Ben Brindle, Madeleine Sumption and Jonathan Portes find that despite the changes to the migration system, the relative earnings of the very large cohorts of new non-EU entrants in 2022 and 2023 are very similar to that of the 2021 cohort, and higher than in most of the pre-pandemic period.
We know a lot about migrants in the UK labour market – where they work, how much they earn and so on. But most of this is based on ‘snapshots’ of the entire resident migration population, lumping those who arrived relatively recently together with those who have been here for years or decades.
Our latest research uses data from HMRC on payroll employees, which includes information on when migrants took up employment in the UK. This means that, for the period since 2014, we can look at both changes in the composition of new migrant employees, and the earnings trajectories (in aggregate) of different migrant cohorts, as well as measuring how many remain in the payroll employee workforce. As a result, we can follow what happens to migrant groups over time – an advance on snapshot data. At a time when both the volume and composition of migration flows to the UK have changed rapidly, what is happening to recent arrivals is obviously of great interest.
Background
As the figure below (Adult migrant employees in their first year of employment) shows, the period following the pandemic and the introduction of the post-Brexit immigration system saw an extremely sharp rise in new entrants to the employee workforce from outside the EU. While the number of work visas rose sharply during this period, this cannot account for the entirety of the rise, which will include people who were already resident here but had not worked before as employees, students, dependants of those arriving on student and work visas, as well as Ukrainian refugees and new arrivals from Hong Kong.
Attrition
The data shows how many people who first appeared in, say, 2015 were still in the dataset a few years later. If people disappear from the dataset this will not always mean that they have left the UK: some will have stopped working, for example to care for children, or become unemployed or moved to self-employment. This said, return migration is likely to be the major reason over the longer term.
Of the EU-origin migrants who registered in 2015, only about half were still on payroll in 2022 (figure below – Cohort attrition by origin). Attrition of non-EU origin migrants was lower, but still significant. Non-EU migrants who arrived in recent years appear to have somewhat lower attrition rates than earlier cohorts, perhaps reflecting in part the availability of the Graduate Visa for international students completing their studies.
Earnings of new entrants to the employee workforce
Turning to earnings, we first look at ‘new entrants’ to the employee workforce. The results depend slightly on whether we look at earnings at the end of the year migrants take up employment in the UK, or at the end of their first full year – both are shown in the figure below (Distribution of new entrants’ monthly earnings).
Compared to the overall workforce, both EU and non-EU origin employees had relatively low earnings in the year they entered the labour market. There is significant catch-up if we look at the end of the first full year of employment, likely due to a combination of individual earnings improving and people in low-wage jobs leaving the labour market (e.g. students working part-time during their studies).
How then has the post-Brexit immigration system affected the skills and thus earnings profile of new migrants? If we look at earnings in the first year of employment, the trend is surprisingly flat given the major changes in the immigration system, for both EU and non-EU origin workers, and the very rapid expansion of the number of new entrants from outside the EU. From 2015 to 2019, each newly arriving cohort of non-EU citizens earned progressively more, compared to the UK workforce median.
This upward trend ended in 2020, but at least as of December 2023 there had not been a decline. If we look at migrants at the end of the first full year of employment, relative earnings improve for each successive non-EU cohort from 2015 to 2021. We see a small decline in relative earnings for the 2022 cohort, although it remains higher than in the pre-pandemic period.
New entrants’ earnings progression over time
We also look at earnings trajectories over time, for the same cohort of migrants, noting that because many migrants leave the employee workforce (as shown above), changes in average earnings reflect compositional changes due to emigration. The figure below (Progression of monthly median earnings) shows the median earnings for those entering the labour market in a given year, relative to the median earnings of the entire workforce in that year.
The data would suggest that non-EU origin employees’ median earnings have progressed somewhat faster over time. For example, while it took 2015 non-EU entrants around six years to reach the overall median wage, 2021 entrants had already exceeded it after two years.
While more recent non-EU entrants have experienced faster earnings progression, the relative earnings of non-EU employees overall fell between 2021 and 2023 (Figure below – Monthly median earnings). How can the two be squared? Whereas our data look at each cohort separately, the overall picture is dependent on the size of each cohort. In other words, since non-EU migrants earn considerably less when they first enter the labour market, the overall earnings of non-EU employees will be lower when there are more new entrants, as was the case in 2022 and 2023.
This is a compositional effect; it does not indicate that new entrants in this period were earning relatively less than new entrants in most of the pre-pandemic period. Indeed, our data suggest this was not the case, at least in the first 0-1 years after arrival. Whether this persists will depend both on earnings growth and on attrition (i.e. how many low earners leave the UK over the coming years).
Conclusion
Focusing on the very large cohorts of new non-EU entrants in 2022 and 2023, their relative earnings are very similar to that of the 2021 cohort, and higher than in most of the pre-pandemic period. Given the changes to the migration system, and the resulting very large increase in the number of new entrants, this stability is perhaps surprising.
Despite the rapid expansion of migrant workers in some low-paid sectors, in particular social care, overall relative wages of the 2022 and 2023 cohorts initially after arrival were higher than for most of the pre-pandemic period, when numbers were much lower. It is the large size of the recent cohorts that appears to have driven the overall decrease in overall non-EU citizens’ relative earnings in 2022 and 2023, rather than lower earnings at entry.
However, in their first full year of employment, the 2022 cohort saw slightly slower earnings progression than the 2021 cohort, although they were still outperforming pre-pandemic cohorts. It is too early to determine if this trend will persist.
Given the size of the 2022 and 2023 cohorts, how their earnings progress in the years ahead is clearly of great interest. Much will depend on the composition of employees who stay in the UK, but also on labour market developments in the sectors in which they are concentrated. For example, if relatively low-earning care workers are more likely to remain long term, we might see slower earnings growth than in the past.
About the authors
Dr Ben Brindle, is a Researcher at the University of Oxford’s Migration Observatory, which informs public and policy debates by providing impartial, evidence-based analysis of data on migration and migrants in the UK. He authors and co-authors briefings covering a range of topics – including UK migration statistics, migrant workers, and the impact of changes to UK visa rules – and is currently designing a large-scale panel survey with researchers at UCL and KCL that will examine how Hong Kongers with BNO status have integrated into UK economy and society. Ben is also a former UK Data Service Data Impact Fellow,
Dr Madeleine Sumption is the Director of the Migration Observatory at the University of Oxford and is a member of the Migration Advisory Committee, an independent panel that advises the UK Government on migration issues.
Jonathan Portes is Professor of Economics and Public Policy at King’s College London and is a Senior Fellow of the ESRC’s “UK in a Changing Europe” initiative. Previously, he was principal research fellow of the National Institute of Economic & Social Research. Before that he was chief economist at the Cabinet Office, and previous to that chief economist at the Department of Work and Pensions.