Spatial Concentrations of Immigrants and their Impact on Employment in the UK

1. Spatial Concentrations of Immigrants and their Impact on Employment opportunities in the UK labour Market Marina Shapira Centre for Educational Sociology University of Edinburgh This research is funded by the UK Economic and Social Research Council and is a part of ongoing project “Understanding immigration labour market impact in the UK ”

2. Introduction • The UK has experienced increasing levels international migration in recent years. • Over the past decade migration into the country increased from 314,000 in 1994 to 582,000 in 2004, with most of the increase occurring after 1997. The inflow of non-British EU citizens to the UK increased from 14,000 in 2003 to 74,000 in 2004 (ONS, 2006). Citizens of the ten EU accession countries made up an estimated four fifths of the increase. • Fears that an influx of cheap workers from Eastern and Central Europe would reduce the wages of native workers or push them out of jobs were expressed long before 2004. A study for the Department for Education and Employment on the possible labour market impact of Eastern European immigrants suggested overall losses to the native population from immigration by unskilled workers and overall gains if immigrants were skilled. • Immigrants have a profound impact on the labour market of the immigrant accepting society. This paper presents up-to-date findings from the ESRC funded ongoing project “Understanding the Labour Market Impact of Immigration in the UK”.

3. Aim of this research • The aim of this research is to find out if variations across local labour markets in employment opportunities of workers could be systematically related to the variations in the spatial concentration of immigrants, after accounting for variations in other characteristics of local labour markets. • A particular attention is paid to the possible relationship between spatial concentration of immigrants and British born ethnic minorities and to the consideration if immigrant impact on wages is mediated by the ethnic composition of the local labour markets. • A particular attention was also paid to the possible differences in the labour market impact of immigrants who arrived in 2004 and thereafter and those who arrived before

4. Research Questions • What are the variations between local labour markets in terms of the outcomes for native workers in employment status and occupational status? • To what extent can spatial variations in the outcomes of native workers be attributed to the differences between local labour markets in characteristics that describe the opportunity structure of local labour markets? • Can spatial variations in individual labour market outcomes being attributed to spatial variations in the concentrations of the immigrant population? • How does the immigration effect vary according their year of arrival in the UK?

5. Existing research evidence in Britain is insufficient in relation to the growing significance of this issue in Britain. • The skill level of recent Eastern and Central European immigration is very much different form the educational profile of previous immigration waves to the UK, therefore the labour market impact of the recent immigration can also be different and therefore deserves separateinvestigation. • Existing international research does not offer consistent evidence on this issue, although there is agreement that the impact of immigration varies according to the skill level of immigrants and the degree of complementarity between their skill levels and those of the ‘native’ population (Bauer and Zimmermann, 1999; Borjas, 1990, 2003, 2004).

6. Immigration labour market impact: Theoretical approaches • Econometric approach: suggests that influx of the immigrant labour force in the labour market leads, therefore, to the violation of equilibrium in the labour market, which results in the wage fall of non-immigrant workers with comparable skills; immigrants also may displace native-born workers in whole occupations and industries forcing the latter outside the labour force (Friedberg, 2001; Borjas, 2003). • Empirical findings show much smaller negative effect of immigration than it is predicted • Assumptions of classical economic theory might be wrong. Sociological approach: for assessing the impact of immigration on the labour market it is important to recognize the multiethnic context of labour markets and to take into account of the number and size of ethnic groups among the non-immigrant population; it is also important to consider of the degree of labour market segmentation and segregation.

7. Labour Market Opportunity Structure • Spatial differences in labour market opportunities is an important factor that may affects the labour market outcomes of workers across different labour markets. • Immigrants are not randomly distributed across the local labour markets in the host county, they are attracted to the labour market of particular characteristics and those characteristics have also an impact both on the labour market outcomes of immigrant and non-immigrant population. • Control for differences in labour market opportunities across local labour markets is particularly important when the immigrant spatial concentration and impact of those concentrations on the labour market outcomes of workers are considered.

8. Sources of inequality in spatial distribution of labour market opportunities • In the UK deindustrialization during the 1960s and 1970s lead to the growth of unemployment among workers who lived in regions where traditional industries used to be developed. These regions did not attract new industries during the 1980s and 1990s and as a result. • High skilled services and high-tech industries developed in only in particular regions, • further technological development contributed to the growth of unemployment, economic inactivity or downward occupational mobility during the 1980s and 1990s - new technologies make new skills short life and rapidly replace them with new skills, therefore forcing workers out of employment or into low skilled and low paid occupations. • Polarization of the labour market and its segmentation also contributed to the spatial dimension of the labour market opportunities. High-skilled services and high-tech industries offer jobs in the primary labour market sector, while in low skilled services and traditional industries jobs are often low-paid, and insecure.

9. Data Sources • To examine income attainment of employed population in the UK the 2006 Annual Population Survey (APS) data set is used. • The size of the Annual Population Survey for 2006 is and 375,865 individuals. The 2006 APS provides enhanced annual data for the UK and covers the sample of at least 601 individuals for 201 Unitary Authority (UA)/Local Authority Districts (LAD). • The aggregate level characteristics at the level of unitary authorities /local areas are estimated from the 2006 weighed APS.

10. Population and sample • The individual level units of analysis are individuals aged 16-65 (without self employed). • The units of analysis at the level of local labour markets are Unitary Authorities across Britain. • 21 localities were excluded from the final sample due to the very small numbers of ethnic minorities and the analyses was conducted on 180 (UA/LAD) were the number of ethnic minorities was 10 or more.

11. Variables:

12. Independent variables • Level of individuals: • Comparison groups -the UK born who describe themselves as White British; immigrants (those who were not born in the UK and did not describe themselves as White British); British born ethnic minorities (those who were born in the UK and did not describe themselves as White British). • Religion – Christians (reference group); Muslims; other religions. • Age and aged squared • Tenure in the UK for immigrants (and tenure squared) • Gender ( men the reference group);

13. Independent variables: Level of individuals (continued): • Level of educational qualification (National Vocational Qualifications): no qualification (or unknown); below NVQ level2; NVQ Level2; NVQ Level3; NVQ level4; NVQ level5. More specifically the reference group includes those with upper secondary qualifications or post-secondary non-tertiary qualifications; Level 2 includes those who have basic compulsory education up to lower secondary level; Level 4 those who possess lower tertiary qualifications (B.A or B.Sc); Level 5 postgraduate qualification or higher degree (M.Sc., M.A., M.Eng. or Ph.D.). • Marital status: the reference group are single people; two other groups are married (cohabitated) and ex-married (widowed, divorced; separated). • Control variables – (dummy variables), student status, disability status, pensioner, single parent family, number of children

14. The Local labour markets level independent variables: • The size of veteran immigrant population • The size of new immigrant population • The size of ethnic minorities • The size of employment • The size of the manufacturing sector • The size of the construction sectors • The size of banking and finance sector • The size of the personal and other services sector • Size of the unskilled jobs pool • The degree of the overall socio-economic well being of the locality

15. Method: • The research is completed through the multilevel analysis using the Hierarchical Lineal Modelling (HLM) statistical package; at the level of individuals population aged 16-65 in Britain in 2006 is considered; this population is nested in the 188 macro-level units that are the unitary authorities in Britain that are considered as proxy of local labour markets

16. Method (continued): • We allow the effects of the following independent variables to vary across localities: level of educational qualifications, ethnic minority, Muslims, and immigrants. The aim is to test if the impact of the size of immigrant population in the locality on wages of workers vary by their level of education, minority status, religion, or immigrant status.

25. Hierarchical linear modelling results: Probability of being economically inactive (or long term unemployed) vs. probability of being in unskilled jobs (or short term unemployed). Estimation of variance components.

26. Estimated level 2 effects for random slopes and randomintercept model :probability of being economically inactive vs. probability of working in unskilled jobs

27. Estimated effects level 2(continued): probability of being economically inactive vs. probability of working in unskilled jobs

28. Probability of being in semi-skilled or lower supervisory occupations (class V and VI) vs. probability of being in unskilled jobs. Estimation of variance components

29. Probability of being economically inactive vs. probability of being in classes V and VI

30. Probability of being economically inactive vs. probability of being in classes V and VI (continued )

31. Probability of being in class I to III vs. probability of being in unskilled jobs. Estimation of variance components

32. Estimated level 2 effects for random slopes and random intercept model : Probability of being economically inactive vs. probability of being in classes I to III

33. Estimated level 2 effects for random slopes and random intercept model : Probability of being economically inactive vs. probability of being in classes I to III (continued)

34. Estimated level 2 effects for random slopes and random intercept model : Probability of being economically inactive vs. probability of being in classes I to III (continued)

35. Conclusions • This study shows that individual level characteristics of workers together with the opportunity structure of the local labour markets have strong positive impact on labour market outcomes of population, in terms of their chances of working in higher status occupations. • However, the findings clearly show that accounting for the local labour market characteristics can not fully explain spatial variations in the labour market outcomes of workers, remained unexplained by the individual level variables. • Remaining spatial variations in employment outcomes are accounted well by across labour market variations in the size of immigrant population.

36. Conclusions • Higher percentage in the labour market of immigrants arrived before 2004 is positively related to the higher odds of non-immigrant workers to work in higher status occupation (Socio-economic classes I to III), while the percentage of new immigrants relates to these odds negatively. However, if local labour market opportunity structure is controlled for, only the percentage of the new immigrants in the local labour market has a statistically significant small negative effect on the considered odds. • For the immigrantsthemselves a large immigrant presence (both old and new immigrants) has a negative effect on their odds of higher status occupations. These effects become even stronger if the labour market opportunity structure is accounted for.

37. Conclusions • The findings show that there are important differences in the labour market impact of immigrants by period of their arrival in the UK. • immigration that arrived in the UK before 2004 has a positive labour market impact in term of chances of higher status occupation of all groups of non-immigrant population. The earlier findings (see Shapira 2008, also show that old immigration has a positive effect on wages of non-immigrant workers. However, these immigrants compete to some extent with non-immigrant population for unskilled jobs and displace some of unskilled workers out of labour force. • Unlike that, immigration that is arriving in the UK since 2004 seems to compete with non-immigrant workers for higher status occupations. Indeed, new immigrants have a negative effect labour market effect in terms of the probability of non-immigrant workers to work in higher status occupations. Moreover, our previous study shows that new immigrants also affect negatively the wages of British born worker and the group that is affected worse in terms of wages by the “new immigration” are those with highest level of educational qualification.

38. Conclusions • The finding also shows a complicated character of interrelationship between White British born majority, British born ethnic minorities and new immigrants. • While UK workers benefit from “veteran immigrants” who seems to compete only with immigrants themselves, new immigrants are competing with all non-immigrant population. • British born ethnic minorities are not affected by immigration more than majority population; however the main labour market competition is between ethnic minorities themselves. High percentage of British ethnic minorities affects positively odds of higher status occupations for the white British population and even more so for immigrants. However, for ethnic minorities themselves, as well as for low skilled workers, the large presence of British born ethnic minorities in the local labour markets has a negative effect on their odds of higher status occupations.