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THE IMPACT OF IMMIGRATION ON THE STRUCTURE OF WAGES: THEORY AND EVIDENCE FROM BRITAIN
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The editor in charge of this paper was Orazio Attanasio.
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Acknowledgments: We are grateful for comments and suggestions to David Card, Christian Dustmann, Steve Machin, John Van Reenen, three anonymous referees, the editor Orazio Attanasio, and seminar participants at the LSE, the Institute for Economic Analysis, Barcelona, the UNDP Human Development Report Office, and the UCL-CREAM Conference on “Immigration: Impacts, Integration and Intergenerational Issues”. Manacorda is a Research Associate at the CEP at the London School of Economics, a Research Affiliate at CEPR, and a Research Fellow at IZA; Wadsworth is a Senior Research Fellow at the CEP at the London School of Economics, a Researcher at CREAM, and a Research Fellow at IZA.
E-mail: m.manacorda@lse.ac.uk (Manacorda); a.manning@lse.ac.uk (Manning); j.wadsworth@rhul.ac.uk (Wadsworth)
Abstract
Immigration to the UK, particularly among more educated workers, has risen appreciably over the past 30 years and as such has raised labor supply. However studies of the impact of immigration have failed to find any significant effect on the wages of native-born workers in the UK. This is potentially puzzling since there is evidence that changes in the supply of educated natives have had significant effects on their wages. Using a pooled time series of British cross-sectional micro data on male wages and employment from the mid-1970s to the mid-2000s, this paper offers one possible resolution to this puzzle, namely that in the UK natives and foreign born workers are imperfect substitutes. We show that immigration has primarily reduced the wages of immigrants—and in particular of university educated immigrants—with little discernable effect on the wages of the native-born.