Social Market Foundation Report Based On Highly Questionable Assumptions


Economics, Employment, Migration Trends

A new report from the Social Market Foundation suggests that an economic slowdown following the UK’s decision to leave the European Union will lead to a slowing of migration – perhaps to the tens of thousands – without requiring the imposition of any actual controls on migration.

Any such conclusion is thoroughly unsound, relying on a number of highly questionable assumptions.

  1. An economic slowdown will occur that will increase unemployment significantly.

There is no reason to think this at all. The latest IMF forecasts (19 July) are for the UK economy to continue to grow, while the Bank of England’s chief economist noted in a post-referendum keynote speech (but ahead of the IMF forecast) merely “the amount of slack in the UK economy is likely to begin steadily rising in the period ahead, perhaps causing unemployment to rise” (emphasis added).

  1. Higher unemployment deters migration

The SMF assert that there is a high correlation between net migration and unemployment, claiming that a one percentage point rise in unemployment is associated with a reduction of 40,000 in net migration. However, the International Passenger Survey figures they use are totals regardless of reason for coming to the UK. Some of the key constituent elements of migration will have been affected by reasons entirely unrelated to the labour market, for example the significant drop in student numbers resulting from the crackdown on bogus colleges are included in the reduction observed at times of peak unemployment.

The actual experience of the last recession was that the number of UK-born workers fell significantly from its end-2007 peak and did not start a sustainable recovery until the beginning of 2012.  In contrast, the number of non UK-born workers was essentially unmoved and started an upward march again at the beginning of 2010.

Graph for SMF blog postFurther evidence that there is not a simple relationship between UK unemployment and levels of migration can be seen from the facts that the English regions with highest rates of unemployment (North-East, London, Yorkshire & Humberside) are those with the highest and lowest levels of migrant workers and that the regions with the lowest rates of unemployment are high-migration Eastern England and low-migration South West.

Putting the two together suggests that a diminution in the demand for labour does not have a similar impact on UK-born and migrant workers, and for this reason it is not safe to conclude anything about how migrant flows might change as a result of any such change in demand.

  1. A halving in the number of vacancies shows a slump in demand for labour

The figures used are not official statistics for job vacancies but – it seems – an assessment by one company of the number of jobs advertised online. In complete contrast, one of the largest UK recruitment businesses said that demand had actually increased since the referendum and said ”this doesn’t chime with our data at all”. However numbers might have changed in the week after the referendum, to infer anything about the evolution of employer demand over the next four years from a single week’s change immediately after the referendum is quite unsound. The latest official statistics on the number of vacancies were published on 20 July and show that in the April to June period they remained around record high levels, a period during which ‘Brexit uncertainty’ was supposed to affect all manner of indicators.

In summary, the report is an unsophisticated analysis based on thin evidence. Its conclusions should bear little weight.

 

 

29th July 2016

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