Immigration and Population

1.1       Effect of Immigration on size of labour force

Using the income approach to calculating GDP, any individual joining the workforce will increase the GDP at least by the amount of their wages.

The key issue for the British economy and the native British people is this: does this amount plus the amount that is added to the gross surpluses of the businesses they work for (i.e. their total contribution to Value Added in the economy) exceed the average for the economy as a whole?  If it does then average productivity is increased, if it does not then average productivity is decreased and the average standard of living of the people as a whole is decreased by these additions to the workforce.

Table 1: Basic data for UK Workforce 2006

  2006 Millions 2001Millions
 UK working-age population[5] (WAP) of which 1 million estimated net immigrants in WAP since 2004 39.2 37.4
 Economically inactive (EI) group in WAP 7.95 7.9
 Thus total available workforce 31.25 29.5
 Total in work from National Insurance data 29.4 28.1
 Unemployed[6] 1.85 approx(5.9% of workforce) 1.45(5% of workforce)
 Long-term sick (included in the EI group) 2.15 1.95

One million mainly East European immigrant workers since 2004-6 (not allowed for in the NSO projections in 2001) amount to 3.3% of the available labour force.  Of the 800,000 increase in WAP allowed for in the NSO 2001 estimate for 2006 around 300,000 would be from our indigenous population, leaving 500,000 principally from Asia and Africa.  In all then, since 2001, we have an addition of 1.5 million immigrants to our workforce.

The effect of this on productivity depends on which sectors of the economy they are mostly employed in.  We may reasonably assume that sectors  F (construction), G (retail and wholesale), H (hotels, bars, camp-sites), N (social and care work), accounting in total for about 8 million jobs in NSO tabkes, are the most likely sectors to absorb the bulk of the 1.5 million, because these sectors are the ones where employment has consistently increased over the last 15 years.  Sector A (agriculture) absorbs around 70,000 seasonal workers, some of whom return home at the end of the growing season.  Those that have stayed, mainly Portuguese and East Europeans, have had a huge impact on schools in particular towns in Eastern England such as Boston and Peterborough.

1.2       Likely Pay Patterns for Immigrant Workers (from 2001)

In the five sectors most likely to receive immigrants (these are the sectors which, with the exception of the special case of agriculture, show numerically the biggest job increases over 15 years), manual pay in 2001 was as shown in Table 2.

Table 2: Pay in Principal Immigrant Employing Sectors 2001

Sector Average weekly pay £ Employees000s
Agriculture 270 300
Construction 369 1,160
Retail & Wholesale 308 3,820
Hotels & Bars 240 1,700
Health & Social 284 2,490
All Economy 411 28,100

Given

—          For a range of reasons, immigrants are likely to be paid in the lowest quartile, which is about 70% of the industry average wage, at least initially.

In fact, in the agricultural sector immigrants are likely to be paid the minimum wage, i.e. £5.86 per hour.  At this level, those with dependent children qualify for a vast range of non-contributory benefits – income support, housing and child benefit being the principal ones.  These can double their income – representing a subsidy to the employer from the taxpayer comparable with their wages.

—          apart from construction, the industries listed in Table 2 pay about 70% of the national average,

—          the added value for employees in the industries in Table 2 is a smaller multiple of their wages than for the economy as a whole (owing to lower than average capital per employee),

then the added value per immigrant employee is likely to be in the range 40-50% of the national average – say, 45%.

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