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
Show Hide image

After Richmond Park, Labour MPs are haunted by a familiar ghost

Labour MPs in big cities fear the Liberal Democrats, while in the north, they fear Ukip. 

The Liberal Democrats’ victory in Richmond Park has Conservatives nervous, and rightly so. Not only did Sarah Olney take the votes of soft Conservatives who backed a Remain vote on 23 June, she also benefited from tactical voting from Labour voters.

Although Richmond Park is the fifth most pro-Remain constituency won by a Conservative at the 2015 election, the more significant number – for the Liberal Democrats at least – is 15: that’s the number of Tory-held seats they could win if they reduced the Labour vote by the same amount they managed in Richmond Park.

The Tories have two Brexit headaches, electorally speaking. The first is the direct loss of voters who backed David Cameron in 2015 and a Remain vote in 2016 to the Liberal Democrats. The second is that Brexit appears to have made Liberal Democrat candidates palatable to Labour voters who backed the party as the anti-Conservative option in seats where Labour is generally weak from 1992 to 2010, but stayed at home or voted Labour in 2015.

Although local council by-elections are not as dramatic as parliamentary ones, they offer clues as to how national elections may play out, and it’s worth noting that Richmond Park wasn’t the only place where the Liberal Democrats saw a dramatic surge in the party’s fortunes. They also made a dramatic gain in Chichester, which voted to leave.

(That’s the other factor to remember in the “Leave/Remain” divide. In Liberal-Conservative battlegrounds where the majority of voters opted to leave, the third-placed Labour and Green vote tends to be heavily pro-Remain.)

But it’s not just Conservatives with the Liberal Democrats in second who have cause to be nervous.  Labour MPs outside of England's big cities have long been nervous that Ukip will do to them what the SNP did to their Scottish colleagues in 2015. That Ukip is now in second place in many seats that Labour once considered safe only adds to the sense of unease.

In a lot of seats, the closeness of Ukip is overstated. As one MP, who has the Conservatives in second place observed, “All that’s happened is you used to have five or six no-hopers, and all of that vote has gone to Ukip, so colleagues are nervous”. That’s true, to an extent. But it’s worth noting that the same thing could be said for the Liberal Democrats in Conservative seats in 1992. All they had done was to coagulate most of the “anyone but the Conservative” vote under their banner. In 1997, they took Conservative votes – and with it, picked up 28 formerly Tory seats.

Also nervous are the party’s London MPs, albeit for different reasons. They fear that Remain voters will desert them for the Liberal Democrats. (It’s worth noting that Catherine West, who sits for the most pro-Remain seat in the country, has already told constituents that she will vote against Article 50, as has David Lammy, another North London MP.)

A particular cause for alarm is that most of the party’s high command – Jeremy Corbyn, Emily Thornberry, Diane Abbott, and Keir Starmer – all sit for seats that were heavily pro-Remain. Thornberry, in particular, has the particularly dangerous combination of a seat that voted Remain in June but has flirted with the Liberal Democrats in the past, with the shadow foreign secretary finishing just 484 votes ahead of Bridget Fox, the Liberal Democrat candidate, in 2005.

Are they right to be worried? That the referendum allowed the Liberal Democrats to reconfigure the politics of Richmond Park adds credence to a YouGov poll that showed a pro-Brexit Labour party finishing third behind a pro-second referendum Liberal Democrat party, should Labour go into the next election backing Brexit and the Liberal Democrats opt to oppose it.

The difficulty for Labour is the calculation for the Liberal Democrats is easy. They are an unabashedly pro-European party, from their activists to their MPs, and the 22 per cent of voters who back a referendum re-run are a significantly larger group than the eight per cent of the vote that Nick Clegg’s Liberal Democrats got in 2015.

The calculus is more fraught for Labour. In terms of the straight Conservative battle, their best hope is to put the referendum question to bed and focus on issues which don’t divide their coalition in two, as immigration does. But for separate reasons, neither Ukip nor the Liberal Democrats will be keen to let them.

At every point, the referendum question poses difficulties for Labour. Even when neither Ukip nor the Liberal Democrats take seats from them directly, they can hurt them badly, allowing the Conservatives to come through the middle.

The big problem is that the stance that makes sense in terms of maintaining party unity is to try to run on a ticket of moving past the referendum and focussing on the party’s core issues of social justice, better public services and redistribution.

But the trouble with that approach is that it’s alarmingly similar to the one favoured by Kezia Dugdale and Scottish Labour in 2016, who tried to make the election about public services, not the constitution. They came third, behind a Conservative party that ran on an explicitly pro-Union platform. The possibility of an English sequel should not be ruled out.  

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