ChainWhat it assumes · how to break it
Start
Net migration into the UK rises, adding workers in sectors such as social care, hospitality and construction.
1
As a result, the supply of labour shifts to the right in the occupations migrants enter.
supply of labour · migration
supply of labour · migration
Assumes: Migrants join the labour force.
But: Students and dependants may not work, or only part time, so labour supply rises by less than the population.
2
This means at the old wage there is an excess supply of labour, so wages are pushed down towards a new, lower equilibrium.
wage determination · equilibrium wage
wage determination · equilibrium wage
Assumes: Migrant workers are substitutes for existing workers.
But: Migrants often fill shortages or do different jobs from existing workers, so they act as complements, raising the MRP of existing workers and their wages.
3
Consequently, firms extend along the demand curve for labour and employ more workers in total.
demand for labour · MRP
demand for labour · MRP
Assumes: Firms can expand output when labour is cheaper.
But: If firms are held back by a lack of premises, capital or demand for their products, cheaper labour adds few jobs.
4
At the same time, some existing workers may be displaced if employers prefer migrants who will work for lower pay, so employment of existing workers may fall.
displacement · substitute labour
displacement · substitute labour
Best link to attack
Assumes: The number of jobs is fixed, so each job a migrant takes is one an existing worker would have had.
Assumes: The number of jobs is fixed, so each job a migrant takes is one an existing worker would have had.
But: This is the lump of labour fallacy: migrants spend their income, raising demand for goods and services and so the derived demand for labour, which creates extra jobs.
End
Total employment rises, though some existing workers in occupations where migrants are substitutes may be displaced.
Evaluation chain
- E1However, displacement depends on the number of jobs in the economy being fixed.
- E2Because migrants spend their wages on housing, food and services, demand for goods and services rises.
- E3As a result, the derived demand for labour increases, creating new jobs that existing workers can also fill.
- E4So migration raises total employment, and any displacement of existing workers is likely to be small and short-lived, mainly in low-skilled jobs where migrants are close substitutes.
Another way to attack it: Where migrants fill vacancies that would otherwise stay empty, as in social care, they keep services running and protect the jobs of other workers who depend on them.
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Questions this answers
- Assess the impact of immigration on employment in the UK.
- Explain why higher immigration need not increase unemployment.
- Evaluate the view that migrant workers take jobs from existing workers.
Diagram
Labour market supply and demand: supply shifts right, the wage falls from W1 to W2 and employment rises from Q1 to Q2. Add a rightward shift of demand (MRP) to show how migrants' spending raises the derived demand for labour.
Reverse and related
Fall in net migration → labour supply shifts left, vacancies go unfilled and employment can fall in sectors that relied on migrant labour.