Memorandum by the Bank of England
1. This submission draws on existing Bank
of England analysis on immigration. See Saleheen and Shadforth
(2006), "The economic characteristics of immigrants",
Bank of England Quarterly Bulletin vol 46, no 4[3];
and Barwell (2007), "The macroeconomic impact of international
migration", Bank of England Quarterly Bulletin vol
47, no 1.[4]
Further analysis can be found in references provided in the relevant
text below.
Q1. What are the numbers and characteristics
of recent immigration? What are the expected future trends for
immigration?
2. The official data suggest that over the
past decade there has been a rise both in the number of people
coming to and leaving the United Kingdom (Chart 1).[5]
But the measured inflow has increased by more such that there
was a net inflow of 185,000 migrants into the United Kingdom in
2005 (the latest full year for which data are available), and
in the preceding year, the net inflow was 223,000. Those net inflows
were large, even by recent historical standards. Between 1998
and 2003 the net migrant inflow averaged around 150,000 people
a year.
3. The pickup in the net inflow of migrants
in 2004 and 2005 was driven in part by the enlargement of the
European Union. Since 1 May 2004 nationals from eight countries
in Central and Eastern Europe (referred to as the A8) have gained
the right to live and work in the United Kingdom. Administrative
data from the Worker Registration Scheme (WRS) indicate that several
hundred thousand migrants from these countries have found work
in the United Kingdom since enlargement (Chart 2).
4. Net inflows of migrants have accounted
for the majority of UK population growth over the past decade
and will continue to do so in the near future according to the
latest set of population projections by the Government Actuaries
Department (GAD) (Chart 3).
5. In order to consider the characteristics
of migrants, the most useful data source is the UK Labour Force
Survey (LFS).[6]
Inflows of overseas residents (and net outflows of British residents)
have also raised the fraction of the UK population that was born
abroad (Chart 4). The LFS data suggest that around 12% of the
working-age UK population were foreign born in 2006. Within that,
around one sixth were born in EU14 countries, one fifth in the
Indian sub-continent and a quarter in Africa or the Middle East
(Table 1). Those born in the A8 countries made up a small fraction
of the stock of immigrants in 2006, but they are the biggest group
in those defined as "new" immigrants.[7]
In other words, while A8-born individuals represented a small
proportion of immigration before 2004, the share of A8-born individuals
has been much greater among the immigrants who arrived in the
past three years. In particular, A8 immigrants account for one
in three of new arrivals since 2004, but only one in thirteen
of the total stock of immigrants.
Table 1
SHARE OF IMMIGRANTS IN THE POPULATION: BY
COUNTRY OF BIRTH
|
| All Immigrants
| | New Immigrants
|
| 2006
| 1995 | Change (pp)
| 2006 | 1995 |
Change (pp) |
|
| Per cent of population | 12.00
| 8.16 | 3.84
| 1.29 | 0.52 | 0.77
|
| (of which) | |
| | | |
|
| A8 | 0.87 |
0.10 | 0.77
| 0.40 | 0.02 | 0.38
|
| Africa and Middle East | 2.97
| 1.64 | 1.34
| 0.21 | 0.10 | 0.11
|
| Indian Sub-Continent | 2.52
| 1.85 | 0.67
| 0.17 | 0.06 | 0.11
|
| EU14 | 2.10 |
2.23 | -0.14
| 0.17 | 0.14 | 0.03
|
| Americas | 1.25
| 1.00 | 0.25
| 0.12 | 0.07 | 0.05
|
| Rest of Asia | 1.07
| 0.63 | 0.43
| 0.10 | 0.07 | 0.04
|
| Rest of Europe | 0.82
| 0.46 | 0.36
| 0.07 | 0.04 | 0.03
|
| Australia and NZ | 0.39
| 0.24 | 0.15
| 0.05 | 0.03 | 0.01
|
|
| 1. Based on individuals aged 16-64.
|
| 2. "New" immigrants are those who entered the UK in the survey year or the (calendar) year before the survey was carried out.
|
| 3. 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.
|
| 4. Rest of Europe includes countries not in the EU15 and A8.
|
Source: LFS.
6. The LFS records the highest qualification of individuals.
However, the LFS definitions are not very useful for assessing
the relative qualifications of foreign born immigrants due to
the policy for categorising any foreign qualification not on the
list of (mainly UK specific) qualifications as "Other".
Within the LFS it is also possible to look at the amount of time
spent in education. Based on these data, people who left full-time
education before 16 are classified as having incomplete schooling,
and those who left after age 21 as having completed a degree.
This leaves individuals who left full-time education between the
ages of 16 and 20—who are classified as having completed
secondary school.[8]
7. Using these definitions, 66% of the UK-born population
have only completed secondary school while 17% have a degree (Table
2). A smaller fraction (51%) of immigrants have only secondary
school qualifications and a greater fraction (37%) have degrees.
So, on the basis of the age at which individuals left full-time
education, immigrants generally appear to be more skilled than
those born in the United Kingdom.
8. Table 2 also shows that the average immigrant in the
United Kingdom is 38 years old, compared to nearly 40 for the
UK-born population. In fact, both the official migration data
and LFS data show that over 90% of immigrants are aged between
15 and 44. "New" immigrants are younger, with an average
age of 29.
Table 2
EDUCATIONAL ATTAINMENT: IMMIGRANTS AND THOSE BORN IN THE
UNITED KINGDOM
|
| 2006
| | | |
| | 1995
|
| All
| UK born | Immigrants
| | Immigrants
|
| | | All
| Recent | New
| All | Recent
| New |
|
| Weighted count (millions) | 38.2
| 33.7 | 4.6
| 1.2 | 0.5
| 3.0 | 0.5
| 0.2 |
| Sample size (thousands) | 299.2
| 266.4 | 32.8
| 86.3 | 34.2
| 29.5 | 4.4
| 1.8 |
| Immigrants (%) | |
| 12.0 | 3.3
| 1.3 | 8.2
| 1.4 | 0.5 |
| Average age (working age pop) | 39.8
| 40.0 | 38.1
| 30.2 | 28.8
| 39.4 | 29.7
| 28.9 |
| Distribution of workers |
| | | |
| | | |
| By highest qualification (%) |
| | | |
| | | |
| Degree | 26.0
| 26.8 | 27.9
| 20.0 | 17.2
| 21.7 | 10.7
| 10.4 |
| A-level or equivalent | 23.9
| 25.4 | 12.9
| 8.5 | 7.0
| 14.5 | 8.9
| 7.5 |
| GCSE or equivalent | 27.4
| 29.7 | 10.8
| 3.6 | 2.2
| 12.8 | 4.5
| 1.7 |
| Other | 8.1 |
4.8 | 31.9
| 53.5 | 59.6
| 28.1 | 62.2
| 69.9 |
| None | 13.6 |
13.2 | 16.6
| 14.4 | 14.1
| 23.0 | 13.8
| 10.5 |
| By age left full-time education (%) |
| | |
| | | |
|
| (Incomplete schooling) | 16
| 16 | 11
| 7 | 6
| 21 | 9
| 6 |
| 16-20 (completed secondary school) | 65
| 66 | 51
| 48 | 48
| 52 | 47
| 41 |
| 21+ (Completed a degree) | 20
| 17 | 37
| 46 | 46
| 26 | 44
| 53 |
|
| 1. Based on individuals aged 16-64.
|
| 2. "Recent" immigrants are those who entered the UK in the survey year or 4 (calendar) years before the survey was carried out.
|
| 3. "New" immigrants are those who entered the UK in the survey year or the (calendar) year before the survey was carried out.
|
| Source: LFS. |
Q2. In what sectors and occupations are immigrants employed?
How do migrants' labour market outcomes—including their
employment rates and earnings—compare to local workers?
9. Compared with UK-born individuals, immigrants (on
the LFS foreign-born definition) are on average somewhat less
likely to be employed. The LFS data suggest that 74% of UK-born
individuals were employed compared with 67% of all immigrants
in 2006 (Table 3). In 1995, "recent" and "new"
immigrants had lower employment rates than immigrants in general,
but this pattern has changed in 2006 with recent and new migrants
having rates that are closer to the average. When employed, the
average immigrant worked 1½ hours per week more in 2006 than
the average individual born in the United Kingdom.[9]
10. Chart 5 shows the share of total employment in each
occupation accounted for by foreign-born workers. About 11% of
all "Managers" in the United Kingdom were foreign born
in 2006. The chart shows a U-shaped profile, where there is a
greater share of immigrants at both ends of the occupation distribution
than in the middle. The pink bars plot these shares of immigrants
since 2001. It shows that the immigrant share has increased in
all occupations, but by proportionally more in lower-skilled jobs.
The bottom two occupation groups are "Process"—including
food and textile operatives—and "Elementary"—including
cleaners, shelf fillers, packers, labourers and kitchen and catering
assistants.
Table 3
LABOUR MARKET OUTCOMES: IMMIGRANTS AND THOSE BORN IN THE
UNITED KINGDOM
|
| 2006
| | | |
| | 1995
|
| All
| UK born | Immigrants
| | Immigrants
|
| | | All
| Recent | New
| All | Recent
| New |
|
| Employed | 72.7
| 73.5 | 66.8
| 67.2 | 64.1
| 59.8 | 45.5
| 46.0 |
| Inactive | 23.1
| 22.5 | 27.4
| 25.9 | 28.0
| 31.6 | 44.3
| 45.8 |
| Unemployed Rate | 5.5
| 5.2 | 8.0
| 9.3 | 11.0
| 12.5 | 18.3
| 15.1 |
| Average basic hours worked | 34.7
| 34.5 | 36.1
| 36.7 | 37.0
| 36.7 | 36.4
| 36.2 |
| Aveage paid overtime hours | 2.9
| 2.9 | 3.2
| 4.5 | 4.9
| 3.6 | 3.8
| 4.4 |
|
| 1. Based on individuals aged 16-64.
|
| 2. "Recent" immigrants are those who entered the UK in the survey year or 4 (calendar) years before the survey was carried out.
|
| 3. "New" immigrants are those who entered the UK in the survey year or the (calendar) year before the survey was carried out.
|
Source: LFS. |
11. Chart 6 shows that immigrants have on average earned
more than UK-born individuals since 1993. This result is partly
explained by the fact that immigrants have been more likely to
live in London, where hourly wage rates are higher than the rest
of the country. The chart also shows that average hourly pay of
"new" immigrants was not very different to existing
immigrants through the 1990s. But since 2002, the real wages of
"new" immigrants have fallen relative to the wage of
those born in the United Kingdom.
Table 4
HOURLY WAGES: IMMIGRANTS AND THOSE BORN IN THE UNITED
KINGDOM
|
| 2006
| | | |
| | 1995
|
| All
| UK born | Immigrants
| | Immigrants
|
| | | All
| Recent | New
| All | Recent
| New |
|
| Average wages per hour (2005 £s) | 11.6
| 11.5 | 11.9
| 9.7 | 9.0
| 9.3 | 10.5
| 10.2 |
| Distribution of workers |
| | | |
| | | |
| By hourly wage in 2005 £s (%) |
| | |
| | | |
|
| .00 | 8 |
8 | 9
| 14 | 17
| 27 | 34
| 34 |
| 5.00-£9.99 | 47
| 47 | 47
| 58 | 59
| 41 | 28
| 27 |
| 10.00-£14.99 | 23
| 23 | 20
| 14 | 10
| 18 | 18
| 20 |
| £15.00 | 22
| 22 | 24
| 15 | 14
| 13 | 20
| 18 |
|
| 1. Based on employees aged 16-64. Those earning above £100 per hour or below £1 an hour are considered to be extreme outliers and are excluded.
|
| 2. "Recent" immigrants are those who entered the UK in the survey year or 4 (calendar) years before the survey was carried out.
|
| 3. "New" immigrants are those who entered the UK in the survey year or the (calendar) year before the survey was carried out.
|
Source: LFS. |
Q6. What is the economic impact of a net change in the
UK population? If there is a net increase, does the impact differ
when this comes from higher immigration rather than from changes
in birth and death rates?
12. Accurate estimates of both migration and the domestic
workforce are important for policymakers to judge the amount of
supply available and, in turn the balance between this and the
demand for goods and services. For example, if immigrants raise
aggregate supply more than they raise aggregate demand then one
would expect inflationary pressures to ease for a period of time.
For more details see box entitled "The macroeconomic impact
of migration" in Bank of England (2006), Inflation Report,
November.[10]
Q10. How does the impact of immigration vary across different
regions of the UK?
13. Chart 7 shows that those immigrants who have arrived
since the start of 2004 are more likely to settle, at least initially,
in London than elsewhere.[11]
Sources: ONS and LFS micr-data, 2004Q1-2006Q4
Q11. Are there any relevant parallels and lessons for the
UK from the economic impact of immigration on other OECD countries?
14. The scale of net inward migration to the UK has been
much lower than in most other EU countries until recently, and
even now remains below the levels of both Italy and Spain (see
Table 5).[12]
Table 5
NET MIGRATION FLOW, 1960-2005 (000s)
|
| Population
Millions
| Net Migration (Thousands)
|
| 2006
| 1960-64 | 1965-69
| 1970-74 | 1975-79
| 1980-84 | 1985-89
| 1990-94 | 1995-99
| 2000 | 2003
| 2004 | 2005
|
|
| EU-25 | 463.6
| 230 | -34
| 82 | 265
| 15 | 382
| 856 | 645
| 677 | 1,981
| 1,887 | 1,776
|
| EU-15 | 389.5
| 216 | -29
| 190 | 280
| 31 | 427
| 1,022 | 627
| 1,077 | 1,925
| 1,847 | 1,720
|
| Belgium | 10.5
| 14.1 | 16.7
| 9.0 | 7.2
| -7.1 | 8.2
| 18.8 | 11.0
| 12.9 | 35.6
| 35.8 | 51.0
|
| Denmark | 5.4
| 0.9 | 1.0
| 6.5 | 2.0
| 1.1 | 6.4
| 10.6 | 15.7
| 10.1 | 7.0
| 5.0 | 6.7
|
| Germany | 82.4
| 163.0 | 220.7
| 171.1 | 14.6
| 1.8 | 332.2
| 562.6 | 204.4
| 167.8 | 142.2
| 81.8 | 81.6
|
| Greece | 11.1
| -41.9 | -35.1
| -24.8 | 56.1
| 17.9 | 24.4
| 88.6 | 61.9
| 29.4 | 35.4
| 41.4 | 40.0
|
| Spain | 43.8
| -109.7 | -30.1
| -32.1 | 28.3
| 0.8 | -19.7
| 49.4 | 129.0
| 389.8 | 624.6
| 610.0 | 641.2
|
| France | 63.0
| 303.7 | 95.3
| 114.8 | 33.8
| 52.3 | 49.8
| 22.5 | 8.0
| 102.7 | 132.7
| 107.7 | 205.1
|
| Ireland | 4.2
| -20.9 | -14.8
| 10.3 | 10.1
| -6.8 | -32.9
| -1.4 | 16.0
| 31.8 | 31.3
| 47.6 | 66.2
|
| Italy | 58.8
| -81.5 | -94.3
| -45.2 | 6.0
| -27.8 | 2.5
| 24.4 | 51.4
| 55.2 | 609.5
| 558.2 | 324.2
|
| Netherlands | 16.3
| 3.9 | 9.6
| 26.7 | 35.7
| 14.2 | 27.4
| 41.3 | 30.9
| 57.0 | 7.0
| -10.0 | -22.8
|
| Austria | 8.3
| 1.0 | 10.0
| 19.1 | -3.0
| 3.3 | 14.4
| 48.7 | 7.1
| 17.2 | 38.2
| 61.7 | 56.4
|
| Portugal | 10.6
| -78.3 | -169.7
| -45.0 | 88.9
| 6.1 | -31.8
| 88.9 | -7.0
| 29.6 | 47.1
| 47.3 | 38.4
|
| Finland | 5.3
| -11.2 | -18.9
| 1.3 | -7.3
| 4.1 | 2.4
| 9.0 | 4.2
| 2.4 | 5.8
| 6.7 | 9.2
|
| Sweden | 9.0
| 10.6 | 24.6
| 6.9 | 17.3
| 5.2 | 24.1
| 32.5 | 9.6
| 24.4 | 28.7
| 25.3 | 26.7
|
| UK | 60.4 |
59.9 | -44.7
| -32.1 | -11.3
| -34.3 | 22.3
| 21.9 | 81.0
| 143.6 | 177.7
| 227.2 | 193.3
|
| Luxembourg | 0.5
| 2.1 | 0.9
| 3.9 | 1.4
| 0.4 | 2.2
| 4.0 | 3.9
| 3.4 | 2.1
| 1.5 | 2.9
|
|
| Source: Population Statistics 2006—Eurostat, Table C1 (population) and Table F1 (migration)
|
Q12. How do differences in migrants' skills affect the
economic impact of immigration?
15. An increase in the number of immigrants, other things
being equal, will raise the supply potential of the economy. But
the extent to which potential supply increases will depend on
the characteristics of immigrants relative to natives. The impact
on the natural rate of unemployment will also depend on the characteristics
of immigrants; in particular it will fall if immigrants help to
fill skill gaps.
Q13. How can data on immigration be improved?
16. There are a number of sources of uncertainty around
the official estimates of the number of migrants entering and
exiting the country, and they primarily relate to the role played
by the International Passenger Survey (IPS) in the construction
of the data.[13] Official
estimates of net migration are primarily based on the IPS, a survey
of individuals passing through the main UK air and sea ports and
the Channel Tunnel. The ONS supplement the IPS with administrative
data on asylum seekers and their dependents, and estimates of
the migrant flow between the United Kingdom and the Irish Republic;
the ONS also make other adjustments to account for those whose
intended length of stay changes (see definitions below). The IPS
questions 250,000 travellers annually. Of those, approximately
1% are migrant interviews. Headline IPS data are available for
2005, but more detailed statistics are only available for 2004
at present. In 2004, the IPS statistics were based on 2,801 people
who entered the United Kingdom and 755 people who left. This is
obviously a very small sample and is one reason why there are
large uncertainties surrounding the official migration numbers.
In addition, it is difficult for the survey to keep pace with
the dramatic change in the pattern of arrivals as seen for example
in the change in movements between the UK and Poland. Other reasons
why the IPS may mismeasure immigration are that: the survey was
not designed to measure net migration, it was designed to capture
tourism and business travel; and participation in the survey is
voluntary and immigrants may be less likely to respond (perhaps
because of language difficulties). To address these issues, the
ONS have published plans to improve migration data over the next
few years by, for example, increasing the sample size of emigrants
in the IPS.
17. Although the ONS definition of a migrant[14]—that
is, an individual who changes their country of usual residence
for a period of at least a year—is appropriate for measuring
the long-run impact of international migration on the population
of the United Kingdom, it may be too restrictive when thinking
about the economic impact of migration. Large numbers of individuals
enter the country to study or to work for a period of weeks or
months. These "visitors" will not be captured in the
official migration statistics, but they may contribute to the
level of demand and supply. These individuals will be recorded
in the data collected by the Civilian Air Authority and the Department
for Transport, and are discussed in the ONS' monthly "Overseas
travel and tourism" first release. A broader measure of the
number of people present in the UK at any one time can be estimated
using these data.[15]
By applying the net flows to an earlier census of the population
(in 1991), and including subsequent births and deaths, the number
of people in the UK at any time can be estimated. The estimates
produced by this headcount method are shown in Chart 8 and compared
to the official ONS data. To address these issues, the ONS are
investigating the possibility of constructing estimates of short-term
migration. For more details, see ONS (2006), Interdepartmental
Task Force.[16]
SUMMARY
— The official data suggests that over the past
decade there has been a rise in the net inflow of migrants to
the UK. Net inflows of migrants have accounted for the majority
of UK population growth over the past decade.
— The pickup in the net inflow in 2004 and 2005
was driven in part by the enlargement of the EU. While A8-born
individuals represented a small proportion of immigration before
2004, the share of A8-born individuals has been much greater among
immigrants who arrived in the past three years.
— A greater proportion of immigrants have degrees
and therefore generally appear to be more skilled than those born
in the UK. In addition, immigrants are on average younger than
the UK population.
— Compared with UK-born individuals, immigrants
are on average less likely to be employed. When employed, there
is a greater share of immigrants at both ends of the occupation
distribution than in the middle. Since 2001, the immigrant share
has increased in all occupations, but by proportionally more in
lower-skilled jobs.
— A disproportionate number of immigrants live in
London where wages are higher therefore on average they have earned
more than UK-born individuals. But since 2002, the real wages
of "new" immigrants have fallen relative to the wage
of those born in the United Kingdom.
— Accurate estimates of both migration and the domestic
workforce are important for policymakers to judge the amount of
supply available and, in turn the balance between this and the
demand for goods and services.
— There are a number of sources of uncertainty around
the official estimates of the number of migrants entering and
exiting the country, and they primarily relate to the role played
by the International Passenger Survey (IPS) in the construction
of the data. In particular, the IPS statistics are based on a
small sample and it is difficult for the survey to keep pace with
the dramatic change in the pattern of arrivals.
— Although the ONS definition of a migrant—that
is, an individual who changes their country of usual residence
for a period of at least a year—is appropriate for measuring
the long-run impact of international migration on the population
of the United Kingdom, it may be too restrictive when thinking
about the economic impact of migration. Large numbers of individuals
enter the country to study or to work for a period of weeks or
months. These "visitors" will not be captured in the
official migration statistics, but they may contribute to the
level of demand and supply.
28 September 2007
3
See http://www.bankofengland.co.uk/publications/quarterlybulletin/qb0604.pdf Back
4
See http://www.bankofengland.co.uk/publications/quarterlybulletin/qb0701.pdf Back
5
See paragraphs 16-17 for a discussion of data measurement issues. Back
6
The International Passenger Survey (IPS), WRS and National Insurance
Number (NINo) allocations to overseas nationals entering the UK
are used to cross check, wherever possible, the results obtained
from the LFS data. Household surveys such as the LFS can provide
more detailed information on the characteristics of immigrants.
However these data cannot be used to corroborate the official
estimates of the size of the immigrant population. Back
7
"New" immigrants are those who entered the UK up to
two years ago. Back
8
The above groupings will not be entirely accurate due to misclassification. Back
9
This differential in hours is accounted for by women: immigrant
women on average work 2.4 hours per week more than UK-born women.
Even after one controls for demographics and job characteristics,
immigrants still work longer hours than UK-born workers. Back
10
See http://www.bankofengland.co.uk/publications/inflationreport/ir06nov.pdf Back
11
See Blanchflower, Saleheen and Shadforth (2007), "The impact
of the recent migration from eastern Europe on the UK economy",
Bank of England External MPC Unit Discussion Paper no 17, April. Back
12
See Blanchflower, Saleheen and Shadforth (2007), "The impact
of the recent migration from eastern Europe on the UK economy",
Bank of England External MPC Unit Discussion Paper no 17, April. Back
13
For further details see box entitled, "International migration
data", in the August 2005 Inflation Report, http://www.bankofengland.co.uk/publications/inflationreport/ir05aug.pdf. Back
14
This definition is consistent with the United Nations Organisation's
definition of a long-term migrant; that is: "A person who
moves to a country other than that of his or her usual residence
for a period of at least a year (12 months), so that the country
of destination effectively becomes his or her new country of usual
residence". See United Nations Organisation (1998) Recommendations
on statistics of international migration, Revision 1 for more
details. Back
15
Bank of England (2007), Inflation Report, February. http://www.bankofengland.co.uk/publications/inflationreport/ir07feb.pdf. Back
16
See http://www.statistics.gov.uk/statbase/Product.asp?vlnk=14731 Back
| 
