Migrant Workers Curb Wages and Keep Interest Rates Low to Boost Economic Growth
Tuesday 18 December
An end to the high levels of migration to
A report by the Ernst & Young Item Club found that the influx of cheaper foreign workers had helped to boost demand while also bearing down on growth in wages and on interest rates.
Peter Spencer, chief economic adviser to the Item Club said that without any immigration over the next 10 years, the economy's long-term trend rate of growth would fall from 2.4% to 2.2%.
By contrast, should migration continue at the high levels seen in 2005 and 2006 - three times as fast as the 0.5% boost seen on average since 1997 - the economy's growth rate would rise to 3%.
Spencer said that the economic benefits of immigration were clear even if the political implications were not. "What is apparent is that in the last five years while over a million jobs have been created in the
"Without a million and a half foreign workers since 1997, the
Item said that typically the average economic migrant in the last decade was as skilled as his UK-born counterpart - if not more so - and earned a comparable wage. However, it is possible that over the last couple of years the immigrants from the eight eastern European countries that joined the European Union in 2004 were less skilled than those previously, earning only 60% of the average UK wage.
Spencer said: "A third of the immigrants in the last three years have come from the recent accession countries and a large number of these have been young workers. Although the numbers of immigrants from eastern Europe are now slowing, there are very few parts of the
The report added that young British-born workers were one group that appeared to have lost out in the jobs market over the past decade since they had felt the impact of the most recent wave of immigrants.
Mark Otty, Ernst & Young's chairman said companies would increasingly have to look further afield and not focus on a purely domestic labour supply.
"We need immigrants to balance the demographic books and to supply us with a range of qualified professionals such as scientists and engineers. Moreover given the likely competition there will be for the most highly skilled immigrant employees, the most progressive companies will have to have credible diversity and inclusiveness policies in place.
"At the same time business has to do something to address the fact that the
Despite
The report said that using purchasing power parities to adjust gross domestic product, China was now the second biggest economy in the world after the United States with India in fifth place behind Japan and Germany.
Larry Elliott, economics editor, The Guardian
Source: http://www.guardian.co.uk/business/2007/dec/18/economics.eu