Migrants force down pay in low-skilled jobs

But, head of the Government's spending watchdog says foreign workers have little impact overall

Immigration, particularly from eastern Europe, may have driven down wages in some lower-paid occupations, according to one of the country's leading economists and a member of the Budget Responsibility Committee at the Office for Budget Responsibility (OBR).

Professor Stephen Nickell, who is also the warden of Nuffield College, Oxford, says that "net migration has been at an unprecedented level over the past decade", and is "expected to remain high".

He said that while immigrants have had little effect on overall levels of unemployment or pay, his research finds "some evidence of a downward impact in wages in the low-skill sector".

Professor Nickell advised the previous government on housing policy and is a former economics professor at Oxford and the London School of Economics. His co-researcher, Jumana Saleheen, is a senior economist at the Bank of England.

The research, published in a collection of academic essays entitled The Labour Market in Winter, shows that the proportion of immigrants across all occupations has risen "significantly" since 1997, but that the increase has been "more marked at the lower end" of the jobs market.

Referring to the "A8" nations – the eight countries that joined the EU in 2004, including the Baltic republics, Poland, Czech Republic and Slovakia – they say the increase in numbers of immigrants in less well paid areas "is a direct consequence of the surge of A8 migrants since 2004". They go on: "While a good proportion of these are well-qualified graduates, many are working in unskilled occupations, often while improving their spoken English, before either returning to their home country or attempting to move up the occupational ladder."

However they caution, "the stereotype of the Polish plumber – used as a symbol of cheap, but competent, labour – encapsulates the commonly held notion that immigrants take jobs from the native-born population, raising unemployment and holding down wages in the most affected jobs. The empirical evidence on this issue, is, however by no means clear cut".

They do, though, suggest that regional variations in immigration can affect local labour markets; "while the overall impact of immigration on wages is very small, the effect of a 10 percentage point rise in the proportion of immigrants working in semi or unskilled services (for example care homes, bars, shops, cleaning) leads to a 5.2 per cent reduction in pay in this sector."

They suggest that the pressure of immigration is identical to the pressure of a rising population from any other factor, and argue that the main reason it has become a political issue is the reluctance of voters to countenance the building of more houses, schools, power stations and the rest of the infrastructure needed for a rising population, even though "there is in fact plenty of room" in the UK, with developed land in England only taking up 8.5 per cent of the total area.

Professor Nickell and Ms Saleheen conclude: "Like it or not, the relatively high population density in England means that there will be serious problems generated by the rising housing and infrastructure requirements associated with the high rate of population growth generated by high rates of immigration. As a consequence, immigration policy will doubtless remain high on the political agenda for a long time to come."

The OBR, which Professor Nickell oversees, has in the past implied scepticism about the Government's immigration cap. By 31 December 2011, the UK will have to decide whether to extend current restrictions on labour market access to citizens from Bulgaria and Romania.

If so, the Government will need to demonstrate that lifting barriers threatens a "serious disturbance of its labour market". Recent research provides little support for such an argument.