Capping benefits for migrants could serve to drive down wages for all

Forcing migrants into whatever work's going will render exploitation a breeze.

From an economic point of view, it's difficult to assess David Cameron's proposal to limit the amount of social support migrants from the EU can receive. Migration is a nearly unqualified positive to a nation's economy, but those positives generally rely on the point that migrants are likely to be in work and a net contributor to the public purse – more likely, in fact, than native Britons. But the premise of the new policy is that it doesn't affect those "good" migrants. So what to think of it?

Firstly, the background. Immigration is a boon to society, and immigration from the EU is no different. A study by UCL's Centre for Research and Analysis of Migration finds that in 2008/9, workers from Eastern Europe contributed £1.37 in taxes for every £1 of services they used, while native Britons contributed 80p to the pound. Migrants represent about 13 per cent of all workers but only 7 per cent of all benefit claimants. Liberalising immigration worldwide could result in a 116 per cent increase in wages overnight.

But arguments in favour of Britain alone opening its borders tend to focus on one very specific benefit of migration. Almost by definition, the foreigners who arrive on our shores seeking work are among the most motivated, richest, and capable members of their nations; as a result, they tend to be a net bonus to the British economy. (Even if you control for characteristics like age, education, children and disability, the UCL study still found that Eastern European migrants were less likely to claim benefits).

But David Cameron's plan is to ban EU nationals "from claiming most benefits after six months in the UK unless they can prove they have been continuously looking for work over that period", according to the Guardian's Patrick Wintour. Since the vast majority of migrants don't claim benefits, and the advantage of migration is frequently attributed to the fact that migrants are more frequently in work, how could this backfire?

On the face of it, it couldn't, because it's largely an empty policy. Cracking down on issues which have a disproportionate public profile is the bread-and-butter of immigration politics. In this way, Cameron's idea follows in the tradition of Ed Miliband's requirement that public sector workers speak English (they overwhelmingly do, as do 99.73 per cent of people living in England and Wales) and Gordon Brown's decision to "suspend" low skilled migration in 2008 despite the fact that it had been practically suspended since 2004. A lot of fuss over something which "fixes" problems which people think they have about immigration.

But there will be effects nonetheless. Because while few migrants claim state aid, the social safety net has an effect on people in work as well. The harsher life is for an unemployed person, the more power employers have over employees. A crucial part of economic life is the ability to tell your employer to go shove it if they treat you badly, and go and find a better job. That keeps the employer/employee relationship more equitable than it might otherwise be, and ensures better treatment for all – even those who would never have the courage to walk out themselves.

There is some evidence that, at the lower levels of pay, migration does drive wages down. The best response to that is through redistribution, rather than a cap; if migration grows the economy by more than it drives wages down, then a redistributionist state can make everyone better off. But Cameron's cap will serve, at the margin, to drive wages for migrants lower still, by forcing them to take jobs at conditions that native workers, without the pressure of starvation after six months, might not do. And since everyone is competing for the same jobs, that will push wages for native workers lower too.

The macroeconomy of that policy might still end up being a positive, because exploitation of labourers is good for the bottom line. But it doesn't seem like the sort of economy which Cameron wants to run.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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After Richmond Park, Labour MPs are haunted by a familiar ghost

Labour MPs in big cities fear the Liberal Democrats, while in the north, they fear Ukip. 

The Liberal Democrats’ victory in Richmond Park has Conservatives nervous, and rightly so. Not only did Sarah Olney take the votes of soft Conservatives who backed a Remain vote on 23 June, she also benefited from tactical voting from Labour voters.

Although Richmond Park is the fifth most pro-Remain constituency won by a Conservative at the 2015 election, the more significant number – for the Liberal Democrats at least – is 15: that’s the number of Tory-held seats they could win if they reduced the Labour vote by the same amount they managed in Richmond Park.

The Tories have two Brexit headaches, electorally speaking. The first is the direct loss of voters who backed David Cameron in 2015 and a Remain vote in 2016 to the Liberal Democrats. The second is that Brexit appears to have made Liberal Democrat candidates palatable to Labour voters who backed the party as the anti-Conservative option in seats where Labour is generally weak from 1992 to 2010, but stayed at home or voted Labour in 2015.

Although local council by-elections are not as dramatic as parliamentary ones, they offer clues as to how national elections may play out, and it’s worth noting that Richmond Park wasn’t the only place where the Liberal Democrats saw a dramatic surge in the party’s fortunes. They also made a dramatic gain in Chichester, which voted to leave.

(That’s the other factor to remember in the “Leave/Remain” divide. In Liberal-Conservative battlegrounds where the majority of voters opted to leave, the third-placed Labour and Green vote tends to be heavily pro-Remain.)

But it’s not just Conservatives with the Liberal Democrats in second who have cause to be nervous.  Labour MPs outside of England's big cities have long been nervous that Ukip will do to them what the SNP did to their Scottish colleagues in 2015. That Ukip is now in second place in many seats that Labour once considered safe only adds to the sense of unease.

In a lot of seats, the closeness of Ukip is overstated. As one MP, who has the Conservatives in second place observed, “All that’s happened is you used to have five or six no-hopers, and all of that vote has gone to Ukip, so colleagues are nervous”. That’s true, to an extent. But it’s worth noting that the same thing could be said for the Liberal Democrats in Conservative seats in 1992. All they had done was to coagulate most of the “anyone but the Conservative” vote under their banner. In 1997, they took Conservative votes – and with it, picked up 28 formerly Tory seats.

Also nervous are the party’s London MPs, albeit for different reasons. They fear that Remain voters will desert them for the Liberal Democrats. (It’s worth noting that Catherine West, who sits for the most pro-Remain seat in the country, has already told constituents that she will vote against Article 50, as has David Lammy, another North London MP.)

A particular cause for alarm is that most of the party’s high command – Jeremy Corbyn, Emily Thornberry, Diane Abbott, and Keir Starmer – all sit for seats that were heavily pro-Remain. Thornberry, in particular, has the particularly dangerous combination of a seat that voted Remain in June but has flirted with the Liberal Democrats in the past, with the shadow foreign secretary finishing just 484 votes ahead of Bridget Fox, the Liberal Democrat candidate, in 2005.

Are they right to be worried? That the referendum allowed the Liberal Democrats to reconfigure the politics of Richmond Park adds credence to a YouGov poll that showed a pro-Brexit Labour party finishing third behind a pro-second referendum Liberal Democrat party, should Labour go into the next election backing Brexit and the Liberal Democrats opt to oppose it.

The difficulty for Labour is the calculation for the Liberal Democrats is easy. They are an unabashedly pro-European party, from their activists to their MPs, and the 22 per cent of voters who back a referendum re-run are a significantly larger group than the eight per cent of the vote that Nick Clegg’s Liberal Democrats got in 2015.

The calculus is more fraught for Labour. In terms of the straight Conservative battle, their best hope is to put the referendum question to bed and focus on issues which don’t divide their coalition in two, as immigration does. But for separate reasons, neither Ukip nor the Liberal Democrats will be keen to let them.

At every point, the referendum question poses difficulties for Labour. Even when neither Ukip nor the Liberal Democrats take seats from them directly, they can hurt them badly, allowing the Conservatives to come through the middle.

The big problem is that the stance that makes sense in terms of maintaining party unity is to try to run on a ticket of moving past the referendum and focussing on the party’s core issues of social justice, better public services and redistribution.

But the trouble with that approach is that it’s alarmingly similar to the one favoured by Kezia Dugdale and Scottish Labour in 2016, who tried to make the election about public services, not the constitution. They came third, behind a Conservative party that ran on an explicitly pro-Union platform. The possibility of an English sequel should not be ruled out.  

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.