Estimating the local employment impacts of immigration

Abstract: https://journals.sagepub.com/doi/10.1177/0042098019887916#abstract

One of the main concerns for those who voted Leave in the UK Brexit referendum was the issue of immigration. Many people felt that their jobs were at risk every time more migrants moved into their area. But there is a misconception underpinning this anxiety. It assumes that there is a fixed amount of work in the economy and so a job offered to a migrant worker is inevitably a job opportunity taken away from a UK-born worker. This assumption is dubious because migrants are also consumers.  So a rise in immigration potentially boosts aggregate demand for goods and services, which in turn creates more jobs. Migrants are also typically better trained and more entrepreneurial than native workers. This boosts productivity and international competitiveness of UK industry, and generating new businesses and jobs.

The question is whether the jobs created by migrants are enough to offset the number of jobs taken by migrants? So far, all the studies of the net impact of migrants on UK employment either find a very small overall negative effect or no impact at all. But there are three significant problems with these studies:

1. They only provide estimates of employment impacts of immigration at the national level. This is a major shortcoming as it is possible that the local impacts vary considerably.
2. Existing approaches tend not to take into account the tendency for employment effects to have knock on effects on surrounding areas.
3. Most studies focus on relatively short time horizons but it can take a very long time for the full effect of immigration to materialise.

Our goal was to address these shortcomings and develop a new robust method for estimating the long run employment impacts of immigration at the local level. To do this we used Census data at ward level going right back to 1971. Because ward boundaries have changed over time, we had to construct a new set of boundaries that were consistent through time–a huge undertaking but one that has led to a dataset which could be useful in a wide range of applications. We also had to apply a new statistical procedure that could make full use of this new dataset and produce reliable local estimates.

Having developed a unique dataset and a new method for spatial panel estimation, we applied it to London to estimate the impact of immigration on employment. We chose London because it is the UK’s central hub for migrant employment. We found that no migrant group had a statistically significant long-term negative effect on employment. However, European migrants were found to have a significant positive impact on employment in London.

Our research has some important political and economic implications at a time when Britain finds itself at a cross roads in terms of immigration policy.

1. Our estimates suggest that there will be serious economic implications for cities like London if we move to a more restrictive immigration system for EU migrants.
2. Our approach opens up new opportunities for estimating the local employment impacts of immigration in other parts of the UK. If some areas experience negative employment effects as a result of immigration, it will raise the question of how the government might compensate those areas.

Funding acknowledgement:

This research was funded by the Economic and Social Research Council (ESRC) through the Urban Big Data Centre (Grant Reference: ES/L011921/1) and the Understanding Inequalities research project (Grant Reference: ES/P009301/1).

Read the accompanying article on Urban Studies OnlineFirst: https://journals.sagepub.com/doi/10.1177/0042098019887916