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Migrants ‘have Kept Interest Rates Down’

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IMMIGRATION into Britain has eased pressure on the labour market and allowed interest rates to be lower than they would have been, according to a new analysis.

The Ernst & Young Item club, which uses the Treasury’s model of the economy, suggests that the increase in net migration into Britain in recent years has reduced interest rates by half a percentage point and that the effect is likely to grow to one percentage point.

This net migration, which reached 223,000 in 2004 — the latest year for which figures are available — has allowed employers to fill jobs more easily. A recent government analysis concluded it had not taken jobs from British workers. Now the Item club suggests the effects have been beneficial.

“We are on the crest of a new immigration wave,” said Peter Spencer, chief economic adviser to the Ernst & Young Item club. “The steady flow from the most recent (EU) accession countries to the UK has proved remarkably positive, keeping interest rates half a point lower than they would otherwise have been. This influx has benefited many regions across the UK.”

http://business.timesonline.co.uk/article/...2147467,00.html

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"A recent government analysis concluded it had not taken jobs from British workers. Now the Item club suggests the effects have been beneficial."

V.

"While the Item analysis concedes that the recent inflow has been accompanied by a rise in unemployment, it says immigration still produces “a very favourable cost-benefit ratio”.

Obviously this is very much a class issue, I very much doubt nice middleclass people have been put out of work, no doubt they enjoy the benefits of a cheap nanny, plumber, builder, restaurant waiter, even BTL demand and so forth.

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Not if you're relying on wage inflation to bail you out of mounting debts!

Or having to pay global commodity prices on wages reduced in real terms by competition from cheap immigrants.

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Or having to pay global commodity prices on wages reduced in real terms by competition from cheap immigrants.

Servicing large amounts of debt and the increased cost of living combined with static wages will leave you with lots of money to spend in the shops!

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"A recent government analysis concluded it had not taken jobs from British workers. Now the Item club suggests the effects have been beneficial."

V.

"While the Item analysis concedes that the recent inflow has been accompanied by a rise in unemployment, it says immigration still produces “a very favourable cost-benefit ratio”.

Obviously this is very much a class issue, I very much doubt nice middleclass people have been put out of work, no doubt they enjoy the benefits of a cheap nanny, plumber, builder, restaurant waiter, even BTL demand and so forth.

Meanwhile the minds of the "lower classes" are toying with the notion of an x for an extremist party in the forthcoming local elections.

It does too depend on an individual's perception of their class. "We're all middle class now". At least in aspirations?

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Does anyuone know anything about the ernst and young item club, who they are, what their interests are, and why (my speculation) they would want more immigrants in the country?

(They said immigrants = lower IRs)

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It does too depend on an individual's perception of their class. "We're all middle class now". At least in aspirations?

'Not really working for a living' is not the same as being unemployed ;)

When looking at the disparity in housing and the jobs market, this all seems quite divisive, more than ever before.

Does anyuone know anything about the ernst and young item club, who they are, what their interests are, and why (my speculation) they would want more immigrants in the country?

They basically do independent forcasts using the same model as HM Treasury, most noted for predictions of GDP and public sector borrowing. Institute of Economic Affairs also has its "Shadow Monetary Policy Committee" of course, most other research groups produce data based on their own models.

Edited by BuyingBear

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'Not really working for a living' is not the same as being unemployed ;)

When looking at the disparity in housing and the jobs market, this all seems quite divisive, more than ever before.

What I was wondering was to what extent some of your displaced plumbers and builders might regard themselves as more "middle" than "working" class now and that to some extent therefore the "middle" might be feeling affected.

Was it Mervyn King or Eddie George who said immigrant workers had helped to keep wages down and the implication was that it was a good thing. Now it's interest rates too.

Divisive disparities, I agree.

Now I've not been able to find a reference for this but I remember, some years ago, an academic, I think he was a professor at the LSE, argued that the developed nations would find that they had large sections of their societies that there would be no economic use for. He saw the growing amount of deviant behaviour in this group as a "slow riot". I wonder whether his views have been adopted by government and that the increasing amount of State control mechanisms are attempts to deal with this.

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What I was wondering was to what extent some of your displaced plumbers and builders might regard themselves as more "middle" than "working" class now and that to some extent therefore the "middle" might be feeling affected.

Statistics are of course clumsy, you can't get half a plumber (unless he's cack-handed), so it's fair to assume there's a good number of semi-skilled trades people on decent wages (say in B, C1 areas?) that haven't actually been made redundant but nevertheless are suffering the downward affects on hourly rates, they may have less work on or are forced to do the same volume of work at lower prices, the only way to counter this wage deflation is to do more work at the lower rate.

So the poor old plumber has to work harder for the same amount of money! This migration business is rather insidious, the new arrival sets the margin price and thus forces through productivity increases for the native born workers. One can only pray for an influx of lawyers, doctors, cluster co-ordinators and politicans from Eastern Europe ;)

Edited by BuyingBear

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One can only pray for an influx of lawyers, doctors, cluster co-ordinators and politicans from Eastern Europe ;)

Now old chap, as much as I would like to offer opportunities to these professions, you must appreciate that the trades uni, er sorry, standards setting bodies here would have to ensure their qualifications were up to scratch and as for politicians, no bl@@dy way is anyone getting my safe, I mean, hard won constituency.

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Now old chap, as much as I would like to offer opportunities to these professions, you must appreciate that the trades uni, er sorry, standards setting bodies here would have to ensure their qualifications were up to scratch and as for politicians, no bl@@dy way is anyone getting my safe, I mean, hard won constituency.

Or rotten borough.

I must say you're jolly well right, there's no way our old boys club professional body can approve of these foreigners, their noble prizes simply aren't up to standard, and more to the point they may make our existing members appear foolish by comparison. Anyway, must run, I've got the builders in, they're from that country that doesn't exist anymore... you know, 'the far away country of which we know little', Czechoslovakia, yes, that's the one! Is there some expenses sheet I should sign before I leave...

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I have little doubt that immigration has indeed kept wages and interest rates lower. But this immigration juggernaught can behave very strangely once the gear stick is thrown into reverse. The high pound and booming miracle eceonomy has meant the UK has been a very attractive destination. We also have a reputation for loose women and partying which no doubt pulls over a few more.

But, if the pound plunges and the jobs dry up then skilled immigrants will look for richer prizes elswhere.

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One can only pray for an influx of lawyers, doctors, cluster co-ordinators and politicans from Eastern Europe

That one has alrady been headed off by the medical prfession - the minite that trained medics could no longer get a guaranteed job and were left hunting around after studying.

Uncontrolled economic migration and jobs displacement will amplify the effects of debt and job losses in the wider economy - this is not going to be like the 90's, people will not only find themselves unemployed from their previous higher paid job but struggle to find any job.

Is this article another hint that the BOE are paying lip service to fighting real inflation (after all look at the way the statistics are calculated and the growth in th money supply) whilst in in fact all they are doing is looking at wages and use those as the deciding factor.

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All part of the switch away from labour to capital which is happening in most English speaking nations !

It seems to have been helped in the UK by the disenfanchisment of the working class after Blair hijacked their party! And I suspect some of those labour voters, who aren't too busy watching Sky, may well boost the BNP vote at the next elections! After all, none of the three main parties seem to have the interests of other than the middle classes in their agendas.

Edited by ILikeBigBoobs

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In making the case for controlling immigration the wider context must be remembered. The opening of world trade is eliminating opportunities for production of labour-intensive tradeable goods and services in high-income countries. Employment of the native-born unskilled must increasingly be in non-tradeable activities. If unskilled immigrants drive down wages for such jobs a hapless underclass will inevitably emerge.

Does this matter? The answer depends on whether extreme inequality is compatible with successful democracy. The precedents suggest, instead, that it is a recipe for populism, plutocracy, or a miserable alternation between the two.

FT - M.Wolf

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lower interest rates as a result of increased labour supply/competition.slower wage growth may mean less upward pressure on HPI but the lower interest rates wipe that effect out probably,and the increased population drives up rents and prices too.

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If as they claim mass immigration has been such a benefit to the economy, why has GDP growth fallen from 3.7 to 1.8 over the period they mention?

Maybe because by all rights we should already be in recession right now, Brown's cack-handedness has been bailed out yet again.

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Maybe because by all rights we should already be in recession right now

We are in a recession. Growth has been below the real rate of inflation for a long time.

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The opening of world trade is eliminating opportunities for production of labor-intensive tradable goods and services in high-income countries.

All this boils down to whether you want to pay £9.99 or £29.99 for a kettle. Most of use couldn't care less where it was made.

Stopping free trade is like cutting off your nose to spite your face.

If tomorrow we started producing every white good for ourselves and banned imports of equivalent goods. Sure unemployment would fall but we wouldn't be better off - You would only create a situation where the public subsided those who would have been unemployed otherwise by paying over the odds for your white goods.

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We are in a recession. Growth has been below the real rate of inflation for a long time.

Indeed, growth in M4 broad money is running at an annualised 12% so -2% 'growth' = something very wrong with the official inflation figures.

We don't have real income growth of course, but remember over the last few years MEW has more than substituted for that, it account for 5.6% of post tax income as of Q4 2005, and it seems to be still rising according to CML releases. So 5.6% MEW + actual ~4% wage growth = about the M4 minus GDP figure above. What a shame MEW is not real income and eventually has to be paid back, unless they hyperinflate.

Also, exporting potential inflation via the importation of cheap Chinese goods hasn't prevented leakage due to the inflated commodities market, something that cannot be fudged, the BoE can create money out of thin air but they certainly can't create oil. Of course, the rise of commodities then leaks back as inflation in the real economy, hence 'normal' people now questioning the CPI in the press. Migration has kept the wage growth under control (but not in some sectors) but combined with the fudged inflation figures means that people have to work harder to stand still or face a lower standard of living.

Housing is the mechanism of choice for releasing money into the economy, it's the modern Keynesianism version of grand public works.

Edited by BuyingBear

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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