Introduction: The Economist and others, such as Jonathan Portes (Director of the NIESR) are wrong to claim that immigration control is acting as a barrier to economic recovery. A careful examination of the immigration statistics does not support their exaggerated claims. That is not to say that the bureaucracy cannot be improved and Migrationwatch will be making some suggestions in this regard. Meanwhile we examine the evidence.
1. Nobody disputes the importance of reviving economic growth but, on examining the facts, it is very hard to argue that recent reforms to the immigration system constitute any significant impediment to a resumption of growth.
2. In his blog of 23 August 2012 (See here) Mr. Portes described recent changes to skilled migration as “a set of new burdensome and bureaucratic rules and regulations” which make it more difficult for businesses to employ the workers they want and, as a consequence, reduce growth and make us poorer.
3. It is hard to see what, in practice, he is referring to. There is no limit on Intra-Company Transfers (ICT’s) nor, of course, on any form of recruitment from the EEA - a pool of over 500 million people. Tier 1, the route for self-starters, was effectively closed after evidence that a significant proportion ended up in unskilled roles such as shop assistants, security guards, supermarket cashiers, and care assistants. (See here) Tier 2, employer sponsored skilled labour, was capped at 20,700 a year but in it first year, only about half that quota has been taken up. (See here) Improved routes have been introduced for entrepreneurs and investors. (See here)
4. The same blog also refers to Mr. Portes’ evidence to the Treasury Select Committee in March 2011 (See here) in which he claimed that, “by applying simple arithmetic to official publications”, he had calculated that the cap on skilled migration would reduce UK output by £2 – 4 billion over the whole 5 year period of this Parliament. According to his evidence about half of this was pure population effect.
5. These calculations were based on the Home Office Impact Assessment. It estimated that there would be a reduction of 11,000 a year in skilled immigrants (and their dependants), or 50,000 over the whole period, and it stated that those excluded would be, on average, about twice as productive as current UK residents.
6. In practice, the cap has not been reached so no significant number of genuinely skilled workers has been excluded. Indeed, the preliminary evidence suggests that most of the reduction was in chefs and care workers – hardly vital to productivity and growth. Other economic migrants might have been excluded by the higher threshold for Tier 2 but that implies that they were of somewhat lower skills and unlikely to be twice as productive as British workers. Mr. Portes recognised that his calculation could prove exaggerated if those migrants “excluded” had lower productivity than the average migrant. That indeed is what has happened.
7. His blog continues that the UK being “open for business” should also mean being open to labour mobility. He suggests that “simply reversing the new regulations introduced by this government, let alone further deregulation, could yield large gains. Sounds good but does he really advocate unlimited immigration of skilled workers from, for example, India? If so he should say so. That, however, would be a recipe for massive levels of immigration which are simply not acceptable to the public and it would surely be better to recognise that.
8. Indeed, since the year 2000, the British labour market has expanded by just over 2 million, nearly all of whom were foreign born. (See here) Whatever the technical arguments, it is clear that, over the boom period up to 2008, British workers were not drawn into the active labour market as would have been desirable. Obviously, immigration is not the only factor. There are issues of motivation and welfare provision as well as education and training but it does seem clear that, if employers are entirely free to bring in cheap, flexible and non-unionised labour, they are likely to do so – especially if they are tied to them by the work permit system. For wider social reasons it is important that there should be some countervailing pressure on employers to train and employ British workers.
9. It would be helpful if Mr. Portes were to be clear about the kind of immigration policy that he advocates. If he advocates an open door policy he should say so. If he advocates a selective immigration policy, than he needs to be clear about where the lines should be drawn. It is important that we also contextualise immigration policy against the backdrop of a rapidly increasing population (two thirds due to immigration), and two and a half million people unemployed.
10. Nobody has yet produced any hard evidence of significant economic benefit to the resident population from recent mass immigration. The House of Lords report in April 2008 was quite clear that they had “found no evidence…… that net migration generates significant economic benefits for the existing UK population.” (See abstract here) Indeed the MAC pointed out recently that much of any benefit goes to the immigrants themselves. (See Paragraphs 3.6-3.13 here) Nor should we overlook the results of the study by the NIESR, a body which Mr. Portes now heads, which found that the contribution of East European migrants to GDP per head was expected to be “negligible” (See Exec Summary here), indeed negative in the long run (p 26). Quotes from the US cut very little ice. Their society is very different. Their labour markets are much more flexible and their welfare much more limited. Nor are they exactly a small island.