

Economics, Employment, European Union, Migration Trends, Population



The current pattern of EU migration

2. Our paper ‘Economic characteristics of migrants in the UK’ (July 2015) looked at labour market outcomes in terms of type of employment, reasons for inactivity if not in employment, and earnings as well as benefit claims. Its central conclusions in relation to European migration were that despite high levels of employment, Eastern Europeans tend to have considerably lower earnings and higher rates of benefit claim than the UK born population. These conclusions are supported by work on similar lines by Migration Observatory (‘Characteristics and outcomes of migrants in the UK labour market’, March 2017) and Eurofound (‘Social dimension of intra-EU mobility: impact on public services’, December 2015, see fig. 18).

3. We have conducted further work on skills levels of European migrants and a sectoral analysis. The former paper (‘A limit on work permits for skilled EU migrants after Brexit’, September 2016) observed that a significant majority of European migrants were working in lower-skilled jobs, by which we mean jobs that would not have met the skills-based criteria for admission from a non-EEA country for work. We think that this is a key and relevant distinction to make.  The latter paper (‘How vital are further inflows of EU workers?’, October 2017) concluded that reliance on present stock is not of itself any indication that further unrestricted inflows are needed.

4. There does not appear to be any evidence of an approaching cliff-edge which would see large numbers of EU migrants leaving the UK for jobs elsewhere, and of course even if that were so the present stock could be maintained with zero net migration.

The consequences for population growth of continued free movement

5. There is no doubt that the trajectory of future migration is a matter of the highest importance. For EU migration, should the UK remain subject to free movement rules notwithstanding Brexit, we can expect net EU migration to continue at about 125,000 a year into the medium term (‘The outlook for EU migration if the UK remains subject to the free movement of people’, July 2017).

6. Combined with migration from the rest of the world this would mean that the UK population might increase by more than four million over the next decade and by just over eight million over the next twenty years. In effect, a failure to control EU immigration would result in the ONS high migration scenario (245,000 a year) under which the population rises by nearly 400,000 a year up until 2041; 82% of that increase would be the result of the direct and indirect effects of immigration.

The impact of continued population growth

7. Since 2000, 1.65 million of the estimated additional 2 million households created in England are headed by someone who has migrated to the UK. More recently the impact of immigration has been even greater. In the past ten years, 90% of the additional households created in England have a foreign born head. The increased demand for housing from a rising population, driven by immigration, has contributed to a dramatic rise in house prices, pushing them beyond the reach of younger people and others who do not already own property.

8. Housing is a prime example of the potential negative impacts of uncontrolled migration that are not captured by economic analyses but which are felt every day by many in the existing population.

The economic and fiscal impact of EU migration

9. There is no evidence at all for the UK that the very large amount of migration into low-skilled or low-paid work over the past decade or so has been in any way enhancing of productivity or of material wider economic benefit. In the period 1986-2006, UK productivity increased by 45%. However since then, productivity has flat-lined despite the number of immigrant workers growing by over two million, and the migrant share of the workforce nearly doubling.

10. It is repeatedly asserted that migrants are net contributors to the public purse. The evidence for the UK on the fiscal impact of migration overall is that it has, in fact, been a net fiscal cost. CReAM/UCL ‘The fiscal effects of immigration to the UK’, 2014 found that in the period 1995 to 2011 all migrants in the UK had made a negative fiscal contribution totalling between £115 and £160 billion depending on assumptions.

11. However, in relation to the fiscal impacts of EEA migration specifically, in CReAM’s central scenario, a net contribution of some £20bn has been widely reported. Our own assessment of this research noted that for Eastern European immigration, a positive result relied almost entirely on attributing business taxes (corporate tax and Business rates) to the whole population on a per capita basis. However, even doing this, the impact they found was negative in the later years of the period they examined. In an alternative scenario without this attribution of business taxes, CReAM’s own estimation of Eastern European contribution fell to a negligible and insignificant amount even over the whole period.

12. Migration Watch subsequently carried out a reprise of their methodology for the more recent year 2014/15 and on essentially the same assumptions (i.e. even following their attribution of business taxes) concluded that the annual fiscal cost of Eastern Europeans had further increased to £1.5bn by 2014/15. Without this assumption, the cost was £3bn.

The necessity of high migration for fiscal sustainability

13. The Office for Budget Responsibility (OBR) makes projections for the future course of the UK economy based on a range of variables, including different levels of net migration. It is often claimed that these projections ‘prove’ that continued high levels of net migration are required both in the short term and over the long term to keep the UK public sector debt to GDP ratio within sustainable limits.

14. However, as we understand it, the OBR assume that from the day of first arrival migrants will be paying the same taxes as a lifelong resident of the same age and gender. Thus a 26 year-old migrant is assumed to get a job in the UK on the day of arrival at the same pay level as 26 year-olds already working in the UK, and then progress up the pay and career ladder with each additional year of age at the same pace. As a general proposition this seems highly implausible and it does not appear to backed up by any empirical evidence.

15. As to more general claims that migrants are needed to pay for pensions in the future, it has been noted that rejuvenating the UK’s ageing population through immigration will be an endless treadmill requiring a never-ending and increasing stream of newcomers with the negative consequences of a larger population exceeding the modest economic benefits of the increased numbers (Robert Rowthorn, ‘The costs and benefits of immigration’, December 2015).

The impact of potential reductions in EU migration

16. The evidence of the past decade or so is that new workers from the EU have been overwhelmingly from Eastern Europe and that this has continued in more recent years. The result is that by the final quarter of 2016, 70% of workers from the EU who had arrived in 2010 or later were in lower-skilled work. We have suggested that, post Brexit, the UK’s existing work permit scheme should be widened to include EU workers, thus confining the inflow to the highly skilled. (‘EU immigration post-Brexit – A comprehensive policy’, May 2017).

17. We believe that this would not result in any material adverse economic or fiscal consequences but would go some considerable way towards relieving pressure on public services and reducing the negative consequences of overcrowding and congestion that will inevitably result from uncontrolled immigration.

30th October 2017

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