Immigration continues to permeate the British political discourse, and was a key issue in last month’s election. As with so many political debates, the discussion deviated so far from the realm of reality that the Archbishop of York described it as descending into “jingoistic nonsense”. It’s time to abandon the rhetoric and examine the effect immigration has on the UK economy from an objective and considered standpoint.
In truth, immigration neither takes the jobs of native British workers, nor reduces their earnings.
One of the most common arguments in favour of reduced immigration is that the influx of migrant workers reduces job opportunities for native British workers. Simply put, the evidence does not support this claim. Economic papers examining the effect of immigration on the UK labour market find that the post-2004 arrival of Eastern European workers had no significant effect on either wages or unemployment. In truth, immigration neither takes the jobs of native British workers, nor reduces their earnings. Migrant workers differ from native workers in culture, language, and other aspects. Clearly, immigrants cannot simply replace British workers; in fact, the group of people who have the most to fear from immigration are the previous generation of immigrants, as they are the ones who will face increased competition in the labour market.
Now we’ve debunked that particularly mendacious pillar of the anti-immigration argument, we can examine some of the huge benefits immigration brings to the UK economy.
Migrant workers increase the workforce supply more than the workforce demand
Because immigrants tend to send a lot of their UK-earned wages back to their families abroad, migrant workers increase the workforce supply more than the workforce demand. This has the beneficial effect of reducing inflation. It has also been argued that migrant labour has actually reduced the ‘Natural Rate of Unemployment’ – the rate of unemployment when the economy is neither in a recession, nor a boom. Since migrant workers arrive from countries with a lower standard of living, they are likely to accept lower wages than British workers. They will do the jobs that natives will not, and thus lower the ‘natural’ unemployment rate.
Opponents of immigration also often bemoan the alleged immigration-induced burden on public services. As with the ‘they take our jobs’ argument, the public service burden is a myth. A paper written by the Institute of Fiscal Studies examined the effect migrant workers have had on British public finances. It found that EU immigrants are less likely to claim benefits or live in social housing, and that they contribute significantly more in tax revenues than they receive in benefits. Once we understand the characteristics of EU migrants, this claim becomes intuitive: on average they are younger, better educated, and have fewer children than their British counterparts. Notably, even when we control for these characteristics, the significant benefit migrants bring to the UK economy remains.
Another advantage immigration provides is a fresh supply of young workers. In a time when Britain and other advanced economies face the prospect of an ageing population, and the strains this generates on healthcare and pensions, the arrival of young workers should be applauded. On top of that, most immigrants eventually return to their home countries, and so never even utilise the most expensive public service of all: state pensions.
Immigration is also a great way to fill skills shortages. Ever used the NHS? Chances are you’ve been treated by one of the thousands of nurses who have arrived from other countries. And let’s not forget that the greatest talent in the world is attracted to work in the City of London, one of the largest financial centres in the world. A less uncontroversially positive addition, perhaps, but a contribution nonetheless.
Any control over the flow of these immigrants would violate a founding principle of the EU: the free movement of labour.
There is one element of the preposterous discourse on immigration which has some merit to it. Rapid population growth can put strain on public services and infrastructure. Although immigrants do contribute positively to the UK’s public finances, the rate at which new houses, schools and hospitals can be built will struggle to match the incredibly rapid rate at which new people arrive in the UK every year – current net immigration figures are estimated to exceed a staggering three hundred thousand. Despite the validity of this argument, it does not outweigh the huge benefits immigration brings. It merely mandates a reduction in the speed at which new workers can arrive in the UK. This has so far proven to be near-impossible, as half of migrants come from the EU, meaning any control over the flow of these immigrants would violate a founding principle of the EU: the free movement of labour.
The economic evidence overwhelmingly speaks in favour of immigration
That said, the fact remains that policies restricting non-EU immigration could “kneecap” the UK’s economic recovery, according to a recent article in The Economist. With growth returning, firms will now begin to recruit more workers, but a restriction on non-EU migrants means firms cannot hire the skilled workers they need. This foolish policy will prevent young, high-earning workers from entering the UK, and hamper the much-needed economic recovery. Given that the capped 20,700 skilled non-EU migrant workers represent a small part of net immigration into Britain, the cap will do almost nothing to reduce the headline figures of net immigration, but could harm businesses’ attempts to fill their skilled job vacancies.
Not just material benefits…intangible benefits to this multicultural nation
Immigration is one of those issues which pervades British politics. Despite the multifarious myths infused into the discourse, the economic evidence overwhelmingly speaks in favour of immigration. It’s not just material benefits the UK receives from immigration; migrants enrich us culturally, and bring many other intangible benefits to this multicultural nation. Rather than constantly demonising and scapegoating immigrants, perhaps it would be better to thank those who have been brave enough to uproot their entire lives to go live and work on a cold, wet rock sitting off the coast of Europe.