Two popular arguments deployed against immigration are that immigrant’s take jobs from British workers or that immigrants are a burden on the welfare state. Both arguments have been shown to be largely invalid: the Lump of Labour fallacy has long been dismissed as economic bunkum; and existing evidence suggests that the net contribution of recent migrants to Britain’s public finances is positive. However, according to this evidence from Centre for Research and Analysis of Migration (CReAM) at University College London not all groups of migrants make a positive fiscal contribution to the UK. Whereas EEA immigrants have made an overall positive fiscal contribution to the UK, the net fiscal balance of non-EEA immigrants is negative.
It is this latter group of migrants that should be the primary focus of government policy. One of the key elements highlighted in the Liberal Democrat policy paper on this topic is helping people to learn English, so they can engage with and make a positive net contribution to British society. The paper makes three specific policy proposals with respect to English Language skills:
…that all new claimants for Jobseeker’s Allowance (JSA) should have their English language skills assessed, and that for those identified JSA will be conditional on attending state funded English language courses.
…that the level of English language required should be increased closer to the ‘proficiency level’ and that the Knowledge of Language and Life test should be made more demanding to reflect this level.
…that the Knowledge of Language and Life test should focus more on the knowledge migrants need to understand British communities and way of life with a particular emphasis on interacting with public services.
Unfortunately, many State funded English language courses have been the victim of local authority budget cuts in recent years.
There is a relatively simple remedy. Recruitment of long-term unemployed native English speakers and training as ESL instructors (this is a very short training course) to work in a voluntary job guarantee program for those interested and able. This has the triple benefit of engaging the long-term unemployed in productive work, developing the English language skills and employability of the immigrant jobseekers and promoting the integration of immigrants within British society. Everyone’s a winner – native Brits out of work, immigrants seeking to improve their lot and society as a whole.
* Joe Bourke is an accountant and university lecturer, Chair of ALTER, and Chair of Hounslow Liberal Democrats.
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50 Comments
Nice thought. Two genuine questions: is there evidence that non-EEA immigrants have worse English skills than those from the EEA? The way this post is worded, it looks like you’re suggesting better English courses would tackle the ‘negative fiscal contribution’ by non-EEA migrants, so I’m wondering if better classes would boost skills of migrants no matter where they’re from, and hence whether the English skills of non-EEA migrants can explain their negative contribution… funnily enough I don’t think I’ve worded this question particularly well!
Also, is fiscal contribution the most appropriate measure anyway? i.e. are there any broader measures of migrants’ contributions to the broader economy, not just the government coffers?
Thanks!
Get the unemployed to teach the immigrants how to speak English? There are obviously some potential drawbacks but I think on the whole this is probably a good idea! It’s a nice pragmatic solution, in reality I suspect it’d be quite hard to get chavs to teach Muslim women English, but I’m sure there’s ways to make such a scheme work.
Nice to see someone thinking of practical ways to make things better!
One way of making things better might be to desist from referring to people as ‘chavs’.
Yes, I agree that the ‘Lump of labour fallicy’, in it’s strict form, is false. i.e. That when a set number of workers are added to the employment market and take up jobs in the economy, that here is no increase whatsoever in the number of total employed in the economy.
However – this doesn’t make the converse automatically true either. If you say 500,000 extra extra workers are added to those available for employment and take up jobs, the number of vacancies automagically increases by the full 500,000 , leaving the number of vacancies, and unemployed, exactly as before, at least on a timescale of less than decades . I say that ALSO is economic ‘bunkum’.
The number is obviously somewhere in between. I am not aware of any studies that have quantified the effect, but I suspect it is highly dependent on growth rate of the economy in case – obviously a far higher rate in a tiger, ‘growing’ economy with 20%+ growth rate, and a high demand for labour, than a moribund flatlining economy with a surplus of labour numbering in the millions.
Which of those two cases is the UK closest to? With ‘headline’ unemplyment of 2.3 million, and a growth rate of 3% or so, I think closer to the latter case than the ‘tiger economy’. So… being generous… lets say 500,000 new workers create sufficient demand for… 300,000 new jobs? I think that VERY generous… after all, the majority of those jobs will be low/minimum wage.
I live in West Yorkshire, and as a part-time retail worker (these days) I have a fair amount of contact with ‘new employees’ (with little or no spoken English). My personal impression is that most are low or Un-skilled employment, and would not be generating significant tax revenue to support another worker at their own level, let alone a doctor, nurse, architect… whatever. Just an impression from personal contact, but I’m sure GP working lists would be a hellava lot shorter is even one tenth of the numbers were skilled. I’m open to evidence, but not faith-based assertions.
Sooo… let in 500,000 migrants who take up 500,000 jobs… (say) 300,000 ‘new’ jobs created within a relatively short time frame… five years, say. Still 200,000 jobs down after five years. And of course, while the individuals in the 500,000 influx may be, on average ‘paying their way’ or ‘a net benefit’… what about the costs of the 200,000 who where here already, and could have taken those jobs? Maybe they need training… maybe it’s the JOBS that need to adapt. But a solution of importing cheap labour ‘ off the shelf’ because your own unemployed are ‘not good enough’ is not what I will vote for. So, offering no solutions, it’s why I won’t be voting ‘Liberal’ this Thursday (I was a member, and activist 2003-2011, but consider the ‘Social democrat’ half of the TWO merged parties to have been effectively excised by Clegg et al Just free-trade econimic liberals in control now).
Perhaps, like me, they wouldn’t be counted in the statistics at all… having a working spouse earning a little above the average salary, I would get nil benefit, and thus wouldn’t cout. Of course, I was eligible for the first six months, but after that… nothing, so chose to sign off so as not to waste my own income to travel to be interrogated every two weeks. Now I’m earning less, for an eight hour minimum-wage working week, than one of the ‘new workers’ will be entitled to, in jobseekers allowance, after three months.
I like the idea; it’s the kind of thinking that we need.
However I doubt that it’s likely to work in practice. I don’t think teaching is such a non-skillset that you can take long-term unemployed and easily turn them into effective teachers.
Reserving certain types of jobs for the unemployed doesn’t seem practical to me, and I wonder if it might even be illegal. Nor does it seem consistent with the concept of equality of opportunity. If the teaching and related jobs are well paid then employed people will be interested too. If the jobs are poorly paid should we insist that employed people take them? How will this proposal impact the existing schools that teach these things?
This proposal is also open to easy challenge from other parties, on the grounds that means the government (taxpayer) is going to pay even more for immigrants than at present.
For immigrants, the proposal means a more prolonged period of uncertainty. There’s no guarantee that immigrants will succeed in learning things quickly – so we will end up with the same issues about repatriation except that they’d be delayed until after the course of instruction ends. Should we apply the same rules to asylum seekers? Maybe send them back, to whatever they were fleeing from, if they can’t learn?
And how does this address the issues of (1) numbers of immigrants, and consequences for housing, schools, services, etc, and (2) illegal immigrants?
Typo correction
If the jobs are poorly paid then is it wholly moral to insist that unemployed people take them? If an unemployed person refuses, for a variety of reasons including prejudice, lack of confidence, or lack of a realistic future, will they lose their JSA?
Prateek,
as a country we have been consistently running fiscal deficits since 2000. As a consequence, we the fiscal contribution of the entire UK population has been negative i.e. we are paying less in taxes net of transfers(social security and tax credits) than the state spends on public goods.
The CReAM analysis looks at the fiscal contribution of immigrants and breaks down its analysis between recent immigrants (after 2000) and earlier immigrants and also between EEA and Non-EEA immigrants. Its finding’s conclude that recent immigrants, both EEA and non-EEA, made a significant net contribution to the UK fiscal position – paying more in tax then the transfers and costs associated with this group. Non-EEA immigrants overall are broadly in line with the native population with respect to a negative net contribution to the fiscal position.
The conclusion to the report sums up the position as follows:
Overall, our findings draw a positive picture of immigrant contributions, particularly for those immigrants who entered the UK fiscal system since 2000… We find that between 1995 and 2011, immigrants from EEA countries made a net fiscal contribution of about 8.8 billion GBP (in 2011 equivalency), compared with an overall negative net fiscal contribution of 604.5 billion GBP by natives. Thus, between 1995 and 2011, EEA immigrants contributed to the fiscal system 4% more than they received in transfers and benefits, whereas natives’ payments into the system
were just 93% of what they received. Our estimates also show that immigrants from non-EEA countries have made a negative fiscal contribution overall, when considering all years between 1995 and 2011. This is partly explained by their demographic structure – non-EEA immigrants have had more children than natives, and we have allocated educational expenditure for children to immigrants (ignoring that immigrants arrived with their own educational expenditure paid for by the origin country).
The contribution of recent immigrants (i.e. those who arrived after 1999) to the UK fiscal system, however, has been consistently positive and remarkably strong. Between 2001 and 2011 recent EEA immigrants contributed to the fiscal system 34% more than they took out, with a net fiscal contribution of about 22.1 billion GBP. In contrast, over the same period, natives’ fiscal payments amounted to 89% of the amount of transfers they received, or an overall negative fiscal contribution of 624.1 billion GBP. At the same time recent immigrants from non-EEA countries
made a net fiscal contribution of 2.9 billion GBP, thus paying in the system about 2% more than they took out. The net fiscal balance of overall immigration to the UK between 2001 and 2011 amounts therefore to a positive net contribution of about 25 billion GBP, over a period over which the UK has run an overall budget deficit.
Page 19 of the report refers to English Language Skills:
“the median wages of natives and non-EEA immigrants are nearly the same, while the median wages for EEA immigrants are substantially below those of natives, by about 15% in 2011. One possible reason for these modest wages differences relative to the considerable educational differences is the age structure: many of these immigrants are young enough that their career profiles have not yet peaked. Another reason may be occupational downgrading of immigrants who have spent only a short time in the UK because of factors (e.g. language proficiency) that prevent them putting their qualifications to the most productive use. This latter explanation is supported by the larger wage gap suffered by recent EEA and non-EEA immigrants arrived since 2000 with respect to their co-nationals who have
been longer in the UK.”
I would conclude therefore that it is length of time in the UK, more than country of origin that determines the level of proficiency in English and consequently English Language tuition should be available to all newcomers. EEA migrants, however, appear more prone to return to temporary residence in the UK and may not have the same motivation as those contemplating permanent residence to engage in language studies.
TonyH,
I think you make some salient points about the short-term impact of migration and it is acknowledged that the impact of immigration upon the employment of native Britons is limited during a “buoyant market” – but that there is no doubt that low-skilled British workers were displaced by migrants during the recent recession.
It is worth reading the short article linked above Lump of Labour fallacy for some research on the topic.
The writer notes “This is the lump of labor fallacy – the number of jobs in the economy is not fixed! By coming to a country immigrants increase the supply of labor and hence reduce wages. In turn, cheaper labor increases the potential return to employers to build new factories or expand their operations. In so doing, they create extra demand for workers.”
In the UK, although starting to come down recently, unemployment has been stuck at over 2m since Jan 2009. Since 2009 it appears that net immigration has been broadly consistent with the increase in total employment over the same period. While it does not follow that all or most new jobs are taken up by immigrants -the impact is consistent with the basic concept outlined by Fabrice Grinda in her ‘Lump of Labour’ piece.
The last figures I heard for long-term youth unemployment were circa 850,000 of which 300,000 were University students seeking part-time work to help support them while studying. This would seem a particular opportunity to aid these students and other long-term unemployed – young or not – with paid work that delivered EFL instruction to immigrants who would otherwise have no such access to such language training.
This kind of job guarantee program and other similar activities that have broad societal benefits can go a long way to getting our unemployment levels back down to acceptable levels as the general economy recovers.
Thanks for your reply.
“Since 2009 it appears that net immigration has been broadly consistent with the increase in total employment over the same period. While it does not follow that all or most new jobs are taken up by immigrants -the impact is consistent with the basic concept outlined by Fabrice Grinda in her ‘Lump of Labour’ piece.”
It may be ‘consistant’, but that doesn’t make it true. There’s the old ‘sciencey’ saying that ‘corrolation doesn’t equal causation’, and this seems to be a prime candidate. There has been growth in the economy that has created (I have no figures to hand, but lets say 500K for argument) jobs, and an influx of a matching number of migrant workers that have taken 500,000 jobs. This in no way supports the position that the influx of 500,000 workers have in any way ‘created’ the 500,000 extra jobs and the influx has had a benign effect on the unemployed. The majority of those extra jobs may well have been generated anyway by the growth in the economy… maybe 300 or 400 thousand of those extra jobs, and a consequent take up of those jobs by the unemployed (or, like myself, “economically under-active” individuals who dont count in the statistics).
I’ll have to try to engage with the article you link to, but my asseement of the basic tenet is that it is simplistic and not ‘real world’, assumes hypotheticals like all potential workers are paid equally and that the ‘best outcome’ is that wages are driven down until the economy is at full capacity, irrespective of the effect on living standards, etc.
However, consider a thought experiment: If it were even remotely the case, as the ‘lump of labour fallicy’ proponents maintain, that each job in the economy creates anywhere near one new job of remotely equal value, the solution to unemplyment would be simple, and it would be almost criminal for it not to be government policy:
The government should ‘create’ a significant quantity of new jobs… doesn’t matter what. ‘Taking in washing’ is a little old fashioned, so lets say childcare. The government doesn’t have an inexhaustable pit of money, but keeping the numbers small relative to the total size of the economy/government should be enough. Lets say 200,000 jobs. 100,000 of them paid for providing childcare for the other 100,000 when they are working, and swapping the roles mid-week. That takes 200,000 indivuduals, out of the sum total of unemployed.
Now, if the ‘Lump of labour fallicy’ proponents are correct, and each employed person creates anywhere near one new job for each one taken up, the total unemplyed will drop to zero fairly quickly… because those 200,000 newly emplyed will create 190,000 jobs, which will in turn create 162,000 new jobs, which will in turn create 145,800 new jobs… and so on. In pretty short order (One year? Three?) the the number of unemployed drops to zero, and the government can gradually remove support for the childcare emplyment…
Obviously rubbish. But that is basicly what you are maintaining if you go with the ‘An influx of migrant workers has NO effect on employment levels’.
Obviously, SOME jobs are created… but individuals, like presumably Fabrice Grinda, using the fact that it’s an obvious fallacy that NO jobs are created to maintain that an EQUAL NUMBER, or anywhere near, the number of jobs taken up are created, is just as fallacious. It’s in there with ‘trickle down’, ‘the private sector is always more efficient’ and ‘Supply side economics’ (although I understand that at least a couple of those are still in favour with the ‘economic liberals’.
Richard,
this policy proposal was adopted at the last Libdem spring conference “…that all new claimants for Jobseeker’s Allowance (JSA) should have their English language skills assessed, and that for those identified JSA will be conditional on attending state funded English language courses.”
The issue now is how to deliver such courses. One option is state funding of a contracted out service to private English language schools or FE colleges and another, that I favour, is to develop an in-house facility via job centre’s that recruit and train ESL instructors from the pool of long-termed unemployed native english speakers on their books.
This may be slightly off topic however a further reason people worry is the lack of control we have of our borders. I know that libdem would welcome records of people arriving and leaving as would I however we should be able to say no. Do people think as a person who lives in the UK that watch program’s of immigrants jumping on the trailers of article vehicles at the ports fill us with confidence
We as a nation need to know who lives here and adjust welfare etc to suit the total numbers living here
I’ve now scanned the ‘Fabrice Grinda’ article linked to, and find it’s a minor modification of the standard ‘Lump of labour fallicy’ mechanism. It maintains that the way that an influx of new workers generate emplyment is by ‘reducing the cost of labour’.
Given that the vast majority of jobs will be, officially, at the legal minimum wage level, and that this can effectively be undercut by ‘apprenticeships’ for under 21-year-olds already, it would seem that the only way that you could support an unrestricted influx of new workers would be if you also advocated repealing the minimum wage legislation. Is this, in fact your case? Better two UK workers on £3 per hour, than one on £6?
I have my doubts about that mechanism too – my last relatively moderately-well remunerated emplyment (peaking at about £12/hour in 2007), in an IT-related feild was effectively instructing a group of Indian IT workers to do my job, for minimum wage. When considered adequately trained (by others) they then returned to Bangalore do do the job at half that rate. They were resident on one of those ‘intra company transfers’ for ‘essential skills’ so beloved of Vince. There is no limits to how low an emplyer will attempt to drive wage rates, and I wont vote for an enabler of that route to ‘a vibrant economy’ either.
TonyH,
I would not disagree with the thrust of the argument that a sudden large influx of new immigrants does cause disruption to the existing labour force and downward pressure on wages over the short-term. It takes time to absorb sudden changes in the rate of migration. The Lump of Labour fallacy simply argues that there is no fixed supply of jobs, anymore then there is a fixed level of demand. The argument is not that each new job creates another job of equal value. It is rather that each new worker on average creates the demand required, by virtue of the goods and services he consumes, to justify the creation of the job he undertakes to satisfy that demand.
We have minimum wage law in this country that sets the floor on the level of pay that can be offered for work. That floor is a determinant of both the effective labour capacity of the productive economy and the minimum acceptable standard of living of residents in the UK.
With respect to government minimum wage job creation programs – the arguments for these are that a job guarantee will put a floor under demand to offset the damaging effects of cyclical recessions and mitigate the downward spiral effects of significant falls in demand on both employment and average wages. There should be a lesser need for such programs when the economy is operating at full capacity and wages are rising significantly beyond minimum rate levels, as a consequence of competition for labour.
Allan,
Libdem policy does indeed spell out the need to restore both entry and exit checks and goes much further in proposing the following in its paper on immigration:
“The public has lost trust in the security of our borders. Liberal Democrats therefore believe that Parliament must take greater direct responsibility for actively managing migration and showing it is working in the interests of British people. We should also Making Migration Work for Britain ensure that evidence and argument, rather than emotion and dogma, inform the public debate on immigration.
It should be for Parliament to decide and vote on what measures are needed each year to assist in the delivery of the
plan. Parliament must be seen to be holding Government and bureaucrats to account.
We propose that the Government should set out its proposed migration plan annually to Parliament, alongside independent advice from the Migration Advisory Committee, the Office for Budget Responsibility and the Chief Inspector of Borders. We would expect there to be a five year strategic migration plan with annual opportunities to refine and extend it to take account of new information in those reports. They would detail migration
flows, economic imperatives, including skills and labour market shortfalls and surpluses, and set out how these are affecting the economy, public services and local communities; together with an annual audit of the control system itself. This would allow an informed debate and provide strong accountability to the public via Parliament. In turn, Government would be seen to be actively managing migration in the interests of Britain as a whole. “
@Joe Bourke
“The argument is not that each new job creates another job of equal value. It is rather that each new worker on average creates the demand required, by virtue of the goods and services he consumes, to justify the creation of the job he undertakes to satisfy that demand”.
Isn’t the second sentence simply stating the opposite of the first?
If not, do you agree that a newly incoming migrant working is ‘taking up’ one of a limited supply of jobs, which otherwise an already resident unemployed person might take instead?
Granted, the ‘supply’ of jobs is in no way ‘fixed’… but if the number of new jobs created is less than those taken up, there is a net negative effect on those who might otherwise take those jobs. And I include myself, my family and most of the people I know amongst that last group, so dont welcome the prospect of increasing the competion for jobs.
I suspect that the viewpoint of yourself, and many of the remaining liberal democrat core voting base, is that it doesn’t matter who gets the jobs, as long as there is growth and profit.
@TonyH
“I have my doubts about that mechanism too – my last relatively moderately-well remunerated emplyment (peaking at about £12/hour in 2007), in an IT-related feild was effectively instructing a group of Indian IT workers to do my job, for minimum wage. When considered adequately trained (by others) they then returned to Bangalore do do the job at half that rate.”
A bit of an aside – but I feel your pain on this one. In my case I first encountered this in 2002 or so, at £7.50/h or so and the group of IT workers were from and returned to Sri Lanka, but otherwise very much the same story. The old ‘train your replacement on your way out the door’ thing is an IT industry classic.
And politicians still have the nerve to complain about skills shortages in STEM 🙂
TonyH,
immigrant’s come in all types and sized. The largest component – foreign students – bring in not only very substantial student fees to the UK, but also their spending on goods and services – that pays the wages of their tutors and other enterprises employing staff in the UK. They represent a significant net contribution to the UK and though some will seek part-time work here they are restricted to ten hours work per week. If they did not come here. there would be less spending in the UK and the part-time jobs they seek to fill would quite likely not exist as a result.
You cannot have jobs without spending in the economy and vice versa there is no spending without a source of income. We all create demand in the economy with our own spending and rely on demand for our own jobs. Immigrants, whether students, investors, high-skilled categories or unskilled are no different.
So in answer to your question – No, I do not agree that a newly incoming migrants are ‘taking up’ one of a limited supply of jobs which otherwise an already resident unemployed person might take instead. I am saying the additional jobs that immigrants take would not exist were it not for their spending i.e. they supply the spending needed to create their own jobs.
I understand your point about not welcoming the increasing competition for jobs – but that it an effect of globalisation and the migration of jobs to low wage economies. What is better for us as a country? Having factories and whole industries relocate to China and elsewhere or having a workforce that can compete globally here in the UK?
It matters a great deal where the jobs are and that standards of living are maintained. I wan’t to see the UK competing in every field – from manufacturing to services – and creating a high wage economy. I recognise that can only happen if we remain as competitive and as productive as international competitors. That requires long-term investment in education and skills (both immigrant and non-immigrant), technological development, modern infrastructure and the joined-up thinking about industrial strategy and competitiveness that Vince Cable speaks of so often.
Hi Jo
Looks like we’ve hit on the fundamendal difference:
” I am saying the additional jobs that immigrants take would not exist were it not for their spending i.e. they supply the spending needed to create their own jobs.”
i.e. Each job ‘taken’ creates one new job. I maintain this is rubbish, and the true rate is nowhere near, and have stated the reasons it can be shown to be rubbish in my earlier posts. No source I’ve ever read has ever worked through the mechanism how it might even be partly true in any real-world case, including the link you provided earlier.
Tonyh,
nowhere above have I said each job taken creates one new job. What I have said is that spending in the economy creates jobs. Whether its multi-millionaires taking up residence in London, foreign students, intra-company transferees or other categories of migrants – they all have one thing in common – they spend money in the UK. That spending creates new jobs – what the exact relationship is between levels of spending and job creation may be quite variable depending on, among other things, how much is spent on domestically produced goods and services and how much on imported goods and services.
What we do know is that most of the immigrants coming here prior to the recession were able to find work and the total number of people employed has increased in line with the growth in population.
The research in the article shows that immigrants in aggregate are net contributors to the UK fiscal position. In developing immigration policy it is good to base it on reliable research and sound economic principles. That is what I would advocate.
Joe Bourke states that the idea that immigrants take jobs from British workers has been shown to be invalid by the Lump of Labor fallacy by Fabrice Grinda that he links to in his article.
Fabrice Grinda doesn’t believe there is a limited number of jobs. I believe at this moment in time there is, however it is likely to change in the near future. Fabrice states “By coming to a country immigrants increase the supply of labor and hence reduce wages” and low wages increases the number of jobs available. Fabrice states having immigrants does not increase the number of people unemployed. However if a company is employing an immigrant then a non-immigrant didn’t get that job and the creation of that job didn’t reduce the number out of work.
We should be clear that the more people who come into the country the more difficult it is for some people to find employment and wages are likely to remain low and so the government has to pay more “in work” benefits. These are real costs of immigration. We should recognise them and as we do not wish to stop individuals coming here we need to do things to increase the demand for labour so wages are not reduced and the unemployed non-immigrant can get a job. This is why I advocate that the Liberal Democrats commit ourselves to having full employment by 2020.
The argument that immigrates create new demand in the economy that benefits everyone is only true if they are providing something non-immigrants couldn’t do. If a non-immigrant could do the role taken by the immigrant then the extra demand would be the same and there might even be a reduction in the number of unemployed as well.
@Joe Bourke
LibDem conferences can make mistakes, but anyway, it’s not what your article appears to be about. Providing English teachers solely from the pool of present unemployed is:
(a) possibly illegal: unless the teaching jobs are also available to anyone who is qualified.
(b) unlikely to make a big difference to the unemployment statistics
(c) focussed on the wrong issues as far as immigration is concerned
(d) costly: your proposal makes the taxpayer pay more to subsidize immigrants
(e) problem-generating: what should we do for people who fail to learn?
(f) hostile to English people: quite a number of the natives might fail the test!
(g) stress-generating for immigrants, particularly if failure to learn or refusal to participate was expected to result in deportation
The big issues with immigration are the numbers of immigrants, the consequences of those numbers, and the fact that the person who chooses whether or not to allow a person to immigrate appears to be the applicant rather than the government. LibDems won’t have any credibility on immigration at all, and will continue to lose out to UKIP, unless and until they address these big issues.
Yes, spending in the economy creates jobs. But if that spending is by the employment of ‘X’ number of new workers (in this case migrants), previously not part of the ‘pool’, and that spending only creates ‘Y’ new jobs, when Y is less than X, there is negative benefit to taking those new workers, at least for the ‘pool’ as it existed before. And we’ve already established that ‘Y’ is a helavalot less than ‘X’. A simple point you either cant engage with, beyond ‘migration has a negative effect on some, and that’s unfortunate’.
I’m saying that the existance of those jobs owes very little to the presence of hundreds of thousands of migrant workers who took those jobs, that if they hadn’t been taken up by migrants, the majority of those jobs would have been filled by otherwise unemployed people who would have taken them up, or at least could have been trained to do so. And possibly, if some of those jobs were not filled at the lowest possible cost, a smaller number of comparible jobs would be available to be filled by the previous ‘indigenous’ unemployed, at a viable rate.
I dont doubt that, measured independantly of the rest of the workforce, or potential workforce, those migrants who have taken jobs are ‘paying their way’, or ‘contributing’ (at least as much as anyone in low/minimum-wage employment is). I really dont care very much about them – I dont wish them ill, but they are not my friends, relatives, former colleagues now languishing on un-, or part-employment. Possibly even considered as a whole, the economy is ‘better off’ -IF you consider that making the population 10% bigger, matched with an economy that’s also 10% bigger, makes everyone ‘better off’ – it doesn’t, especially as any economic benifit accrues to the top strata of income bands.
What I maintain is, those members of UK society who were resident in the UK before an influx of migrant workers get nil benefit, or in fact worse off. Wages are driven down, opportunities are restricted and there is increased competition for a restricted (even if it is slowly increasing) ‘pool’ of job vacancies. It’s no benefit to me if there are 100,000 extra jobs in the economy if there are also 200,000 extra workers. And being 50+, or mildly disabled, or poorly trained/educated or just socially inept means there is a strata of society that will always be overlooked in favour of young, ‘hardworking’, intelligent and possibly educated (over requirements for the job) migrant workers, willing to work for the bare minimum rates set, and below.
And, when it comes down to it, simply maintaining that ‘these migrants are a net benefit’ as an article of [economic] faith-based creed is one reason that the liberal democrats have lost my vote, and a number of individuals in similar curcumstances to myself are turning to UKIP. Still havn’t committed myself mind, but certainly not LD.
Interestingly, though slightly off topic, it seems that it wasn’t until after the 1st World War that passports and visas became necessary travel documents. This shows that control of immigration certainly isn’t part of the long-term English culture or history. Quite the reverse is probably true, given our massive pre-20th century empire. http://en.wikipedia.org/wiki/Visa_(document)
Obvious flaw in the policy: if the UK unemployed can be trained in TEFL skills then they can most probably be trained to do many of the jobs that the immigrants are intending to do…
This has a natural beneficial outcome: zero population increase and negative or zero increase in future liabilities on the UK government.
TonyH,
with all due respect, I would suggest that the empirical research and data. in report after report has confirmed that immigration has been a net economic benefit to the UK economy. That is something that even Nigel Farrage acknowledges when he moves the argument on to the quality of life in the UK and away from the economic arguments that are incontrovertible.
You say that we’ve already established that ‘Y’ is a helavalot less than ‘X’ (i.e. that there are more migrants than jobs that can be created. I would say that any rational review of the data establishes the opposite i.e. as the population grows (whether by internal growth or immigration) so too does total employment grow in tandem. I have acknowledged that there are short-term disruptions with competition for low-skilled jobs during recessionary periods, but these disruptions are cyclical and temporary and ultimately generate the extra demand that the economy needs to recover and create new jobs.
I understand that you are saying the existence of new jobs owes very little to the presence of hundreds of thousands of migrant workers who took those jobs, that if they hadn’t been taken up by migrants, the majority of those jobs would have been filled by otherwise unemployed people who would have taken them up. If this is UKIP’ s argument, I am saying that it is economic bunkum. We have had relatively high levels of employment since the 1970’s and particularly youth unemployment. It is nothing to do with immigration.
“IF you consider that making the population 10% bigger, matched with an economy that’s also 10% bigger, makes everyone ‘better off’ – it doesn’t.” I would say that with a government deficit of £100 billion a year, making the economy bigger is an economic imperative – especially if we can do so with workers that make a positive contribution to reducing that deficit.
The best thing we can do for those approaching retirement, mildly disabled, poorly trained/educated or just socially inept means is ensure that we maintain a productive and growing economy that continues to create jobs and that can fund the welfare state that so many people rely on for health care, pensions and a safety net during periods of unemployment.
Making the population and the economy 10% bigger will probably make the deficit 10% bigger too!
Roland,
as per my earlier comment – long termed youth unemployment currently stands at circa 850,000 of which something like 300,000 are university students seeking part-time employment to help fund their studies. Many university students spend their summers working as TEFL instructors. They and other long-term unemployed with the requisite English skills can be trained to undertake any job that needs doing and pays a wage that they find acceptable.
‘A net economic benefit to the UK economy’ – simply bigger, with bigger liabilities too. Per capita; not so clear cut.
“I understand that you are saying the existence of new jobs owes very little to the presence of hundreds of thousands of migrant workers who took those jobs, that if they hadn’t been taken up by migrants, the majority of those jobs would have been filled by otherwise unemployed people who would have taken them up. If this is UKIP’ s argument, I am saying that it is economic bunkum. We have had relatively high levels of employment since the 1970′s and particularly youth unemployment. It is nothing to do with immigration.”.
– And I state that your own view is the ‘bunkum’ view. I certainly do not consider the answer to a long-term persistant level of unemployment is to import vast numbers of migrants willing to drive down wages to a level that those already resident, and the ‘less effective’ cannot compete.
Frankly, I see our views as irreconcilable – we can argue until we are blue in the face: You have all the ‘evidence’ – which is not without challenge, and accusation of being ‘massaged’ to fit the economic liberal manta that cheap labour is only ever a benefit, by only ever by considering the migrants themselves, not those they displace. I have yet to see any which convinces me – a bigger economy is not necessarily ‘better’ for the individuals in it, and I maintain it would be ‘better’, if smaller, were unskilled migrant workers to be limited a very much greater degree than they are now.
I think we’ve reached an end-point: Have to hold my nose and vote UKIP on Thursday. Their domestic policies are distastefully right-wing but they’re probably no more set in stone than the centre-left LD ones were before the last GE, and at least there is a faint prospect of some increased limit to EU immigration, even at the cost of a percent or two off GDP for a year or two – less of an effect than coalition economic policies foe the last four years, which were ‘tough but justified’ apparently.
PS. Importing migrant workers to ‘fund the welfare state’ is not an issue for myself. As explained earlier, even though resident in the country for more than three (or is the proposal six?) months – 23 years NI contributions actually, I’m not entiled to any for another 17 years.
@ Joe Bourke
When people talk of net economic benefit what they mean is that they produce and spend is greater than what they take. I assume you have heard of the Keynesian thing called the multiplier that states that what someone earns and is not taxed, spent on imports or saved helps create demand that calls for someone to do more work (together with others this can lead to a new job).
I have not seen any reports or research that states that an immigrant doing a job creates more economic benefit than if an unemployed person does the role instead. If such research does exist I would be interested to see it.
With regard to an employee being paid X and so generates Y a sum less than X in extra demand I refer you again to Keynes and his multiplier and leakage.
The argument that when the population increases there will always be economic growth is just wrong. It could lead to famine and so the population would reduce to meet the economic circumstances. It could lead to everyone having less income (as I have ready stated Fabrice Grinda states that an increase in population can lead to a decrease in wages) and cause the economy to shrink because everyone would have less money to buy the produces being manufactured and these people would have to be laid off.
The increase in population can increase growth but it doesn’t have to. It is only because the new people are employed that there is an increase in growth, but this growth is not bigger than if an unemployed person is employed instead.
@ Joe Bourke “We have had relatively high levels of employment since the 1970′s and particularly youth unemployment.” We have had higher levels of unemployment and especially youth unemployment since the 1970’s when governments ceased to achieve full employment.
The question whether a job taken by an immigrant can be done by someone already resident is an interesting question and the answer is not either all those jobs can be done by residents or all of the jobs can only be done by the immigrants. I don’t understand why you can’t see this.
The government could do more to try and ensure that those unemployed would be employed rather than someone newly arrived. As Liberal Democrats we have to come up with a solution that doesn’t ban the immigrant from coming or applying, but gives the unemployed a better chance of being what is looked for. We believe in education as a way to help people and therefore aid for unemployed people with education and training might be a way of dealing with this issue.
It is no good for Liberal Democrats just to talk of the benefits of immigration without considering the costs. It is only once we recognise the costs that we can start addressing them.
Tonyh,
thanks for commenting on the thread. I don’t consider the ‘Lump of Labour Fallacy’ to be an economically liberal view but rather a universally accepted principle among labour economists of whatever political persuasion.
You are correct to say that our views are irreconcilable on this economic tenet and that I base my views, as far as possible, on the available research and evidence.
I also do not consider the answer to a long-term persistent level of unemployment is to import vast numbers of migrants willing to drive down wages to a level that those already resident, and the ‘less effective’ cannot compete. The coalition government has already taken measures that for all intensive purposes have eliminated unskilled migrant labour from outside the EU.
There are persuasive arguments for further immigration control and these are outlined in the Libdem policy paper. In my view, the more persuasive arguments are around social cohesion and capacity to provide housing, health and education services rather than the arguments about job displacement or benefit dependency that are often put forward by UKIP and its supporters.
I am sorry to hear about the difficulties you have experienced in West Yorkshire and hope that your circumstances and opportunities for re-engagement in your area of expertise will improve in the near future.
Almaric,
the Keynesian multiplier can be used to justify government deficits whether it be public investment, tax cuts or other programs designed to increase employment and spending in the economy. UK public debt has doubled in the past 6 years in the largest fiscal stimulus this country has ever seen.
That government deficit spending together with unprecedented monetary policy has aided in shoring up domestic demand in the wake of the financial crash. Demand in the economy has also been spurred by the growth in total employment including that of newly arrived migrants working and spending in the UK. That additional spending and the associated job creation would not exist in the absence of the migrants.
“The argument that when the population increases there will always be economic growth is just wrong. It could lead to famine and so the population would reduce to meet the economic circumstances.” This is the Malthusian Catastrophe developed in 1798 – it hasn’t happened yet.
I don’t argue that either all those jobs can be done by residents or all of the jobs can only be done by the immigrants. I argue that migrants coming here and spending money creates jobs – just as tourist spending creates jobs. Tourist spending creates jobs for UK workers, so does migrant spending and they take up many of the jobs that their own spending creates. The same principle applies to British emigres living and working overseas.
“The government could do more to try and ensure that those unemployed would be employed rather than someone newly arrived.” Yes, one way to start this is a job creation program to recruit and train unemployed native English speakers to deliver state fund TEFL instruction..
“It is no good for Liberal Democrats just to talk of the benefits of immigration without considering the costs. It is only once we recognise the costs that we can start addressing them.” Agreed – but I think these costs are more around social cohesion and pressure on housing, health and education services rather than jobs and benefits.
@ Joe Bourke
I still don’t know if you recognise that the multiplier is less than 1, as TonyH set out in his example and you rejected.
There has not been the largest fiscal stimulus this country has ever seen in the last 6 years. There was a large stimulus in 2008-09 but this is being reduced. The Coalition government is providing a smaller fiscal stimulus than the last two years of the Labour government. This lack of stimulus was the reason we didn’t really see any economic growth in the early years of this government.
I accept that someone in employment creates more demand. As far as I know there is no evidence that migrants produce more demand in the economy than if a non-migrant was employed instead. A tourist does create new demand above that which would have been produced without them because there is no displacement and the money is entering from outside the country.
“That additional spending and the associated job creation would not exist in the absence of the migrants.” This is only true if there is no one who was resident in the country to do that job.
For me the size of the economy would be the same if an immigrant or a non-immigrant did the role assuming that the immigrant doesn’t send any money back to their family in the country they are from. Can you recognise this? However it would be better for the unemployed if the person employed was a non-immigrant. It might even be better for the government’s finances as well and it might be better for the level of wages and it might be better for reducing inequalities as well.
“I think these costs are more around social cohesion and pressure on housing, health and education services rather than jobs and benefits.” I agree that the costs do include social cohesion and pressure on housing, health and education services. The pressure on benefits is caused by the increase in the supply of labour which reduces wages so the government has to pay more “in work” benefits than if wages were higher. Of course the pressure on health and education should be off-set by the tax the migrant pays I wonder why this doesn’t appear to be true. Is it there is a large time lag? It is housing where the pressure is often felt the most and the government needs to take action to reduce the housing shortage.
Almaric,
I have rejected Tony’s example for several reasons. Firstly, the research quoted in my article shows that immigrants on average are less likely to be unemployed than the population already here. There has been something like 4m of net migration since 2000 – unemployment was largely unaffected until the financial crash i.e. one way or the other, virtually all these new immigrants created their own new jobs. High levels of youth unemployment have been a feature of the UK economy since the Eighties regardless of immigration levels or state of the economy. The current rate of unemployment is attributable to the recession, not to immigration. The high rate of youth unemployment is structural not cyclical and again largely unaffected by immigration. The recession is attributable to reckless lending, an over-dependence on consumer debt and unbalanced international trade.
We have had the largest peacetime fiscal stimulus in the history of the UK during the 2 years of Labour following the crash and in the four years since the coalition was elected. There has been no overall reduction in government spending – spending has reduced in some areas and increased in others – heath and welfare particularly. The coalition government has for all intensive purposes followed the Alistair Darling plan for deficit reduction.
Migrants don’t produce more demand than non-migrants – they produce the same on average. If there are more people engaged in productive capacity than the economy will grow – even without an underlying increase in the productivity of the existing labour force. With a massive deficit to cope with in the UK – economic growth is vital to our recovery. That recovery is aided by skilled migrants working and and making a net contribution to the public purse here . The economy would be smaller and total employment less without the contribution of migrants – just as it would be if falls in the birthrate lead to a contraction in the total workforce (as is happening in Japan).
I understand what is being said and I am saying, based on the empirical research and findings that it should be self-evident that this statement is a truism – “That additional spending and the associated job creation would not exist in the absence of the migrants.” The salient point here is that the job will not exist without the spending of the migrant. If it did then it would already be filled by existing residents in the country that are able and willing to do the job.
It is true that there can be short-term displacement of unskilled workers when an influx of immigrants are competing for low paid work, but this is a temporary cyclical feature of large migration inflows that corrects as the economy recovers from recession.
Downward pressure on wages comes from globalisation and the effects of the recession. Up until the recession, real wages were increasing as wage increases outstripped the increase in prices of food, consumer goods and energy. That situation has now reversed. Low skilled work that can be done cheaper overseas will move to low wage countries and that trend will accelerate if there is a shortage of workers here able to compete with international producers. We need to be able to correctly analyse the causes of falls in living standards, if we are to develop solutions to reverse these trends. Immigration control is important for many reasons but it is not the source of our present economic difficulties. Intelligently managed, it is rather part of the solution.
I think you are correct in citing the ‘time lag’ as part of the problem in expanding public service facilities to cope with an increased density of population. However, the problems with housing are structural and long-term. The issues around social cohesion and integration are regional and more intractable where large immigrant populations concentrate in a confined area.
@Joe
Sorry, I couldn’t just let the blanket ‘all immigration is good’ manta go unchallenged again. Your economic ‘Faith’ trumps reason.
“virtually all these new immigrants created their own new jobs. ” – Rubbish. the jobs existed, and were taken up by immigrants, by undercutting wage rates, and being prepared to take on terms and conditions that others would not, or could not take up. Actual numbers of jobs ‘created’ by those migrants were small in number – Polish foods shops and translation and money-transfer services, additional teachers fluent in languages other than English… there may be the odd Indian billionaire who took over a pre-existing UK business and preserved or even expanded it, but those would be a tiny, tiny proportion of the total. Just sit back and think about what you are declaring as ‘truth’ – that several millions of migrants arrived in the country and each one, instantly (or what time-frame do you envisage?) “Created their own job”. Nonsense. They took up avalable vacancies, of which there are alsways some from growth and natural churn, and removed an opportunity for an otherwise unemployed indiginous potential employee could have taken. Only a mind befuddled by ‘faith based’ economic theories could spout such nonsense with a straight face.
“High levels of youth unemployment have been a feature of the UK economy since the Eighties regardless of immigration levels or state of the economy.” Yes – an economic POLICY implimented by the Thatcher government, and maintained by every government and it’s ‘supply side’ adherants since then. High unemployment, maintained as policy, and the mechanism to do so since the late 1990’s has been a high level influx of cheap migrant labour.
“Immigrants on average are less likely to be unemployed than the population already here” Yes; Very few migrants are at the low end of the capability spectrum, or disabled, or Over 50, or have dependants thay cant leave at a moments notice… at least until they are settled, and we have to bring in the NEXT tranche of migrants. So, your anser is to let those who ARE in less than ideal employment candidate rot on subsistance level (and below) benefits, so that an individual enterprise doesnt have to adapt to less than perfect candidates? And, by excluding those disadvantaged groups, I’m sure a proportion of the available pool of unemployed would be exactly as capable as migrants, so I’m not sure what you propose other than ‘leave ’em on the scrapheap as an example to the others’.
As has been explained earlier by myself, and another poster, simply expanding the workforce by X%, by importing X% more workers, cannot make those individuals who are part of the workforce better off. In fact it MUST make it worse – those displaced and ‘still available’ have to be supported still (although the coalition are making sterling efforts to introduce ‘work for free and/or starve’ measures to address this – I assume you would be in favour as it’s all part of the ‘drive down the cost of employment ‘ mantra). Another effect would be to drive those businesses who are willing to shave a few percent off ‘efficiency’, with higher wages or more adaptable terms and conditions, to either match the early adapers of lowest possible cost migrant labour, or be out-competed and go bankrupt.
You say that migrant labour has had NO effect on employment because the raw numbers of unemployed have not changed significantly over decades. Please read, and engage, MY conjecture, at least as well supported by evidence as your own: Unemployment would be A GREAT DEAL LOWER were not for a large scale influx of migrant labour. That is the harmful effect. The growth in the economy would have provided vacancies to be filled by those capable of it, and the level of unemplyments would have fallen to the levels of the 60’s and 70’s, where broadly speaking, the long-term unemployed comprised those who were really incapable or unwilling to work, with a small ‘in transition’ on top – possibly several millions lower than now. As stated earlier – the level of unemployment is a matter of undeclared government/business economic policy, to hold down wages, and it is maintained at that historically high level by a constant influx of cheaper migrant labour. Supply-side economics 101, as proposed in your link provided Waaay up this thread.
Tonyh,
let’s try and use real data rather than assumptions or contrived conjecture. Page 17 of the CReAM report tells us the following:
“Since the late 1980s, when net migration to the UK was close to zero or even negative for some years, immigration has been steadily rising… since 1995 the native population has barely increased, remaining relatively stable at around 52 million. The immigrant population, on the other hand, has grown substantially over that period, from about 4.8 million in 1995 to around 9 million in 2011, an increase from 8.4% to 14.7% of the general population in just 17 years. Breaking these figures down into EEA versus non-EEA immigrants, in 1995, the former made up under 20% of the total UK immigrant population but more than tripled between 1995 and 2011, growing from 885 thousand to 2.8 million. Over that same period, the non-EEA population grew at a considerably lower rate, increasing from 3.9 million to 6.1 million, so that by 2011, 32% of the immigrant population was composed of EEA immigrants. However, …between 2000 and 2011, the net addition to the UK immigrant population was about 1.5 million for EEA and 2.9 million for non-EEA immigrants, meaning that despite an increase in EEA immigration, non-EEA net immigration was twice as large as EEA net immigration during that decade.
…Migration has also contributed substantially to overall employment- which is not surprising, since immigration accounts for nearly the entire growth of the UK population. About 2.3 million of new jobs created since 1995 went to immigrants, but – despite their population size being unchanged over the period – about 1 million new jobs created over the period went to natives. More specifically, the number of employed individuals from the EEA increased fourfold, from 377 thousand to 1.5 million, while the number of employed non-EEA increased by almost 80%, from 1.5 to 2.6 million.”
I do not advocate uncontrolled immigration from outside the EU. I broadly support the existing regime of tight controls from outside the EU and free movement of labour within the EU. I also believe it was a great mistake to forego the transitionary rules that would have stemmed the flow of migrants from the A8 countries from 2004 – not for reasons of unemployment, but because of the pressures on housing and public services and the effects on social cohesion.
The report refers to above shows that of the 4.2 million migrants (including spouses and children) to the UK from 1995 to 2011 – about 2.3 million of new jobs created since 1995 went to immigrants, but – despite their population size being unchanged over the period – about 1 million new jobs created over the period went to natives.
The great majority of these 3.3 million new jobs did not exist before these migrants came. Their arrival was a significant part of the economic growth that we saw between 1995 and 2008. The CReAM data also records (page 18) that while the educational level of new immigrants is on average higher than the existing UK population – average wages are initially lower, but the gap closes over time as language skills improve and migrants are able to move on with their career development.
The displacement of unskilled workers, such as it has been, during the recession has often been in jobs that Brits do not find very appealing – labouring on building sites, night shifts in factories, agricultural labourers, minimum wage manual work etc.
Just look at countries that have very low levels of immigration like Japan – an economy in stagnation for twenty five years, jobs for life a thing of the past, increasing levels of youth unemployment, stagnant wages, unaffordable housing and a rapidly aging population relying on an ever decreasing workforce to see them through old age.
It’s not Supply-side economics 101 Tony – its Economics 101 full-stop. UKIP’s arguments are economic illiteracy to me as is the idea that unemployment would be any lower were it not for a large scale influx of migrant labour.
There are certainly legacy problems with languishing immigrant populations in old mill towns in your part of the British Isles and problems of social cohesion and youth unemployment in sectors of longer established and newly arrived immigrant communities here in London. But immigrants taking British Jobs is not the cause of persistent unemployment and, as the data shows, has no lasting effect on average wages. We have to look elsewhere for the real reasons why wages are depressed and it is there that we will find the solutions.
I understand why you feel the way you do when you see newly arrived immigrants doing work that you could be doing yourself, but paraphrasing your earlier comment “correlation doesn’t equal causation”.
@ Joe Bourke
It seems you have a completely different view of what TonyH was saying than I have. What I believe he was saying was quite simple if an immigrant earns £1000 they will not spend all that amount. Therefore the amount of demand they create in the economy will be less than the £1000. If you wish I can give you a more detailed example of how the multiplier might work in relation to a migrant and a non-migrant. I am glad you have accepted the migrants and non-migrants on average produce the same amount of demand in the economy.
Yes it would be a good thing if you could produce some data. The figures you quote do not talk about the number of people unemployed or not employed for other reasons, which have been much higher since about 1976 than they were before that. You state that about 2.3 million new jobs went to immigrants while only about 1 million went to natives. What your figures do not show is how many natives could have been employed instead of the immigrants. The point I am making is not that all 2.3 million jobs could have been filled by non-migrants but that some of them could have. It seems to be a matter of faith that you refuse to see this possibility. You do admit that when they first arrive these higher educated migrants receive on average lower wages than the native population. I do accept that some of the jobs carried out by immigrants are ones that it is hard to find natives to do, but this is not ALL of the jobs.
My point is not that immigrants always take a job that could be done by a British worker, it is that sometimes they do. The reason this happens needs to be studied (you have already pointed out that they often have a higher level of education) and the government should intervene to make the non-migrant more appealing to the prospective employer or with other assistance for the non-migrant if there are health issues which make the younger, fitter migrant more attractive. After all as liberals don’t we believe that people shouldn’t be disadvantaged by things beyond their control?
Economics should teach everyone that if the government is more concerned with the level of inflation than the number of unemployed the number of unemployed will be higher than if it was the main target for government policies. Once there is a large pool of unemployed people and the government is no longer pursuing full employment policies wages will not increase as fast as they did when there was full employment. It is simple supply and demand of labour economics. This is of course why Fabrice Grinda in an article you link to states that immigrants reduce wages because the supply of labour has increased.
The deficit fell to about 5.7% of GDP in 2013-14 from the high of about 11% in 2009-10. I think you will find that the deficit was larger in 1988-89 than in 2009-10 and also in 1993-94. Therefore it isn’t the largest fiscal stimulus as you keep saying. Have you noticed that members of the government keep saying that they have reduced the deficit by a third? Therefore even using your definition of fiscal stimulus it has been reduced since 2009-10. There is of course the question are all government deficits a stimulus to economic activity or do some of them just keep demand at the current rate?
I do accept that skilled migrants, where there is no alternative non-migrant skilled worker aid the economy and without them the economy would be smaller.
However it is this point that is clearly incorrect. – “I understand what is being said and I am saying, based on the empirical research and findings that it should be self-evident that this statement is a truism – “That additional spending and the associated job creation would not exist in the absence of the migrants.” The salient point here is that the job will not exist without the spending of the migrant.” This is economic nonsense. As far as I know the only job where this would be true would be a subsistence farmer, when the farmer consumed only what he produced. The job exists only because there is demand in the economy that the supplier cannot meet without employing another person. Once a person is employed then some of their income will generate extra demand in the economy (see above to recognise that this is less than the total amount they are paid).
The Keynesian economic point is that when a new person is employed that person will spend some of their gross pay within the economy and so there will be new demand in the economy. Therefore what is true is that if a migrant is employed some of their gross pay will create extra demand in the economy. However if a non-migrant is employed then some of their gross pay will also create extra demand in the economy. In this respect in matters not if they are a migrant or a non-migrant.
You recognise that sometimes immigrants compete with non-immigrants for jobs – “It is true that there can be short-term displacement of unskilled workers when an influx of immigrants are competing for low paid work, but this is a temporary cyclical feature of large migration inflows that corrects as the economy recovers from recession.” This therefore makes your claim a vacancy would “be filled by existing residents in the country that are able and willing to do the job” incorrect. Whether the displacement is temporary or not would depend on whether there was a constant influx of new immigrants to compete for low paid work.
Almaric,
When net migration began to move up from close to zero in the early nineties unemployment was at the 3m level. Unemployment fell continuously from 1993 to 1.6m before the recession in 2008. It peaked at 2.68 million in 2011 and is currently around 2.2m.
From 1995 to 2011 there were 3.3m new jobs created of which 2.3m were taken up by immigrants and 1m by existing residents. The data is produced by the Office of National statistics and widely known. Throughout the period of increasing immigration, sufficient new jobs were created for not only the newly arrived migrant workforce but also for 1m of the existing population.
You need no knowledge of economics to understand this very basic fact and to recognise that unemployment began to increase as a consequence of the financial crisis, not as a consequence of immigration.
“Economics should teach everyone that if the government is more concerned with the level of inflation than the number of unemployed the number of unemployed will be higher than if it was the main target for government policies. Once there is a large pool of unemployed people and the government is no longer pursuing full employment policies wages will not increase as fast as they did when there was full employment. It is simple supply and demand of labour economics. ” I think this is an accurate statement.
Fabrice Grinda refers to research by David Card comparing wage trends in cities with lots of immigrants such as Los Angeles, with those in places with only a few, such as Indianapolis. If immigration had a big effect on relative pay, you would expect this to be reflected in differences between wage trends. Mr. Card’s research suggests that immigrants had no significant effect on low-skilled workers’ pay. Mr. Card also tested the idea that perhaps low-skilled natives leave cities with lots of immigrants rather than compete with them for jobs, so that immigration indirectly pushes up the supply of low-skilled workers elsewhere and pushes down their wages but found no evidence that it does.
The deficit is reducing as as consequence of increased taxation and a growing economy. The economic period from the start of the recession in 2008 to date is cumulatively the greatest level of peacetime fiscal stimulus (being government deficit financing) in British history.
The Libdem immigration policy paper linked above notes the following:
“Economic migration is vital to building a stronger economy. The Office of Budget Responsibility estimated that a net
migration rate of 250,000 per year boosts annual GDP by 0.5% and that if net migration were to stop tomorrow the UK’s net public sector debt would rise by £18bn in five years. Furthermore, economic migration is essential to delivery of public services. There are 40,000 foreign-born doctors in the NHS and over 6,000 foreign teachers received qualified teacher status over the last five years.”
The Keynesian point you refer relates to his recommendation that during recessions the government should step in and employ temporarily idle workers directly or initiate public works to create spending in the economy. The demand is introduced by government borrowing to maintain the level of spending and hence employment. There is no universal agreement on the multiplier effects of such spending. Others advocate that tax cuts will have a similar effect in keeping consumer spending at the level required to maintain full employment.
Migrant workers increase the productive capacity of the economy i.e. they both create demand with their spending and supply labour at the same time. There may be a multiplier effect as some of the 1m new jobs created and taken up by native workers in the period 1995 to 2011 could be attributable to multiplier effects of the new migrant demand.
I think Joe, like many in the “immigration is wonderful rah rah crowd”, you have missed the point and hence have failed to actually address the underlying challenges this country is facing!
Fundamentally the important concern is the long-term well being of the established UK population, not that of people outside of these isles who may wish to come here for whatever reason. So just because “the net contribution of recent migrants to Britain’s public finances is positive” (a conclusion that analysis of the various reports can demolish), does not mean that we need more migrants and that we need to make it easier for them.
Going back to your point about teaching UK nationals TEFL skills, here you are looking in totally the wrong direction – you are saying that we should be teaching these skills to migrants who come here to work; rather skill up and do those jobs ourselves. Whereas if you look at those who currently gain TEFL skills, they predominantly go abroad to practise those skills. The only reason the UK will be able to support an increased population and an increased level of economic success is if we export more stuff (remember we rely on imports to support a population greater than circa 30m). So I suggest the most effective export isn’t to train UK nationals to teach TEFL to migrants coming to the UK but to go oversea’s and create new customers and markets for UK goods and services…
@ Joe Bourke
1.6 million unemployed plus those not in employment for other reasons is clearly not full employment. Therefore in 2007 there were over 1.6 million people who could under certain conditions be employed instead of some of the 2.3 million immigrants.
I have never said immigration causes unemployment what I have said is that under some circumstances if an immigrant was not employed a non-immigrant would have been employed and with government intervention a non-immigrant could be employed where without that help an immigrant would be employed.
I am surprised that an increase in the number of people looking for work didn’t reduce the wages for that work. I wonder if there were other factors in why the classic laws of supply and demand didn’t apply that Card didn’t notice.
When you speak of the cumulatively greatest level of peacetime fiscal stimulus I wonder if you are speaking of in real terms, just pounds or in relation to GNP because you have produced no figures unlike me. Also you have ignored the idea that the 2008 stimulus was not to create extra demand but to replace that demand that had disappeared because of the economic crash.
If we are employing an extra 40,000 foreign-born doctors and 6,000 foreign-born teachers then we are not being successful in encourage enough UK-born people to take up these professionals and we should address this problem.
I would argue that if the government invests directly rather than giving tax cuts the economy would receive a larger economic stimulus. The reason for this is that if someone earns twice as much as someone else they are less likely to spend all of their tax cut than the other person, but if an unemployed person is employed they are likely to spend more of their salary. It is well know that the multiplier has different values depending on how the stimulus is created.
Almaric,
1.6m unemployed was the level reached after 15 years of economic growth from 1992 to 2007 and is the same level reached in the late eighties after a period of growth when net immigration was close to zero. There is always a certain amount of frictional unemployment i.e. people between jobs or re-entering the workforce after a break and higher regional unemployment in more remote areas or unemployment hotspots that are undergoing a process of transition and structural youth unemployment. Somewhere around 5% appears to be a floor as the UK economy is currently configured and based on international comparisons with open developed economies.
I think the impact of technology and increasing productivity may be as significant a contributing factor as the laws of supply and demand with respect to the level of wages. Real wages increased rapidly in the 1960’s and 1970’s at a time when the supply of labour was increasing both as a consequence of baby boomers leaving school and joining the workforce and significant inward immigration from commonwealth countries.
The cumulative level of government deficit financing (excluding the bank bailouts) has been approximately 50% of GDP over the last six years. Net public sector debt is currently 76% of GDP and expected to peak at around 80% in 2015-16.
The labour government from 2008-2010 and the coalition (somewhat belatedly) have used both direct capital investment and tax cuts directed at basic rate taxpayers (temporary VAT cuts by labour and increases in the personal allowance by the coalition) as a means of stimulating or maintaining spending in the economy. Despite this and the implementation of extraordinary monetary easing the economic recovery has been very slow in coming and still needs to be secured.
@ Joe Bourke
5% unemployment is not full employment; in 1974 we achieved 2.6%. The lowest annual average in the 1980’s and the early 1990’s was for 1989 at 6.3% not 5%. I would consider about 3.5% unemployed as full employment.
The reason real wages rose in the 1960’s and 1970’s was because there was full employment not because there was an increase in the number of people in the labour force. I am not old enough but I have spoken to people who are and when there was full employment they could leave one job one day and have a new job in just a few days often having to choose which job to take.
You have quoted the level of National Debt, however the increases were approximately 7.68% in 2009, 7.82% in 2010, 7.63% in 2011 and forecast to be about 3% for 2013 and 2014. In 1921 it increased by 23.3%, and in 1931 by 9.91%. Therefore for the six years in question the overall increase in the National Debt will be the biggest in peace time, but each individual stimulus is not the biggest ever.
Almaric,
around 1 million people were classed as unemployed in the early 1970s with an unemployment rate of around 4%. The level rose to just under 1.5 million by the end of the decade and the rate to around 5.5%.
The low unemployment figures for 1974 was engineered by the Barber Boom. His unsuccessful “dash for growth” led to inflation, confrontation with the unions, and ultimately to the defeat of Edward Heath and his replacement by Mrs Thatcher. Anthony Barber told Parliament in 1972 that his Budget would add 10% to the UK’s growth in two years, and he professed to be unconcerned by his own forecast of a £3.4bn public sector borrowing requirement. He reduced income taxes by £1bn, and gave further huge tax concessions to industry in order to save jobs. Unfortunately, events soon proved him wrong. Inflation soared, boosted by the newly-floated pound and the first oil crisis. Within 15 months the chancellor was forced to bring in a deflationary Budget, and the government was forced into an incomes policy (wages freeze) to try to control inflation which led to a confrontation with the miners. The UK’s economic performance continued to deteriorate during the 1970s, and the stock market and housing boom went into reverse.
The debacle convinced many critics, not least in the Conservative Party, that Keynesian measures which used government spending to boost the economy and cut unemployment, no longer worked.
Jim Callaghan, the Labour prime minister said at the 1976 Labour party conference “We used to think you could spend your way out of recession and increase employment by 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… by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step…”
Unemployment soared in the early 1980s, the official level exceeding 3 million and the official rate reaching 11.9% in 1984. Most of these jobs had been lost in the heavy nationalised industry sector, which was in decline. Unemployment remained high until the boom in the second half of the 1980s. The official level fell below 3 million in mid 1987 and ended the decade at around 2 million. The official rate of unemployment stood at 7.0% at the end of 1989.
However, increases in the inflation rate towards the end of the 1980s led to increased interest rates and another recession. Unemployment began to increase and by early 1993 the official level had again risen to 3 million with the official rate around 10.6%. The economic situation of the UK improved throughout the 1990s however and the official unemployment level fell below 2 million in mid 1997 with the rate standing at around 6.8%.
The official level of unemployment remained below 2 million with an official rate around 5% until 2008. The economic downturn in 2008 caused the official level of unemployment to rise to 2.68 million in 2011 with the rate reaching 8.3%. The rate and level then both began to fall to today’s level of 6.8%.
Sustainable full employment levels in the 1970’s were around 5% and I expect that that is pretty much where we will get to when the economic recovery has recovered to full capacity.
Joe, Almaric & TonyH
An interesting and thoughtful discussion, however there are a number of oversights:
1. % Unemployment rate: If we are to belief the guff about the high level of economic activity among the immigrant population then the maths tells us that the headline unemployment rate will go down, even if the actual numbers of unemployed remain the same. Given the sustained high levels of immigration we’ve seen since the late 90’s and that such migration has been by far the largest contributor to the growth in the working population then the reduction in the % unemployment rate should be noticeable. The fact that it isn’t says that some thing is happening that isn’t being captured.
2. Job creation numbers: I think what we are seeing here is the same mindset that doesn’t understand the difference between turnover and profit. Hence to these people, all created jobs are equal; when they are not.
I think one of the things Tony Blair actually got right was to talk about “UK plc”, hence lets look at immigration from a business perspective. In this context 500,000 new joiners immediately become an overhead; along with all the stuff they need to become productive: houses, hospitals, schools etc. etc., not forgetting all the people needed staff those services (eg. doctors and nurses). Hence we could be looking at having to create a 100,000 paid jobs along with accepting that a further 100,000+ may not be available for productive employment. (aside – all numbers are wet finger guestimates!). So we need to discount from any job creation and wealth creation figures attributable to immigrates, their attributable overheads. In doing this it would not surprise me to find that the extra 40,000 doctors and 6,000 teachers cited above were actually overheads incurred wholly in servicing the migrant population…
Roland,
the points you raise are indeed the focus of the CReAM report linked above.
1. Unemployment rate. The employment/unemployment rate for migrants is broadly similar to the native population. The report breaks down migrants between EEA and Non-EEA and between recent (post-2000) and earlier migrants. The most productive are the recent EEA migrants – the least productive are the earlier (pre-2000) Non-EEA migrants.
EEA migrants as a group have a higher employment ration than the native population. Non-EEA have a lower employment ratio than the indigenous Brits.
2. The report also assesses tax contributions versus attributable costs in terms of positive and negative contributions to the public purse. Again EEA migrants are found to contribute positively – paying more into public coffers than the costs attributable to them – whereas Non-EEA migrants (particularly earlier non-EEA migrants) are a net drain overall. The report attributes this difference in net contributions of the respective groups to their demographic structure – non-EEA immigrants have had more children than natives, and are allocated educational expenditure for their children (ignoring that immigrants arrived with their own educational expenditure paid for by the origin country).
Doctors and Teachers migrating here have had the costs of their education and training borne by their home countries, but the UK enjoys the benefit of their services in adulthood. That is probably a pretty good deal for UK Plc.
I think housing is the most important choke point. Jobs are not fixed and medical provision and school places can be expanded as the tax base increases. Housing, unlike jobs, is relatively fixed with new housing development consistently running far short of new household creation. Access to Social housing is a point of contention in communities that have seen an influx of immigrants and is an area where preference needs to be given to those with long established ties to their local community.
As you will gather from my article, I am persuaded that migration has no long-term effect on unemployment . I do however, favour the introduction of a safety net by way of a voluntary minimum wage Job guarantee for people like Tonyh who, through no fault of their own, find themselves unemployed or underemployed for six months or more as advocated in this earlier article
We can conquer unemployment
@ Joe Bourke
I think you need to check your facts regarding 1974. I remember there being miner’s strikes earlier than 1973. I remember the Yom Kippur War and the ban on Sunday car travel. I remember the three day week and the TV going off at 10.30 and power cuts. I could quote the average unemployment rates for every year since 1945 but I won’t. The lowest between 1945 and 51 was 1.3 and the highest was 3.1. Between 1951 and 1964 the lowest was 1.2 and the highest was 2.6. Between 1964 and 1970 the lowest was 1.5 and highest 2.7. Between 1970 and 1974 the lowest was 2.6 (1974) and the highest was 3.8 (1972). Between 1974 and 1974 the lowest was 2.6 and the highest was 6.2 (1977). It was down to 5.7 when the Tories had their Labour not working campaign. Between 1980 and 1987 the highest was 13 and the lowest was 7.4 (1980). Between 1988 and 1995 the lowest was 6.3 and the highest was 10.3. (Government Statistical Service – Unemployment Statistics from 1881 to the present day {c 1996} by James Denman and Paul McDonald). According to the ONS unemployment was only under 5% between 2003 and 2005 and they don’t call that full employment which they believe is less than 5%.
I am not sure that in 1976 Jim Callaghan would have really understood that it was the expanding money supply that was causing high inflation rather than Keynesian policies to reduce unemployment.
The sustainable full employment levels until the Heath Government banking reforms (c 1972) that massively increased the money supply was an average unemployment level of below 2.5%.
I am surprised to learn that the unemployment rates are the same for migrants as for non-migrants because lots of people say migrants do not come here and stay if unemployed or is that only EEA migrants?
Almaric,
the first miners strike was in 1972 and the second in 1974 forced the election in that year with the Conservatives asking the voters for their support using the slogan ‘Who governs Britain’.
The current unemployment measure – The Labour Force Survey – came in during 1971. Prior to that only the benefit claimant count was recorded and with widespread over-manning accommodated in nationalised industries, data for the post-war period prior to 1971 is not comparable.
Jim Callaghan was Chancellor of the Exchequer from 1964-1967 and managed the devaluation of sterling 1967. He is the only British politician to have served in all four of the “Great Offices of State”, – Chancellor of the Exchequer, Home Secretary from 1967 to 1970, and Foreign Secretary from 1974, until his appointment as Prime Minister in 1976. I think we can safely assume that he clearly understood the impact of increased money supply on prices and wages as did Keynes and earlier generations of Chancellors both before and after World war II. He also had come to understand by 1976, that significant fiscal and monetary stimulus was advocated by Keynes as a short-term emergency measure to kick-start an otherwise stalled economy in deep recession – not as an regular economic tool for micro-management of employment levels or as an alternative to more permanent structural strategy.
There is now very little difference between the unemployment rates of immigrant and UK-born men.
Historically the employment gap has widened in recessions and narrowed in economic recoveries. This has not been
observed during the latest recession. Unemployment rates for immigrants and UK-born have risen together by similar
amounts.The higher average unemployment rate of immigrants in the past was explained in part by a relative lack of
skills and the fact that many of them were employed in casual and insecure jobs: anyone who is in this sort of job faces
much higher risks of subsequent unemployment. Changes in the skill mix of immigrants over time can explain the convergence in unemployment rates. New immigrants cannot claim state benefits unless they are working or have paid sufficient contributions when in work. See 2012 link to report from LSE for data: http://cep.lse.ac.uk/pubs/download/pa014.pdf
Joe Bourke An interesting stat you quote, in the comparison of immigrant and UK born men’s unemployment. I would add to your factors, higher levels of “active” racism in previous decades, and the rocketing levels of insecure jobs and odd job “self employment”, making it very difficult to restrict insecure work to immigrants.
This argument seems to have become focused on a key economic technicality, important, but only one part of the picture.
In reply to Chris B, I’m puzzled why it should be chavs deputed to teach English to Muslim women. There were plenty of well-educated non-chavs made redundant in the economic crash or by austerity, including many public sector and voluntary sector workers. Some of these were/are at an age when getting a new job, especially one in a different sector, is particularly hard – the 50+s, especially the 60+s. Made redundant three months short of 65, with some TEFL experience in my past, I’d have been delighted to be asked to teach English to immigrants. As for the others put out of work, they’ve mostly got jobs again, but just a few months of tutoring could work wonders for many people’s English.
I’m pleased that Joe frames this around Jobseekers. While some 80-year-old Bangladeshi grandparents in poor health coming to Britain to be maintained by son and daughter-in-law will jump at the opportunity to learn English, it would be foolish to demand it of all.
One slight reservation I have about Joe’s idea is that it may be addressing the excuse rather than the root cause. There are plenty of people convinced that various ills – unemployment, crime, litter, lax morals – are down to immigration, rarely (not never) with any real evidence, and they may not listen to reason. Where the root cause is fear of strangeness, initiatives to bring different groups of people together to get to know one another (not saris and samosas, but sharing common interests and concerns) can be effective: I’ve seen that in an area of Sunderland with arriving asylum-seekers and white locals.
@Simon – good points about jobs/second career for the 50+ age group.