fact that Britain is an attractive destination due to its relatively high income and the fact that it speaks English (Q 399). Dr Bridget Anderson also emphasized the importance of learning English and to "have fun" as a key factor that motivates young East Europeans to migrate to the UK (Q 213).

Key features of recent migration to the UK

22. Immigration to the UK has been highly concentrated in London while the rest of the South East, as well as Yorkshire and Humber, have also attracted large shares relative to the rest of the country. Recent immigration, however, has been more widely distributed across the UK with a still substantial but much smaller proportion of net immigration in London. As shown in Table 4, the areas mentioned above accounted for almost three quarters of international net immigration to the UK during the period 1991-2006 but just under 60% of net immigration in 2004-2006. London has seen the biggest change with more than half of net immigration in 1991-2006 and 36% in 2004-06. The recent change has been mainly due to the arrival of Eastern European migrants who have been much more widely distributed across the UK than other migrant groups. Between May 2004 and December 2007, Anglia had the greatest number of A8 workers registering with employers in the area (15% of the total), followed by the Midlands (13%) and London (12%).[17]

TABLE 4

Total international net immigration by region, 1991-2006


	1991-2006		2004-2006
	Thousands	%	Thousands	%

England	+1,854	99.7%	+598	93.6%
London	+989	53.2%	+230	36.0%
South East	+200	10.8%	+64	10.0%
Yorkshire and Humber	+182	9.8%	+80	12.5%
Rest of England	+483	26.0%	+224	35.1%
Wales	+27	1.5%	+7	1.1%
Scotland	-2	-0.1%	+26	4.1%
Total UK*	+1,860	100.0%	+639	100%

International net immigration refers to all net immigration from outside the UK (including that of British nationals)

*Figures for Northern Ireland are currently being revised. They are included in the total for the UK but not reported separately.

Source: ONS, Total International Migration (TIM) tables, 1991-2006

23. Between 1995 and 2006, two-thirds of the growth in the foreign-born population of working age was of people born in Africa and Asia (see Table 2). In the last few years there has been a large additional net inflow from the EU, which accounted for just under a third of all net immigration in 2004-06, including 19% from the A8 countries. Figure 2 shows the changes in the pattern of net immigration since the early 1990s.

FIGURE 2

Scale and composition of foreign net immigration to the UK by nationality, 1991-2006 (thousands and %)

EU15: the fifteen EU member states before EU enlargement in 2004
A8: the eight East European countries that joined the EU in 2004
Old Commonwealth (Old CW): Canada, Australia, New Zealand and South Africa
New Commonwealth (New CW): all other Commonwealth countries
Source: ONS, Total International Migration (TIM) tables, 1991-2006

24. The economic impact of immigration depends partly on immigrants' length of stay in the UK. Among new immigrants in 2005, 44% said they intended to stay for 1-2 years (up from 35% in 1996), followed by 19% who said they intended to stay for 3-4 years, and 30% more than 4 years (down from 39% in 1996).[18] Among A8 workers registering for employment in the 12 months to September 2007, 62% said they intended to stay for less than one year (including 57% saying that they would stay for less than three months).[19] As intentions may change, these data cannot be considered reliable indicators of immigrants' likely degree of permanency and length of stay in the UK. Recent research on Eastern Europeans suggests that, over time, a significant share of immigrants change their intentions from a short-term to a longer-term or permanent stay in the UK.[20] Another recent paper found significant variation in return propensities across immigrants from different origin countries and of different ethnicity.[21] Return migration is significant for immigrants from the EU, the Americas and Australia and New Zealand. In contrast, it is much less pronounced for immigrants from the Indian sub-continent and from Africa.

25. Intentions of stay are related to immigrants' reasons for coming to the UK, which are, in turn, often—but not always—reflected in immigrants' immigration status when entering the UK. The ONS provides data on annual immigration by purpose of visit for all persons (including British citizens) who intend to stay for more than 12 months, while the Home Office publishes data on the immigration status of all non-EEA nationals (including those staying for less than 12 months) arriving in the UK. Although both sets of data are incomplete and not always consistent, broad patterns can be identified. In recent years, the main reason for immigration (including that of British nationals) has been work (39% in 2006, one of the highest shares among major OECD countries),[22]followed by study (27%) and accompanying/joining family members/partners. Compared to the early 1990s, the shares of work-related immigration and immigration for studying in the UK have each increased by about 10%, while the share of family immigration and immigration for other reasons declined (see Figure 3).

FIGURE 3

All immigration (incl. British nationals) by reason of visit, 1991-2006

Source: ONS, Total International Migration (TIM) tables, 1991-2006

26. Among non-EEA nationals, whose immigration the UK can control, Home Office data suggest that students have been the biggest group in recent years (309,000 in 2006), followed by work-related migrants (about 167,000) and family members/dependants (about 118,000).[23]

27. The existing data about emigration from the UK, based on the International Passenger Survey, do not contain any information about the leaving person's legal (immigration) status in the UK. So it is impossible to describe the composition of the current immigrant population in the UK by its immigration status. Professor David Coleman of Oxford University explained: "The International Passenger Survey … was invented back in the 1960s as an instrument for the Board of Trade for balance of trade, tourism and things of that kind. It is only incidentally used to measure migration. It does so by using a small fraction of its interviews … to take a voluntary sample of those coming in, about 1,800 a year, and those going out, about 800 a year or thereabouts. Those are then grossed up to make migration assumptions from different categories of people by age, marital status, country of origin, nationality and all the rest of it. That is intrinsically unsatisfactory because it is voluntary and it is quite a small sample survey" (Q 268).

28. Immigration status is important to the analysis of the economic impacts of immigration because it determines an immigrant's rights in the UK, including rights in the labour market, access to welfare benefits and rights to family-reunion, and rights to stay permanently in the UK and acquire British citizenship. As shown in Appendix 8, different types of immigration status are associated with different rights and restrictions. For example, unless they are highly skilled, immigrants holding work permits may only work for the employer specified on the permit. In contrast, EEA nationals and non-EEA nationals with permanent residence status in the UK have complete freedom of employment in the UK. Immigrants employed on low-skilled work permits do not have rights to family reunion, but those on skilled and highly skilled permits do. Access to welfare benefits, such as jobseekers' allowance, varies across different types of status.

A profile of immigrant workers in the UK

29. Labour Force Survey data for 2006 suggest that the three most popular sectors for foreign-born workers in the UK are public administration, education and health (32%), distribution, hotels and restaurants (21%) and banking, finance and insurance (20%). Among A8 immigrants, the top sectors are distribution, hotels and restaurants (24%), manufacturing (21%) and construction (14%). (ONS p50) In some sectors and regions, the share of immigrants is much higher.

30. The submission from the Bank of England showed that, although employed across all occupations, immigrants are concentrated at the high and low skill end of the occupation distribution (p 401). The City of London illustrates this range of occupations, where immigrants are widely found among the staff of the restaurants serving financial executives, many of whom are also immigrants. Overall, more foreign-born workers are in highly-skilled jobs than the UK-born (49% vs 42%), with similar levels for elementary occupations (12% vs 11%). But A8 immigrants are more concentrated in low-skilled jobs, with 38% in elementary occupations and only 13% in higher skilled occupations (ONS p 51). Dr Drinkwater of Surrey University and Professor Blanchflower told us that, for recent A8 immigrants, there is a significant mismatch between their education/skills and their employment in the UK (Q 235; Q 319)

31. Measuring immigrants' skills and educational qualifications is difficult because few qualifications obtained abroad are directly comparable to British ones. Analysis of the age at which people left full-time education—over 21s are assumed to have a degree, and those who left school aged 16-20 are assumed to have completed secondary school—indicates that immigrants are generally more skilled than UK-born persons. Labour Force Survey data suggest that 66% of the UK-born population have only completed secondary school while 17% have a degree. A smaller fraction (51%) of migrants have only secondary school qualifications and a greater fraction (37%) have degrees (Bank of England p 394).

32. Data from the LFS show that among new immigrants (those arrived up to two years ago), the proportion of persons with degrees is particularly high (46%) and the proportion of persons with only secondary schooling particularly low (48%), compared to the UK-born population (Bank of England, p 395). Dr Drinkwater noted that Poles appear to be higher educated than other recent migrants from the A8 countries (p 136).

33. There is very large variation in the labour market outcomes, including employment rates and earnings, across and within different migrant groups. Average figures for immigrants' employment rates and earnings conceal significant differences between the labour market outcomes of different types of immigrants, especially between low-, medium- and high-skilled workers, but also between men and women.[24]

34. The overall employment rate of immigrants (68%) is lower than that of UK-born persons (about 75%), but the gap has been declining in recent years.

35. The employment rate of A8 immigrants is over 80%, while that of immigrants born in Bangladesh is only around 50% (Bangladeshi women have an employment rate of about 19%) (ONS p 331). When employed, the average immigrant worker worked one and a half hours per week more in 2006 than the average individual born in the UK (Bank of England, p 395).

36. The average earnings of immigrants have been higher than that of UK-born persons since the early 1990s but the gap has been declining in recent years. In 2006, the average hourly wage of all immigrants was £11.90 compared to £11.50 for UK-born workers. The earnings gap is partly explained by the fact that immigrants are more likely than UK-born persons to live in London where hourly rates are higher than in the rest of the UK. The recent decline is partly due to the low average rates at which new immigrants are employed in the UK (£9 per hour in 2006) (Bank of England, p 397). Dr Drinkwater noted that average earnings of Eastern Europeans have been particularly low, with recently arrived Poles earning an average of £6 per hour during 2003-2006 (p 136), and also that the vast majority of recent A8 immigrants have been employed in low-paying jobs at around the minimum wage (p 136).

37. The determinants of immigrants' earnings in the UK include proficiency in English language skills, work experience, education, ethnicity, agency working[25] and length of time spent in the UK. (Drinkwater and Anderson Q 226-228).[26] Immigration status is likely to matter but, on its own, illegal working by immigrants does not necessarily translate into lower wages. (Anderson Q 225).

38. Government policy can help immigrants raise their productivity and outcomes in the British labour market. In particular, given that language proficiency can be a key factor to economic success in the British labour market[27], the Government should consider whether further steps are needed to help give immigrants who come and take up employment in the UK access to English language training.

Improving data on immigration and migrants

39. There is a clear and urgent need to improve the data and information about gross and net migration flows to and from the UK, and about the size, geographical distribution and characteristics of the immigrant stock. The inadequacies of the current data create a number of problems. They reduce the efficiency of the allocation of government resources to local councils that provide public services across the UK. The Statistics Commission pointed out that "some £100 billion a year is being distributed through formulae that are directly affected by migration estimates" (p 506). Problems with migration data led Mervyn King, Governor of the Bank of England, to tell the Committee in 2006: "We just do not know how big the population of the United Kingdom is."[28] This makes it difficult for the Monetary Policy Committee (MPC) to assess potential output, predict inflation and set interest rates. Professor Stephen Nickell, a former member of the MPC, said that "we [the MPC] used to worry about this quite a lot", although "I do not think we made mistakes because of in-migration" (Q 45, 48). More generally, inaccurate data on migration have obvious adverse impacts on the empirical analysis of the scale and impacts of immigration and population growth.

40. A series of measures—outlined in an inter-departmental report published in December 2006[29]—have been proposed to improve migration data and statistics. They include: increasing sample sizes in surveys; collecting more data from migrants through landing cards; the partial points-based system being introduced this year (see Appendix 12) and the e-Borders project (which includes passport scanning) currently being developed; creating better links between the various data sources that are already used; and improving statistical and demographic models. The ONS also started issuing "experimental" short-term migration estimates in October 2007. Karen Dunnell, the National Statistician, suggested to us that data held by local authorities could improve migration statistics (Q 68).

41. It is too early to assess the effectiveness of the Government's measures to improve migration statistics, some of which will take many years to implement. It is still unclear, for example, whether adequate funding is being made available to implement the recommendations made by the inter-departmental taskforce on migration. Procurement for the e-Borders programme, which is meant to record electronically all arrivals and departures, is now under way, and the success of the programme will obviously depend on effective implementation of the technology. The Statistics Commission noted that there has been reluctance on the part of some government departments to develop and share data on migration (p 507). Moreover, linking administrative databases held by different government departments can be difficult because of data protection and privacy issues as well as running the risk of losing data "in transit"—as the recent loss of a large amount of personal data related to child benefits has illustrated. The main challenge in using data provided by local councils is to get all councils to implement a uniform method for collecting and reporting data on migration. However, councils appear to be reluctant to commit the resources to introduce such uniform methods (LGA Q 446).

42. Professor David Coleman and Professor John Salt of University College London both suggested that new ways and a "step change" of collecting data on migration and migrants are necessary, as "the instruments which the ONS has at its disposal are really at the end of their useful life" (Coleman Q 268) and "we have pushed existing data as far as we can" (Salt Q 605). Professors Salt and Coleman both proposed that the Government should consider setting up a population register, divided into a register for citizens and non-citizens.

43. It is unrealistic to expect that the Government can have complete data on migration. The key questions are how, by how much, and at what cost, the current gaps in the available data can be reduced. But clearly there is ample room for improvement in UK migration statistics. The Government should make a clear commitment to improving migration statistics and facilitating more comprehensive assessments of the scale, characteristics and impacts of immigration.

10 Research report on short-term migration, ONS, October 2007 available at: http://www.statistics.gov.uk/about/data/methodology/specific/population/future/imps/updates/downloads/STM_Research_Report.pdf Back

11 ONS 2007, Population Trends, Winter 2007, p.10, Table 1 and note from ONS covering the population each year in the 1960s. One has to go back to 1961-66-when the population rose 3.5%-to find a faster five-year period of population growth than 2001-06. Back

12 ONS 2007, Population Trends, Winter 2007, p.53, Table 1.6 Back

13 GAD, Migration and Population Growth, http://www.gad.gov.uk/Demography_Data/Population/2006/methodology/mignote.asp Back

14 See Appendix 11. Back

15 Home Office 2008, Accession Monitoring Report May 2004-December 2007 Back

16 Institute of Directors, Immigration: a business perspective (January 2007), p 12 Back

17 Home Office 2008, Accession Monitoring Report, May 2004-December 2007, p. 17 Back

18 ONS 2007, International Migration, Series MN no.32, Table 2.11, p.17 Back

19 Home Office 2008, Accession Monitoring Report, May 2004-September 2007, p. 16 Back

20 Spencer, S., Ruhs, M., Anderson, B. and Rogaly B. (May 2007), Migrants' lives beyond the workplace: The experiences of East and Central Europeans in the UK, Joseph Rowntree Foundation, London Back

21 Dustmann, C. And Y. Weiss (2007), Return Migration: Theory and Empirical Evidence from the UK, British Journal of Industrial relations 45(2): 236-256 Back