May 13, 2011 • 3:47 pm

 

“Mass immigration ‘has made the UK’s poor even poorer. Competition for unskilled jobs means many give up and turn to benefits. Poverty in working-age adults reaches highest level in 50 years.” The Daily Mail, 13 May 2011. 

This week the Institute for Fiscal Studies (IFS) released new research on changing income and poverty levels in the UK. While most papers choose to focus on last year’s decline in median income levels, the Daily Mail’s reporting highlighted the increased levels of poverty among working age people over the last decade. 

The report argued a link between working-age poverty and large-scale immigration into the UK over the nineties, quoting Work and Pensions Secretary Iain Duncan Smith as saying that an “open door to migration meant tens of thousands more people were chasing unskilled jobs – and that in turn meant many gave up on work for a life on benefits.”

Looking at specifically at the rises in poverty it goes on to say: “The poverty figures showed that 5.7 million working-age people were living below the Government’s poverty line in the financial year that ended in April 2010, a rise of 700,000 in five years between 2004 and 2009. The IFS said the 16 per cent of working-age people now below the poverty line is the highest since it started compiling its own records in 1961.”

In making the link to immigration, the paper argues that the data shows the bulk of the increase came in the boom years between 2004 to 2007, when a large influx of Eastern European migrants came to the UK. 

Because immigration is so easily an inflammatory topic in the press, Full Fact went in search of clarification on the issue. 

The relevant figures come from the Department for Work and Pensions’ (DWP) 2009/10 Households Below Average Income (HBAI) release, which are analysed further in the IFS ‘Poverty and Inequality in the UK: 2011‘ report. 

The DWP Households Below Average Income data

The DWP figures on low-income show that “in 2009/10, 16 per cent of working-age adults (5.7 million) were in households in the UK with incomes below 60 per cent of contemporary median net disposable household income Before Housing Costs (BHC), and 22 per cent (7.9 million) After Housing Costs (AHC)… Compared to 1998/99, this represents a rise of 1 percentage point (0.7m) on a BHC basis and a rise of 2 percentage points (1.2m) AHC.”

For ‘absolute’ low-income (assessed against the median in 1998/99 adjusted for inflation), in “2009/10, 10 per cent of working-age adults (3.7 million) were in households in the UK with incomes below 60 per cent of 1998/99 median net disposable household income held constant in real terms Before Housing Costs (BHC), and 15 per cent (5.5 million) After Housing Costs (AHC)…  Compared to 1998/99, this represents a fall of 4 percentage points (1.3m) on a BHC basis and a fall of 4 percentage points (1.1m) AHC.”

These figures outline the rise in the number of people in working-age poverty since 1998 according to the relative measure, whilst showing a decrease in poverty in terms of absolute income rises since 1998.

The IFS Poverty and Inequality in the UK: 2011 report

The IFS report analyses further the changes in real income and poverty levels. The report concludes that “between 1996–97 and 2009–10, income growth was largely constant across much of the income distribution, but it was weakest at the very bottom of the distribution and strongest at the very top. It is these contrasting trends at the very top and very bottom which drove the increase in income inequality.”

Specifically on working age adults, the report confirms the Daily Mail reporting that poverty amongst working-age adults without dependent children is at its highest level since the start of our comparable series in 1961”. The table below shows poverty levels for this group. 

While poverty levels have risen amongst this group of the population, the IFS also shows that for the majority of workers over the last decade real incomes have risen since 1996/7. 

It is only for the bottom five per cent that there has been a real income declines since the 1990′s.

The link to immigration

The Daily Mail and Iain Duncan Smith both made the link between rising poverty within the working-age population and large-scale immigration. 

Independent analysts at the Oxford Migration Observatory reviewed current research on any link between immigration and UK born workers wages and employment opportunities. 

They say that: “UK research suggests that immigration has a small impact on average wages of existing workers but more significant effects along the wage distribution: low-wage workers lose while medium and high-paid workers gain… each 1 percent increase in the share of migrants in the UK-born working age population leads to a 0.6 percent decline in the wages of the 5% lowest paid workers and to an increase in the wages of higher paid workers. Similarly, another study focusing on wage effects at the occupational level during 1992 and 2006, found that, in the unskilled and semi-skilled service sector, a one percentage point rise in the share of migrants reduced average wages in that occupation by 0.5 percent (Nickell and Salaheen 2008).

They also note that the impact on wages is likely to be greatest for the migrants themselves. 

On the question of immigration impacting employment opportunities, there is less evidence according to the Oxford Migration Observatory. One study of data from 1983-2000 found no statistically significant effect on overall employment, but found an adverse effect on labour market participation of UK-born workers with intermediate education. A DWP study on A8 immigration from the pre-2004 EU states found little impact on employment levels. 

Finally they report that “an OECD study of the impact of immigration on the unemployment of domestic workers in OECD countries (including the UK) during 1984-2003 found that an increase in the share of migrants in the labour force increases unemployment in the short to medium term (over a period of 5-10 years) but has no significant impact in the long run (Jean and Jimenez 2007).”

Conclusions

While the figures clearly show an increase in poverty levels amongst the working-age population over the last decade, coupled with declining real income of the bottom five percent of the population, making a connection to immigration is difficult.

In establishing a possible link, a distinction needs to be made between UK workers possibly losing out through increased competition for jobs due to immigration and UK workers leaving work due to lower wages and/or the higher value state benefits. 

Research suggests that there has been wage depression at the lowest levels over the last decade, and the Oxford Migration Observatory cite research linking immigration to reduced wages at this level. Therefore, it seems fair to suggest that a link between immigration and lower income among the lowest earners; and thus a rise in poverty levels.

Suggesting that UK born workers are shifting from work to benefits as an easier option due to immigration seems a slightly different issue, and the Oxford Migration Observatory suggest the link between immigration and employment is less well understood and depends on education levels and the time frame considered.

Further, the IFS points out that the real value of benefits and tax credits have markedly improved for the lowest income groups. This is likely to be an additional variable in the balancebetween workers choosing benefits over work, regardless of immigration. 

Lastly, in speaking about the poor getting poorer, it is important to keep in mind that wages are not the sole determinant of poverty. Prices and the cost of living are equally important, with the IFS research showing that living costs and poverty levels are linked and vary regionally across the UK. 

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