LibLink: Vince Cable The Tory fallacy that immigrants are taking British jobs and driving down wages

It is good that people like Andrew Adonis help to build the case for a referendum on the Brexit deal. However it is profoundly depressing when both he and Tony Blair feed the “immigration is bad” narrative.

Thank goodness somebody is out there saying that immigration is actually a good thing and that this narrative that these foreigners are coming over here and taking our jobs and driving down wages. Step forward one Vincent Cable, writing in the Guardian:

At the heart of the politics of immigration is the belief, repeated by Theresa May as a fact, that immigrants, especially unskilled immigrants, depress wages. At first sight the argument seems plausible – and undeniably there is low-wage competition in some places. But there is no evidence that this is a general problem. When the coalition embarked on its review of EU competences in 2013, I commissioned a range of reviews and studies to establish the facts. They showed that the impact on wages was very small (and only in recession conditions). By and large, immigrants were doing jobs that British people didn’t want to do (or highly skilled jobs that helped to generate work for others). This research was inconvenient to the Home Office, which vetoed the publication of its results. I have now written to the prime minister to ask her to publish them as part of the current public debate.

So, the Government has evidence, commissioned by Vince, that the right wing tabloid press is talking hogwash and refuses to publish it.

And he makes an important point about the costs of immigration and who they affect:

All this is not to deny that immigration brings costs as well as economic benefits. The most obvious, if least discussed, is the impact of rising numbers of people on the housing market, where supply is constrained. House prices and rents are bound to rise. Yet the critics of immigration rarely raise this issue, perhaps because the beneficiaries are generally older owner-occupiers (who tend collectively towards Brexit) and the losers are younger people in cities such as London (who tend collectively towards remain). Here, as elsewhere, it is perception that is driving immigration policy; not reality.

However, these issues can be resolved by better investment in public services:

The frustrations over public and private sector pay are real, even if immigrants are not the main reason for wage stagnation. The anecdotes about immigrants in doctors’ surgeries reflect a wider problem of stress in primary health care. And immigration has compounded an underlying failure in housing supply.

The political temptation to play to the gallery rather than address these underlying problems is, sadly, all too real.

You can read the whole article here.

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31 Comments

  • So some-one who has studied Economics, and even lectured on the subject, thinks that the supply of Labour does not obey the laws of Supply and Demand. Oh dear oh dear.

  • Mark,

    google the ‘Lump of Labour Fallacy” and you will begin to understand that despite annual net immigration of 200,000 to 300,000 for several years, the number of unemployed has decreased. See Paul Krugman (Nobel prize winning economist for discussion) http://www.nytimes.com/2003/10/07/opinion/lumps-of-labor.html?scp=1&sq=lumps%20of%20labor&st=cse

  • Lorenzo Cherin 10th Sep '17 - 1:22pm

    We can read the facts without pushing the argument in a sledge hammer manner too far.

    Immigration is good. Immigration in an area with a vast influx and poor services can be bad .

    Common sense is good. Too bad it is not so common.

  • Jane Ann Liston 10th Sep '17 - 1:54pm

    Considering that for centuries people from the British Isles migrated without hindrance throughout the world, with both good and bad consequences, I think the default should be to allow people to enter the UK unless there is a very good reason to keep them out.

  • Steve Trevethan 10th Sep '17 - 4:16pm

    Why the delay in asking HMG to release relevant research on this contentious matter?

  • Unfortunately the electoral is not made up of 56,000,000 economics, the reality is that although economically immigration may a good thing, politically all that matters is whether or not the voters think immigration is a good thing. The economists can hector until they are blue in the face but if the voters consider that there is too much immigration then politically there is too much immigration.

    A failure to realise the above is in my opinion the main reason remain lost, you won’t change the public’s mind by lecturing them with spreadsheets about how they are wrong or misinformed. You have to understand and respond to their concerns (regardless of whether or not you agree with them)

  • joebourke,
    The debate here isn’t about whether it creates unemployment, but whether or not it increases the pressure to lower wages. Personally, I suspects it’s really about culture and the failure of advocates to convince many people that having their local demographics/environment changed is innately good in and of itself. Plus the reality that the vast majority of the electorate in survey after survey repeatedly say they want it at lower levels. It is not a vote winner and never will be.

  • So why is it that employers are themselves talking about having to pay higher wages in order to attract workers to the unfilled posts? But, I suppose, they must know less than supposedly “expert” economists.

    Something has happened to the UK labour market since the mid-2000s that has meant wages, instead of rising by 4% or more a year, have increased by 2% per year instead.

    This change has been determined by the interaction of supply and demand, and since demand has been strong, it can only be a change to the supply side that has had this impact.

    Can anyone tell me what major supply side changes there have been in the UK labour market in the last ten years, other than a massive influx of EU workers? And don’t say “zero hours contracts” because that is a *symptom* of an oversupply, not a cause.

  • Nonconformistradical 10th Sep '17 - 5:32pm

    @RC

    “So why is it that employers are themselves talking about having to pay higher wages in order to attract workers to the unfilled posts?”

    If you follow through the links in the article you’d find reference to the All-Party Parliamentary Group on Migration’s latest report – Brexit: Beyond the Highly Skilled – the Needs of Other Economic Stakeholders – highlighted several startling cases. For example, one evidence-giver recalled that they recently hired 53 individuals, of whom 11 were UK nationals and 42 EEA nationals. Of the 11 UK nationals, eight left on their first day, saying the work was not for them, as it was too repetitive and the environment was too cold. All 42 EEA migrants were still there at the time of the report’s publication. Stories such as this are repeated up and down the country.

    Quoting from the report itself: (following the above example)-

    “That’s very representative of the clients we’ve spoken to. There are lots of similarities between hospitality, food processing, and manufacturing of consumer products. We find there’s a sort of continuous trend…The prime example in our submission is a larger food-processing business with a small site in East Anglia. In that site, approximately 80% of their employees are EU nationals, and they find it incredibly difficult to recruit UK nationals, because the UK nationals say that the conditions are not attractive. It’s hard work; it’s physically hard work, it’s cold. They have three times the turnover in staff for UK nationals compared to EEA nationals.”

  • The Lib Dems are shooting themselves in the foot and all over their body. Too much unskilled immigration from the EU was why Brexit happened. Why can’t the Lib Dems grasp this point ? The Lib Dems must come up with credible solutions to reduce EU migration and address the concerns of the working class that unskilled migration is way too high.
    Failure to understand and address this point could cause the extinction of our Party as a electoral force. It pains me to say this the blindness shown by some Lib Dems on this matter is Political negligence.

  • Katharine Pindar 11th Sep '17 - 12:10am

    Perhaps people are right to suggest that perception and cultural factors have more to do with opposition to major immigration than the economic facts. There is a kind of echo chamber in operation, which has taken it for granted that we have too many migrants here. Yet if surveys can be produced as Vince says to show that migrant workers haven’t led to much depression of wages, and if people can be shown again and again that in their particular area (as here in West Cumbria) migrants are in fact useful and much needed in certain sectors, the cultural effect can probably be gradually eroded.

    There will need to be sensible measures put in place as well, such as ensuring that EU rules about having only a certain length of time to find a job are applied. We also surely ought to make more of the fact of so much of migration coming from outside the EU.

  • Steve Trevethan 11th Sep '17 - 7:11am

    Why is “Economics” omitted from the “National Curriculum”?

  • We do of course have contril of immigration. People from the EU have a right to work here of course. They wimm not be able to surbive without work unless we decide to support them.
    It is time to look at some of the real problems. We sell off companies often to foreign companies who take profits out of tje country and more to the point bring in highly paid senior managers. We need highly skilled workers because our education is in crisis and we refuse to face it. UK is a highly desireable country to come to because we speak English – and this is essential in Europe and the rest of the world.

  • The trouble is, of course, Katharine, if the “cultural factors and perceptions” are a quiet, disguised form of racism. I think this largely explains the previous “wish not to discuss immigration”, and the possible – now real – genies being let out of bottles!

  • “Why is “Economics” omitted from the “National Curriculum”?”

    The same reason “Astrology” isn’t there.

  • Nigel Jones 11th Sep '17 - 9:34am

    Immigration is the key issue about the EU for a good proportion of those who voted to leave, but not all of them. It is the others who would be persuaded by economic realities, but that will take time.
    However, I still meet very intelligent people, including businessmen who are absolutely convinced that even at economic risk, we should not continue with the freedom of movement of people or labour. You may call it irrational or emotional and contrary to facts about consequences, but these people have an extremely strong gut reaction against immigration from the EU, because it is not controlled. They will accept that some immigration is good, but it is the ‘freedom’ of movement that they will never accept.

  • Vince doesn’t seem to understand that this ‘taking our jobs’ thing isn’t just about immigration.

    A truly sovereign UK government could factor in several issues when awarding government contracts beyond just lowest cost. This might be employment levels, regional development, engineering skills retention, etc. But yet again the EU is a severe blockage to those kind of ‘truly sovereign’ decisions.

    Let’s call it the ‘Bombardier Trains effect’?

    So even though it might not be a consequence of EU immigration, for sure, being locked into this restrictive EU membership can mean a loss of UK jobs, contracts and essential skills base.
    Proof once again that our loss of UK sovereignty, has meant that we see the EU dictating the tendering process resulting in the export of jobs, work, and engineering skill base. And crucial to my point, those ‘jobs gone’, doesn’t involve even one single EU migrant?
    To be honest I’m starting to see through Vince’s theoretical economic expertise, and he’s proving to be, a not very robust or consistent thinker.

  • Tony Blair has published an article based on recent discussions he has had with European leaders http://institute.global/news/brexit-and-centre. The gist of his argument is that Europe was different to when Britain voted to leave the EU – a move Mr Blair described as “the most serious it’s taken since the Second World War”.
    senior figures had told him they were willing to consider changes to one of the key principles of the single market.
    He said “The French and Germans share some of the British worries, notably around immigration, and would compromise on freedom of movement,” he wrote.
    He said France’s new president, Emmanuel Macron was proposing “far-reaching reforms” for the EU and Europe itself is now looking at its own reform programme.
    They will have an inner circle in the EU that will be part of the eurozone and an outer circle. They will make reforms that I think will make it much more comfortable for Britain to fit itself in that outer circle.

    Francis O’grady is making the same point as Vince at the TUC conference. Immigrants are not the cause of low wages, they (like their British counterparts) are the victims of a dysfunctional economic system that imposes subsistence level wages on large numbers of the working population- homegrown or not.

  • Steve Trevethan 11th Sep '17 - 2:36pm

    Whether or not you are an aspiring politician intending to read “Politics, Philosophy and Astrology” at university, you might find the attached article interesting.
    http://anotherangryvoice.blogspot.fr/p/feeble-right-wing-fallacies.html

  • Katharine Pindar 11th Sep '17 - 4:03pm

    Thanks, Joe B., for posting the link to Tony Blair’s article. It shows me again that we shouldn’t demonise extremely clever and astute politicians of our recent past, refusing to hear them ever again because of our disapproval of some of their actions. It seems to me that Tony Blair is putting the case for and aiming for exactly what we Lib Dems want and demand in the Brexit debate. Yes, the problems to us of the EU’s four freedoms are capable of being resolved, because the EU itself is capable of change and reform. Yes, we still have to convince enough people of the harm of Brexit, but in the end there should be another referendum to stop it by popular assent.

    In the end the problems of some people’s visceral dislike of the EU and other personal priorities can be outweighed, it seems to me. Our country needs to be competitive but also co-operative in facing the challenges of the future, and the necessary compromises can best be addressed within this great European enterprise.

  • Ely Devons, an English economist said
    “If economists wished to study the horse, they wouldn’t go and look at horses. They’d sit in their studies and say to themselves, ‘What would I do if I were a horse?’”

  • Peter Martin 11th Sep '17 - 7:42pm

    @ Palehorse,

    Yes very good re the horse. 🙂

    The answer to the question about immigrants, labour and driving down wages is -possibly!

    It all depends on how the economy is managed. Once upon time Governments used to have a concept of “full employment”. The idea was that aggregate demand would be fine tuned, by Govt varying its spending and its taxation rates, so that everything which was for sale in the UK economy would be sold. If demand was too low not everything would be sold. Workers wouldn’t be needed to make new products and so dole queues would lengthen. If there was too much spending then there wouldn’t be enough real things to buy and we’d get inflation.

    So if we have more workers we need to have more spending to buy the extra things that the extra workers produce. This usually does mean that Governments have to increase their deficits to provide the extra spending in the first place so that there is enough money in the economy to provide wages for the extra workers who can then go off and spend it.

    But if we fret too much about our deficits then the economy cannot expand. If we have extra workers then we’ll end up making the same amount of stuff but with more people involved in the process. Real wages then have to fall. It’s just arithmetic. Or if the number of people in work increases and output per worker increases only in proportion then wage levels have to stagnate.

    If we have a large pool of semi-unemployed workers who are prepared to work on minimum wages then some things which previously might not have been economically viable might become more viable. So instead of running our car through one of those automatic car washes we can now get it valeted by hand. Or we are lucky enough to be in a well paid job may be able to afford a cleaner or a nanny, whereas the previous generation wouldn’t. That spending adds to the GDP so its quite possible that GDP is rising, albeit slowly, but inequality is growing. The more workers we have doing these kinds of unskilled minimum pay jobs the more unequal we will end up.

    So what’s happened in the UK economy in the last few years?

    https://www.ft.com/content/83e7e87e-fe64-11e6-96f8-3700c5664d30

  • Peter Martin,

    Jim Callaghan held every great office of state and it is worth reminding ourselves of what he had to say:

    “…Those who advocate devaluation are calling for a reduction in the wage levels and the real wage standards of every member of the working class.”

    “…the policies of the 1960s would not be successful today. No more would general import controls.They benefit some home industries at the expense of the livelihood of everyone working in exports. We would be robbing Peter to pay Paul.”

    “We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists, and in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step.”

    When demand in the economy can only supported by increasing consumer borrowing and by an ever deepening trade deficit, then Greek style problems start to develop. Counties like Greece cannot devalue and so must undergo internal devaluation i.e. restoring competitiveness mainly by reducing wages and pensions. Countries like the UK can let the currency take some of the strain to curb imports.boost exports, but as Callaghan noted we should expect a reduction in the wage levels and the real wage standards of every member of the working class.”

    Government policies based on maintaining full employment or demand for domestically produced goods and services are an important part of the policy mix; but such policies have to be underpinned by enhancing international competitiveness to ensure that overseas consumers will want to buy our goods and services as much as we want to buy theirs.

  • Peter Martin 11th Sep '17 - 8:58pm

    @ Joe B

    When Jim Callaghan said this, inflation was well into double figures. Partly this was due to a quadrupling of oil prices. Partly it was due to a general misunderstanding of how the economy worked. When the economy had previously needed a stimulus the spending was ramped up first in the SE of England with the end result that it overheated while the more distant regions were just thawing out. In retrospect it seems obvious that there should have been more spending in places like Northern Ireland where there were unused resources, and where it wouldn’t have caused inflation, and less in the Home counties, where it did. It would have ended the Troubles a lot earlier too – if they’d even have started.

    So lessons needed to be learned but there was no need to throw out the baby with the bathwater. Right wing economists seized their chance and replaced Keynes for Hayek in the 70’s and 80’s.

    The economy still works in the same way as it always did though. If we want some growth we need to find a way of getting some extra spending. Sure, you can persuade people to borrow more but that creates assets bubbles, which price young people out of the property market, and which then burst with disastrous results. Sure, you can increase your exports. Or try to. But we can’t all be Germany. We can’t all export more than we import. So what have you left to grow the economy?

    In the end, when interest rates are so low they can’t go any lower, it has to be down to Government to provide the extra spending power. There simply aren’t any other options.

  • Peter,

    Callaghan did say on every occasion since the war, including the Barber boom that pre-dated the oil crisis. I take your point about the regional imbalances in spending.

    I do however think that Piketty and other economists studying inequality have a point. We should be focusing on the distribution of value created in the economy; and not assume that the historically high levels of per capita economic growth achieved in the aftermath of two world wars can be sustained indefinetly.

    Government can provide some stimulus, but that it just to keep things from coming to stop during slumps. Ultimately, innovation and private sector investment has to drive the productivity gains needed to improve standards of living and we collectively need to ensure that the economy is organised in a fashion that ensures those productivity gains are equitably distributed among the population.

  • Vince shows he does not understand the people. Lots of people have talked about the costs of immigration such as lack of houses, rising house prices and rents, pressure on the NHS. The percentage of the UK population that were born outside of the UK increased from 8.3% in 2001 to 13.8% in 2011 (https://en.wikipedia.org/wiki/Foreign-born_population_of_the_United_Kingdom) and “71% of the overall increase in population growth in the last decade (from 2001 to 2011) is accounted for by non-UK born resident population” http://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/internationalmigration/articles/internationalmigrantsinenglandandwales/2012-12-11#country-of-birth).

    Between 2001 and 2011 about 3 million non-UK born people came to the UK, when we were in government we didn’t build enough houses to meet this demand, we failed to provide enough training places for doctors and nurses so we could meet future demands from our own population. Is it any wonder that people do not believe politicians about the effects of immigration because all three major political parties failed while in government to provide enough houses, nurses or doctors for today ?

    In 1981 only 6.2% of the population was born outside the UK; in 1991 it was 6.7%. I think a level about 7% would be acceptable to the majority of the British population, nearly half of what it is now. Of course it might be possible to make huge immigration into the UK acceptable if we had full employment, didn’t have over 2 million not in work with health issues or disabilities and had a job or meaningful training guarantee for every working age person (but we didn’t provide these when in government).

    Vince should understand that the National Minimum Wage would reduce the downward pressure on wages that having almost an unending supply of labour should create. Compared to 2010 the National Minimum Wage had increased by 6.4% by 2013. Another disadvantage from having this large labour pool is that UK industries instead of investing in mechanisation to improve productivity just employs more people which hold back UK productivity.

  • Peter Martin 12th Sep '17 - 11:24am

    @ JoeB,

    I remember struggling through Piketty’s book a couple of years ago. This is the gist of what he was saying , if I understood him correctly:

    Usually wealth grows faster than economic output. He uses the expression r > g (where r is the rate of return on Capital and g is the economic growth rate). Faster economic growth will reduce the importance of wealth, whereas slower growth will increase it. But there is nothing, at present, preventing this concentration of wealth. Only a period of rapid growth, from technological progress usually inspired by military spending, or even wartime spending, can keep economies from returning to the 19th century type capitalism as described by Karl Marx. Piketty recommends that Govts urgently impose a global tax on wealth, to prevent increasing inequality contributing to economic or political instability down the road and which could lead to the overthrow of Capitalism as predicted by Marx.

    Piketty seems to be more of a Classical economist and doesn’t share my Keynesianism but I wouldn’t disagree with most of what he’s written.

  • Peter,

    well done on getting to the end of the book. I have still to finish the last couple of chapters. I would say Piketty’s focus, as a student of the economics of inequality, is more focused on the what drives the distribution of economic value created.and its impact on the economy, rather than the macroeconomic approach of Keynes. He shares that focus with the classical economists and the labour theory of value as further developed by Marx.

    He does argue that the trend towards a concentration of capital in the hands of a few is the state of affairs that is normal consequence of capitalism and a rentier economy. He argues that state of affairs was only interrupted for a time in the 20th century as as consequence of the two world wars and great depression and we are on a path to returning to the kinds of wealth inequality prevailing prior to the great war.

    He showed that the proportion of disposable income going to household rents has risen sharply since the 1970’s . The economist, Joseph Stiglitz, who also studies inequality has made the same point and argues for imposing a land value tax, to directly address this source of increasing wealth inequality https://www.bloomberg.com/view/articles/2015-03-03/to-fight-inequality-tax-land .

  • Peter Hirst 12th Sep '17 - 4:24pm

    It’s occasionally wise to remember the distinction between there being no evidence and it being not true. Evidence depends on relevant research being done and it’s easier to prove a connection than there not being one. In fact, it is almost impossible to prove something is not true.

  • Good to see some Lib Dems are reading Piketty – I wish the Party leadership would.

    As for Peter’s comment… “It’s occasionally wise to remember the distinction between there being no evidence and it being not true”…. got me thinking at a tangent and brought back memories of the Thorpe business.

  • Richard Underhill 15th Sep '17 - 10:17pm

    Vince Cable was on Any Questions on BBC Radio 4. He did all right. The Tory should understand that we are not now in a coalition. He supported abolition of the 1% cap on public sector pay, pointing out the large number of nursing vacancies. The programme will be repeated on Saturday, followed by Any Answers?

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