What's the impact of migration on the UK economy? Photo: Getty
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Are migrants good for the UK economy?

Analysing two apparently contradictory studies that have been published about the impact of migration on the UK economy.

Two studies about the impact of migration on the UK economy have been published which – if media reports are to believed – appear to contradict one another. A closer reading of these reports, however, shows that in fact they come to very similar economic conclusions. Even so, from reading them it is possible to suggest very different approaches to migration policy.

One study by Professor Robert Rowthorn led to headlines such as: “Further proof of damage created by immigration” and: “How mass migration hurts us all”.

The second study is a paper published by Lineskova and others in the latest issue of the National Institute Economic Review which led to headlines such as: “Reducing immigration would slow UK economy and lead to tax rises” and: “Cameron’s migration cap would leave Brits poorer and taxes higher

So clearly the two reports have created space for some news outlets to pick their own truth. But what should we make of these different studies – and what do they contribute to our understanding of the impacts of migration on the economy?

Long-term impact on GDP

Both studies look at different annual net migration scenarios in the future to provide a picture of the long-term impact of migration on GDP and GDP per capita. The future level of net migration (that is, the difference between immigration and emigration) determines the size and age structure of the UK population.

As shown in Figure 1, if all other things remain equal, a higher level of net migration is expected to lead to a larger UK population (see complete explanation here).

But migrants also tend to be younger than the overall UK population and net migration is also likely to decrease the “dependency ratio” – an assessment of the number of people of working age compared to the number of people of retirement age. For instance, Rowthorn suggests that the dependency ratio will be 3.5 percentage points lower with annual net migration of 225,000 compared to an annual net migration of just 50,000 (Rowthorn defines the dependency ratio as the number of people 65 years of age and above per 100 persons aged 15-64). Figure 2 presents the 15-64 years old population of the UK under different assumptions about net migration.

Rowthorn suggests that, given a set of assumptions about employment rates and labour productivity: “GDP per capita is 3% higher in 2087 with high migration than with very low migration”.

The paper by Lineskova and others looks at two scenarios: net migration of 200,000 and a lower migration scenario, which assumes that net migration is reduced by around 50% – close to David Cameron’s migration target of less than 100,000. They find that by 2060 GDP per capita would be 2.7% lower under the lower migration scenario.

Given the impact of net migration on the size and age structure of the UK population it comes as no surprise that both studies conclude that higher net migration will be associated with a higher level of GDP and GDP per capita.

Long-term fiscal impacts

The two studies also look at the long-term potential “fiscal implication” – the impact on UK government finances – of migration to the UK. Rowthorn also looks at the short-term fiscal impact of migration. Rowthorn scrutinises previous analysis from the Office for Budget Responsibility which suggests that lower levels of net migration will lead to higher public sector net debt to GDP (see Figure 3). While Rowthorn does not contest the validity of the OBR estimates, he underlines the high levels of uncertainty related to these estimates.

The paper by Lineskova and others suggest that under the lower migration scenario to “keep the government budget balanced, the effective labour income tax rate has to be increased by 2.2 percentage points”. Again, this refers to estimates for 2060.

Both studies come to similar conclusions – that lower levels of net migration will impose greater pressure on national debt over GDP. This effect is just the result of faster ageing of the population with lower levels of net migration, and corresponds with standard economic thinking.

Why the different implications? There is agreement on the general economic effects of higher net migration in both studies: that conclusion is that higher levels of net migration lead to higher GDP per capita and lower net debt as a share of GDP. Where there is disagreement is about the need or desirability of higher net migration.

Social impacts

The Lineskova makes a straightforward economic argument from this about the benefits of migration in maintaining an age structure which supports economic growth. They do not venture into providing policy prescriptions and accept that their analysis does “not take into account the potential social impacts of higher migration”.

Rowthorn, however, emphasises that it may be preferable to have lower levels of migration even at the expense of faster ageing. He suggests that the levels of migration required to increased GDP per capita or lower future public debt are so high that their social impacts may outweigh the positive economic benefits. He points to potential problems such as overcrowding of public facilities (including schools, hospitals, roads), limited supply of housing and strain on natural resources (for example water) as additional reasons for preferring lower levels of migration.

This goes back to the essence of the migration debate in the UK. Economic estimates are important, but limited in that they cannot resolve important judgements about the type of society people want. These preferences over the “sort of place we want to live in” can drive people’s views and choices on migration just as much as the “pure” economic factors.


Carlos Vargas-Silva does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

This article was originally published on The Conversation. Read the original article.

Carlos Vargas-Silva is a Senior Researcher at the Migration Observatory at the University of Oxford.

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The economic and moral case for global open borders

Few politicians are prepared to back a policy of free movement everywhere. Perhaps they should. 

Across the world, borders are being closed, not opened. In the US, Donald Trump has vowed to halve immigration to 500,000 and to cap the number of refugees at 50,000. In the UK, the Conservative government has reaffirmed its pledge to end free movement after Brexit is concluded. In Europe, Hungary, Poland and the Czech Republic are being sued by the EU for refusing to accept a mandatory share of refugees.

Even Jeremy Corbyn’s Labour Party has followed the rightward drift. Its general election manifesto promised to end free movement, and Corbyn recently complained of the “wholesale importation of underpaid workers from central Europe”.

Among economists, however, a diametrically opposed conversation prevails. They argue that rather than limiting free movement, leaders should expand it: from Europe to the world. Michael Clemens, a senior fellow at the Center for Global Development, likens the present system to leaving “trillion-dollar bills on the sidewalk”.

Economists estimate that allowing migrants to move to any country they choose would increase global GDP by between 67 and 147 per cent. A doubling of GDP (a $78trn increase) would correspond to 23 years of growth at 3 per cent. By contrast, the International Monetary Fund estimates that permitting the entirely free movement of capital would add a mere $65bn.

The moral case for open borders is similarly persuasive. As the Dutch historian Rutger Bregman writes in his recent book Utopia for Realists: “Borders are the single biggest cause of discrimination in all of world history. Inequality gaps between people living in the same country are nothing in comparison to those between separated global citizenries.” An unskilled Mexican worker who migrates to the US would raise their pay by around 150 per cent; an unskilled Nigerian by more than 1,000 per cent.

In his epochal 1971 work A Theory of Justice, the American philosopher John Rawls imagined individuals behind a “veil of ignorance”, knowing nothing of their talents, their wealth or their class. It follows, he argued, that they would choose an economic system in which inequalities are permitted only if they benefit the most disadvantaged. The risk of being penalised is too great to do otherwise. By the same logic, one could argue that, ignorant of their fortunes, individuals would favour a world of open borders in which birth does not determine destiny.

Yet beyond Rawls’s “original position”, the real-world obstacles to free movement are immense. Voters worry that migrants will depress their wages, take their jobs, burden the welfare state, increase crime and commit terrorism. The problem is worsened by demagogic politicians who seek to exploit such fears.

But research shows that host countries gain, rather than lose, from immigration. Migrants are usually younger and healthier than their domestic counterparts and contribute far more in tax revenue than they claim in benefits. Rather than merely “taking” jobs, migrants and their children create them (Steve Jobs, the son of a Syrian immigrant, is one example). In the US, newcomers are only a fifth as likely to be imprisoned as the native born. A Warwick University study of migration flows between 145 countries found that immigration helped to reduce terrorism by promoting economic development.

In a world of open borders, the right to move need not be an unqualified one (the pollster Gallup found that 630 million people – 13 per cent of the global population – would migrate permanently). Under the EU’s free movement system, migrants must prove after three months that they are working (employed or self-employed), a registered student, or have “sufficient resources” (savings or a pension) to support themselves and not be “a burden on the benefits system” – conditions that the UK, ironically, has never applied.

But so radical does the proposal sound that few politicians are prepared to give voice to it. An exception is the shadow chancellor, John McDonnell, who argued in 2016: “Inevitably, in this century, we will have open borders. We are seeing it in Europe already. The movement of peoples across the globe will mean that borders are almost going to become irrelevant by the end of this century, so we should be preparing for that and explaining why people move.”

At present, in a supposed era of opportunity, only 3 per cent of the global population live outside the country of their birth. As politicians contrive to ensure even fewer are able to do so, the case for free movement must be made anew.

George Eaton is political editor of the New Statesman.

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear