Immigration And The British Economy

[cashinmattress]

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Immigrants: don’t you just love ‘em? They travel to Britain from far-flung lands, coming here to toil away in our shops and offices and homes, paying their taxes and generally making us all better off.

Now, I suspect that some people who read this post won’t entirely agree with the paragraph above. I suspect that some of you will take a slightly different view. But hopefully, I’ve piqued your interest for long enough to ask you to consider what follows.

The Organisation for Economic Co-operation and Development is an international think-tank backed by the world’s biggest governments. It crunches numbers on an industrial scale, providing data about developed economies that are regarded by a lot of people as fairly credible.

Today, it’s produced a large report about migration and related issues.

Part of that report looks at the fiscal impact of immigration. Broadly, the OECD concludes that migrant workers tend to make a net contribution to the countries they move to. This is because they tend to be younger and more economically active than the average of the wider population in their new country, a population that includes more very young and very old people.

At the same time, migrants consume public services. Do they pay in more than they take out? In lots of countries, the OECD concludes that the answer is Yes.

There are two ways of measuring the impact of immigration on the public finances.

The first is to include pension contributions and payments. However, some people argue that’s a misleading measure, because migrants’ age profile differs from the wider population, and because of the time-lags involved in receiving pensions. So you can estimate the impact excluding pensions.

On both measures, the OECD found that international migration is making a positive difference to Britain’s public finances. That is, the Government’s deficit is smaller than it would have been without the presence of immigrants in the UK.

So, that’s a 0.46 GDP contribution including pensions, or 1.02 per cent excluding pensions.

It’s a slightly crude calculation, but using the OBR’s estimate for nominal GDP this year, that works out at either £7.337 billion or £16.269 billion.

Either way, that’s a decent chunk of change that the Government would otherwise have to find. And there are only three ways for the Government to raise money: it can impose taxes, it can cut spending, or it can borrow.

(By way of context, the Government is spending about £720 billion this year, of which it’s borrowing around £120 billion. Increasing the basic rate of income tax by 1p would bring in roughly £5 billion a year for HMG.)

So, ladies and gentlemen, we have come back to the beginning. One of the world’s most credible economic analysts has concluded that because of immigration to the UK, British taxes are lower, spending is higher and the deficit is smaller. So, just for fun, let me ask the question again. Immigrants: don’t you just love ‘em?

Let's see what the forum says.

[TheCountOfNowhere]

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Let's see what the forum says.

The real reason for immigration:

Should welcome 50-300 million immigrants into our country just so the people at the top of the pile can cash in their winnings ?

Edited June 18, 2013 by TheCountOfNowhere

[SarahBell]

Every immigrant is a native worker out of work.

As long as each immigrant pays more in tax than the out of work native worker then it all works out ok..

As long as translation services don't cost anything either... across health, schools, police, social services, benefits etc.

[(Blizzard)]

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Let's see what the forum says.

Am I reading that right, a 0.46% impact on GDP?

Per person? Per million?

Edited June 18, 2013 by (Blizzard)

[Tired of Waiting]

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Let's see what the forum says.

http://en.wikipedia.org/wiki/Lump_of_labour_fallacy

[tomandlu]

Let's see what the forum says.

GDP is a hopeless measure.

I've nothing against immigration, but you need to make sure that the employment opportunities, services and accommodation is there to support them.

In the end the cleverest trick the devil ever pulled was convincing socialists and the young to unequivocally support immigration or else be thought of as racist, when the real winners are employers and rentiers, who get a cheap work-force and desperate tenants. See also 'conservation'.

[cashinmattress]

Every immigrant is a native worker out of work.

What about the millions of 'pure-bred' Britons entering perhaps the fifth generation of their lineage who haven't worked a day?

Somebody needs to provide them with services and life essentials.

[gimble]

Every immigrant is a native worker out of work.

As long as each immigrant pays more in tax than the out of work native worker then it all works out ok..

As long as translation services don't cost anything either... across health, schools, police, social services, benefits etc.

This is a bad myth, it's much more complicated than that. When an immigrant takes a job they also spend (most of) their wages into the economy, which generates an equivalent amount of economic demand and, in aggregate more jobs are created. There isn't a fixed amount of economic activity or a fixed amount of jobs. To give you another example, the population of the USA in 1900 was 76 million. It is now 300 million. Most of this rise is due to immigration - so how come the USA doesn't have 100 million unemployed?

[Guest eight]

This is a bad myth, it's much more complicated than that. When an immigrant takes a job they also spend (most of) their wages into the economy,

I suppose that's why there's a Western Union on every high street?

[richc]

That article was a prime example of a journalist pulling one chart out of a 200 page report and then jumping to a completely contradictory conclusion based on that one item.

Look closely at the chart: what is the fiscal impact on Germany and France? If you read the report, they point out that countries with large scale immigration of low-skilled labour saw a positive impact on a very narrowly-defined measure of fiscal benefit, until those immigrants started to retire, at which point it becomes highly negative. Germany and France have a longer history of large scale immigration, so they're seeing those negative impacts now, it's just a matter of time for several other countries to see the same thing. Immigrants tend to be working age when they arrive. Working age people pay higher taxes and receive fewer benefits than pensioners, so the fiscal balance tends to look good just because from the (temporary) population profile of recent immigrants.

[Trampa501]

This is a bad myth, it's much more complicated than that. When an immigrant takes a job they also spend (most of) their wages into the economy..

A good proportion of which goes to the rentier landlord class. And then many will send remittances home (or save up and buy that house in Poland).

Not that I agree that every immigrant is a native worker out of work either (we're told that some industries wouldn't function without cheap imported labour ) - but try telling anyone in the building industry that their wages haven't been forced down as a result.

[Bloo Loo]

snip - so how come the USA doesn't have 100 million unemployed?

some measures say it DOES.

[richc]

This is a bad myth, it's much more complicated than that. When an immigrant takes a job they also spend (most of) their wages into the economy, which generates an equivalent amount of economic demand and, in aggregate more jobs are created. There isn't a fixed amount of economic activity or a fixed amount of jobs. To give you another example, the population of the USA in 1900 was 76 million. It is now 300 million. Most of this rise is due to immigration - so how come the USA doesn't have 100 million unemployed?

Please do look at the USA, where average real wages have flat-lined since the early 1970s, which coincidentally, is exactly when immigration controls were significantly relaxed there.

You have a point that the number of jobs in an economy isn't fixed, but there's much more to it than that.

First, the labour market is a market. Increase the supply of labour and the price of labour (i.e. wages) falls. When the UK spends billions propping up the incomes of low-wage workers, it's rather counter-productive to decrease those wages through immigration. To say that immigrants are simply spending their wages in the economy and are therefore a benefit, is to completely ignore the reality that Britain spends billions to subsidise those wages.

Secondly, labour is fungible. Not perfectly, but more so at lower skill levels, i.e. the type of jobs likely to be affected by immigration. If a native-born British person has the option of living a life on benefits rather than working in a low-skill, low-wage job, then reducing wages through immigration will increase welfare dependency. This is nothing but an outright loss for the economy (which that OECD report chooses to conveniently ignore).

[Errol]

Some immigration is fine, but it should be tightly controlled and subject to stringent criteria.

Potential immigrants should be health/gene tested (why should we take people who are ill or needing expensive medical treatment?), and only those with exceptional skills or large bank balances permitted entry.

And immigration should apply only to the individual subject to the process - no family members or other hangers-on should be allowed entry.

And if potential immigrants don't like this then tough. They can go elsewhere.

There should be no right of appeal.

Edited June 18, 2013 by Errol

[richc]

Immigration And The British Economy

OECD says its a good thing. I tend to agree

Before coming to that conclusion, could I recommend that you actually read the report. Or is that too much effort?

[Quicken]

0.46%? To quote from True Lies: So far, this is not blowing my skirt up, gentlemen.

What about HPI and wage arbitrage? What's the correlation between immigration numbers and the total LHA bill, or the tax credit bill?

Q

[richc]

GDP is a hopeless measure.

I've nothing against immigration, but you need to make sure that the employment opportunities, services and accommodation is there to support them.

In the end the cleverest trick the devil ever pulled was convincing socialists and the young to unequivocally support immigration or else be thought of as racist, when the real winners are employers and rentiers, who get a cheap work-force and desperate tenants. See also 'conservation'.

Was it the devil who did the convincing or was it the Labour Party? Is there a difference?

[iamnumerate]

Every immigrant is a native worker out of work.

As long as each immigrant pays more in tax than the out of work native worker then it all works out ok..

As long as translation services don't cost anything either... across health, schools, police, social services, benefits etc.

I don't think immigration is 100% a good thing. However immigrants need services so create jobs as well as take them of course whether it is net +/-ve is a matter of debate.

The problem is not immigrants who work but those who harm us in some way (parasites/criminals) as that costs the economy.

[richc]

0.46%? To quote from True Lies: So far, this is not blowing my skirt up, gentlemen.

What about HPI and wage arbitrage? What's the correlation between immigration numbers and the total LHA bill, or the tax credit bill?

Q

They're calculating a higher positive number by taking a straight average across the countries included in the study, but they've counted small-countries with a large positive benefit as the same as big countries with a large negative impact.

The GDP of Germany (where immigration has a strongly negative impact) is about 5 times bigger than the economies of Luxembourg and Switzerland (where immigration is a benefit), but the OECD decides that immigration is good because it's a vote of 2 against 1.

[Executive Sadman]

yada yada, how many times have I read press releases saying "high house prices good for british economy", "high debt levels good", trade deal that offshores millions of jobs 'good' etc etc

[gimble]

I suppose that's why there's a Western Union on every high street?

And British people don't work abroad and bring savings back with them when they return to the UK? Go to Dubai and ask the average ex-pat what they plan to do with their savings.

[gimble]

A good proportion of which goes to the rentier landlord class. And then many will send remittances home (or save up and buy that house in Poland).

Not that I agree that every immigrant is a native worker out of work either (we're told that some industries wouldn't function without cheap imported labour ) - but try telling anyone in the building industry that their wages haven't been forced down as a result.

see above. I'd like to know what net remittances are, there are 5 million UK born people living abroad.

[gimble]

Please do look at the USA, where average real wages have flat-lined since the early 1970s, which coincidentally, is exactly when immigration controls were significantly relaxed there.

You have a point that the number of jobs in an economy isn't fixed, but there's much more to it than that.

First, the labour market is a market. Increase the supply of labour and the price of labour (i.e. wages) falls. When the UK spends billions propping up the incomes of low-wage workers, it's rather counter-productive to decrease those wages through immigration. To say that immigrants are simply spending their wages in the economy and are therefore a benefit, is to completely ignore the reality that Britain spends billions to subsidise those wages.

Secondly, labour is fungible. Not perfectly, but more so at lower skill levels, i.e. the type of jobs likely to be affected by immigration. If a native-born British person has the option of living a life on benefits rather than working in a low-skill, low-wage job, then reducing wages through immigration will increase welfare dependency. This is nothing but an outright loss for the economy (which that OECD report chooses to conveniently ignore).

Yes I don't disagree with you, I was arguing against this idea that 1 immigrant in work = 1 native out of work. That's just wrong. As I said myself it's more complicated. Re stagnant wages, I would argue that this is less because unskilled people can easily come to work in the USA, more that someone working in China can buy ship their goods to the USA for pennies. Globalisation, not immigration, is the more powerful force. Western countries with low migration (e.g. Italy, Japan) have seen their workers' wages stagnate too.

Edited June 18, 2013 by gimble

[Cardigan]

The problem with this report and the results it produces is that it relies upon the establishment for its figures and the establishment has admitted that it doesn't know how many (illegal) immigrants are here so they are not in the equation. Next is that schools, the NHS and other welfare services provide free education/health care/welfare to anyone who turns up at the door, no questions asked, and the amount that costs us is not included in the equation. Finally a lot of these immigrants bring with them a culture where corruption and cheating is their way of life and that cost to the economy and welfare is not included in the equation.

[billybong]

It would be interested to see an analysis of the cost of the extra congestion due to the extra millions.

How would the cost be measured but it must have a really significant cost which should be taken account of and it's very clear everywhere you go these days even compared to just 15 years ago. The UK isn't the US with plenty of extra space to go round - especially with the planning laws etc.

Of course it's not only new settlers but likely the incentives in the benefit system to have children will have had an effect as well. Then there's the housing and all the resource that's gone into providing for extra millions. Maybe with a more stable population that resource would have been better spent directed to a more production oriented economy more along the lines of Germany. That's the sort of economy they used to say the UK had to compete with not so long ago.

The opportunity the new settlers presented has been wasted.

They could have been used to boost the UK's productive sectors but no it seems that in the main that's not been the case and in fact the UK economy has been bureaucratically rejigged to provide things like pc correct non-jobs. Inefficiencies and extra rules have been introduced to require more jobs. If the bureaucrats work at it hard enough with new rules etc they can create any number of new non-jobs to funnel taxpayers money to.

Then it's look there's all those jobs to be filled but British workers don't want to do them.

There's never been a proper financial analysis of the cost of congestion and all the other stuff.

Edited June 18, 2013 by billybong