Are immigrants driving down wages in the adult social care sector?

Posted on

The ILC-UK and Independent Age have recently published a report on the potential consequences of Brexit for the adult social care sector in England. The report reiterated a warning issued last year, with the authors predicting severe staff shortages by 2037 due to increasingly restrictive migration policies.

While generally well received, the report elicited some criticism, especially from those who maintain that migration is not the solution but the cause of the low wages in the adult social care sector, and that the rising demand for care services would be filled by UK born workers should wages rise. [1]

We know with a fairly high degree of confidence that immigration has zero impact on the employment levels of the native born workforce, since hundreds of studies, including a meta-analysis conducted by Longhi, Nijkamp and Poot, taught us that.[2] However, when authors disaggregate the workforce by skill level, they might find that increases in immigration do drive down the wages in the so called “low skilled” sector.

The authors did not specifically focus on the adult social care sector, which may or may not be considered low skilled. Indeed, some job roles in the adult social care sector are relatively well paid, as our estimates in table 1 show. Table 1 also summarises annual salary and hourly wages for workers born in the UK, in the European Economic Area (EEA) or outside the EEA, differentiating by job group. The numbers are quite clear: compensation for UK born workers and migrants is pretty much identical in all job groups, both in terms of annual salary and in terms of hourly wage. Any difference in wages becomes statistically insignificant if we carry out a more in-depth analysis and take into account factors like age, gender, experience and qualification.[3]

1

What about the long-run impact of immigration?

When some critics claim that migration drives down wages, they don’t necessarily refer to the difference in actual wages earned by today’s workforce, but refer to the wages that today’s workforce could earn if mass migration were never allowed. Their line of reasoning is that thanks to a continuous supply of cheap labour, employers can get away with not paying their staff properly, while they would have been forced to raise wages if faced with a scarce pool of workers to choose from.

The problem with this line of thinking is that unfortunately we do not have a counterfactual, i.e. a parallel universe in which migration was kept down while every other element was exactly the same, so we will never know for sure how employers would have reacted. We do have several studies that use advanced statistical techniques to simulate such parallel universes, and some of these studies do provide interesting insights.

For example, Brücker et al, finds a small negative impact of migration on the wages of the native born workers, especially of the less educated. [4] However, other studies, for instance the one conducted by Ottaviano and Peri, found a small positive effect on average wages and a larger, more significant negative one on the wages of previous immigrants in the long-run. [5]

One element that stands out from the analysis of Brücker et al is that institutional factors matters. According to the authors, the negative impact of immigration on wages in the low skilled sector in the UK is largely dependent on its weak unemployment protection, low overall benefits and low coverage of collective bargaining agreements.

Therefore, rather than focusing on the influx of migrants, we might direct our attention towards the government and ask them to guarantee a better pay and workers’ rights in the low paid sector, and especially in the adult social care sector, in order to make it more attractive to the UK born workforce.

In the meantime, we are faced with an ageing population and increasing demand for care services and therefore the adult social care sector cannot risk to lose any of its 260,000 migrant workers.

Dr Cesira Urzì Brancati
Research Fellow

Notes

[1] Migration watch @ https://www.migrationwatchuk.org/press-release/468; and Semi-partisan politics https://semipartisansam.com/2016/09/21/brexit-catastrophisation-watch-part-1/.

[2] A meta-analysis is a method for systematically combining pertinent qualitative and quantitative study data from several selected studies to develop a single conclusion that has greater statistical power. All studies scrutinised are published in peer reviewed academic journals.

[3]Regression tables available on request.

[4] Brücker et al (2014). Migration and imperfect labor markets: Theory and cross-country evidence from Denmark, Germany and the UK, European Economic Review.

[5] Ottaviano, G. an Peri, G. (2011). Rethinking The Effect Of Immigration On Wages, Journal of the European Economic Association.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>