Poles Apart? EU Enlargement and the Labour Market Outcomes of Immigrants in the UK*

 Stephen Drinkwater

Michal GarapichJohn Eade

CRONEMUniversity of Surrey

January 2007

*Funding from the ESRC is gratefully acknowledged

• The UK was one of only 3 EU member states to allow the more or less free movement of workers from A8 countries in 2004

Of interest to observe the subsequent flows and labour market outcomes of migrants - especially given the low income levels in the A8 and that some were experiencing high levels of unemployment

• This is particularly true for Poland, since it had the third lowest per capita GDP (49% of EU25) and highest unemployment rate (19%) amongst the A8 in 2004 • Poland also accounted for more than half of the population of the new entrants

Background

• Also been a long history of Polish migration to the UK Large influx during WWII and immediately afterwards Fairly small inflows 1950-1990 Increased flows in the 1990s after the fall of Communism and in the early 2000s because of policy changes (e.g. for the self- employed) and through illegal means Huge influx following EU enlargement in May 2004

• As a result of these factors, WRS figures indicate that 62% of the 427,000 A8 workers registering to work in the UK from May 2004 to June 2006 were Poles

• Therefore the analysis of the labour market outcomes of recent A8 migrants to the UK, focuses particularly on Poles

Background (continued)

Data

• Labour Force Survey (LFS) data up to June 2006 are used (wave 1 respondents only)

Main problem is the relatively small samples, even despite the large influx of A8 migrants since 2004

But it provides relatively up-to-date information and details of the necessary individual characteristics to analyse the labour market outcomes of recent Polish and other A8 migrants

Can also be used to show migration patterns highlighted earlier (e.g. large influx just before 2004), its effect on demographic change and the personal and labour market characteristics of different migrant groups

Time of arrival and average age of Polish migrants living in the UK: 2002-3

Male Female AllPre 1946 24.32 1.61 13.971946-9 38.51 26.61 33.091950s 2.70 2.42 2.571960s 3.38 8.06 5.511970s 0.68 7.26 3.681980s 6.08 15.32 10.291990s 9.46 25.00 16.542000-3 14.86 13.71 14.34Mean age 63 51 58Median age 76 48 67

Time of arrival and average age of Polish migrants living in the UK: 2004-5

Male Female AllPre 1946 4.18 3.23 3.721946-9 9.89 10.08 9.981950s 1.52 2.02 1.761960s 1.14 4.44 2.741970s 1.14 4.44 2.741980s 2.28 5.65 3.911990s 6.84 9.68 8.222000-3 20.15 25.00 22.502004-5 52.85 35.48 44.42Mean age 37 39 38Median age 29 30 30

Demographic characteristics of migrant groups in the UK: 2001-6

% Male 36.3 48.5 61.4 53.5 49.8 48.1 46.2% aged 16-25 5.1 33.1 42.9 47.1 37.6 33.3 36.9% aged 26-35 30.3 51.5 42.5 28 42.9 45 40.5% aged 36-59/64 64.5 15.4 14.7 24.8 19.5 21.7 22.6% Married 69.2 40.8 38.6 36.9 26.5 46.3 57.8% in London 58.1 59.2 18.9 22.9 27.5 48.9 31.6% in East/South East 18.4 18.3 19.3 12.1 26.8 24.7 20.6% in Other UK 23.5 22.5 61.8 65 45.6 26.4 47.8Ave. age left FT Ed. 20.5 20.5 20.6 18.6 20.7 20.2 19.9N 234 169 259 157 287 231 623

Other

Other Post Enlargement Immigrants

Oth. A8 Oth. Eur. Eng. Sp.

Poles

Pre 2000 2000-3 Post Enl.

Note: Data relate to working age immigrants

Labour market characteristics of migrant groups in the UK: 2001-6

Employment Rate 69.5 76.0 82.1 66.0 71.0 77.6 49.1Self-Emp. Rate 26.5 32.4 3.5 3.0 8.0 9.0 3.5% in Production inds 16.9 6.3 24.8 30.6 22.7 11.3 18.0% in Construction 13.0 25.2 7.4 9.2 4.0 6.9 2.1% in Ret./Hosp./Cat. 24.0 23.4 29.2 21.4 20.7 14.4 20.1% in Other Services 46.1 45.1 38.6 38.8 52.7 61.5 59.8% Man./Prof. 34.8 9.0 10.4 7.1 42.4 68.3 37.1% in Intermed. occs 39.4 43.2 14.9 15.3 23.2 14.6 16.8% in Semi Rout. occs 14.2 19.8 33.2 24.5 15.9 9.8 25.4% in Routine occs 11.6 27.9 41.6 53.1 18.5 7.3 20.7Ave. weekly hours 37.3 40.0 41.9 39.9 38.9 42.6 37.5Ave. hourly earnings 11.45 6.32 6.03 6.07 10.52 13.96 8.26

Oth. Eur. Eng. Sp. Other

Poles Other Post Enlargement Immigrants

Pre 2000 2000-3 Post Enl. Oth. A8

Note: Data relate to working age immigrants excluding full-time students

Estimation

• Earnings are focused on because of the relatively high employment rates for A8 migrants (esp. Poles) and the low proportion claiming benefits in the WRS

• LFS earnings data also appears to be consistent with WRS information (80% of A8 migrants earning between £4.50 and £6 an hour) and a COMPAS survey (average hourly earnings of £5.94)

• Three sets of earnings comparisons are undertaken:

Relative to other recent migrants (default is Other Europeans):

4

1

log i j ji i ij

w D X

Estimation (Continued) Relative to previous cohorts of migrants from the

same countries of origin (default is arrived before 1980):

Separate models for each of the migrant groups:

• Years of education is used for the educational level because the highest qualification for most A8 migrants is “other” (>60% for Poles)

This variable uses information on the age started school by country of origin

4

1

log i j ji i ij

w C X

log i i i iw YSM X

Earnings Equations for Post Enlargement

Migrants to the UK 1 2 3 4

Years of ed. 0.069 (0.007) 0.062 (0.008) 0.037 (0.007) 0.017 (0.017)Experience 0.027 (0.008) 0.021 (0.007) 0.012 (0.006) 0.008 (0.006)Exp.-sq./100 -0.055 (0.021) -0.042 (0.020) -0.028 (0.015) -0.017 (0.014)Polish -0.335 (0.064) -0.317 (0.070) -0.237 (0.064) -0.142 (0.059)Other A8 -0.393 (0.093) -0.378 (0.098) -0.326 (0.089) -0.235 (0.090)Eng. Sp. Cos 0.264 (0.077) 0.230 (0.077) 0.170 (0.065) 0.070 (0.061)Other -0.216 (0.069) -0.239 (0.072) -0.176 (0.070) -0.141 (0.059)R2

 0.320  0.374  0.526 0.629Sample Size 564   564 550  528

Notes: 1: Mincerian; 2: + Personal Chars; 3: + Job chars (excl. occ.); 4: + Occ. Vars. Standard errors in parentheses.

Summary of Results (1): Relative to Other Recent Migrants

• Not much difference between recent migrants from Poland and Other A8 countries => Poles earn 28% and Other A8 migrants earn 32% less than Other Europeans in a simple Mincerian specification

• Controlling for personal and job characteristics doesn’t reduce the differentials that much: down to 21% for Poles and 28% for Other A8 migrants

• But the importance of occupation is again demonstrated by the reduction in the differentials to 13% for Poles and 21% for Other A8 migrants by including 1 digit controls

Earnings Equations for Polish and A8 Migrants to the UK

1 2 3 4Poles1980s -0.435 (0.206) -0.477 (0.211) -0.357 (0.210) -0.383 (0.186)1990s -0.058 (0.203) -0.136 (0.209) 0.009 (0.206) -0.056 (0.221)2000-3 -0.445 (0.210) -0.558 (0.222) -0.264 (0.186) -0.228 (0.181)Post Enlargement -0.456 (0.196) -0.537 (0.205) -0.228 (0.177) -0.204 (0.171)Other A81980s -0.189 (0.228) -0.498 (0.264) -0.170 (0.327) -0.140 (0.289)1990s -0.275 (0.244) -0.527 (0.263) -0.212 (0.356) -0.108 (0.314)2000-3 -0.628 (0.222) -0.905 (0.241) -0.250 (0.327) -0.148 (0.294)Post Enlargement -0.599 (0.229) -0.927 (0.247) -0.312 (0.342) -0.203 (0.306)

Notes: 1: Mincerian; 2: + Personal Chars; 3: + Job chars (excl. occ.); 4: + Occ. Vars. Standard errors in parentheses.

Summary of Results (2): Relative to Earlier Cohorts of A8 Migrants

• Post enlargement migrants earned considerably less than compatriots arriving before 1980 – Poles earned 37% less and Other A8 migrants 45% less in the Mincerian specification

• Those arriving after enlargement had similar earnings to those arriving earlier this century for both groups

• The differential is reduced considerably after controlling for job characteristics but occupation has a relatively small effect – especially for Poles

Earnings Equations for Migrants to the UK

Poles Other A8Other

Europeans Eng. Sp. Cos Other CosSpec. 1Years of ed. 0.064 (0.012) 0.065 (0.024) 0.084 (0.003) 0.084 (0.005) 0.068 (0.002)Experience 0.018 (0.012) 0.023 (0.012) 0.039 (0.003) 0.044 (0.004) 0.024 (0.002)

Exp.-sq./100 -0.046 (0.035) -0.081 (0.031) -0.079 (0.005) -0.080 (0.010) -0.054 (0.004)

Yrs since mig. 0.017 (0.006) 0.029 (0.006) 0.004 (0.001) 0.000 (0.001) 0.011 (0.001)Spec. 2Years of ed. 0.020 (0.013) 0.036 (0.022) 0.030 (0.003) 0.043 (0.005) 0.020 (0.002)Experience 0.008 (0.009) -0.004 (0.015) 0.023 (0.002) 0.030 (0.004) 0.015 (0.002)

Exp.-sq./100 -0.034 (0.025) 0.007 (0.031) -0.044 (0.005) -0.055 (0.009) -0.034 (0.004)

Yrs since mig. 0.006 (0.004) 0.008 (0.007) 0.000 (0.001) -0.001 (0.001) 0.004 (0.001)

Notes: Spec. 1: Mincerian + Personal Chars; Spec. 2: + Job chars (incl. occ.). Standard errors in parentheses.

Summary of Results (3): Separate Models for Migrant Groups

• Returns to education and experience are lowest for Poles and only slightly higher for Other A8 migrants, just controlling for personal characteristics

• Returns to education remain lowest for Poles when job characteristics are included but rise in relative terms for Other A8 migrants

• The effect of years since migration on earnings is highest for Other A8 migrants, followed closely by Poles and is much lower for the other groups

Conclusions

• Most recent A8 migrants to the UK have found low wage employment

• However many Poles are relatively well qualified implying that they have low returns to their education, compared to other recent migrants and earlier waves of Polish migrants

• In contrast, recent migrants from other A8 countries are less well qualified and have slightly higher mean earnings => have higher returns to their education

Therefore it will be interesting to observe if these are just entry level jobs for Poles and whether these individuals move up the job hierarchy

Conclusions (Continued)

• At present not a lot known about the length of time they intend to stay in the UK especially since many seem to be adopting a ‘wait and see’ approach (CRONEM surveys and WRS)

• The CRONEM surveys also suggest that younger and less qualified individuals are more likely to be short term migrants which may imply a longer term ‘brain drain’ of the more qualified

• However despite the relatively low earnings, remittances can be very beneficial to sending countries (if used productively)

– Caselli and Tenreyro (2005) argue that massive investment is needed to restructure the Polish economy