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Cross-occupational effects of immigration on native wages in the UK

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Marco Alfano estimates the effect of immigration into an occupation on the wages of natives working in other, better-paid occupations.

Image courtesy of interviewee. May 2, 2024

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This video video discusses research on the impact of migration on UK workers, emphasizing the polarization of the migration debate and its detachment from evidence-based academic analysis. The study notes a steady increase in migrants in the UK, which has been accompanied by rising anti-migrant sentiment and low public knowledge about migration's effects on the labor market.

Key findings include that migrants in the UK tend to be better educated than native workers but often take lower-paying, lower-skilled jobs, leading to a phenomenon where highly qualified individuals perform basic work. This video video can potentially enhance productivity in teams since overqualified migrants may boost the overall performance of their workplace.

The research focuses on how migrant inflows affect native workers' labor market outcomes, concluding that influxes of migrants into lower-level occupations may positively influence wages for natives in higher-level jobs in the same region. Specifically, the study found that while migrant competition can depress wages for similar occupations, there is evidence that migrants can also generate positive spillover effects on native wages in adjacent job categories.

The study utilizes comprehensive and reliable data from the Office for National Statistics in the UK and provides a nuanced approach to understanding the complexities of migration's impacts. It aims to inform public and political discourse with evidence and statistics instead of emotion-driven arguments, particularly highlighted as discussions become politically charged during election cycles.

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X-TIMESTAMP-MAP:LOCAL=00:00:00.000,MPEGTS=900000

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Our research is on the impact of migration on UK workers.

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And I'm sure as you're aware,

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migration is a very hotly debated topic.

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So it plays a central law role.

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In the political discussion,

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there was a European parliament to reelection,

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and in the US election is likely to play,

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a major role as well.

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Unfortunately, much of the debate has become very polarized,

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and it's become somewhat detached from kind

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of evidence-based and kind of, academic work.

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Um, in the uk the country we're looking at is a special case

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because, in the UK over the last 10

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or so years, the number of migrants has been more

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or less, steadily increasing.

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And this rise in the migrant stock

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and the number of migrants in the UK has also been

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accompanied by an increase in anti-migrant sentiment,

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which again, is likely to, we believe,

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play a role in the next general election,

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here in the uk.

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Um, surprisingly,

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however, which you might not think from the kind

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of polarization of the debate, there is,

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very little knowledge on migration in the UK

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and the effects it has on the labor market, especially

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as you see it in online chat rooms

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or in the political, debate as well, which is a pity

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because the Office for National Statistics, which is kind

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of the official body to provide data from the uk,

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provide extremely high quality data,

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data which are reliable, which are official,

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which you can use to make informed decisions,

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which are also the data that, we end up using.

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Um, and if you look at who the migrants are that come

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to the uk, the migrants to the UK are very,

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very special type of person.

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So one thing that mi you might find surprising is

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that on average, migrants

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to the UK are better educated than UK natives.

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So if you take the average migrant,

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they have a few years more education compared to the,

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average UK born person.

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One thing that happens a lot in to migrants in the UK is

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that once they arrive into the uk,

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they downgrade in terms of occupations.

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So in other words, that means that they take up a job

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for which they're overqualified.

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So their qualification would say, go to job A

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and they take a job that's lower paying, than a,

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and these two, kind of phenomena together.

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So the fact that migrants are highly educated

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and the fact that they downgrade upon arrival,

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has some unique effects.

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So one kind of the very first obvious consequences

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that we have a lot of overqualified people doing relatively

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basic work, and we believe that, this kind of

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extra education that you kind of get for free

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by hiring migrant migrants is going

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to make the team in which the migrants work more

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Productive. So

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if you have better educated individuals in the team,

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that's more likely to make the team more productive,

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and this extra productivity is gonna be benefit the

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supervisor of the team, right?

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So if you have a team working under you

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and that team is more productive, that's going

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to reflect well on you.

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And the supervisors of these teams tend

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to be on average natives.

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So we believe that by being more educated,

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by increasing the productivity of the team,

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migrants can have beneficial effect on UK workers working in

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occupations that supervise them, or at least above them.

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The kind of the general area that we're looking at is,

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kind of big body of research, which asks the question,

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what's the impact of migrant inflow on

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the labor market outcomes of natives?

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So in a, in a certain way, they ask the question,

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if migrants come in, is that good or bad for natives?

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Or does that have any effect at all?

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Now there's a very, very large body of academic work

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that analyzes this topic.

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It's kind of, it's not just a hotly debated topic.

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In policy circles is also a hotly debated topic in,

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academic circles.

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And one thing to bear in mind is

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that migration varies from context to context.

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So, you know, what holds for the UK doesn't necessarily hold

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in the US or even in other countries.

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So it's very, very hard to kind

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of make generalizing statements across different countries

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and across different time periods.

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However, as a very, very stylized overview

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of the literature, most papers, again, not all of them,

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there are definitely some papers

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that find different results,

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but kind of the broad average, they find very

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small and very short term negative effect of migration.

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So, this is the ideas

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that the way economists think about migration is

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that a migrant worker comes in

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and then this migrant worker competes for the same job

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with a native worker of similar characteristics.

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So if you take a migrant roughly the same education level,

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roughly the same age, they are going to compete

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for the same job as a native with similar characteristics,

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similar qualifications, similar age, et cetera.

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Now, this increased competition is very good for employers

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because it, they have more people to choose from,

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but it's, it does depress wages.

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So, a large number of study finds

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a negative effect on wages.

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So market inflow leads to a decrease.

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However, I really want to stress that the vast majority

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of papers finds that this effect is very small

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and in many, many contexts is absolutely negligible.

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And where it is often it disappears after a short.

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So I, I really want to stress kind of small

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and, short effect

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in of migration.

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Now in, in the uk,

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maybe an example would be that,

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imagine you have a worker coming in

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and that worker decides they might be overqualified,

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but that worker decides to work in the hospitality industry.

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So this worker is going to compete

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with the natives in that area.

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So in London, for example, this migrant moves to London.

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This migrant is going to compete

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for a job in the hospitality sector

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with natives also living in London.

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And that can have a short decrease,

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depressing effect on wages, which then

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after a while, dissipates.

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Um, this kind of the setting.

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What's new about our study is

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that we look at an often overlooked aspect of migration.

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So the idea is that migrants flowing into an occupation,

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like the, the literature points out that they compete

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with nas, which we totally acknowledge and agree with.

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However, they can also once hired impact

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Nas working around them.

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So either in the same occupation or the occupation above,

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or even we look at occupation below as well.

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So, it is possible, for example, that migrants

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in the same job have a different

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productivity compared to natives.

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In the uk that's particularly likely to be the case

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because migrants tend to downgrade.

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So there's a, a very famous paper by al showing

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that upon arrival migrants take jobs

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for which they're overqualified.

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So if you have these overqualified workers,

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they're more likely to be more productive, not

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because they're migrants, but just

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because they're over, they're overqualified.

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Um, so if you have these overqualified people working in

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team, that's likely to increase the productivity

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of the team, which is going to benefit

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the person supervising the team.

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And these supervisory roles, meaning the occupation above,

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they tend to be, natives.

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So there is a possibility, for migrants

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to have a positive spillover effect, so to say,

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on on natives and other occupations, as I mentioned

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before, they're like in the UK to have

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extremely reliable, easily accessible, data.

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And I would like to underline again that it's a pity

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that these data don't get mentioned more in the,

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in the public discourse,

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because these have been vetted

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by the official statistical authority in the uk.

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So we downloaded these data,

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which is the annual population survey.

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So that's a representative survey of the uk.

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So that's a true snapshot

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of the UK population by year.

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So we choose the years 2004 to 2017.

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Um, we stopped because

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after that, Brexit complicates, the discussion a lot.

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So we wanted kind of a pre Brexit, years.

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Uh, this survey, apart from being representative,

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which is very important, also contains rich

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information on wages.

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So much people earn, the employment status,

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whether they work where they work,

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which occupations they work in,

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what education level they have, and the migrant status.

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So we know if a person is a migrant,

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and we define a migrant as a person that lives in the UK,

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was not born in the uk.

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So this means at some point they, they move to the uk.

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Now, for each region in the uk,

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we use the official coding by the Office

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of National Statistics

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and divide workers into nine occupations.

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So you can have i in every area.

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So in London, for example, you can be employed in either

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of nine occupations, where at the very top

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are managers, directors and senior officials.

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So they get, they're also the ones that get paid the most.

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And at the very bottom you've got elementary occupations,

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which on average have much, much lower wages compared to,

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the other one.

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So once we set up the, the uk so to say, the, the economy

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in that way, we relate changes in wages in the same period.

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So how do wages of natives change in London, for example,

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from one year to the next, what's the yearly change in wages

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and how does that relate to

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migrant inflows into three types of occupations?

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So the first one would be how does, how do wages of

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natives change with respect

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to inflows into the same occupations?

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So that's kind of replicating

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what the literature done so far, so to say.

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So that's kind of replicating previous studies,

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but then we add the number of migrants

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who flow into the occupations working

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above natives.

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And also as a curiosity, we also added below to see,

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if anything, changes.

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And without getting too technical,

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we follow standard procedures to account

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for unobservable factors,

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which might change from one county,

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from one area to another.

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So anything London specific

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or anything specific to Scotland, for example,

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we kind of take account for.

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And we also take account of kind

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of large macroeconomic fluctuation.

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So we, we follow standard practice in the literature.

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The first one, we kind of,

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we were curious if we could replicate previous findings.

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And on average, although our,

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our replication is much simpler, it does fit with,

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a lot of other studies.

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So we find that changes in wages

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for natives have basically no relationship

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to changes in, migrants.

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So we find no effect of,

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migrant inflows into one occupation, into wages

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of natives working in the same occupations as well.

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So in a certain way, that's hardly surprising

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because that's what a, a large number.

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Now what's completely new is that we found that if we relate

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native wages to migrants flowing into the occupations below,

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always in the same region,

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We find that that significantly increases wages,

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for natives.

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So I know this is all very abstract,

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so maybe an example would be, one kind

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of middle level occupation is administrative occupations,

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and the one above that would be associate professions.

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That's in our ranking. That's the way it is.

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So for example, if a lot

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of migrants flow into these administrative occupations

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in one region in London, for example, then what we find is

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that that increases the wages

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of natives working in associate professionals,

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which is the occupation above in the same, region.

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So we, we clearly find that natives benefit from

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migrants working the occupations below them.

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Uh, we, we can't identify whether they actually work

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physically together, these people.

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But on average, we find that, we find that

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we give some kind of ideas of the mechanisms.

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We're still thinking about the mechanisms,

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but we kind of wanted to give a flavor

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of the mechanisms that we have in mind.

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So one is peer effects,

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which is a longstanding literature in economics that shows

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that the productivity of one worker

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affects the productivity of other workers around.

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So the idea is that if you get these overqualified

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individuals, then their extra productivity somehow might

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reflect or might be reflected in in other,

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native workers.

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And that's kind of corroborated by the fact that we find

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that natives are, have lower educational attainment compared

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to migrants.

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So we believe peer effects,

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are the most likely mechanisms,

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although we can't say for sure, we kind of

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below was our main focus

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because kind of the, it fits with the literature broader

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with previous studies, and we kind thought that it fits.

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We also wanted to check whether anything happens above which

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intuitively you wouldn't think that there should be much

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of an effect, but it could be that kind

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of if your boss is more productive, then that might affect,

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kind of people working under them.

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We found a, again, a negligible effect of native

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slight, slight negative.

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So it's, it's, it's kind of, it's on the negative side,

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but very small and, very imprecisely estimated.

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So, I wouldn't feel confident saying there is a kind

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of significant effect to wrap up.

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Uh, our analysis provides evidence that migration

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into one occupation that positively affects native workers

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in the same area working in other occupations.

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So specifically we find that the wages of natives

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increase if there is an inflow

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of migrants in the occupations below them, in,

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the same region.

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So as such, our analysis provides evidence

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of positive spillovers effect of migrants.

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So migrants can have

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These kind of additional effects

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that maybe we haven't thought about.

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They can benefit native workers in ways that maybe

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so far we haven't really, thought about.

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And there is very little evidence on

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this kind of extra effect.

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There's a lot of evidence on how to

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what extent migrants compete with natives for the same jobs.

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There's a lot of work done on that,

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but there's relatively little work on this kind

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of extra spillovers effect on other

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occupations in the same area.

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Uh, of course.

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So we hope that our findings contribute to more constructive

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and more fact-based discussion around migration and beyond.

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And we realized that in an election years, tempers are high

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and the stakes are high.

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But we really hope that migration,

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which is a very important topic for the uk,

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we really hope that the debate focuses on findings

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and on official data from reliable and official sources.

00:00 - Our research is on the impact of migration on UK workers. And I'm sure as you're aware, migration is a very hotly debated topic. So it plays a central law role. In the political discussion, there was a European parliament to reelection,

00:16 - and in the US election is likely to play, a major role as well. Unfortunately, much of the debate has become very polarized, and it's become somewhat detached from kind of evidence-based and kind of, academic work. in the uk the country we're looking at is a special case because, in the UK over the last 10 or so years, the number of migrants has been more or less, steadily increasing. And this rise in the migrant stock

00:50 - and the number of migrants in the UK has also been accompanied by an increase in anti-migrant sentiment, which again, is likely to, we believe, play a role in the next general election, here in the uk. surprisingly, however, which you might not think from the kind of polarization of the debate, there is, very little knowledge on migration in the UK and the effects it has on the labor market, especially

01:18 - as you see it in online chat rooms or in the political, debate as well, which is a pity because the Office for National Statistics, which is kind of the official body to provide data from the uk, provide extremely high quality data, data which are reliable, which are official, which you can use to make informed decisions, which are also the data that, we end up using. and if you look at who the migrants are that come to the uk, the migrants to the UK are very,

01:48 - very special type of person. So one thing that mi you might find surprising is that on average, migrants to the UK are better educated than UK natives. So if you take the average migrant, they have a few years more education compared to the, average UK born person. One thing that happens a lot in to migrants in the UK is that once they arrive into the uk, they downgrade in terms of occupations.

02:16 - So in other words, that means that they take up a job for which they're overqualified. So their qualification would say, go to job A and they take a job that's lower paying, than a, and these two, kind of phenomena together. So the fact that migrants are highly educated and the fact that they downgrade upon arrival, has some unique effects. So one kind of the very first obvious consequences that we have a lot of overqualified people doing relatively

02:46 - basic work, and we believe that, this kind of extra education that you kind of get for free by hiring migrant migrants is going to make the team in which the migrants work more Productive. So if you have better educated individuals in the team, that's more likely to make the team more productive, and this extra productivity is gonna be benefit the supervisor of the team, right? So if you have a team working under you

03:12 - and that team is more productive, that's going to reflect well on you. And the supervisors of these teams tend to be on average natives. So we believe that by being more educated, by increasing the productivity of the team, migrants can have beneficial effect on UK workers working in occupations that supervise them, or at least above them. The kind of the general area that we're looking at is, kind of big body of research, which asks the question,

03:42 - what's the impact of migrant inflow on the labor market outcomes of natives? So in a, in a certain way, they ask the question, if migrants come in, is that good or bad for natives? Or does that have any effect at all? Now there's a very, very large body of academic work that analyzes this topic. It's kind of, it's not just a hotly debated topic. In policy circles is also a hotly debated topic in, academic circles.

04:12 - And one thing to bear in mind is that migration varies from context to context. So, you know, what holds for the UK doesn't necessarily hold in the US or even in other countries. So it's very, very hard to kind of make generalizing statements across different countries and across different time periods. However, as a very, very stylized overview of the literature, most papers, again, not all of them, there are definitely some papers

04:37 - that find different results, but kind of the broad average, they find very small and very short term negative effect of migration. So, this is the ideas that the way economists think about migration is that a migrant worker comes in and then this migrant worker competes for the same job with a native worker of similar characteristics. So if you take a migrant roughly the same education level, roughly the same age, they are going to compete

05:09 - for the same job as a native with similar characteristics, similar qualifications, similar age, et cetera. Now, this increased competition is very good for employers because it, they have more people to choose from, but it's, it does depress wages. So, a large number of study finds a negative effect on wages. So market inflow leads to a decrease. However, I really want to stress that the vast majority of papers finds that this effect is very small

05:39 - and in many, many contexts is absolutely negligible. And where it is often it disappears after a short. So I, I really want to stress kind of small and, short effect in of migration. Now in, in the uk, maybe an example would be that, imagine you have a worker coming in and that worker decides they might be overqualified, but that worker decides to work in the hospitality industry.

06:13 - So this worker is going to compete with the natives in that area. So in London, for example, this migrant moves to London. This migrant is going to compete for a job in the hospitality sector with natives also living in London. And that can have a short decrease, depressing effect on wages, which then after a while, dissipates. this kind of the setting.

06:40 - What's new about our study is that we look at an often overlooked aspect of migration. So the idea is that migrants flowing into an occupation, like the, the literature points out that they compete with nas, which we totally acknowledge and agree with. However, they can also once hired impact Nas working around them. So either in the same occupation or the occupation above, or even we look at occupation below as well. So, it is possible, for example, that migrants

07:14 - in the same job have a different productivity compared to natives. In the uk that's particularly likely to be the case because migrants tend to downgrade. So there's a, a very famous paper by al showing that upon arrival migrants take jobs for which they're overqualified. So if you have these overqualified workers, they're more likely to be more productive, not because they're migrants, but just

07:35 - because they're over, they're overqualified. so if you have these overqualified people working in team, that's likely to increase the productivity of the team, which is going to benefit the person supervising the team. And these supervisory roles, meaning the occupation above, they tend to be, natives. So there is a possibility, for migrants to have a positive spillover effect, so to say, on on natives and other occupations, as I mentioned

08:05 - before, they're like in the UK to have extremely reliable, easily accessible, data. And I would like to underline again that it's a pity that these data don't get mentioned more in the, in the public discourse, because these have been vetted by the official statistical authority in the uk. So we downloaded these data, which is the annual population survey. So that's a representative survey of the uk.

08:29 - So that's a true snapshot of the UK population by year. So we choose the years 2004 to 2017. we stopped because after that, Brexit complicates, the discussion a lot. So we wanted kind of a pre Brexit, years. this survey, apart from being representative, which is very important, also contains rich information on wages. So much people earn, the employment status,

08:57 - whether they work where they work, which occupations they work in, what education level they have, and the migrant status. So we know if a person is a migrant, and we define a migrant as a person that lives in the UK, was not born in the uk. So this means at some point they, they move to the uk. Now, for each region in the uk, we use the official coding by the Office of National Statistics

09:25 - and divide workers into nine occupations. So you can have i in every area. So in London, for example, you can be employed in either of nine occupations, where at the very top are managers, directors and senior officials. So they get, they're also the ones that get paid the most. And at the very bottom you've got elementary occupations, which on average have much, much lower wages compared to, the other one. So once we set up the, the uk so to say, the, the economy

09:53 - in that way, we relate changes in wages in the same period. So how do wages of natives change in London, for example, from one year to the next, what's the yearly change in wages and how does that relate to migrant inflows into three types of occupations? So the first one would be how does, how do wages of natives change with respect to inflows into the same occupations? So that's kind of replicating what the literature done so far, so to say.

10:26 - So that's kind of replicating previous studies, but then we add the number of migrants who flow into the occupations working above natives. And also as a curiosity, we also added below to see, if anything, changes. And without getting too technical, we follow standard procedures to account for unobservable factors, which might change from one county,

10:51 - from one area to another. So anything London specific or anything specific to Scotland, for example, we kind of take account for. And we also take account of kind of large macroeconomic fluctuation. So we, we follow standard practice in the literature. The first one, we kind of, we were curious if we could replicate previous findings. And on average, although our,

11:12 - our replication is much simpler, it does fit with, a lot of other studies. So we find that changes in wages for natives have basically no relationship to changes in, migrants. So we find no effect of, migrant inflows into one occupation, into wages of natives working in the same occupations as well. So in a certain way, that's hardly surprising because that's what a, a large number.

11:42 - Now what's completely new is that we found that if we relate native wages to migrants flowing into the occupations below, always in the same region, We find that that significantly increases wages, for natives. So I know this is all very abstract, so maybe an example would be, one kind of middle level occupation is administrative occupations, and the one above that would be associate professions. That's in our ranking. That's the way it is.

12:12 - So for example, if a lot of migrants flow into these administrative occupations in one region in London, for example, then what we find is that that increases the wages of natives working in associate professionals, which is the occupation above in the same, region. So we, we clearly find that natives benefit from migrants working the occupations below them. we, we can't identify whether they actually work physically together, these people.

12:44 - But on average, we find that, we find that we give some kind of ideas of the mechanisms. We're still thinking about the mechanisms, but we kind of wanted to give a flavor of the mechanisms that we have in mind. So one is peer effects, which is a longstanding literature in economics that shows that the productivity of one worker affects the productivity of other workers around. So the idea is that if you get these overqualified

13:11 - individuals, then their extra productivity somehow might reflect or might be reflected in in other, native workers. And that's kind of corroborated by the fact that we find that natives are, have lower educational attainment compared to migrants. So we believe peer effects, are the most likely mechanisms, although we can't say for sure, we kind of below was our main focus

13:38 - because kind of the, it fits with the literature broader with previous studies, and we kind thought that it fits. We also wanted to check whether anything happens above which intuitively you wouldn't think that there should be much of an effect, but it could be that kind of if your boss is more productive, then that might affect, kind of people working under them. We found a, again, a negligible effect of native slight, slight negative. So it's, it's, it's kind of, it's on the negative side,

14:08 - but very small and, very imprecisely estimated. So, I wouldn't feel confident saying there is a kind of significant effect to wrap up. our analysis provides evidence that migration into one occupation that positively affects native workers in the same area working in other occupations. So specifically we find that the wages of natives increase if there is an inflow of migrants in the occupations below them, in, the same region.

14:41 - So as such, our analysis provides evidence of positive spillovers effect of migrants. So migrants can have These kind of additional effects that maybe we haven't thought about. They can benefit native workers in ways that maybe so far we haven't really, thought about. And there is very little evidence on this kind of extra effect. There's a lot of evidence on how to

15:05 - what extent migrants compete with natives for the same jobs. There's a lot of work done on that, but there's relatively little work on this kind of extra spillovers effect on other occupations in the same area. of course. So we hope that our findings contribute to more constructive and more fact-based discussion around migration and beyond. And we realized that in an election years, tempers are high and the stakes are high.

15:34 - But we really hope that migration, which is a very important topic for the uk, we really hope that the debate focuses on findings and on official data from reliable and official sources.

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