Hard evidence: are migrants draining the welfare system?

Are migrants really “costing the taxpayer billions of pounds per year” or is there more to it than that? Carlos Vargas-Silva, Senior Researcher at the Migration Observatory at the University of Oxford, looks at the data.

This article was originally published on The Conversation, where it forms part of Hard Hard Evidence, a series of articles that looks at some of the trickiest public policy questions we face. Academic experts delve into available research evidence to provide informed analysis you won’t get from politicians or vested interests.

Recent data released by the Department for Work and Pensions under the Freedom of Information Act revealed the number of people claiming working age benefits who were non-British nationals when they first registered for a National Insurance Number.

One of the figures from the new dataset that caught the attention of several newspapers was the increase in claims from those who were nationals of EU accession countries (i.e. the new EU members states that have joined since 2004). This number increased from 12,610 in 2008, to 49,720 in 2012. This fact led to statements such as this one from the Daily Mail:

Number of foreigners claiming UK benefits leaps 41% in 5 years … rise has been fuelled by a four-fold increase in benefit claims by Eastern Europeans.

The common narrative was one of growing concern, given the new wave of Eastern European migration that the UK may experience with the relaxation of border controls on Romanian and Bulgarian workers in 2014.

Preliminary number-crunching

It would be tempting to dismiss these new numbers from DWP for three reasons, but these reasons can all be countered convincingly.

1) The data are for those who were non-British nationals when they first registered for a NINO and many of those could now be British nationals.

But this is unlikely to play a big role for nationals of EU accession countries as there is little incentive to become British nationals.

2) The increase in the annual number of nationals of EU accession countries claiming working-age benefits was only 37,000, much smaller than the equivalent increase for British nationals (588,000).

True, but the 2008-2013 percentage increase in the annual number of EU accession country nationals claiming DWP working age benefits was almost 300%, far greater than any other group. The increase was 12% for British nationals.

3) The number of nationals of EU accession countries living in the UK has been increasing over the past few years. Therefore, we should expect the number of nationals of EU accession countries claiming benefits to also increase.

Again this is true, but according to Office for National Statistics there were 497,000 Polish nationals living in the UK during 2008. This compares to 646,000 Polish nationals living in the UK during 2012, representing a 30% increase for the five year period. This increase in the population is much smaller than the increase in nationals of EU accession countries among benefit claimants (close to 300%). Even if you include other major groups of nationals of the accession countries in the UK such as Lithuania, Slovakia, Romania, Bulgaria, Latvia, Czech Republic and Hungary the percentage increase in the population is just 54%.

So the problem is not with the figures, per se. The problem is that some sectors of the media used the data to suggest that migrants (particularly nationals of EU accession countries) drain UK public coffers. The Daily Mail’s conclusion was:

They are costing taxpayers billions of pounds a year.                                    

The fiscal impact of migration

In order to find out whether the Daily Mail was correct in its conclusion, it is necessary to look at two factors: the taxes and other contributions migrants make to public finances and the costs of the public benefits and services they receive. Subtract the second from the first and you get the answer. If the difference is positive, migrants are net-contributors; if the difference is negative, migrants are a burden for the state.

The academic literature on the fiscal impacts of migration suggests that migrants doing highly paid jobs are the ones more likely to make a positive contribution to public finances. These migrants pay more taxes and are less likely to claim benefits. It is well known that nationals of the EU accession countries in the UK tend to do low-paid jobs. Does this mean that they have a negative fiscal impact?

It may come as a surprise that the only study which comprehensively analyses the fiscal impact of migration from the EU accession countries, in their case nationals from the A8 countries (the eight countries that joined the EU in May 2004 – excepting Cyprus and Malta), found that in the four fiscal years after they joined the EU, migrants to the UK from A8 countries made a positive contribution to public finances.

The finding that A8 workers make a positive contribution to UK public finances contrasts with the fact that most A8 workers concentrate in the low-wage sector. However, as shown in Figure 1, A8 workers have one the highest employment rates in the UK, a fact which offsets the effect of their lower wages.

 

Figure 1 – Employment rates of British, Old EU, A8 and non-EU nationals Note: these are ONS estimates from the UK Labour Force Survey

The result that migration has a net positive fiscal impact is not limited to nationals of the A8 countries. The OECD recently estimated that on average, households headed by migrants in the UK contributed about €3,000 more than they received in benefits in 2007-2009.

Netting the benefits

Has there been a significant increase in the number of nationals of the EU accession countries claiming DWP working age benefits? Yes.

Has the positive fiscal impact of migrants from the EU accession countries changed since 2008-2009? This is less clear.

Establishing whether the increase in the proportion of nationals of the EU accession countries claiming benefits has been offset by their increase in the working population or increased wages in that group is not possible to know without further study.

The only thing we can say for certain is that the concept that they are “costing the taxpayer billions of pounds per year” is pure speculation and is not supported by the data.

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.

The ConversationThis article was originally published at The Conversation. Read the original article.

A protester holds a sign during a march hoping to draw attention to claims of exploitation and discrimination of migrant workers in 2007. Photo: Getty

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

Photo: Getty Images/AFP
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Is Yvette Cooper surging?

The bookmakers and Westminster are in a flurry. Is Yvette Cooper going to win after all? I'm not convinced. 

Is Yvette Cooper surging? The bookmakers have cut her odds, making her the second favourite after Jeremy Corbyn, and Westminster – and Labour more generally – is abuzz with chatter that it will be her, not Corbyn, who becomes leader on September 12. Are they right? A couple of thoughts:

I wouldn’t trust the bookmakers’ odds as far as I could throw them

When Jeremy Corbyn first entered the race his odds were at 100 to 1. When he secured the endorsement of Unite, Britain’s trade union, his odds were tied with Liz Kendall, who nobody – not even her closest allies – now believes will win the Labour leadership. When I first tipped the Islington North MP for the top job, his odds were still at 3 to 1.

Remember bookmakers aren’t trying to predict the future, they’re trying to turn a profit. (As are experienced betters – when Cooper’s odds were long, it was good sense to chuck some money on there, just to secure a win-win scenario. I wouldn’t be surprised if Burnham’s odds improve a bit as some people hedge for a surprise win for the shadow health secretary, too.)

I still don’t think that there is a plausible path to victory for Yvette Cooper

There is a lively debate playing out – much of it in on The Staggers – about which one of Cooper or Burnham is best-placed to stop Corbyn. Team Cooper say that their data shows that their candidate is the one to stop Corbyn. Team Burnham, unsurprisingly, say the reverse. But Team Kendall, the mayoral campaigns, and the Corbyn team also believe that it is Burnham, not Cooper, who can stop Corbyn.

They think that the shadow health secretary is a “bad bank”: full of second preferences for Corbyn. One senior Blairite, who loathes Burnham with a passion, told me that “only Andy can stop Corbyn, it’s as simple as that”.

I haven’t seen a complete breakdown of every CLP nomination – but I have seen around 40, and they support that argument. Luke Akehurst, a cheerleader for Cooper, published figures that support the “bad bank” theory as well.   Both YouGov polls show a larger pool of Corbyn second preferences among Burnham’s votes than Cooper’s.

But it doesn’t matter, because Andy Burnham can’t make the final round anyway

The “bad bank” row, while souring relations between Burnhamettes and Cooperinos even further, is interesting but academic.  Either Jeremy Corbyn will win outright or he will face Cooper in the final round. If Liz Kendall is eliminated, her second preferences will go to Cooper by an overwhelming margin.

Yes, large numbers of Kendall-supporting MPs are throwing their weight behind Burnham. But Kendall’s supporters are overwhelmingly giving their second preferences to Cooper regardless. My estimate, from both looking at CLP nominations and speaking to party members, is that around 80 to 90 per cent of Kendall’s second preferences will go to Cooper. Burnham’s gaffes – his “when it’s time” remark about Labour having a woman leader, that he appears to have a clapometer instead of a moral compass – have discredited him in him the eyes of many. While Burnham has shrunk, Cooper has grown. And for others, who can’t distinguish between Burnham and Cooper, they’d prefer to have “a crap woman rather than another crap man” in the words of one.

This holds even for Kendall backers who believe that Burnham is a bad bank. A repeated refrain from her supporters is that they simply couldn’t bring themselves to give Burnham their 2nd preference over Cooper. One senior insider, who has been telling his friends that they have to opt for Burnham over Cooper, told me that “faced with my own paper, I can’t vote for that man”.

Interventions from past leaders fall on deaf ears

A lot has happened to change the Labour party in recent years, but one often neglected aspect is this: the Labour right has lost two elections on the bounce. Yes, Ed Miliband may have rejected most of New Labour’s legacy and approach, but he was still a protégé of Gordon Brown and included figures like Rachel Reeves, Ed Balls and Jim Murphy in his shadow cabinet.  Yvette Cooper and Andy Burnham were senior figures during both defeats. And the same MPs who are now warning that Corbyn will doom the Labour Party to defeat were, just months ago, saying that Miliband was destined for Downing Street and only five years ago were saying that Gordon Brown was going to stay there.

Labour members don’t trust the press

A sizeable number of Labour party activists believe that the media is against them and will always have it in for them. They are not listening to articles about Jeremy Corbyn’s past associations or reading analyses of why Labour lost. Those big, gamechanging moments in the last month? Didn’t change anything.

100,000 people didn’t join the Labour party on deadline day to vote against Jeremy Corbyn

On the last day of registration, so many people tried to register to vote in the Labour leadership election that they broke the website. They weren’t doing so on the off-chance that the day after, Yvette Cooper would deliver the speech of her life. Yes, some of those sign-ups were duplicates, and 3,000 of them have been “purged”.  That still leaves an overwhelmingly large number of sign-ups who are going to go for Corbyn.

It doesn’t look as if anyone is turning off Corbyn

Yes, Sky News’ self-selecting poll is not representative of anything other than enthusiasm. But, equally, if Yvette Cooper is really going to beat Jeremy Corbyn, surely, surely, she wouldn’t be in third place behind Liz Kendall according to Sky’s post-debate poll. Surely she wouldn’t have been the winner according to just 6.1 per cent of viewers against Corbyn’s 80.7 per cent. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.