Skip to main content
Skip to main content

University of Warwick academic paper finds migrants are highly represented among top 1% of UK incomes

Summary:

Migrants found to make up more than a quarter of UK's top earners

Date of Publication:
23 September 2020

University of Warwick academic paper finds migrants are highly represented among top 1% of UK incomes

23 September 2020
EIN

A new academic paper from the Centre for Competitive Advantage in the Global Economy (CAGE) at the University of Warwick's Department of Economics looks at the contribution of migrants to the rise in UK top incomes.

CoverYou can read the 29-page paper here.

It makes use of anonymised taxpayer data from 1997 to 2018 and it finds that migrants make up more than a quarter of the UK's top earners and that migration accounts for the vast majority of the growth in the UK's top 1% income share in the past 20 years.

The authors say: "Our findings suggest that migrants are highly represented at the top of the income distribution. The public debate primarily focuses on low-income migrants; however, migrants make up a higher proportion of earners at the very top of the income distribution. Among low-income groups, about one in six people are immigrants. In contrast, among the top percentile of the income distribution, one in four people are immigrants and at higher fractiles, every third person is an immigrant. A lack of data has created a perception that migration is mainly a low-income phenomenon, but these new data show that the economy relies most heavily on immigrants for extremely highly paid positions."

According to the paper, the share of migrants in the top 1% has grown rapidly over the past two decades. It states: "There are 52% more migrants in the top 1% in 2018 than in 1997, and more than twice as many in the top 0.01%. While this period encompasses economic expansions and recessions, it exhibits a steady increase in migrants at the top of the income distribution in the UK."

The CAGE paper also finds that it's income rather than investment that accounts for the majority of the earnings.

The paper explains: "In 1997 migrants in the top 1% received 84% of their income from earnings, compared with 80% for natives. By 2017 it was 92% to 87%. In the top 0.01%, migrants (natives) have moved from 68% (54%) of income from earnings to 90% (83%). These results are notwithstanding the repackaging of some labour income into investment income … The picture for migrants contrasts sharply with the common image of top migrants as high wealth individuals living off the returns to wealth. While such cases clearly exist, quantitatively earnings are more important, and increasingly so at the very top."

High-earning migrants in the UK are found to be "predominantly middle-aged individuals who migrate straight into a high-paying job".

The authors find that 47% of top income to migrants comes from the finance sector.

The paper says: "The importance of finance is immediately clear. More than one in six top migrants work for a bank. Taking into account support to financial services, fund managers, and other smaller areas of financial activity, finance employs more than a quarter of all migrants in the top 1% … [F]inance is highly dependent on migrants: they make up 40% of top individuals who are employed in banks, and between 35% and 45% of top individuals in credit bureaus, securities dealing, financial management, fund management and support to financial services."

Healthcare is the second most important area, with one in ten top migrants employed in a hospital, medical practice or some other human health activity.

Assistant Professor Arun Advani, the lead author of the paper, told the Guardian that he was surprised at the over-representation of migrants among UK high earners.

He said: "I was genuinely surprised, and we spent a long time convincing ourselves that we weren't screwing it up. But we checked and triple-checked it and it was correct." According to the Guardian, the data has also been checked by officials at HMRC.

Advani added: "People may not think of 'migrants' as being rich. But if you stop and think who are the wealthy people hanging out in Mayfair, a lot of them are not UK-born. Or if you go to Canary Wharf, you will hear a lot of voices in [other] European languages because people come here for well-paying jobs."