Ben Brindle, Jonathan Portes and Madeleine Sumption summarise the findings of a new paper for the Migration Observatory on migrant earnings. While the conclusions are tentative, their research suggests that the migrant workforce is gradually improving its position in the wage distribution.
We know a lot about migrants in the UK labour market – where they work, how much they earn and so on. But most of this is based on ‘snapshots’ of the entire resident migration population, lumping those who arrived relatively recently together with those who have been here for years or decades.
Our new research uses data from HMRC on payroll employees, which includes information on when migrants took up employment in the UK. This means that, for the period since 2014, we can look at both changes in the composition of new migrant entrants to the (payroll employee) workforce over time, and the earnings trajectories (in aggregate) of different migrant cohorts, as well as measuring how many remain in the payroll employee workforce.
This period saw very large shifts in migration flows, as well as dramatic developments in the labour market more generally. The pandemic led to a significant reduction in the number of EU resident workers, and then in January 2021 the introduction of the post-Brexit immigration system ended free movement while liberalising migration for work from outside the EU, which grew sharply in 2021 and 2022, especially in the health and care sector – developments which are summarised here (and reflected in Figure 1).
The data also show the very sharp post-pandemic rise in new entrants to the employee workforce from outside the EU. While the number of work visas rose sharply during this period, this cannot account for the entirety of the rise, which will include people who were already resident here but had not worked before as employees, students, dependants of those arriving on student and work visas, as well as Ukrainian refugees and new arrivals from Hong Kong.
In other words, even though most non-EU migrants coming to the UK in recent years have not been on work visas, they have nonetheless made a substantial contribution to the size of the labour force.
Attrition from the employee workforce
The HMRC data provide a crucial new insight into how long migrants remain in the employee workforce over time, because we can track how many people who first appeared in, say, 2015 were still in the dataset a few years later. If people disappear from the dataset this will not always mean that they have left the UK: some will have stopped working, for example to care for children, or become unemployed or moved to self-employment. This said, return migration is likely to be the major reason over the longer term.
Of the EU-origin migrants who registered in 2015, only about half were still on payroll in 2022 (Figure 2). Attrition of non-EU origin migrants was lower, but still significant. For UK-origin workers, it was unsurprisingly much smaller, but still represented about 1 in 6 workers. For established workers –that is, those who first appeared in the dataset in 2014 or earlier – attrition rates were lower, with more than 60% of EU-origin workers still in the data in 2022, while three-quarters of already-established non-EU origin workers remained.
Earnings of new entrants to the employee workforce
The HMRC data also provide information on migrants’ earnings and how their distribution has changed over time. Since we have earnings data for the calendar year, earnings data in the year of entry is incomplete and is typically very low for new registrants, so we measure earnings in the first full year after the year the person first appeared in the dataset (for example, calendar 2016 earnings for those who first appeared in the dataset in 2015).
We also show earnings for the whole sample for comparison, which includes UK and longer-established non-UK workers (Figure 3).
At the median, non-EU new entrants (who arrived sometime in 2021) earned 97% of the overall workforce median in 2022, up from 80% among new entrants in 2016. This is despite the very rapid expansion in their numbers; there is at this early state as yet no evidence that this has led to lower earnings among new non-EU migrants on average. But while non-EU new entrants are now entering the workforce somewhat higher up the pay distribution, EU-origin ones are slightly lower.
Earnings progression over time
Our data also allows us to look at earnings trajectories over time, for the same cohort of migrants. A key caveat is that because many migrants leave the employee workforce (as shown above), changes in average earnings over time may partly reflect changes in the composition of the workforce due to emigration.
Here we show the median earnings for those entering the labour market in a given year, relative to the median earnings of the entire workforce in that year (Figure 4).
The data suggest that non-EU origin employees are entering the workforce at a higher point in the wage distribution and are (possibly) progressing somewhat faster than EU citizens. The net effect is that while it took 2015 non-EU entrants around six years to reach the overall median wage, 2019 entrants had already exceeded it after two years.
By contrast, there appears to be less rapid improvement in earnings for EU-origin workers at the median. Nonetheless, the 2015 and 2016 cohorts had reached the UK average monthly earnings within five or six years.
Our analysis is preliminary and based on aggregate data only – we follow groups whose composition changes over time. However, it suggests that:
- Substantial shares of migrants leave the UK’s employee workforce within the first few years.
- The earnings of non-EU workers first entering the employee workforce increased from the mid-2010s to 2021, at the same time as their overall numbers increased rapidly. Whether as a result of earnings growth or selective out-migration from the UK, the monthly earnings of non-EU origin workers exceeded the UK median earnings within a few years for all cohorts for whom we have data.
- Entry earnings for EU-origin workers were lower. If anything, EU workers seem to be entering somewhat lower down the wage distribution, although we have only very limited data for those who arrived under the post-Brexit immigration system.
These conclusions are very tentative, but overall suggest the migrant workforce is gradually improving its position in the wage distribution and that the recent shift from EU-origin workers to non-EU origin workers, driven both by Brexit and broader economic and labour market developments here and in the countries of origin of migrants to the UK, may accentuate these trends.