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.

Photo: Getty
Show Hide image

Who will win in Stoke-on-Trent?

Labour are the favourites, but they could fall victim to a shock in the Midlands constituency.  

The resignation of Tristram Hunt as MP for Stoke-on-Central has triggered a by-election in the safe Labour seat of Stoke on Trent Central. That had Westminster speculating about the possibility of a victory for Ukip, which only intensified once Paul Nuttall, the party’s leader, was installed as the candidate.

If Nuttall’s message that the Labour Party has lost touch with its small-town and post-industrial heartlands is going to pay dividends at the ballot box, there can hardly be a better set of circumstances than this: the sitting MP has quit to take up a well-paid job in London, and although  the overwhelming majority of Labour MPs voted to block Brexit, the well-advertised divisions in that party over the vote should help Ukip.

But Labour started with a solid lead – it is always more useful to talk about percentages, not raw vote totals – of 16 points in 2015, with the two parties of the right effectively tied in second and third place. Just 33 votes separated Ukip in second from the third-placed Conservatives.

There was a possible – but narrow – path to victory for Ukip that involved swallowing up the Conservative vote, while Labour shed votes in three directions: to the Liberal Democrats, to Ukip, and to abstention.

But as I wrote at the start of the contest, Ukip were, in my view, overwritten in their chances of winning the seat. We talk a lot about Labour’s problem appealing to “aspirational” voters in Westminster, but less covered, and equally important, is Ukip’s aspiration problem.

For some people, a vote for Ukip is effectively a declaration that you live in a dump. You can have an interesting debate about whether it was particularly sympathetic of Ken Clarke to brand that party’s voters as “elderly male people who have had disappointing lives”, but that view is not just confined to pro-European Conservatives. A great number of people, in Stoke and elsewhere, who are sympathetic to Ukip’s positions on immigration, international development and the European Union also think that voting Ukip is for losers.

That always made making inroads into the Conservative vote harder than it looks. At the risk of looking very, very foolish in six days time, I found it difficult to imagine why Tory voters in Hanley would take the risk of voting Ukip. As I wrote when Nuttall announced his candidacy, the Conservatives were, in my view, a bigger threat to Labour than Ukip.

Under Theresa May, almost every move the party has made has been designed around making inroads into the Ukip vote and that part of the Labour vote that is sympathetic to Ukip. If the polls are to be believed, she’s succeeding nationally, though even on current polling, the Conservatives wouldn’t have enough to take Stoke on Trent Central.

Now Theresa May has made a visit to the constituency. Well, seeing as the government has a comfortable majority in the House of Commons, it’s not as if the Prime Minister needs to find time to visit the seat, particularly when there is another, easier battle down the road in the shape of the West Midlands mayoral election.

But one thing is certain: the Conservatives wouldn’t be sending May down if they thought that they were going to do worse than they did in 2015.

Parties can be wrong of course. The Conservatives knew that they had found a vulnerable spot in the last election as far as a Labour deal with the SNP was concerned. They thought that vulnerable spot was worth 15 to 20 seats. They gained 27 from the Liberal Democrats and a further eight from Labour.  Labour knew they would underperform public expectations and thought they’d end up with around 260 to 280 seats. They ended up with 232.

Nevertheless, Theresa May wouldn’t be coming down to Stoke if CCHQ thought that four days later, her party was going to finish fourth. And if the Conservatives don’t collapse, anyone betting on Ukip is liable to lose their shirt. 

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