Surge in immigration risks ‘pushing down wages’ for low-paid Britons

Rapid rises in immigration can depress wages for low-paid locals in countries like Britain, the International Monetary Fund (IMF) has found.

A “surge in low-skilled immigration” benefits middle-class workers, but leaves those in lower skilled roles worse off, researchers found.

Pay growth for low-skilled native workers slows by 1 percentage point when there is a large increase in immigrants with similar skills, according to modelling by the IMF.

Conversely, the IMF found well paid workers actually tend to get a small wage boost in this scenario.

Ben Brindle, of the Migration Observatory at Oxford University, said: “Think about a doctor’s surgery. If it’s low-skilled immigration and you take on additional receptionists, that might lead to more competition and a slight decrease in wages for receptionists.

“But because you’ve now got this receptionist answering the phones, doing various bits of paperwork, the doctor can focus more on the medical side of things, and they can apply their skills where they are more productive.”

The overall impact is likely to be tempered by the minimum wage, which prevents further falls for the lowest paid.

Mr Brindle cautioned that other research from the UK suggested that immigration’s impact on wages tended to be small and short-lived, costing no more than two pence an hour.

However, the IMF’s findings will raise alarm bells in Britain, after the UK experienced an unprecedented rise in net immigration. A surge in new arrivals added 2.3m people to the population in the three years to June 2024.

While many have come for humanitarian reasons, a significant proportion have come for economic roles, taking jobs such as staffing British care homes and hospitals.

The Office for Budget Responsibility recently found that immigrants on low wages in Britain tend to receive more from the state than they contribute over their lifetime, weighing on public finances.

The share of voters pointing to immigration as a top issue facing Britain has steadily risen in recent years. It is currently the second most cited concern after the economy, according to YouGov. Some 44pc of the population say immigration is a significant concern, a similar level to the aftermath of the Brexit referendum.

The IMF noted that while immigration typically has a limited impact on overall inflation and wage growth, it can impact certain costs. It said: “For instance, in the United States, higher rates of immigration are found to lower local goods inflation, but to increase local housing and utilities inflation.”

The fund said that overall immigration tended to be positive for the economy. Significantly restricting it reduces global growth by preventing workers from lower-productivity countries helping to plug labour shortages abroad.

Mr Brindle said reducing immigration would be challenging.

“It’s very much a matter of trade-offs,” he said. “Care workers are the best example of this. Migration isn’t the only way of filling vacancies in the care sector – it’s possible to fill them by making care sector jobs more attractive by improving pay and conditions, but that is going to cost money.

“Doing those things is going to mean taking resources away from other priorities for policymakers. You can reduce migration, but it’s not a free lunch.”

It is not only low-paid workers who risk paying the price of a sharp rise in newcomers. Well-paid Britons could also see their wages fall if there is a spike in the number of highly-skilled workers coming to a country, the IMF suggested.