The formation of the EU played a pivotal role in increasing the movement of people across Europe, resulting in increased migration of people from the less developed Eastern Europe countries towards the more developed Western Europe states such as UK. The goal of this paper was to determine the relationship between Polish immigration to the UK and the effects on unemployment in both countries, especially with regard to unemployment levels and wage rates. The findings reveal that Polish immigration, for the case of the UK, increased unemployment and lowered the wage rates. For the case of Poland, the findings indicate that outflow immigration results in reduced unemployment, increased labour shortages, and increase in the wage rates.
Table of Contents. 3
CHAPTER 1: INTRODUCTION.. 6
1.1 Background of the Topic. 6
1.2 Historical Overview of Polish Immigration to the UK.. 8
1.2.1 Immigration Trends in the UK.. 8
1.2.2 Trends of Polish Immigration to the UK.. 10
1.3 Problem Statement 11
1.4 Research Objectives Questions. 12
1.5 Professional Significance of this Thesis. 12
1.6 Delimitations. 12
1.7 Research Structure. 13
CHAPTER 2: LITERATURE REVIEW… 14
2.1 Introduction. 14
2.2 Population Changes in the United Kingdom before the 21st Century. 15
2.3 Rise in Immigration to the UK in 21st Century. 17
2.4 Polish Immigration to the United Kingdom.. 20
2.4.1 Settling after the Second World War 21
2.4.2 Resettlement of Polish Solders. 22
2.4.3 First immigration law in the UK, PRA (1947) 23
2.4.4 Immigration after 1950. 24
2.4.5 Economic Migration of the 21st Century. 25
2.5 Impacts of A8 immigrants on Western European economies. 28
2.5.1 Immigrants Provide a Huge Bunch of Consumers. 29
2.5.2 Profiling the East European Immigrant Purchaser 31
2.5.3 New Opportunities for the Airlines. 32
2.5.4 Immigrants and the Banking Sector 33
2.5.5 Expansion of Brands and Businesses. 35
2.5.6 Government Gaining in Revenue from Immigrants. 37
2.6 Impact of Emigration on Source Nations. 38
2.6.1 Economic Impact of Migration on Source Country. 39
2.6.2 Impacts of Emigration on Unskilled Labour Market in Source Country. 40
2.6.3 Effect on Skill labour, Brain Drain. 41
2.6.3 Social Impacts on the Source Country. 43
CHAPTER 3: METHODOLOGY.. 44
3.1 Introduction. 44
3.1 Research Design. 44
3.2 Methods of Data Collection. 45
3.2.1Secondary Data Sources. 46
3.3 Analysis and Presentation of Data. 47
CHAPTER 4: RESULTS. 48
4.1 Introduction. 48
4.2 The Effect of Polish Migration to the UK on the Rates of Unemployment of both UK and Poland 49
4.2.1 Effect of Polish Migration to UK on the UK unemployment 52
4.2.2 Effect of Polish Migration to the UK on Poland’s unemployment 56
CHAPTER 5: DISCUSSION AND CONCLUSION.. 59
5.1 Summary of the Main Findings. 59
5.1.1 How Does Polish Migration to the UK Affect the Unemployment Rate in UK?. 59
5.1.2 How Does Polish Migration to the UK Affect the Unemployment Rate in Poland?. 59
5.2 Wider Implications for this Study. 60
5.3 Suggested Directions for Further Research. 60
List of Figures
Figure 1: Immigration in the UK 2003-2011. 9
Figure 2: Polish-born people employed in the UK.. 11
Figure 3: Population growth in percentage. 16
Figure 4: Distribution of Immigrants across the UK.. 27
Figure 5: Percentage of those in employment who are migrants. 51
Figure 6: Youth unemployment and immigration. 53
Figure 7: Migration and Labour market phenomena in Poland. 57
1.1 Background of the Topic
The establishment of the European Union (EU) gave individuals within its member countries the right to move freely within the region. Theoretically, the formation of a single market should help in creating extra earning opportunities and employment for workers found in the member countries of the European Union (Blanchard 2000). The underlying theoretical assumption is that immigration has positive impacts on a countries labour market, especially the receiving the country (Baumol & Blinder 2006). With baby boomers nearing their age of retirement and lesser youth cohorts ready to join the labour market, immigrants play significant role in contributing to the supply of labour, which helps in funding pension systems. Anderson & Winters (2008) asserts that an increased immigration to a country can play a significant role mitigating a rise in the dependency ratio. Nevertheless, a high rate of immigration by itself is not adequate to alleviate the negative costs of ageing populations. In the United Kingdom and other countries such as Poland, the question of immigration and its respective effects are a subject of contention. The concern raised by many natives relates to whether immigration has a negative effect on the rates of unemployment, implying that higher immigration rates might result in higher unemployment rates (Dustmann, Fabbri & Preston 2005). Such concerns are likely to result in a dislike of foreigners, which is a significant challenge in the integration of immigrants. Because of these concerns, it is essential to investigate the topic of immigration, especially the relationship existing between immigration and unemployment for the source and destination countries.
Several studies regarding this topic have been carried out although controversies are still present. For instance, the United Nations reports that, according to economic theories, immigration should not have a negative effect on the rates of unemployment. The Migration Watch UK published a report relating to the topic of immigration and youth reports and reported a positive correlation existing between immigration and youth unemployment; although this does not point out a casual relationship, it is not a likely concurrence (Anyanwu & Erhijakpo 2010).
Immigrants moving to other nations have varying motives, and permanent immigrants must be differentiated from guest or temporary workers. Schiopu & Siegfried (2006) defines guest workers as people moving to another nation on a provisional basis in search for better employment conditions and opportunities. The United Nations defines immigration as the process through which an individual sets up his or her typical residence in the territory of a member nation for a time of at least one year, having been a previous resident of another member country or a third country. Simultaneously, the classification of unemployment takes different fronts such as temporary unemployment, seasonal unemployment, frictional unemployment and structural unemployment (Borjas 2006). As a result, it is essential to define unemployment, which will be reviewed further in the following sections of this study. According to Devine (2004), individuals are considered unemployed if they lack work in the course of the reference week and are accessible to begin work in the course of the following two weeks, and have been actively seeking employment during the previous four weeks. Furthermore, unemployed individuals include people who have attained the working age and lack employment, but they are available work at the existing wage rates (Anderson & Winters 2008). The classification also includes people who have attained the working age and are unwilling to participate in the labour market. In view of the fact that, unemployment is represented as a percentage, its value is a fraction of the total labour force, which comprises of the number of both the unemployed and employed individuals (Devine 2004). The following formula is used in the computation of the unemployment rate.
Unemployment Rate = (Number of unemployed individuals / Total labour force) x 100
For illustration, if there are 2 million people lacking employment and 30 million employed individuals, the unemployment rate is computed as follows:
(2 / (2+30)) x 100 = 6.25 %
1.2 Historical Overview of Polish Immigration to the UK
Polish immigration to the UK denotes the permanent or temporary migration of the Polish people to the UK. A significant percentage of Polish migrants to the United Kingdom migrated to the country as economic migrants, especially after the enlargement of the EU in 2004 (The Migration Watch UK 2012). At present, a substantial number of Polish-born individuals reside in the United Kingdom, and there is a large population of British Poles together with the descendants of earlier immigrants.
1.2.1 Immigration Trends in the UK
The Great Britain has a lengthy record of immigration flow because of the country’s colonial past. In the late 1960s, there were concerns to formulate an immigration policy in order to regulate immigration flow from the increasing number of immigrants originating from previous colonies including Pakistan, India and Jamaica (Migration Advisory Committee 2010). With the drastic increase in the number of immigrants, there was the need to adopt immigration acts. During 1968, the government of the Great Britain enacted the Second Immigration Act in to restrict immigration for people who lacked birth connection with the United Kingdom. However, the policy relating to the asylum seekers evolved in the following years, and during the late 1990s, the immigration process was under the control of the British Government with the primary goal of limiting the rights of new immigrants. The Independent Asylum Commission criticized this move by the British Government as a form of violation of human rights.
During 2004, the United Kingdom was one of the first nations in the EU block to initially allow free movement of workers to EU member countries. The 2004 EU enlargement comprised of Slovenia, Slovakia, Czech Republic, Poland, Malta, Lithuania, Latvia, Hungary, Estonia and Cyprus. The EU enlargement lead to higher immigration inflow to the UK during the period 2004-2006 and the country witnessed one of the biggest shifts as shown in Figure 1 below. A similar effect was anticipated in the case of the 2007 EU enlargement. Nevertheless, the United Kingdom opted to establish restrictions on the new member nations, which included Romania and Bulgaria. This may perhaps be probable explanation for the fall in the number of immigrants for the years following 2008.
Figure 1: Immigration in the UK 2003-2011
Source: Eurostat, US Statistical Abstract 2006 and Health Statistics Quarterly, 32, (Schiopu & Siegfried 2006)
1.2.2 Trends of Polish Immigration to the UK
The immigration of the Polish people to the UK can be traced back to the 16th century when Britain imported substantial amounts of grain from Poland. During 19th century, after the fall of the November Uprising of 1831 in opposition to the Russian Empire, scores of Polish insurgents moved to the United Kingdom to look for political sanctuary. Following the World War I, Polish people made settlements in London, who were mostly from the London Polish prisoner of war camps situated in Felltham and Alexandra Palace (House of Lords 2008). During the World War II era, the Polish people played a significant role in the Allied war effort that resulted in the establishment of the Polish British Community that still exists at the present day. Most of the Polish people moved to UK as political immigrants after the Soviet Union and Germany occupied Poland. After the end of World War II, the enactment of the Polish Resettlement Act relaxed the travel restrictions to and from Poland, which led to a steady growth in Polish migration to the UK during the 1950s. The dawn of the 21st century saw an increase in economic migration of Polish immigrants to the UK. In the course of the 1990s, the Polish people made use of the freer travel limitations to migrate to the United Kingdom and seek employment in the grey economy. After the 2004 EU expansion, the United Kingdom allowed free movement of workers between the new member states of EU, which resulted in most EU member states (House of Lords 2008). The following Figure 2 shows the trend of Polish-born employment in the UK during the period 2003-2010.
Figure 2: Polish-born people employed in the UK
Source: Eurostat, US Statistical Abstract 2006 and Health Statistics Quarterly, 32, (Schiopu & Siegfried 2006).
1.3 Problem Statement
Immigration is one of the most contentious subjects relating to migration for the reason that native populations fear the possible competition on the labour market derived from foreign labour. Controversies still exist regarding the impacts of immigration on the rates of the unemployment for the host nation. In aIDition, the simplest theoretical models fail to provide a precise solution to this problem (Anderson & Winters 2008). A considerable portion of the existing empirical results point out that immigration pose a negative impact on the rates of employment; on the other hand, some studies indicate a positive impact. Several factors determine whether native populations can anticipate losses or gains because of increased immigration, and often depends on the size and structure of the immigration flow and the institutions of the labour market of the host countries. Furthermore, there is the need to investigate the effects on unemployment that immigration imposes for the source country, which in this case, is Poland (Barajas et al. 2009). Amidst the divergent results regarding to the relationship between unemployment and immigration, there is the need to undertake a study to determine the relationship between Polish migration to the UK and the effects of unemployment in both countries.
1.4 Research Objectives Questions
The primary purpose of this study is to investigate the effect of Polish migration to the UK on the rates of unemployment of both UK and Poland. The study assesses whether immigration rates has a significant influence on the rates of unemployment based on the data collected from UK and Poland. In an attempt to attain this objective, the following research questions were utilized:
How does Polish migration to the UK affect the unemployment rates in the UK?
How does Polish migration to the UK affect unemployment rates in Poland?
1.5 Professional Significance of this Thesis
This study is pertinent to economists and students in the field of labour economics, and local authorities engaged in the tracking of statistics relating to unemployment and immigration. This study should be helpful in making policy decisions relating to unemployment and immigration, In aIDition, this study will be helpful to students and professional entities in economic and global governance.
This study utilized data collected from two countries, UK and Poland, which served as source and host nations respectively. In aIDition, the study conducts an analysis using a limited period for the years 2003-2011 for both the UK and Poland. In this study, the immigration flow did not take into consideration the working experience and years of schooling; rather, the immigration flow was considered as a homogeneous group. This is because of the limited access to the data needed at the municipality levels.
There is a correlation between the state of affairs in the labour market and the migration flow of a nation (Anderson & Winters 2008). As a result, the rate of immigration is usually lower in nations with high rates of unemployment or during periods of economic recession. In aIDition, immigrants have a tendency of moving to geographic areas with higher probabilities of finding employment. This might lead to a possible bias in relation to estimations and the effect of unemployment on the rates of immigration. This feedback effect and non-economic variations are extremely hard to measure; as a result, they were omitted in this research. Furthermore, the study was limited only to one generation of Polish immigrants in the UK and did not take into account the labour input to the UK associated with the second and third generation of Polish immigrants in the UK.
1.7 Research Structure
The first chapter offered a detailed background of the topic, problem description, research objectives and questions, professional significance of this thesis, and research delimitations. Chapter 2, Literature Review, attempts to review current empirical research and literature regarding the relationship between unemployment rates and immigration for both source and host nations. The chapter also provides an overview of the theoretical framework adopted for this study. Chapter 3 provides a discussion of the research methodology adopted and their respective justifications in relation to attaining the purpose of this study. Chapter 3 also discusses the data collection and analysis method. Chapter 4 analyses and presents data collected taking into account purposes of this study. The discussion chapter interprets the data in an attempt to answer the research questions whereas the conclusion chapter summarized the findings and made appropriate recommendations on the topic.
The European Union was formed with the theoretical basis that a greater economic integration would definitely benefit the member states in a wide array of aspects. Several essential agreements would provide the basis for which such economic integration would be achieved. For instance, the European Union agreed to the use of a single currency the Euro (Peri & Spaber 2009). Either, the European Union agreed to the free flow of both humans and goods within the trading bloc (Aggrawal, Demirguc-Kunt & Martinez 2006). This has since allowed nationals of different nations to immigrate to other more developed nations in search of employment opportunities and better working conditions. While this may have been one of the projected successes envisaged during the formation of the union, it has had its fair share of controversies.
The controversy emanates from the huge flow of immigrants from the Eastern European nations commonly referred to as the A8 nations. These nations include Slovenia, Poland, Hungary, Slovakia, Latvia, Czech Republic, Hungary and Estonia (Borjas 2006; European Commission 2006; Ortega & Peri 2009). Several immigrants from these nations have been seen to “flood” the workforce and labour markets of the more developed Western Europe nations. The influx of workers from these regions has been a debate in several nations such as the United Kingdom, France, Germany and Italy. The UK is one of the nations that have had a protracted debate on the impact of immigrants from east European immigrants on its economy. This section first reviews the population of the UK and its change over time. The second section of this review also analyzes the changes in the population over the past few especially since joining the European Union. The third section reviews the impacts of migrants of the economy of destination countries. This section will be concerned with the economic impact of immigration of national of the A8 nations on Western European nations. The final section reviews the impact of the immigration on the source nation paying attention to studies carried out on nations that have experienced huge emigrations.
2.2 Population Changes in the United Kingdom before the 21st Century
According to Abdih et al. (2009), the UK has had a less than average population increase in the last three decades of the 20th century. Official records at the office of National Statistics of UK has it that that between 1972 and 2006, the country’s population only increased by 8.2% (House of Lords 2008). In fact, Anderson & Winters (2008) assert that the population changed from 55.9 million to 60.5 million, much lower increase as compared to any of the developed west European counterparts. The population of the United States changed by about 44% over the same period registering an increase from about 208 million in 1971 to over 300 million in 2006 (Schiopu & Siegfried 2006; Anyanwu & Erhijakpo 2010). Similarly, other nations have had a higher population growth as compared to that of the UK. Nations such a Spain, Italy and France have had much higher population growths in the period between 1971 and 2004 (Azam & Gubert 2006; Mohapatra, Joseph & Ratha 2009). This can be illustrated by the figure below.
Figure 3: Population growth in percentage
Source: Eurostat, US Statistical Abstract 2006 and Health Statistics Quarterly, 32, (Schiopu & Siegfried 2006)
However, the long run indications of the charts have been found to mask some significant changes that took place along the way. Between 1971 and 1998, the UK registered extremely low levels of population growth with a much evened out proportion of birth to death ratios. Quartey (2006) reports that population in the UK grew by only 2.8 million between 1971 and 1999; this is just about 4.2 percent of the population growth. However, after 1999, the population grew by 3.2% within a span of 3 years. Anderson & Winters (2008) attribute this suIDen change to immigration with inflows increasing at an unprecedented rate vis-à-vis unchanged outflows.
In summary, the UK population appears to grow at a much lower rate as compared to the rest of developed EU member states. By international standards, the UK has had its population very much under check over the past decades and this has contributed to low unemployment levels and higher per capita indices. Such good statistics has made the UK a very attractive destination for many immigrants seeking a better lifestyle and higher wages. The accession of the A8 nations has seen significant changes in the European labour market. Thus, the question remains as to why the UK seems to have attracted a high number of immigrants in the past decade.
2.3 Rise in Immigration to the UK in 21st Century
The changes in the UK population can be attributed directly to the accession of A8 nations on May 1st 2004 (Boeri & Brucker 2005; Mattoo & Mishra 2009; Ajayi, et al. 2009). The accession of the A8 allowed the free movement of citizens of the eight nations to work and live in the UK, Swede and Ireland. This was a concerted move by the UK to review its immigration policy and provide room for economic attractiveness. The move was seen as chance for the UK to open up its economy to the world by allowing works from different parts of Europe to settle and contribute to UK’s economy.
Literature on the concept of immigration directly focuses on economic factors that define migration. Agunias (2010) argues that the fundamentals of migration are based on the simple fact that an individual compares the economic condition and benefits that would accrue before moving to the new location. Agunias (2010) further illustrates that individuals also consider social costs of relocation before making the decision to emigrate. The benefits of migrating to another location can be easily calculated by considering the expected income in the new country in comparison with current location. The difference will be calculated upon consideration of chances of getting a job in the destination country by comparing the unemployment rate in the different economies. After a careful evaluation of the cost verses the benefits and the individual finds that the benefits outweighs the costs, then such a person considers emigrating to another country or location.
Changes in the probability to immigrate have been explored by different scholars and economics experts. Bracking (2008) estimates that an increase in the minimum wage by about 10% in the destination location increases the chances of individual’s immigration by 7 percent. In the same respect, increase in employment rate in the country of origin reduces the chances of immigration by about 2%. Schiopu & Siegfried (2006) further illustrate that the majority of those immigrating are young educated single males.
There are varied statistics indicating as whether immigrants eventually go back to their countries of origin. According to Barajas et al. (2009), about 13 per cent of all immigrants tend to go back to their countries of origins. Similarly about 15 per cent of immigrants move on to another locations still seeking better livelihoods. Bracking (2008) summarizes the flow of immigration within Europe to be majorly dominated by Central and East European population moving to the west. In this sense, Bracking (2008) argues that most of the immigrants in west Europe originate from eastern nations especially Romania, Bulgaria and Poland. Empirical evidence in different literature point to the trend most of east Europe population consider west European nations as better placed as working environments. Consistent immigration from the east to the west has been ascertained to a high degree (European Commission 2006).
Aggrawal, Demirguc-Kunt & Martinez (2006) further examine the reasons for the movement from the East (A8) nations to the UK. As earlier discussed, the reason that drives most immigrants from the A8 nations may be due to high probability of getting employment or the high standards of living that west European nations presents to these immigrants. To evaluate these issues, data from the UK’s Worker Registration Scheme is evaluated vis-à-vis home country population. This data is directly correlated with the home country’s GDP and unemployment rates.
Table 1: WRS applications between May 2004 and September 2006 as a proportion of home population
WRS registrations as percentage of home country
(2004)GDP per head
Source: Eurostat, US Statistical Abstract 2006 and Health Statistics Quarterly, 32, (Schiopu & Siegfried 2006)
The table above is a clear indication of the flow of immigrant into the UK seeking employment. Lithuania leads in terms of the proportion of the home country to relocate to the UK. With 1.6% of total population, Lithuania also happens to be the nation with the highest unemployment rate. Similarly, Latvia, Slovakia and Poland have similarly high numbers of immigrants in the UK and equally lower GDP per capita in their countries f origin. Other nations with much less percentage as immigrants in the UK happen to have higher GDP per head in their home nations.
According to the above table, Poland has the highest number of registered immigrants as workers in the UK and this implies Polish immigration into the UK has existed for a much longer of time. Boeri & H. Brucker (2005) argues that Polish immigrants have been pouring to the UK for a long period. The history of east European immigration into the UK has been explored in several literatures and it is of great importance to review the history Polish immigration to the UK.
2.4 Polish Immigration to the United Kingdom
The history of Polish immigration to the UK dates back to the medieval era. Medieval Europe was characterized by wars between kingdoms and monarch of different origins. Bracking (2008) state that first instance of Polish presence in the UK dates back to the time of King Canute of the 15th century. There is evidence of such claim in inscriptions found in Hyde Abbey Winchester asserting that the sister to the King Canute had made headway to the land of Britain. There is also evidence of Polish invasion, where troops invaded the UK during the rule of King Canute. The presence of such evidence of invasion and inscription within the great landmarks in the UK provide evidence Polish.
At the turn of the century, Poland started to increase their presence in the UK due to the trade in grains that the UK imported from Poland. British imports of grains from Poland implied that merchants and diplomats would flow from Poland to UK in order to do business. Dustmann, Fabbri & Preston (2005) singles out the flow of migrants from Gdansk through trading in the Eastland Company. These immigrants settled in London and soon become part of the London community. In fact, Poles in the Britain soon became integral to the community that the great play writ, William Shakespeare mentions about them in his play Hamlet.
Polish immigrants would increase in numbers to a point that they would be sought after for employment. Eade & Garapich (2006) state that the Polish immigrants were enough to be hired by shipping company in order to sail to the United States. The Virginia Company hired Poles to in 1608 to sail to the US and recapture the colony of Jamestown. The 18th century saw much of Polish movement into the UK with evidence setting up of pubs and streets named after the Poles. For instance, a London Street was name ‘Poland Street’ and a pub name the ‘King of Poland’.
The 19th century still saw several numbers of Poles flowing into the country. The failed political uprising of 1831, that looked to eliminate Russian rule over Poland, forced thousands of Poles into the UK seeking refuge and asylum (Peri & Spaber 2009; Anderson & Winters 2008). The same trend would continue after the First World War. After the First World War, Polish prisoners of war from several camps would be released and end up settling in London.
2.4.1 Settling after the Second World War
The Second World War was one perhaps one of the most important eras in the migration of Poles to the UK. The United Kingdom considered Poland a great ally in the war against the axis. After the Germans occupied Poland, several Poles would immigrate to London to seek refuge. In fact, Beine, Docquier & Schiff (2009) assert that after the fall of France to Germany in 1940, the Polish Prime Minister and the almost the entire government would lead the first wave of tens of thousands of immigrants into London. This first wave of emigrants was mainly composed of ground solders and air men.
As earlier mentioned, the Poles made a big contribution to the war against the Axis in the war. Borjas (2006) illustrates that the Polish regiment contributed the fourth largest contingent to the allies. In the Battle for Britain, the Poles were biggest non British army to participate in the war. The Polish army also played a very instrumental role in other several battles such as Siege of Tobruk, the Battle of Monte Cassino, the liberation of Bologna, the battle of the Falaise Gap and the liberation of Breda (Boeri & Brucker 2005).
Perhaps, the most important contribution from the Polish army to the Second World War was in the field of intelligence. The Polish army provided the British army with the necessary grounds to break the encryption code used by the Germans to pass messages in the field of battle and to the frontlines (Bracking & Sachikonye 2008). The code breaking mechanism, commonly referred to as the ‘Ultra’ was later hailed by King George a