A large number of MPs seem to believe that net inflows of 330,000 people per year into Britain are “too high”. What, then, is the optimal annual number of net migrants?
Up until recently, the Conservatives said “tens of thousands” should be the aim. What’s not entirely clear is why they felt they had the knowledge to centrally plan for the right level of people Britain should admit any more than the right number of cars or bottles of wine we should import.
For just as with trade, behind the aggregate migration statistics lie the very personal decisions and actions of hundreds of thousands of individuals, deciding to relocate for employment or for love or for a multitude of other reasons. These decisions can be shaped at any given time by the macroeconomic climate here and abroad, individual circumstances, firms’ desire for certain workers, and “push” and “pull” factors related to policy. Trying to cap migration given the changing scene and the unknown preferences of individuals and firms can therefore be extremely damaging.
Indeed, the cost of immigration quotas can be seen with a simple example. Suppose an entrepreneur wanted to come to the UK and had the potential to build a business worth billions. Ludicrously, if he was number 100,000 that year, he’d be kept out.
Of course, given free movement from the rest of the EU, immigration cannot currently be “capped” anyway, and trying to cap net migration with any degree of precision without also restricting people leaving the country is simply impossible.
So for economic and practical reasons, it would be better if the government simply abandoned a quota or number target altogether. But in the post-Brexit world, and if we were to leave the Single Market, it seems likely that we will see a whole reset in immigration policy.
In formulating a new framework, two economic lessons should be borne in mind. First, all migration controls (just like controls on trade) have economic costs. Second, the role of government should be to set the rules and conditions to allow free people to make migration decisions, rather than trying to set the outcome or quantity of those decisions with number targets.
Ideally, this would mean lowering barriers to migration as broadly as possible but making the UK’s welfare system more contributory to avoid any welfare draw factors. It would also mean more flexible planning laws and markets in public services, to allow the supply of these to adjust to changing demand as the population fluctuates. If neither of these were possible directly, a migrant payment could be made to cover a number of years of public service provision or to be allocated to development funds.
But many people seem to want the role of government in setting the rules to be much more extensive. An idea popular among many Brexiteers is an Australian-style points-based system, where a government bureaucracy lists a whole range of criterion, including on skills, that migrants must meet before being allowed entry to the UK.
Yet just as with quotas, this assumes a level of foresight in economic planning that governments are simply incapable of. How on earth is a government department supposed to assess what skills businesses and the broader economy require at any given time? How can a “system” react to the constant changes in demand the economy faces? It requires knowledge that is inherently decentralised, and ignores the possibility for latent demand for goods and services, and hence skills, which may not even exist yet.
The reality would be a policy biased towards those who meet certain skills criteria today, ignoring the potential for many low-skilled migrants to better themselves. After all, most skills are developed “on the job” rather than being acquired in established vocational training or degrees. These days, most people’s careers do not entail 40 years of working in a particular field.
Sadly, even many politicians who understand the benefits of markets and free decisions in other areas of life seem to have a remarkable faith in the planner when it comes to allowing the “right people” in. It would be good to know where this faith comes from.