Working Paper: NBER ID: w13506
Authors: David G. Blanchflower; Chris Shadforth
Abstract: UK population growth over the past thirty-five years has been remarkably low in comparison with other countries; the population grew by just 7% between 1971 and 2004, less than all the other EU15 countries. The UK population has grown at a faster pace since the turn of the millennium. Both the inflow and outflow rates have risen, but the inflow rate has risen more rapidly recently, with an influx of workers from Eastern European. The propensity to come to the UK to work is higher the lower is a) GDP per capita b) life satisfaction in each of the East European countries. There is reason to believe that the majority of those who have arrived in the UK from Eastern Europe have not come permanently. When surveyed only 9% said they expected to stay for more than two years. Hence, in our view it is inappropriate to call them migrants, whereas in fact they should more appropriately be considered temporary or guest workers. There is evidence that, as a result of this increase in the flow of workers from Eastern Europe, the fear of unemployment has risen in the UK which appears to have contained wage pressures. We argue that the influx of workers from Eastern Europe has tended to increase supply by more than it has increased demand in the UK (in the short run). We argue that this has acted to reduce inflationary pressures and reduce the natural rate of unemployment.
Keywords: migration; unemployment; UK economy; Eastern Europe
JEL Codes: J31; J61
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Eastern European migration (F22) | labor supply (J20) |
| increased labor supply (J20) | inflationary pressures (E31) |
| increased labor supply (J20) | natural rate of unemployment (J64) |
| Eastern European migration (F22) | wage pressures (J39) |
| fear of unemployment (J64) | wage pressures (J39) |
| increased immigration (K37) | wage inflation among least skilled workers (F66) |
| Eastern European migration (F22) | flexible labor market (J46) |