Where now for the immigration debate?

The coalition's political approach is at risk of unravelling, but genuine policy challenges remain.

The economic impacts of migration, and of immigration policy, are back in the spotlight. Today, Gus O’Donnell accused the government of "shooting itself in the foot" on growth by restricting skilled immigration. Yesterday’s two big economic reports, from Michael Heseltine and the Resolution Foundation’s Commission on Living Standards also considered the issue from different perspectives.

O’Donnell and Heseltine both highlight the potentially negative impacts on growth of immigration policy that restricts (either in principle or in practice) the ability of businesses to access a global pool of talent. Meanwhile, the Commission on Living Standards, in an exhaustive study of the causes of the "wage squeeze" that has affected low and middle earners in the UK, concludes that immigration has not been a significant factor.

So if immigration is important for growth, and doesn’t have significant effects on low and middle earners (the evidence for both these claims is strong), what’s the problem? Why does the government persist with an immigration policy that appears to make no economic sense, and why does the opposition not offer a more straightforward criticism of it? There is sometimes a feeling on the "progressive" side of the argument that this is simply a problem of politics and public opinion – if only the economic evidence could be better communicated and understood, then the path would be clear for a more "rational" (and, by implication, more liberal) immigration policy. This is wrong, for at least two reasons.

The first is that there are genuine policy challenges with respect to immigration policy that need to be addressed – this is not simply a case of politics and public opinion muddying the crystalline waters of economic evidence.

The impacts of migration on the labour market and the economy are complex. Although the finding that migration has had little impact on wages or unemployment is robust, there are some important caveats which need to be considered. Too little is known about the distributional impacts of migration. The Commission on Living Standards is right that even at the bottom end of the labour market, the impacts of migration on wages and employment seem to be very small, but this does not rule out more significant impacts on specific groups of workers (for example in some sectors in particular local areas). Nor does it take into account the fact that migration (including skilled migration) has been part of an economic model that has seen wages at the top end of the labour market become disconnected from those at the bottom. Pleas from the City to be able to bring in more highly-skilled (and highly-paid) migrants may make sense from the point of view of economic growth, but we should take seriously the argument that some kinds of growth are better than others, and that migration policy needs to be part of that discussion.

Migration also poses a range of complex policy challenges beyond labour markets and the economy, particularly at the local level – the rapid population change that can result does affect housing, public services, and community cohesion, whatever the economic benefits.

The second reason, which Heseltine recognised in his report yesterday, is that migration policy must have "public assent". This is not just an argument for better communications. Progressives and economic liberals may find some aspects of public opinion on this issue uncomfortable, and it is always open to them to try to shift the terms of debate – but the right response can never be simply to ignore the views of the electorate. Arguments over migration cannot be left to experts or economists but must be shaped through democratic debate and choice.

So where does this leave migration policy and politics? There are three key challenges that policymakers and politicians must face up to. The first is that migration must be situated in a wider policy debate about the economy (and housing, welfare, and communities). Ed Miliband has understood this, and Labour is showing promising signs of tackling migration policy in this way. The second is that many of the real policy challenges are local ones, and need to be addressed at the local level – something that will require a big change of approach in a policy area that has traditionally been highly centralised. The government’s net migration target is about as far away from the nuanced local policy mix that is needed as it is possible to get. In light of this, the third challenge presents a paradox – although there are real policy challenges at the local level, the public don’t (on the whole) feel that immigration is a problem in their own local communities, although a large majority do feel that it is a problem for the country as a whole.

So politicians are faced with a national political problem which is cast in terms of very simple choices, and a need for nuanced and local policy solutions. The government has opted to play the political game rather than the policy one – a strategy that is at risk of unravelling under the weight of its own contradictions, and the kinds of critiques that have emerged this week. Labour are engaging seriously with the policy questions, but are still in search of a narrative on immigration – "one nation" Labour is as good a starting point as any, but much more work is needed given the party’s difficult recent history on this issue.

David Cameron watches passengers go through immigration control during a visit to Heathrow terminal 5. Photograph: Getty Images.

Sarah Mulley is associate director at IPPR.

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In your 30s? You missed out on £26,000 and you're not even protesting

The 1980s kids seem resigned to their fate - for now. 

Imagine you’re in your thirties, and you’re renting in a shared house, on roughly the same pay you earned five years ago. Now imagine you have a friend, also in their thirties. This friend owns their own home, gets pay rises every year and has a more generous pension to beat. In fact, they are twice as rich as you. 

When you try to talk about how worried you are about your financial situation, the friend shrugs and says: “I was in that situation too.”

Un-friend, right? But this is, in fact, reality. A study from the Institute for Fiscal Studies found that Brits in their early thirties have a median wealth of £27,000. But ten years ago, a thirty something had £53,000. In other words, that unbearable friend is just someone exactly the same as you, who is now in their forties. 

Not only do Brits born in the early 1980s have half the wealth they would have had if they were born in the 1970s, but they are the first generation to be in this position since World War II.  According to the IFS study, each cohort has got progressively richer. But then, just as the 1980s kids were reaching adulthood, a couple of things happened at once.

House prices raced ahead of wages. Employers made pensions less generous. And, at the crucial point that the 1980s kids were finding their feet in the jobs market, the recession struck. The 1980s kids didn’t manage to buy homes in time to take advantage of low mortgage rates. Instead, they are stuck paying increasing amounts of rent. 

If the wealth distribution between someone in their 30s and someone in their 40s is stark, this is only the starting point in intergenerational inequality. The IFS expects pensioners’ incomes to race ahead of workers in the coming decade. 

So why, given this unprecedented reversal in fortunes, are Brits in their early thirties not marching in the streets? Why are they not burning tyres outside the Treasury while shouting: “Give us out £26k back?” 

The obvious fact that no one is going to be protesting their granny’s good fortune aside, it seems one reason for the 1980s kids’ resignation is they are still in denial. One thirty something wrote to The Staggers that the idea of being able to buy a house had become too abstract to worry about. Instead:

“You just try and get through this month and then worry about next month, which is probably self-defeating, but I think it's quite tough to get in the mindset that you're going to put something by so maybe in 10 years you can buy a shoebox a two-hour train ride from where you actually want to be.”

Another reflected that “people keep saying ‘something will turn up’”.

The Staggers turned to our resident thirty something, Yo Zushi, for his thoughts. He agreed with the IFS analysis that the recession mattered:

"We were spoiled by an artificially inflated balloon of cheap credit and growing up was something you did… later. Then the crash came in 2007-2008, and it became something we couldn’t afford to do. 

I would have got round to becoming comfortably off, I tell myself, had I been given another ten years of amoral capitalist boom to do so. Many of those who were born in the early 1970s drifted along, took a nap and woke up in possession of a house, all mod cons and a decent-paying job. But we slightly younger Gen X-ers followed in their slipstream and somehow fell off the edge. Oh well. "

Will the inertia of the1980s kids last? Perhaps – but Zushi sees in the support for Jeremy Corbyn, a swell of feeling at last. “Our lack of access to the life we were promised in our teens has woken many of us up to why things suck. That’s a good thing. 

“And now we have Corbyn to help sort it all out. That’s not meant sarcastically – I really think he’ll do it.”