Labour Market Effects of Eastern European Migration in Wales

The enlargement of the European Union in May 2004 triggered a relatively large and rapid migration inflow into Wales which was concentrated into narrow areas and occupations. As this inflow was larger and faster than anticipated, it arguably corresponds more closely to an exogenous supply shock than most migration shocks studied in the literature. This helps to some extent to circumvent identification issues arising from simultaneity bias which usually pose difficulties when estimating the effect of migration inflows on the labour market. We found little evidence that the inflow of accession migrants contributed to a fall in wages or a rise in claimant unemployment in Wales between 2004 and 2006. In particular, we found no evidence of an adverse impact on young, female or low-skilled claimant unemployment and no evidence of an adverse impact on the wages of the low-paid. If anything, we found a positive effect on the wages of higher paid workers and some weak evidence of a potentially favourable impact on claimant unemployment.