Labor Mobility as an Adjustment Mechanism in the UK During the Great Recession

Abstract

The United Kingdom (UK) provides a fascinating case study with which to examine international migration flows during and immediately after the Great Recession. This is because the UK experienced both a rapid growth in immigration, especially following European Union (EU) enlargement in 2004, and a particularly severe fall in output in the wake of the financial crisis of 2008. The UK was one of only three countries to essentially grant open access to migrant workers from the eight “Accession” countries (EU8) in 2004, and net migration to the UK increased by 66 % from 148,000 to 245,000 between December 2003 and December 2004, with at least two-thirds of this increase accounted for by migrants from the EU8. Furthermore, following a 15-year period of sustained economic growth of around 3 % per annum, the UK economy was severely affected by the global financial crisis that began in 2007. Real GDP fell by over 6 % between early 2008 and mid-2009, with sectors such as banking particularly affected. However, the decline in employment over this period was more muted since employment fell by only 2 percentage points, with Gregg and Wadsworth (2010) suggesting that this discrepancy was due to factors such as the pro-active policy measures introduced by the UK government and modest wage settlements at the beginning of the recession.