Analysing the costs and benefits of immigration. Photo: Getty
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Yes, EU immigrants do have a positive impact on public finances

The academics behind a study that shows EU migrants make a net contribution to our economy on the positive impact of recent immigrants.

The impact of immigration on Britain’s tax and welfare system is perhaps the most important economic issue in the debate over the country’s relationship with the EU and its principle of free movement. There are claims that immigrants from Europe take advantage of the UK’s benefit and health system. This has led to political pressure to limit immigrants' access to benefits and public services and even restrict immigration from the European Economic Area countries.

But, despite the controversy surrounding this issue, evidence for how much immigrants take out of and contribute to the public purse in Britain is surprisingly sparse. Our new research published by the Royal Economic Society in the Economic Journal aims to fill this void.

Based on the UK Labour Force Survey and a multitude of government sources, we calculate the overall fiscal contribution of native Britons and immigrants. Our findings show that European immigrants to the UK have paid more in taxes than they received in benefits, helping to relieve the fiscal burden on UK-born workers and contributing to the financing of public services.

To do this, we assign individuals their share of cost for each item of government expenditure. We then identify their contribution to each source of government revenue. We distinguish between immigrants from the European Economic Area (EEA), and those from outside Europe. Additionally, we break down the EEA group into immigrants from the Eastern and Central European countries that joined the EU since 2004 (known as A10 countries), and immigrants from the rest of EEA.
 

Positive net contribution

Our findings show that immigrants to the UK who arrived since 2000, and for whom we observe their entire migration history, have made consistently positive fiscal contributions regardless of their area of origin. Between 2001 and 2011 recent immigrants from the A10 countries contributed to the fiscal system about 12 per cent more than they took out, with a net fiscal contribution of about £5bn.

At the same time the overall fiscal contributions of recent European immigrants from the rest of the EU totalled £15bn, with fiscal payments about 64 per cent higher than the value of public services they used. Immigrants from outside the EU countries made a net fiscal contribution of about £5.2bn, thus paying into the system about 3 per cent more than they took out.

In contrast, over the same period, native British people made an overall negative fiscal contribution of £616.5bn. The fiscal balance of overall immigration to the UK between 2001 and 2011 amounts therefore to a positive net contribution of about £25bn, over a period in which the UK has run an overall budget deficit.

Our analysis thus suggests that immigrants arriving since the early 2000s from Europe have made a net contribution to Britain’s public finances. This is a reality that contrasts starkly with the view often maintained in public debate that immigrants are a drain on the economy.
 

State benefits

This conclusion is further supported by our evidence on the degree to which immigrants receive tax credits and benefits compared with natives. Recent immigrants are 43 per cent (17 percentage points) less likely to receive state benefits or tax credits. These differences are partly attributable to the fact that immigrants are generally working-age men and coming to the UK to work. However, even when compared with natives of the same age, gender composition and education, recent immigrants are still 39 per cent less likely than natives to receive benefits.

Additionally, our research points at the strong educational background of immigrants. For instance, while the percentage of natives with a degree was 24 per cent in 2011, that of EEA and non-EEA immigrants was 35 per cent and 41 per cent, respectively. Similarly, about one in two British born individuals fall into the “low education” category (defined as those who left full-time education before 17), while only 21 per cent of EEA immigrants and 23 per cent of non-EEA immigrants do so.

Most immigrants arrive in the UK after completing their education abroad, and thus at a point in their lifetime where the discounted net value of their future net fiscal payments is positive. If the UK had to provide each immigrant with the level of education they have acquired in their home country (and use productively in the UK, as natives do), the costs would be substantial.

Our estimates indicate that recent immigrants endowed Britain with productive human capital between 2000 and 2011 that would have cost £6.8bn in spending on education. This aspect is often neglected in the debate about the costs and benefits of immigration.
 

Christian Dustmann is director at the Centre for Research and Analysis on Migration (CReAM) at University College London; Tommaso Frattini is assistant professor of economics at the University of Milan

Christian Dustmann receives funding from European Research Council (ERC). Tommaso Frattini 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.

 

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Leader: Trump and an age of disorder

Mr Trump’s disregard for domestic and international norms represents an unprecedented challenge to established institutions.

The US presidency has not always been held by men of distinction and honour, but Donald Trump is by some distance its least qualified occupant. The leader of the world’s sole superpower has no record of political or military service and is ignorant of foreign affairs. Throughout his campaign, he repeatedly showed himself to be a racist, a misogynist, a braggart and a narcissist.

The naive hope that Mr Trump’s victory would herald a great moderation was dispelled by his conduct during the transition. He compared his country’s intelligence services to those of Nazi Germany and repeatedly denied Russian interference in the election. He derided Nato as “obsolete” and predicted the demise of the European Union. He reaffirmed his commitment to dismantling Obamacare and to overturning Roe v Wade. He doled out jobs to white nationalists, protectionists and family members. He denounced US citizens for demonstrating against him. Asked whether he regretted any part of his vulgar campaign, he replied: “No, I won.”

Of all his predilections, Mr Trump’s affection for Vladimir Putin is perhaps the most troubling. When the 2012 Republican presidential nominee, Mitt Romney, warned that Russia was the “number one geopolitical foe” of the US, he was mocked by Barack Obama. Yet his remark proved prescient. Rather than regarding Mr Putin as a foe, however, Mr Trump fetes him as a friend. The Russian president aims to use the US president’s goodwill to secure the removal of American sanctions, recognition of Russia’s annexation of Crimea and respect for the murderous reign of the Syrian president, Bashar al-Assad. He has a worryingly high chance of success.

Whether or not Mr Trump has personal motives for his fealty (as a lurid security dossier alleges), he and Mr Putin share a political outlook. Both men desire a world in which “strongmen” are free to abuse their citizens’ human rights without fear of external rebuke. Mr Trump’s refusal to commit to Nato’s principle of collective defence provides Mr Putin with every incentive to pursue his expansionist desires. The historic achievement of peace and stability in eastern Europe is in danger.

As he seeks reconciliation with Russia, Mr Trump is simultaneously pursuing conflict with China. He broke with precedent by speaking on the telephone with the Taiwanese president, Tsai Ing-wen, and used Twitter to berate the Chinese government. Rex Tillerson, Mr Trump’s secretary of state nominee, has threatened an American blockade of the South China Sea islands.

Mr Trump’s disregard for domestic and international norms represents an unprecedented challenge to established institutions. The US constitution, with its separation of powers, was designed to restrain autocrats such as the new president. Yet, in addition to the White House, the Republicans also control Congress and two-thirds of governorships and state houses. Mr Trump’s first Supreme Court appointment will ensure a conservative judicial majority. The decline of established print titles and the growth of “fake news” weaken another source of accountability.

In these circumstances, there is a heightened responsibility on the US’s allies to challenge, rather than to indulge, Mr Trump. Angela Merkel’s warning that co-operation was conditional on his respect for liberal and democratic values was a model of the former. Michael Gove’s obsequious interview with Mr Trump was a dismal example of the latter.

Theresa May has rightly rebuked the president for his treatment of women and has toughened Britain’s stance against Russian revanchism. Yet, although the UK must maintain working relations with the US, she should not allow the prospect of a future trade deal to skew her attitude towards Mr Trump. Any agreement is years away and the president’s protectionist proclivities could yet thwart British hopes of a beneficial outcome.

The diplomatic and political conventions embodied by the “special relationship” have endured for more than seven decades. However, Mr Trump’s election may necessitate their demise. It was the belief that the UK must stand “shoulder to shoulder” with the US that led Tony Blair into the ruinous Iraq War. In this new age of disorder, Western leaders must avoid being willing accomplices to Mr Trump’s agenda. Intense scepticism, rather than sycophancy, should define their response.

This article first appeared in the 19 January 2016 issue of the New Statesman, The Trump era