Migrant crackdown runs against all the economic evidence

Jonathan Portes
THE health secretary Jeremy Hunt said yesterday: “The pull factors are very important if we are to deter people from coming here in the first place.” It is deeply depressing that, with UK GDP well below its 2008 level and no growth last year, the government chose to make proposals designed to put people off coming to Britain the centrepiece of the Queen’s Speech. So much for making the UK “open for business.”

It is far from clear what problem the government is trying to solve. Do immigrants come here to claim benefits and take advantage of free NHS care? While there are cases of abuse, all the available evidence suggests that immigrants more than pay their way. For example, immigrants from the new EU member states appear to pay almost a third more in taxes than they cost in benefits and services. Overall, far from being a burden, immigration makes it easier to finance our welfare state, not harder.

This is hardly surprising. Most immigrants are of working age and healthy, while the biggest items of state expenditure are, of course, pensions and health care, with the latter disproportionately going to the old. As for working age benefits like Jobseeker’s Allowance, government statistics suggest that immigrants – whether from inside or outside the EU – are only about half as likely as natives to be claiming benefits.

Nor is there much evidence that, in aggregrate, immigrants take jobs from natives or reduce wages. Most studies show little or no impact on employment; there may be small negative impacts on wages for less skilled workers, but these are small compared to other, more important, factors, like the National Minimum Wage and technological change.

But the impact of immigration on growth is more than just these short-term, mostly positive, impacts. Immigrants don’t just fill specific short-term gaps in the labour market. They can bring different skills and aptitudes, and transmit those to non-immigrant colleagues (and vice versa); they can raise competition in particular labour markets, increasing the incentive for natives to acquire certain skills. Immigrant entrepreneurs can also increase competition in product markets. And workplace diversity – across a number of dimensions – can increase (or decrease) productivity and innovation.

So what are the implications for policy? It is not credible for the government to say, via the Queen, that its first priority is to “strengthen Britain’s economic competitiveness.. support the growth of the private sector and the creation of more jobs and opportunities”, while making the primary objective of immigration policy the reduction of net migration. The first priority for politicians of all parties should be simply to make clear that immigration, like trade, is central to making the UK open for business, and hence to our growth strategy. There are many specific policy changes, major and minor, that are required. But in my view, more important is a change of attitude and mindset on the part of government and policymakers. If we want to be serious about growth, we need to be positive about migration.

Jonathan Portes is director of the National Institute of Economic and Social Research.