Chain of analysis · Labour markets

Rise in net migration → Productivity

Edexcel 9EC0 3.5.2AQA A level 4.1.6
ChainWhat it assumes · how to break it
Start
Net migration rises, bringing in both highly skilled workers, such as doctors and engineers, and workers for lower-paid jobs in care and hospitality.
1
As a result, firms can fill skills shortages and hard-to-fill vacancies, so their capital and other staff are used more fully.
skills shortages · occupational immobility
Assumes: Migrants have the skills employers are short of.
But: Some migrants work in jobs below their qualification level because their qualifications are not recognised, so their skills are wasted.
2
This means firms can expand output with the capital they already have, and skilled migrants bring new knowledge and ideas, raising output per worker.
labour productivity · human capital
Best link to attack
Assumes: Migrants work in high-productivity jobs.
But: If most migrants work in low-wage, low-productivity sectors, average output per worker can fall even while total GDP rises.
3
Consequently, unit labour costs fall, making firms more competitive and giving them more profit to invest.
unit labour costs
Assumes: Productivity rises faster than wages.
But: If firms rely on a plentiful supply of cheap labour, they have less reason to invest in labour-saving capital.
End
Labour productivity rises where migrants fill skills shortages and bring human capital.
Evaluation chainattacks link 2 · Assumptions
  1. E1However, the effect on productivity depends on which jobs migrants do.
  2. E2If most migrants work in low-wage sectors such as care, hospitality and warehousing, they add to output but at below-average output per worker.
  3. E3As a result, average productivity can fall even as total output rises, and firms may put off investing in labour-saving capital.
  4. E4So migration raises productivity when it brings skilled workers into shortage occupations, and may lower it when it mainly supplies cheap low-skilled labour.
Another way to attack it: A steady supply of low-paid labour can delay investment in machinery and training, so productivity in sectors such as food processing and hospitality may stay low. GDP rises with migration, but GDP per head may rise only slightly.
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Questions this answers

  • Assess the impact of immigration on labour productivity in the UK.
  • Explain how migration can reduce skills shortages.
  • Discuss the economic costs and benefits of migration for a country.

Diagram

No standard diagram. A labour market diagram can show demand for labour (MRP) shifting right as productivity rises. The NHS's reliance on overseas-trained doctors and nurses is useful evidence.

Reverse and related

Fall in net migration → skills shortages persist, though firms short of labour may invest more in capital and training, which can raise productivity over time.

GCSE version

  1. StartMore people move to the UK to work, including skilled workers such as doctors.
  2. 1More migrants means firms can fill jobs they struggled to fill.
  3. 2Skilled migrants such as doctors and engineers bring skills and ideas.
  4. 3Each worker produces more on average, so productivity rises.

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