Lower migration ‘will make little difference to wages’

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Post-Brexit economic challenges will wipe out any benefit for lowest paid; Resolution Foundation warns of ‘severe damage’ to key sectors if skills issues not addressed  

Any rise in wages for Britain’s lowest-paid workers following the vote to leave the EU will be dwarfed by the broader economic damage wreaked by Brexit, according to a report by the Resolution Foundation.

The think tank modelled a scenario in which migration was brought down to 99,000 before 2018 – slightly below the government’s target of 100,000, and in line with the expectation of many Leave campaigners.

Although certain occupations – including skilled trades (up 0.62 per cent), care (up 0.41 per cent) and elementary occupations (up 0.45 per cent) – could attribute a very small rise in basic pay to a reduction in immigration under this scenario, in all cases overall wages were reduced by around 2 per cent thanks to the broader effects of a forecast economic slowdown, including a fall in the value of the pound, higher inflation and sluggish growth.

Stephen Clarke, policy analyst at the Resolution Foundation, said: “Those expecting a wage boost off the back of a post-Brexit fall in migration are likely to be disappointed. Any gains will be dwarfed by the losses caused by the post-referendum slowdown in the economy.”

The Resolution Foundation’s report, A brave new world, suggests that the link between lower migration and higher wages for the lowest paid is marginal at best. It forecasts that average hourly pay would have been only 3p higher if there had been no immigration between 1994 and 2016, and only 2p higher if immigration had settled at a 99,000 annual level.

Even in sectors most intimately affected by migratory trends – such as food manufacturing, hospitality and domestic personnel – wages for British workers would rise by only 0.2-0.8 per cent by 2018, assuming the government hit the 99,000 target with immediate effect. And these figures ignore the “severe damage” skills shortages could wreak in such sectors if migration was dramatically reduced. The report concluded: “Going forward, recruitment is likely to be a challenge for these sectors. Given the fact that migrants in these sectors earn a lot less than average native wages, it is unlikely that these sectors will be able to substitute migrant for native labour without rethinking their business models.”

Kevin Green, chief executive of the Recruitment & Employment Confederation, said its own research suggested that construction was one of the few areas where pay was currently rising, as building firms compete to keep infrastructure projects on track. “Those that work in construction can expect to be earning £1,000 a week – £34 a week more than last year,” he said.

However, he warned that this would be a short-term spike: “There are hard questions that need to be asked about the sustainability of this trend. More apprenticeships, greater investment in skills development, better careers guidance in schools and more work experience opportunities are needed so that young people are shown the potential benefits of a career in construction.”

Resolution Foundation director Torsten Bell said its data demonstrated that immigration was a complex subject – and that both sides of the Brexit debate had overstated its impact for their own ends.  “People who say that everybody benefits from migration automatically are wrong, but so are those who suggest ending migration will solve all our problems,” he said.

Story via – http://www.cipd.co.uk/pm/peoplemanagement/b/weblog/archive/2016/08/16/lower-migration-will-make-little-difference-to-wages.aspx

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