Lower paid workers to lose out from Brexit, according to Resolution Foundation
Research by the think tank says that economic slowdown will outweigh benefits of lower immigration
Cleaners - Image credit: PA images
Any gains for British workers from reduced immigration after Brexit will be “dwarfed” by an overall drop in wages after leaving the EU, according to the Resolution Foundation.
It also suggests that with just one enforcement officer per 20,000 working age migrants at present, more enforcement is likely to be needed post-Brexit to prevent temporary workers overstaying their visas.
Research by the think tank suggests that while cutting migration could offer a small boost to the wages of some lower paid British workers, this is likely to be more than cancelled out by the much greater reduction in overall pay growth predicted by the Bank of England.
The proportion of immigrants in the UK has increased from 10 per cent in 2004 to 16 per cent in 2016, according to the organisation’s report, which looks into the impact of reduced immigration on the pay and jobs of UK-born workers.
And although the think tank found that the increase in migration over the last decade has had no overall impact on the wages of British workers, it did conclude that it has affected earnings in some areas such as skilled trades, cleaning, sales and security.
However, it also reports that while reducing immigration immediately to “the tens of thousands” could boost the wages of British workers by 0.2 to 0.6 per cent by 2018 in the sectors most affected by migration, those increases would be dwarfed by the predicted two per cent downturn in average wage growth.
Reducing migration will have little effect on the earnings and employment of British workers overall, the think tank says, but it will create significant challenges for businesses in sectors such as food and clothing manufacturing and domestic services where over 30 per cent of the workforce are migrants.
The think tank suggests that simply replacing migrant workers in these firms with British staff is not realistic because of the large pay differences between the two groups of employees, with Eastern European workers typically earning nearly £3 an hour less than British-born workers.
Rather, firms in immigrant-reliant sectors will need to fundamentally rethink their business models if they are to survive and the UK government will need to take action to avoid wider economic disruption, it says.
These low paying sectors, not just high technology industries, should be a priority for the UK government’s economic strategy, according to the organisation.
It recommends that in the short-term the rights of existing migrants to continue to work in the UK should be guaranteed to prevent a sudden drop in the number of workers available, while in the
In the medium term companies, with support from the UK government, will need to invest in skills and technology to support more well-paid jobs or replace low-paid roles that can no longer be filled.
The report also suggests that a post-Brexit migration system will require an overhaul of the UK’s current labour market enforcement, as there is likely to be a greater reliance on temporary workers in future.
The UK’s three existing agencies – the HMRC National Minimum Wage Enforcement Unit, Gangmasters Licensing and Labour Abuse Authority and the Employment Standards Agency Inspectorate, have a combined staff of under 350 at present – just one enforcement officer for every 20,000 working age migrants.
To prevent temporary workers overstaying their visas and possibly undercutting pay and conditions, the Resolution Foundation recommends that the UK government creates a new single labour enforcement agency with far greater resources than the combined forces currently have.
Stephen Clarke, Policy Analyst at the Resolution Foundation, said: “The impact that recent widespread migration has had on British-born workers is hotly disputed.
“While there has been no effect on wages overall, increased migration has caused a slight drag on wages for some low-paid British workers.
“However, those expecting a wage boost off the back of a post-Brexit fall in migration are likely to be disappointed.
“Any such gains will be dwarfed by the losses caused by the post-referendum slowdown in the economy.
“While reducing migration may not have a huge impact on the pay and job prospects of British-born workers, it will create major new challenges for many British-based firms.
“The government must use its new industrial strategy to support these firms, such as food and clothing manufacturers, who have hitherto relied heavily on migrant workers.
“These firms will need to invest in skills and new technology if they’re to stay afloat in a changed labour market.
“A new migration policy will also need to be properly enforced if it includes a greater role for temporary workers.”
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