Does Mass Immigration Help the Economy?

Saturday, 28th May 2016

As net migration to the UK hits record levels, many opinion leaders, especially in the Labour and Green parties, claim this is no bad thing. Don’t worry about the numbers. They are just a sign of our interconnected times. We get to go on holiday or retire in Southern Europe and they come here to do all the jobs we used to do, add a little spice to our life and, of course, boost our wonderful economy. Naturally more people lead to greater retails sales, but any net benefit can only measured on a per capita basis.

However, one of the most cherished claims we hear from mass migration lobbyists is that EU migrant workers pay more in tax than they receive in welfare. Both Caroline Lucas of the Greens and Alex Salmond of the SNP have parroted the statistic from 2007 that EU migrants contribute net 2.5 billion to the exchequer. I should sincerely hope so as otherwise they would not contribute at all to the services they consume, such as transport infrastructure, street cleaning, health, schooling or policing. Unless you live in a tent in a sparsely populated region without access to electricity or running water, you inevitably consume public services. This then raises the question if that 2.5 billion in tax covers the services consumed by over 3 million EU citizens working in the UK, do they pay enough tax?

Currently if you earn less than around £32,000 a year, you are on average tax-negative, i.e. you consume more in services and welfare than you pay in tax (read Are you a contributor to or a burden on the nation’s finances?). Of course, besides income tax we also pay sales tax (VAT and other duties), council tax and vehicle excise duty, however, these are just levies on consumption. Like most governments the UK runs a budget deficit. It needs more than half the population to be tax-positive to subsidise the other half who cannot afford to pay more, but still need services. Initially clever-dick economists told us Eastern European migrants would not burden our public services because they are young, childless and will return to their home countries after a few years in the UK. Now schools and hospitals are overwhelmed by increased demand from the same newcomers, who have miraculously had children, aged and succumbed to ill health. Indeed the fertility rate among Eastern Europeans in the UK is higher than it is in Eastern Europe because our relatively generous child benefits. Polish women in the UK have on average 2.4 children compared to just 1.4 in Poland (see Poland’s baby boom … in UK! and End of 2.4 children, as Britain has biggest families in Europe).

Despite a massive rise in inward migration, the UK still has a substantial skills shortage in Science, Technology Engineering and Maths (STEM), because a higher population raises demand. As advances in artificial intelligence enable far greater levels of automation than we dreamed possible only ten years ago, the demand for a select number of high skilled jobs will increase while many other jobs can be fully automated. Indeed the only low-paid occupation that is likely to see increased demand is personal care where empathy and cultural affiinity are distinct assets. Does it make any sense to import care workers from poorer countries just to undercut local workers? We have a huge oversupply of unskilled and semi-skilled workers. The overwhelming majority of new international commuters do jobs that native born Britons could easily do with appropriate training and, more important, sufficient motivation. Only a small proportion of 630,000 new immigrants (the 333,000 figure is the net amount after discounting emigration) are talented engineers, doctors, architects or academics. We do not have a shortage of sandwich makers or bar staff, but a growing divide between low-paid workers competing with other low-skill workers on little more than the minimum wage on one hand and professional elites on the other. The latter group do not see their jobs threatened by newcomers from other countries. They enjoy cheaper childminders and more attractive bartenders and will probably retire to a holiday home in Southern France, Spain, Greece or Bulgaria. Indeed the arrogant liberal elite do not like native Britons at all, too uncouth, lazy and borderline racist, unless they learn to repeat the same old line about the wonders of multiculturalism and diversity.

If you listen to globalising evangelists, you might believe immigrants only ever come to the UK to work in our health service, help us build houses and pay more taxes. Sadly this is just a fantasy. Most people come out of shrewd self-interest to earn more than they would do back home. Southern Europe has over 50% youth unemployment as a by-product of enforced free markets and an unsustainable currency union. Some may well have some rare skills, but most will just be fairly average and have little to offer other than enthusiasm and perseverance. Meanwhile, any chances of economic revival in much of Southern Europe are scuppered as their best and brightest have left.

While globalisation seems unstoppable, unbalanced migratory flows always harm the poorest most. Neoliberal pundits should stop calling the native working class racist and start listening. They may actually learn economic growth as in bigger profits for leading supermarkets does not translate into a happier more egalitarian society. Most people just want more affordable housing, greater job security, more accessible healthcare, less congested transport network and more social cohesion around common values and experiences. By all accounts quite the opposite is happening. The economy may be growing, but people's real lives are under greater stress.