Research and analysis

Summary findings: immigrant downgrading: new evidence from UK panel data

Updated 27 March 2024

This paper synthesises the immigrant downgrading analysis we published in November 2023.

In the UK, the first 2 decades of the 21st century witnessed a rapid rise in the share of the population who were born outside the UK. A natural question to ask is how those migrating to the UK have performed in the labour market – both at entry and as they remain in the country. Our analysis builds the evidence base of migrant outcomes by looking at the experience of different cohorts of migrants within the labour market, focusing particularly on workers who arrived in the UK since 2004 as part of EU expansion.

We use data from the Annual Survey of Hours and Earnings-Migrant Worker Scan (ASHE-MWS) to investigate the main differences between migrant cohorts’ experiences in the UK labour market, focusing on the job roles migrants work in, and whether these change with time in the UK.

We find that migrants from A12^{[footnote 1]} countries enter the UK with similar education levels to natives, however, tend to work in routine occupations, with lower pay levels. 65% of newly arrived A12 migrants work in routine occupations compared to only 17% of natives, despite broadly similar education levels, representing a 24% lower wage for A12 migrants entering the UK labour market when compared to natives. A12 migrants receive only a 5% wage increase for 10 years in country, compared to newly arrived A12 migrants, showing they are unable to overcome significant initial downgrading.

Descriptive statistics and educational attainment of migrants

Migrants are on average younger than natives and this gap widens when we focus on those who have recently arrived. Almost 60% of newly arrived migrants in work are aged under 30 compared to only 24% of working natives. Migrants are also more likely to work in London, though there is a clear difference between A12 and EU14/Rest of the world (ROW) migrants, with the latter group very heavily concentrated in London (13% natives, 21% A12, 46% EU14 and 39% ROW). Data from the Labour Force Survey (LFS) shows A12 migrants have a similar number of years of schooling as natives, though they are less likely to either have a degree or less than 12 years of schooling relative to natives. Therefore, they are more likely to be in the middle of the educational distribution. By contrast, EU14/ROW migrants have much higher education levels compared to natives. They have an average of around 2 years of additional schooling, are almost 30 percentage points less likely to have under 12 years of schooling and around 25 percentage points more likely to have a degree.

Entry downgrading

Immigrant downgrading is where a migrant works in a job role/occupation that does not match their level of qualifications, or the kind of work they would expect to attain in their home country. 41% of recent A12 migrants with a degree level qualification start work in routine occupations, whilst only 3% of natives with this level of education work in these occupations. We find that A12 migrants are likely to work in routine occupations, even when they have similar education to native workers. In contrast, EU14/ROW migrants usually begin work in higher skilled occupations that match their education level more closely. More A12 migrants working in routine occupations leads to a wage gap between this group and native workers when they start working in the UK. By considering the occupational difference, the wage gap for A12 migrants is reduced, indicating that most of the difference is due to which occupations A12 migrants work in. A12 migrants experience significant wage penalties when they start working in the UK, mainly because they tend to work in routine job roles. This is not a universal migrant experience; EU14 and ROW migrants are slightly more likely to work in lower-skilled jobs compared to natives (24% of recent EU14/ROW arrivals, compared to 17% of natives). This means when entering the UK labour market, the difference in pay between EU14/ROW compared to natives is not as large as the difference between A12 migrants and natives. We find evidence to show that migrants from A12 countries significantly downgrade in occupation status upon entry to the UK, despite having a similar level of education to natives.

Persistence of downgrading

We look at occupation changes and wage growth over a migrant’s time in the UK to understand if migrant workers pay catches up with native workers, from their original lower wage. On average, workers (migrant or native) switch jobs around 2.5 times in 10 years. However, for workers starting in routine occupations, UK and EU/ROW migrants change employers more than A12 migrants.

Figure 4: probability of switching out of routine job

Observation year	UK	A12	ROW/EU14
0	0%	0%	0%
1	16%	5%	14%
2	24%	8%	19%
3	29%	9%	21%
4	32%	14%	23%
5	35%	16%	27%

The analysis in Figure 4 (taken from the full paper) shows that after 5 years, around 35% of UK workers transition to higher-paying jobs. Migrants, especially A12 migrants, have a lower transition rate of 16%. The implication is that A12 migrants (who start with large wage gaps) have lower wage growth and more persistently remain in routine occupations. We find that A12 migrants experience a 5% wage increase for 10 years in-country experience compared to newly arrived A12 migrants showing they are unable to overcome significant initial downgrading. For EU14/ROW migrants, the gain is around 7% compared to newly arrived EU14/ROW migrants, showing they start with a smaller initial wage gap, and experience stronger returns than A12 migrants for UK labour market experience.

The ASHE-MWS dataset

The main dataset used is the Annual Survey of Hours and Earnings-Migrant Worker Scan (ASHE-MWS), a detailed dataset of earnings, occupation, and nationality. The innovative matched dataset combines Office for National Statistics (ONS) (ASHE) and HMRC (MWS) data and allows us to track migrant wages and progression over time which is fundamental to understanding the long-term impacts of migration. The sample includes employees between 18-64 from 2002 to 2019. In most instances individuals will have been observed across multiple years, but some will only be sampled in a single year. The data is then broken down into cohorts of migrants’ nationality. These cover 3 groups:

• A12 – the countries that joined the EU from 2004 onwards
• EU14 – the countries who were in the EU prior 2004
• ROW – rest of the world

The LFS is used both to compare the representativeness of the ASHE-MWS data and to supplement the analysis where variables are not available in ASHE.

Conclusion

Migrant cohorts entering the UK labour market have different experiences, based upon which country they migrate to the UK from. We found that 1 group, A12 migrants, have a substantially lower wage upon entering the labour market in the UK compared to other similarly qualified workers. The evidence shows that this is a result of occupational downgrading. We show that these workers’ wages growth stays low as their time in the UK increases. Given the size of the initial downgrading wage penalty, these workers are on average unlikely to reach the wages of similarly qualified natives. This is in contrast with other migrant cohorts – EU14 and ROW – where we see a lower wage penalty upon entry to the UK labour market, due to less occupational downgrading. This is followed by stronger wage growth than their A12 counterparts that allows them to reach wages more closely aligned with their native counterparts.

1. A12 countries joined the EU from 2004 onwards including Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia, Bulgaria, and Romania. ↩