Migrant Workers Aid the Economy

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Byline: By Karen Attwood and Lucy Asplin

It may only be a small consolation for homeowners but rising mortgage bills might have arrived sooner without help from one corner of Europe.

With unemployment relatively low and bills rising, wages growth should have taken off by more - fuelling the need for an aggressive stance on interest rates.

There are several reasons it has not happened, but economists point to the arrival of Poles, Slovak and other central and eastern Europeans since the accession states joined the European Union in May 2004.

Last week, Bank of England governor Mervyn King said the increase in migrants helped keep earnings down.

Delivering the Bank's key inflation report, Mr King said: "A rise in labour force growth reflecting significant inflows of migrant labour has also contributed to subdued earnings growth."

And David Frost, director-general of the British Chambers of Commerce, observed UK companies were increasing their use of legal migrant labour at "an enormous rate".

Philip Shaw, economist at Investec, said migrant workers - skilled and unskilled -were essential to economic growth. "You get the feeling in this country, and certainly in London, it would grind to a halt without migrant workers."

He added due to increased migrant labour, in particular from accession states, the economy has grown rapidly.

Several years ago, given the rate of growth in this country, without migrant workers the UK would have had a skills shortage which would have led to higher wage inflation, he said.

"The Bank of England would have had to raise interest rates to slow the pace of the economy down," Mr Shaw added.

Some 7.5 per cent of people living in Britain were born overseas. It is difficult to keep track of accurate statistics due to the many ways people enter the UK on a permanent or semi-permanent basis.

But according to Home Office data, the rate of immigration has increased significantly over the past few years. Between 1999 to 2000 net immigration was around 100,000 but that had grown to more than 171,000 in 2001.

In 2004, when the ten accession countries joined the EU net immigration stood at 223,000.

The Association of Labour Providers, a trade association with 116 members providing workers largely to the agricultural, food packing and processing industries, believes migrant workers are vital for the life blood of the economy.

In particular, the farming industry is heavily dependent on workers from overseas, it says. Without migrant workers willing to work for low wages, food costs would have to rise for suppliers to pay more -which would lead to a decrease in living standards generally across the UK.

Retailers would also find it more economical to buy food from abroad, which would mean a reduction in employment in the food industry in the UK. …