Association for Public Policy Analysis & Management

On the 1st of May 2004 the United Kingdom (UK) allowed nationals of the A8 countries (i.e. The Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia) free access to its labour market. From this date onward, immigrants from these countries no longer required a visa to either enter the UK or take up employment in the country. This led to an increase in the share of working age individuals from A8 countries in the UK labour force and a shift in their occupational distribution in comparison to other immigrants as well as natives. Around 40 per cent of A8 immigrants who entered the UK from 2004 onward were employed in an “elementary occupation”. The corresponding shares were less than 20 per cent for immigrants from non-A8 countries. In comparison, no more than 21 per cent of immigrants from A8 countries who entered the UK before 2004 were employed in these occupations. Despite this large change in occupations, the educational attainment and age at arrival in the UK of A8 immigrants did not change much before and after 2004, implying that the (observable) skill composition of these individuals did not change greatly.

The existing literature posits that the inferior labour market outcomes of groups of immigrants arise from lower skill levels (see for example Borjas (1985, 1987) and Mattoo et al, 2008), which in turn may partly explain why we observe immigrants in lower level occupations. Looking at immigrants in the USA for example, Mattoo et al (2008) argue that one may observe immigrants with similar observables at different points of the occupation ladder because quality of education may vary across origin countries of immigrants, implying unobserved differences in human capital levels. It has also been suggested that the host country’s policies may play a role (Green and Green, 1995) because differences in the occupational distribution of immigrants and natives might be desirable to the host country as this could indicate that immigrants are filling supply gaps in the labour market (Green, 1999). It is indeed the case that several OECD countries adopt immigration policies whereby some immigrants are granted permission to enter the country in order to fill shortages in certain occupations or industries.

The novelty of the present paper is that we are able to tease out the role of immigration policy amongst other factors that affect the occupational outcomes of immigrants using a quasi-natural experiment, namely the change in the UK’s immigration policy on 1^st May 2004, in a difference in differences framework. We find that the complete relaxation of visa restrictions had very little impact on the occupational outcomes of immigrants from A8 countries. The large shift in occupations appears to predominantly result from immigrants who entered the UK after 2004 having shorter duration of stay in UK.  The evidence suggest that A8 immigrants would move up the occupation ladder as their duration of stay in the UK lengthens.