A recent speech by Ben Broadbent of the Bank of England gives an insight into an effect of immigration.
It’s also possible the relative supply of low-skilled labour has risen. We know, for example, that migration flows have risen significantly over the past fifteen years, and that immigrants are more likely to take low-skilled jobs than UK-born workers (see, for example, the Report of the Migration Advisory Committee (2014)). So if easier immigration has made the overall supply of labour more responsive to economic conditions in this country – if, as if often argued, it’s flattened the Phillips curve (Bean (2006), Bentolila (2008)) – it’s probably done so to a greater extent for low-skilled than high-skilled workers. So when the UK economy grows faster than its neighbours, as has been the case over the past couple of years, you’d expect to see greater inward migration and a disproportionate rise in the supply of low-skilled labour in particular.
Comment It is clear that other factors also impact on productivity which is the theme of the speech but the points made highlight a defect of the current free flow of labour – employment may rise but this is not the same as improving employment. As the labour force grows total employment and output also increase but that is largely irrelevant as it is the quality of employment and earnings that are the important criteria.
Britains (Cornwall’s) rising employment create the illusion of positive growth yet in reality hide the reality of unsustainable growth.