The huge influx of migrants has hit low-paid workers and training for younger staff, an influential House of Lords committee has warned.
A report by the Lords Economic Affairs Committee said record levels of immigration was also contributing to rising house prices and the government should cap the number of migrants coming to the UK.
In 2006, official figures showed 591,000 people arrived in the UK to live for a year or more.
The peers’ report, The Economic Impact of Immigration, dismissed government claims that a high level of immigration was needed to prevent labour shortages as “fundamentally flawed”.
Inquiry chairman Lord Wakeham said: “Looking to the future, if you have got that increase in numbers and you haven’t got any economic benefit from it, you have got to ask yourself, is that a wise thing to do? That is why we want the government to look at it.”
The report added: “The available evidence suggests that immigration has had a small negative impact on the lowest-paid workers in the UK and a small positive impact on the earnings of higher-paid workers.”
There was a risk that immigration would hit training and apprenticeships offered to British workers by employers, it added.
But immigration minister Liam Byrne said migration had added £6bn to the economy and that the new points-based system would make a difference.
Anne Fairweather, head of public policy at the Recruitment and Employment Confederation, said the system needed to be flexible enough to respond to demands from employers. “A cap on immigration which is not related to a need for workers could be harmful to both the economy and front line delivery of services,” she said.
TUC general secretary Brendan Barber, said: “Without the contribution of migrant workers important parts of public services and the private economy would collapse.
“This does not mean that there have been no problems associated with recent patterns of migration, but the solution is to deal with these issues, rather than abuse migrant workers.”
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