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Economic damage will outweigh pay rises says think-tank

A reduction in immigration following Brexit may boost pay in some low-paid sectors but this will not compensate for the accompanying slowdown in growth, according to a report by the Resolution Foundation.

The social policy think-tank said there may be a small pay increase to native-born employees in sectors such as security and cleaning if there is a big cut in the number of workers arriving in Britain from overseas.

But  these benefits will not compensate for the reduction in real incomes caused in the short term by the higher inflation triggered by a falling pound, and in the long term by a slowdown in the economy’s growth rate.

Dwarfed

“In the wake of the vote to leave the European Union it seems likely that the UK will adopt a new immigration regime, moving away from the current free movement of people within the EU and possibly extending the current points-based-system that applies to those outside the European Union,” said author Stephen Clarke.

“Migration has reduced pay for some lower-paid occupations and groups such as skilled trades occupations. However, the effect is small compared to broader economic forces such as the squeeze on pay caused by the financial crisis. Looking forward it would also be dwarfed by the economic fallout of the vote to leave the EU if forecasts are remotely right. Anyone expecting a post-Brexit pay boost is going to be disappointed.

“So both those saying migration has no effect or those saying it explains all our pay problems are wrong.”

The report says that reducing the numbers of migrants allowed to enter the UK will pose a serious challenge in some low-paying sectors such as food manufacturing and domestic cleaning, where more than 30 percent of workers are migrants. Such sectors will either need to adjust their business models with greater investment in skills and technology, have access to temporary workers, or shrink.

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