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Foreign workers drag down UK wages, says head of the bank of England.

Thursday, 14 May 2015

A huge influx of foreign workers is threatening the economy by holding down wages, the head of the Bank of England warned yesterday.

In a dramatic intervention, Mark Carney said high rates of immigration helped explain why pay rises had been subdued for several years.

He said sluggish earnings were a key risk to the country’s recovery from the worst recession in a century. The comments coincide with the release of figures showing a record 4.8million foreigners work in Britain – making up one sixth of the labour force. Almost two million of them are from the European Union – another all-time high.

The figures from the Office for National Statistics are a fresh blow to the Government’s mission to slash immigration. David Cameron wanted to cut net migration to the tens of thousands but an official report before the election showed the annual influx had reached 300,000.

However, buoyed by last week’s poll triumph, the Prime Minister is demanding that Brussels change the rules to allow him to slash the numbers coming to Britain.

Mr Carney’s remarks will be noted with interest in Westminster and Brussels because he has avoided the political arena since joining the BoE in July 2013. EU chiefs are desperate for Britain to vote to remain in Europe in the promised in/out referendum.

Speaking in public for the first time since the election, the Canadian bank governor said the UK labour force had ‘expanded significantly’ in recent years. This is partly explained by an increase in older workers and a willingness to work longer hours but Mr Carney also blamed ‘strong population growth partly driven by net migration’.

Mr Carney said the increase in the size of the workforce had ‘contained wage growth in the face of robust employment growth’. He added: ‘A key risk [to the economy] is that these subdued growth rates continue.’

Latest figures show that in the first three months of this year, there were 1.9million EU nationals working in the UK, up from 1.6million a year ago

Latest figures show that in the first three months of this year, there were 1.9million EU nationals working in the UK, up from 1.6million a year ago

Gerwyn Davies, an adviser at the Chartered Institute of Personnel and Development, said: ‘The increased supply of workers, especially older workers and EU migrants, means that employers are under little or no recruitment pressure to boost pay growth.

‘Until this supply begins to diminish, employers will be under little pressure to increase starting salaries and, even then, we still have some way to go to see wages significantly exceed living costs.’

Alp Mehmet, of the campaign group MigrationWatch UK, said: ‘While some people have resisted the view that mass immigration exerts downward pressure on wages, the Bank of England report shows that such a view is neither extreme nor unjustified and that the impact of immigration is very likely affecting not just the lowest-paid. It is a key issue about which the government needs to be clear in its impending negotiations with the rest of the EU.’

The central bank says it is now factoring in higher levels of population growth for the coming years ‘on the basis of higher net migration’.

Its inflation report – published every three months by the BoE to outline its latest forecasts – added: ‘The outlook for net migration is highly uncertain and is likely to depend on a number of factors such as the United Kingdom’s relative economic performance and also UK government policy.’

Before employment restrictions were lifted more than a year ago, there were around 140,000 Romanians and Bulgarians in the UK.

Many exploited a loophole which allowed them to work here as soon as the two countries joined the EU – in 2007 – as long as they declared themselves self-employed.

A record number of European workers have jobs in the UK – fuelling urgent demands for David Cameron to strike an immigration deal with the EU.

New figures have revealed nearly 2 million people born in the EU are employed here – almost one in every 15 of the 31 million-strong workforce.

Of those, 942,000 are from Poland and seven other former Eastern Bloc countries – a surge of 135,000, or 17 per cent, on the previous year.

And 186,000 Romanians and Bulgarians, whose residents have had full freedom of movement and access to work since January 2014, are also working here.

Despite assurances from Labour and Liberal Democrat MPs that there would be no major influx after employment restrictions were lifted, workers from the two Eastern European countries soared by 38,000 – or 26 per cent – in the year to March.

The data offers clear evidence of how a wave of EU immigration has taken advantage of Britain’s fast-recovering economy – which has produced an extra 2 million private sector jobs since 2010 – while the Eurozone remains mired in chaos.

But it will also increase fears that the huge influx from countries in the former Soviet Union is placing extra demands on Britain’s schools, healthcare and the welfare state, while also forcing down wages.

And it will place increase pressure on the Prime Minister to secure sweeping reforms of EU rules ahead of the in/out referendum on Britain’s EU membership. Mr Cameron has accepted that the EU will not tear up free movement laws but wants tougher rules on benefits – including a ban on migrants claiming any handouts for four years – as the price for trying to keep Britain in Europe

Alp Mehmet, vice-chairman of MigrationWatch, which campaigns for controlled borders, said: ‘Ten years after the EU accession, we still find very large numbers of workers arriving from Eastern Europe, mainly to work in low-paid jobs.

‘This puts growing pressure on wages and housing. It simply cannot be allowed to continue.’

The Office for National Statistics revealed yesterday that 1.95 million people born in the 27 other EU member states were working in Britain in March.

The figure is almost 500,000 up on four years ago, equivalent to the population of Liverpool, and 1.3 million up on 2004 when Tony Blair threw open the UK’s doors by axing employment restrictions.

There was a rise of 190,000 EU workers in Britain in the past year, an increase of 11 per cent.

The figures have showed a steady climb as large numbers of Europeans escape economic problems in countries such as Spain, Italy and Greece. Dr Carlos Vargas-Silva, of the University of Oxford’s Migration Observatory, said: ‘It is the strong British economy that is driving this effect.

‘As long as the British economy remains strong relative to the rest of the EU, we are going to see continued migration from other countries in the EU. It will remain an attractive destination.’ Ukip MEP Jane Collins, the party’s employment spokesman, said: ‘This level of mainly unskilled migration from the EU is totally unsustainable in both the short and long term.’

She added: ‘Mass EU economic migration is placing extra strains on the UK’s pubic services and infrastructure, such as the NHS, education and housing.’

The ONS figures revealed that 264,000 people born overseas found jobs in Britain in the year to March, taking the total to 4.8million.

The figures do not include the unemployed or dependent relatives of immigrant workers. ONS figures also showed 74,000 newcomers from outside the EU found jobs in the UK over the same period, taking the total to 2.9 million. The number of non-UK nationals in work increased by 294,000, outpacing the 279,000 UK nationals who found jobs over the same period.

The data is another blow to the Government’s aims to slow immigration. Mr Cameron suffered a humiliating blow before the election when his promise to get tough by reducing net migration to ‘tens of thousands’ a year was left in tatters when it hit nearly 300,000.

Source: The Daily Mail

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