Effects of immigrants on the UK economy

Migration, Employment and UK Economy

Point 1: Perception and Reality do not always align

Duffy and Frere-Smith (2013) published their report on perception versus reality where immigration\\'s impact on the UK labour market are concerned. The report highlighted several gaps between perception and reality, such as the composition of immigrants being largely asylum-seekers (most are students), and the fact that concerns about immigration have been rising recently. They also highlight that concerns are often surrounding impact on public service and benefits, but ignore positive elements like the tax contribution and economic benefits of immigrants.

This study supports the findings of Dustmann and Preston (2007), which held that residents of the UK were mostly concerned about the impacts of immigrants in terms of paying taxes and using the welfare system. They found two areas where such concerns were disconnected from reality. One being that such concerns were outsized in proportion to the actual relevance of that particular issue, and the other being that more important concerns, such as big picture things like impact on wages and employment, were actually not as important. These findings illustrate more that cognitive bias and the way public debates are framed have a far strong influence on public perception than things like facts and rational analysis.

Point 2: Immigrants make a generally positive contribution

Dustmann and Frattini (2014) published their study on the fiscal effects of immigration in order to lend expert analysis to the debate about whether immigrants are positive or negative for the fiscal health of the UK. Among their key findings was that immigrants generally had a positive impact on the fiscal health of the UK, even during economic downtimes. In particular, they found a positive effect for immigrants from EEA countries, the strongest impacts coming from \\"immigrants coming from countries that joined the EU in 2004\\", which stands in direct contrast to many of the political narratives about Eastern European immigrants in the UK.

Dustmann et al (2003) also found that higher immigration \\"appears to be associated with higher wage growth in the currently resident population\\" (p.4). Findings of a different Home Office report in 2014 showed consistency with these findings (Devlin et al, 2014). It is worth noting that both of these studies were careful to point out certain deficiencies with the data that was available, and the challenges associated with measuring immigration effects in general, However, that the results are consistently positive across multiple studies is also worth keeping in mind, that immigration has at the very least no net negative effect.

Point 3: Immigrant Impacts on Native-Born are Overstated

Manacorda, Manning and Wadsworth examined the impact of immigrants, especially university-educated, on the wages of native-born Britons. They had expected that the arrival of so many educated immigrants would have a negative impact on wages of native-born, but found that this was not the case. The arrived at a new theory, which is that these two labour pools are poor substitutes, and that the arrival of more educated immigrants had a much stronger impact on the wages of other educated immigrants than on the wages of native-born. They could have also explored a different hypothesis as well, which is that the arrival of educated immigrants leads to greater job creation; the highly educated are more likely to start their own company if they cannot find work, than to go on the dole, and when they do start companies those companies employ other people.

Dustmann, Frattini & Preston (2013) arrived at a somewhat more nuanced finding. They found that immigrants had a slightly positive impact on wages in the top quintile but negative impact on the bottom quintile. The latter likely relates to labour surplus of low-skilled labour (i.e. that labour which has minimal bargaining power). They also note that immigrants may compete in that bottom quintile because of \\"initial mismatch or immigrant downgrading.\\" They do not offer a theory about the upper quintile, but the job creation theory would probably hold up just as well there. Strong contributors to the labour pool will tend to benefit each other, as they will find among their number others with complementary skills more readily than at the bottom quintile where the skill sets of the workers are less complementary than they are duplicative.

Point 4: Immigrants Often Suffer Abuses

A further counterpoint to the idea that immigrants are a net negative to the UK economy is the fact that immigrants are more likely than native born to suffer from exploitation (Anderson & Rogaly, 2005). On the economic level, this exploitation allows for lower prices, and on the human level these are people doing jobs at the bottom rung, filling positions that native-born Britons might not even wish to fill. In other words, these immigrants are filling roles for which there is no native-born competition, and thus cannot have a negative impact on native-born wages, employment levels of living standards.

The Economist (2014) also notes that immigrants are a net gain to the public purse, at an estimated gain of more than ?4 billion, in contrast to the native-born population, which is a net negative contributor of ?591 billion. The fact that migrants are willing to work even under poor conditions is one reason, along with net positive contributions from the better-educated immigrants, for these types of findings that entirely disprove the notion that immigration is a negative for either the British economy or for the economic well-being of native-born Britons either. Such arguments are simply disproved by the data.



References

Anderson, B. & Rogaly, B. (2005) Forced labour and migration to the UK. TUC Report Retrieved March 6, 2018 from http://ccem.elteg.com/media/anderson_2005_forced_labour_and_migration_uk.pdf

Duffy, B. & Frere-Smith, T. (2013) Perceptions and reality: Public attitudes towards immigration. IPSOS Mori Social Research Institute https://www.ipsos.com/DownloadPublication/1634_sri-perceptions-and-reality-immigration-report-2013.pdf

Dustmann, C., Fabbri, F., Preston, I. & Wadsworth, J. (2003) The local labour market effects of immigration in the UK. Home Office. Retrieved March 6, 2018 from http://www.ucl.ac.uk/~uctpb21/reports/HomeOffice06_03.pdf

Dustmann, C. & Frattini, T. (2014) The fiscal effects of immigration to the UK. The Economic Journal. Vol. 124, pp. F593-643.

Dustmann, C., Frattini, T. & Preston, I. (2013) The effect of immigration along the distribution of wages. Review of Economic Studies. Vol. 80 (2013) 145-173.

Dustmann, C. & Preston, I. (2007) Racial and economic factors in attitudes towards immigration. BE Journal of Economic Analysis and Policy Vol 7 (1) 1-41.

Manacorda, M., Manning, A. & Wadsworth, J. (2011) The impact of immigration on the structure of wages: theory and evidence from Britain. Journal of the European Economic Association. Vol. 10 (1) 120-151.

The Economist (2014) What have the immigrants ever done for us? The Economist. Retrieved March 6, 2018 from https://www.economist.com/news/britain/21631076-rather-lot-according-new-piece-research-what-have-immigrants-ever-done-us