High levels of immigration have sustained British economic success in the last decade, argues David Coats, associate director at The Work Foundation
Is immigration good for the British economy or has the impact been negative? Have migrant workers contributed to higher economic growth or have they forced down wages and pushed up unemployment?
These are perhaps the most controversial questions in politics today. The concern about the impact on “British workers” crosses party lines; both Labour and Conservative politicians have looked anxious, although all too often personal experience or anecdote have been seen as substitutes for hard evidence.
Most recently, the House of Lords Economic Committee have offered us a largely negative assessment of the impact of migration. They made four linked claims. First, that the high level of inward migration over the last decade has generated few economic benefits for native Britons. Second, that migration has pushed down the wages of the lowest paid. Third, that the most disadvantaged young people find it harder to get on the job ladder because they are competing directly with more qualified migrants, especially those from Central and Eastern Europe. And fourth, that the only rational policy response is to impose a cap on the number of non-EU migrants coming to the UK.
Perhaps the biggest problem with the report is that it measures economic benefits only in terms of changes in income per head. Yet the best case for migration is that it enables labour supply to be matched to labour demand and keeps the economy on a stable growth path. In other words, in the absence of inward migration, there would be more skills and labour shortages, a higher risk of wage inflation (because of a shortage of labour), higher interest rates and lower growth.
There is no evidence to show sustained downward pressure on the earnings of the lowest paid; this is true even when detailed data from sectors such as construction, hotels and agriculture are examined. The low paid have been greatly helped by rises in the National Minimum Wage, which has been increasing faster than average earnings for much of the period since 2001. It is important that more effort is made to enforce the NMW, to protect the most vulnerable workers against exploitation. Government should increase the resources available for inspections in those sectors where employees are exposed to the greatest risks. The National Minimum Wage is the one of Labour’s great success stories; it would be even more so if we could be sure those most in need of it were getting it.
It is true that youth unemployment has indeed risen over the last three years, but this is a consequence of wider changes in the economy (higher interest rates and slower growth) rather than a direct consequence of migration. Long-term youth unemployment remains low and the percentage of young people not in employment, education or training (the so-called NEETs) is much lower than in the 1980s – though more certainly needs to be done to help them.
While the proposal for an annual cap on the number of migrants may have some commonsense appeal, it is likely to prove inflexible and ultimately unworkable. Most importantly, it assumes that there is some level of migration that is self-evidently right, whereas the reality is that the economy’s need for migrants will vary depending on the level of demand and the rate of growth. One can anticipate a situation where foreign footballers are excluded from joining a Premier League club on the grounds that the annual quota of migrants has already been reached, which hardly sounds like a sensible or popular policy.
The most urgent priority must be to get a grip on the official statistics. It is often said that the government has ‘lost control’ of the immigration issue, but this is largely because different sources of information have produced very different figures for the numbers of migrants in the UK. Each source has the potential to create conflicting headlines. Getting hold of good, consistent, high quality data is critical. Once this has been done, the government can begin to advance the positive case for migration. So far ministers have been wrong-footed, not because migration is “out of control”, but because they have failed to tell a compelling story derived from a sophisticated understanding of the facts.
Finally, if there are any ‘losers’ from high levels of immigration, they are likely to be found among already disadvantaged communities. An employer faced with the choice between a young, educated, motivated migrant and a low-skilled British citizen, who has not worked much in the recent past, will inevitably pick the former. But the policy message is not “stop migration” but “make a greater effort to tackle worklessness”. A commitment to open borders in the EU and managed migration from elsewhere must be matched by a determination to root out disadvantage and offer greater opportunities to those from the most deprived communities.