Because more equal societies work better for everyone

Has immigration increased inequality in the UK?

Friday, 3 April, 2015

Immigration often scores top in polls of issues the UK electorate is most concerned about. One of the charges often laid against it is that it makes us all less equal by dragging down wages at the bottom end and boosting profits at the top. But is there evidence to actually support this claim?

Our previous review and other reviews of the international literature suggest that on the whole immigration leads to a small increase in inequality. But is this the case if we just focus specifically on the UK to see whether immigration has increased inequality here? We might expect to find something slightly different as immigrants to the UK tend to be more highly skilled than immigrants in other countries, for example 35% of non-UK born residents at the last census had a degree (compared to 26% of the UK born population) whilst 27% or non-US born residents in the US had a degree.

Taking a look at UK inequality and the level of net migration over the last few decades there appears to be no clear link. Inequality saw large increases in the late 1970s and 1980s whilst net migration was low. It also seems reasonable to rule out any time lag effect as net migration was negative in the period before this. When immigration then increased in the 1990s and 2000s inequality stayed fairly stable. It is possible that immigration in the 1990s and 2000s was  increasing inequality but was then counteracted by other policies; but it seems to stretch credulity to suggest immigration has been the main driver of inequality.

The evidence on immigration’s effect on the wage distribution does not support any substantial effect of immigration on inequality in the UK. Whilst some early research suggested that immigration to the UK lowered the inflationary pressure that pushes up wages, later research has struggled to find such wage effects.

In addition, multiple studies have failed to find any significant effect of immigration on the wage distribution. Those that do find the effect to be very small, with wages at the bottom of the spectrum reduced by 0.7p per hour and those in the upper part increased by 2p per hour, with positive wage effects felt across the spectrum.

Much of the effect that studies are finding is that immigrants reduce the wages of previous immigrants, which has been found to be the largest effect of immigration on the UK labour market. This might lead you to believe that immigration creates more inequality simply by bringing in more people who are poorer. However, the research can find no relationship between the wider income difference amongst immigrants and the UK’s total level of inequality.  The evidence suggests  there is no significant relationship between employment levels or the wages of those in low skilled work and the change in number of immigrant in a local area.

Other arguments suggest that immigration could indirectly be increasing inequality, for example by increasing the pressure on public services. But this fails to account for high levels of immigrants filling jobs and skill gaps in public services.

A final argument frequently used is that racially and culturally homogenous societies do better at reducing inequality. However the research literature on these issues too often focus on developing countries like South Africa or Peru, and there is  very little focus on developed nations like the UK.  It is therefore questionable how much can be gained by comparing the struggles these nations have faced in reducing inequality to those faced by the UK.

Altogether it seems you should be highly sceptical of any claim that immigration has increased inequality in the UK, and if it did, it was probably by a very small amount. There may well be future effects of immigration on inequality but the research suggests that to date,  they have not appeared.

Tim Stacey, Senior Policy and Research Advisor

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