Humans have an innate desire to place blame
and find a scapegoat. It therefore does not surprise me that immigration in the
UK is a touchy subject when it absolutely should not be. The UK, now more than
ever, is in dire need of a large influx of immigration yet David Cameron has
succumbed to the irrational public pressure to reduce it. This is a perfect
example of politics interfering with sound economics.
The conservative party wants to limit net
immigration to 100,000 people per year. It has already tightened the rules and
imposed a cap on student visas and set a limit for non-EU skilled immigration.
Luckily nothing can be done about EU immigrants who have a right to migrate,
but even this, which accounts for a third of net migration, may come under
scrutiny following a future EU referendum.
Let’s be clear. Immigration in a globally
competitive world is fundamentally good and in the case of the UK, absolutely
necessary. UK net immigration needs to increase not decrease. The Office for
Budget Responsibility (OBR) has been clear on this. UK demographics are
changing and our population is ageing. In order to prevent the UK from going
bankrupt, we require a large influx of immigrants to pay off our overwhelming
debt burden through taxes and work.
Usually anti-immigration arguments are
riddled with myths, ignorance and xenophobia. It is time to dispel the myths of
immigration so we can overcome the ignorance.
Dispelling
the Myths
“Immigrants
cost us money”
Perhaps the most common and factually
incorrect argument is that immigrants cost the UK taxpayer money. The
anti-immigration clan fall back on the idea that many immigrants sponge off the
state and use the UK as a health or benefit tourist destination. This is wholly
untrue and to some extent simply racist propaganda.
Of course there are the few that abuse the
system just like there are a minority of UK citizens that do so as well. Yet
the overwhelming majority of immigrants are of working age and hold jobs. They
pay taxes, national insurance and contribute to spending and our GDP. Most are
skilled and many hold university degrees or equivalents. Immigrants add to the
economy, increase productivity, increase the flow of ideas and innovation,
improve trade links and add new specialisations to a rather one-dimensional
economy. Most importantly, as the OECD explains, immigrants without a doubt put
more into the pot than they take out.
It is for these reasons that the OBR has
recently published a report saying that the UK requires an influx of immigrants
to sustain public finances and counteract a talent shortage. The UK is an
ageing population. The OBR says that a net of 140,000 migrants per year from
2016 would lead to a net debt to GDP ratio of 99% by 2062. With zero net
migration, however, it will rise to an obscene 174%. To maintain the UK 2.75%
long-term trend growth, we need the same immigration levels as when Britain was
opened up to Poland. Sir Alan Budd calculates that due to changing
demographics, trend growth will naturally fall to 2% (an almost 30% decrease in
the long run growth rate), unless immigration increases.
State pensions, social care and healthcare
will rise from 14% of GDP to almost a fifth in the near future. Immigrants can pay for this. Hard-working,
productive, tax-paying immigrants, usually in jobs that they are far too
qualified to be in can fill the gap. If the Tories continue with their
plans, a lack of immigration will completely counteract years of austerity
and put the UK public finances back in the same dire position.
Of course, a larger population of
immigrants leads to larger NHS and welfare costs. The point is not to focus on
only the costs when the benefits so obviously outweigh them. Immigration pays
for itself and so much more. Many argue that immigrants from the EU, who are
free to move, abuse our health and benefits system. But this is also simply not
true for the majority. EU immigrants are, on average, younger and more likely to be in work than a native.
Ironically, Spain suffers from elderly Brits spending their later years on its beaches.
A
lot of the skepticism towards immigration is simple scapegoating. Something
that I hope will one day be eradicated by globalistion and subsequent
acceptance of other races. Immigration does not cause recessions. Recessions
are caused by bubbles, greed, stupidity, risk taking and poor judgments. In fact, immigrants can smooth the costs of a
recession for those countries that are lucky enough to attract workers to their
labour supply.
“Immigrants
take our jobs”
A very right wing argument and once again
simply not true. To be fairly crude, lets separate migrants into skilled and
unskilled workers. You may be surprised to know that 40% of all UK migrants
actually hold a university qualification, which is much better than for the
rest of the EU. A large majority hold at least a vocational qualification or
similar. Skilled workers are highly demanded around the world for obvious
reasons and any country would be extremely jealous of the UK’s influx of such a
precious commodity. Skilled workers can only add to the economy whether it is
through better products, new skills, a new comparative advantage or greater
competitiveness of the UK. Either way, a more productive workforce can only
increase the standard of living in an economy.
In the UK, construction workers are in fact
in very short supply. With rising demand for property, especially with the
government’s new Help to Buy scheme, the UK needs more construction workers to
fill the supply gap. Without immigration, rising demand may be met with higher
prices rather than a larger supply.
As for unskilled workers, most end up in
roles that pay near minimum wage. These are jobs that locals are unwilling to
take. It is not the case that unskilled workers are pushing down wages and
replacing UK natives. Locals are simply not willing to work at the going wage
rate. If this is the case, then I see no reason why UK companies should hire
equally or less skilled natives for more money than they are worth. If an
unskilled worker refuses to work at the competitive wage then the UK needs
unskilled immigrants to fill the gap.
“Abuse
our educational system”
This one is less frequent but completely
illogical. Education is one of the UK’s greatest exports and I strongly believe
that it is a grave mistake to limit student visas. Foreign student fees are
much higher than Home fees. It is thanks to a large inflow of foreign students
that universities are allowed to flourish and stay afloat. Even if a foreign
student moves on after her education, she has still invested a large amount of
money in the UK educational system.
Furthermore, it is often the case that
foreign students stay in the UK and go on to become highly skilled workers here.
This is a win-win for the UK. We charge these students extortionately high
prices and they then go on to pay taxes and add to the UK economy afterwards.
In a highly globalised world, the country with the most productive workforce
will usually prosper.
“Too
many people”
The idea that immigration leads to
overpopulation is misleading. Net immigration, after the EU was established,
averaged at 214,000 per year up until 2011. It then hit 165,000 in 2012, which
is a modest 0.3% of our population. This is a lower level than Italy or Spain.
With an ageing population and lower birth rates than previous decades, this
inflow will hardly have a substantial effect on overcrowding. Thanks to large
outflows as well, the UK population will not grow any faster than the rest of
the world.
As for language, I find it amusing that
people become agitated that an immigrant’s first language may not be English.
English is still the second most widely spoken language (behind Mandarin) and
the most used language in the business world. It is not going anywhere.
Immigrants moving to the UK must learn the language to prosper (and be granted
entry). So what if it is their second language?
Conclusion
My conclusion in simple. Increase net
migration and focus on more pertinent issues. If abuse of the welfare system or
the NHS is a concern, then improve controls and the efficiency of the system.
Prevent the ease of tax avoidance of the wealthy and encourage new
specialisations. Continue to promote the UK as an exporter of education. These will all help to improve future public finances.
Politicians know the benefits of
immigration but capping it wins votes. If only politicians could ignore the
ignorance, the UK economy would be much better off in the long run.
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