What the immigrants can do for us, or the economic

consequences of Mr Blunkett.

David ColemanRobert Rowthorn

Presentation given at the Centre for Research in the Arts, Humanities and Social Sciences, Cambridge, 5 July 2004.

New Labour, new immigration policy

• Previous policy put ‘restriction of settlement’ first, subject to ‘needs of labour market’ and open-ended ‘obligations’. ‘Race relations’ prominent.

• Result - more immigration since 1980s.• New policy takes positive view of immigration,

still subject to controls (especially asylum, focus of much legislation). Social benefits of ‘diversity’.

• Result - even more immigration since 1997, with ‘no obvious upper limit’.

Current UK migration situation• Some (two-way) migration normal in advanced

societies.• Work - related migration for highly skilled long

standing, was not very controversial. • Most immigration non-labour; asylum 25? percent

net inflow. Net inflow 2003 151,000; foreign +236k, UK -85k.

• Easier entry for non-labour migration, expansion of low-skill work permits, working holidaymakers

• Two revisions of migration estimates since 2001 census

Net Immigration to UK (2 definitions) 1981-2002 (thousands)

-100

-50

0

50

100

150

200

25019

81

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

thou

san

ds

Net balance corrected 2001 census-based (re-revised)

Net migration to UK by citizenship

Net migration by citizenship, UK 1984-2002 (thousands). Source ONS.

-100

-50

0

50

100

150

200

250

300

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

British

non-British

The case for more immigration - positive and negative, theoretical

and empirical• Demographic benefits - future workforce, ageing.• Essential for economic growth.• Entrepreneurial benefits.• Fiscal benefits.• Fill skills shortages, keeps NHS going, IT needs.• Perform ‘dirty jobs’.• ‘London / UK would collapse without them’.• Cultural, social benefits of ‘diversity’.• All with no damage to ‘native’ interests.

Three related demographic problems behind argument for

more immigrants.• End of population growth, possible decline

• End of growth and possible decline in labour force and of young labour force entrants; failure of economic growth.

• Population ageing leads to crises in pensions and old-age care.

Immigration can solve all that:

• Immigration cannot be stopped anyway.• Will sustain or expand population size.• Provide rejuvenated and expanding

workforce.• Rectify ageing population while saving

natives from trouble of reproduction.• Everyone gets what they want and lives

happily ever after.

Immigration as demographic salvation?

• Do we need to be saved? Why should ‘no decline’ targets be met (UN 2000)? Is zero growth or decline axiomatically undesirable?

• Immigration can keep population, or workforce size, approximately constant.

• But that can require very large inflows; and adjustment difficult.• Immigration can only 'solve' population ageing with large and

infinitely increasing population increases.• Given sub-replacement fertility, migration to maintain constant size

must eventually replace original population with immigrant population. Does a society ‘save’ itself that way?

• ‘Economism’ and ‘Demographism’ tend to ignore environmental and social problems of immigration and population growth.

UK population - no decline imminentUK population projections 2002-2071, 2002-based (millions). source: GAD

50

55

60

65

70

75

2002

2006

2011

2016

2021

2026

2031

2036

2041

2046

2051

2056

2061

2066

2071

2002 Principal projection

2002 'High' migration(163k)2002 Natural change

2003 Principal projection

Projected population growth by component,

United Kingdom, 2002-2031, thousands. Source:

GAD 2004.High

migration variant

Principal projection

Low migration

variant

Total population increase 2002 - 2031 (thousands) 7,822 5,606 3,389

Assumed net migration 5,500 3,790 2,080

Natural change with no migration 966 966 966Additional natural change from

net migration 2,139 1,633 1,126Other changes (UDC) -783 -783 -783

Migration effect (%) 97.7 96.7 94.6Migration effect without UDC 88.8 84.9 76.8

Resulting from:

Entry to working age populationPopulation aged 20-24, selected European countries 2000 -

2050 (2000 = 100). Source: United Nations, GAD.

35404550556065707580859095

100105110115120

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Norway France GermanyItaly Spain UK (UN)UK (GAD 2002 PP)

Projection of UK population aged 15-64

UK population aged 15-64, 2002/6-2051. Source: GAD 2002, 2003 Principal projections

31

32

33

34

35

36

37

38

39

40

41

2002

2006

2011

2016

2021

2026

2031

2036

2041

2046

2051

UK population 15-64 2002 PP UK population 15-64, 2003-based

UK population 15-64, 2002-based natural change

Annual net migration 'required' to preserve 1998 population and workforce, UK 1998 - 2100

-150

-100

-50

0

50

100

150

200

250

300

350

400

19

98

-00

20

00

-4

20

05

-9

20

10

-14

20

15

-9

20

20

-4

20

25

-9

20

30

-9

20

40

-9

20

50

-9

20

60

-9

20

70

-9

20

80

-9

20

90

-9

an

nu

al n

et

mig

rati

on

(1

00

0s)

15-64 as in 1998 1998 pop

Population ageing: an unavoidable destiny

• Population ageing here to stay – an irrevocable feature of mature society.

• Birth and death rates for a younger population gone for good.

• With constant vital rates, population age-structure will eventually stabilize.

• Longer life means even older populations, but changes meaning of ‘old age’.

Potential Support Ratio, UK 1980-2100 GAD PP 1998-based. Population Trends 103

Figure 7 Ratio of persons aged 15-64 to those aged 65 and over, United Kingdom, 1980-2100

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1980 2000 2020 2040 2060 2080 2100

Year

Rat

io

HF - HM

PP

HF - PMHF - LMPF - HM

LF - HMPF - LM

LF - PMLF - LM

See Box 4 for key

Projected

No limits to migration? Immigration and the PSR

Population Trends 103

Figure 8 Support ratio under alternative assumptions, United Kingdom, 1980-2100(a) alternative migration assumptions

(b) alternative fertility assumptions

(c) alternative upper boundaries for working age

0.00.51.01.52.02.53.03.54.04.55.05.5

1980 2000 2020 2040 2060 2080 2100Year

Rat

io

Zero95,000 (principal)

500,000250,000

Long-term TFR: 1.8Long-term annual net inward migration: as shown

1,000,000

Projected

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

1980 2000 2020 2040 2060 2080 2100Year

Rat

io

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

1980 2000 2020 2040 2060 2080 2100Year

Rat

io

Net Annual Immigration required to maintain UK Potential Support Ratio, 2000 -

2100 (millions)

0

1

2

3

4

5

6

1998

2000

2010

2020

2025

2030

2040

2050

2060

2070

2080

2100

mil

lion

s

UK population size required to maintain given PSRs by immigration, 2000 - 2100 (millions)

0

50

100

150

200

250

300

35020

00

2010

2020

2025

2030

2050

2060

2080

2100

PSR 3.0 PSR 3.5 PSR 4.22

The economic arguments for mass migration –labour market

and macroeconomic

• Increases GDP• Fiscal benefit• Essential for labour needs• Does the natives no harm

That ‘0.5% GDP growth’• Rounded up from increase of 0.4% (not 0.5%) in

population of working age.• Assumes that output rises pro rata• But what matters is GDP per head• Ignores contribution of immigration to population

growth : 0.25%• Increase per head therefore 0.15% or £25 per year

= 48p/week• Ignores lower workforce participation and

displacement effect.

Population growth does not make you rich (western countries 2000)

Relation between GDP growth per head and population growth, 2001-2, Western countries and Japan (both percent)

y = 0.0957x + 0.6371

R2 = 0.0014

-1.50

-1.00

-0.50

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00

Population growth 2001-2 (percent)

GD

P g

row

th p

er h

ead

, 2

00

1-2

(p

erce

nt)

GB, Workforce participation and unemployment

By citizenship, 2000 (%)Economically active UK Foreignall ages over 16 64 59ages 15-59/64 80 69

Unemployed 5.5 8.5

Source: Dobson et al. 2002

United Kingdom 2002. Economic activity by ethnic minority status

all birthplaces

Economic Employment Unemployment Worklessactivity (%) rate % rate % households %age 16-59/64 age 16-59/64 age 16+ by ethnic group of ref. person

White 80 76 5 16British 81 77 5Other white 77 72 6

All ethnic minority 66 58 12Mixed 71 58 18 35Black Caribbean 77 66 14 25Black African 64 56 13 35Indian 75 69 8Pakistani 54 45 15 27*Bangladeshi 47 41 14Chinese 65 60 - 25

Source: Labour Market Trends March 2003 p.113 ; April 2003 p.167 (Labour Force Survey)Note: Not all groups are shown. See source. * = Pakistani, Bangladeshi together.

Fiscal effects - many studies, unclear message

• Variety of approaches - static and dynamic, national and provincial.

• Variety of effects - educated , skilled immigrants, mostly from rich countries, can make large contribution. Unskilled immigrants, mostly from poor countries, may not. Mixed, small overall effect (e.g. Sweden -$718) e.g:

• Net present value in US - high skill+$96k, low skill -$36k (Storesletten 2000). Annual fiscal effect Denmark: rich countries +$1650 poor countries -$8546 (Wadensjo ‘99).

• Emigration usually (but wrongly) ignored.

• Fiscal analysis relates to limited, direct effects only.

Net fiscal contribution of immigrants

United States surplus ($bn) % GDPBorjas 1994 -16 -0.20%Huddle 1993 -40 -0.60%Passel 1994 27 0.40%Lee and Miller 1998* 24 0.30%Lee and Miller 1998** 67 0.95%Lee and Miller 1998*** -76 -1.10%* (debt interest and public goods costs not allocated to immigrants)** (increased taxes to balance budget, no more spend on immigrants)*** (taxes constant, debt interest and public goods allocated pro rata)

Switzerland 1990 annual fiscal contributionWeber and Straubhaar 1996 $460 0.20%UK 1999/2000 Gott and Johnson 2002 £42 0.25%Denmark - Wadensjo 1999from developed countries $1650poor countries -$8546

Alternative Estimates of the Fiscal Impact of

Migrants in the UK in 1999/2000. Source: Rowthorn

Tax Spend Balance£ bn £ bn £ bn % GDP % p c*

Original 31.1 28.8 2.5 0.27 0.36Adjustment 1

Corp’n tax -0.8Budget Balance -1.3After 1st adj. 29.1 28.8 0.4 0.04 0.06Adjustment 2

Home Office** 0.7After 2nd adj. 29.1 29.5 -0.4 -0.05 -0.06Adjustment 3

Defence -1.9Debt interest -1.1After 3rd adj. 29.1 26.6 2.6 0.28 0.36Note: totals may not add because of rounding errors.* individual expernditure, per head** Immigration and Citizenship

Problems of ‘labour migration’

• Most migration is not (formal) labour migration.

• Foreign / minority unemployment rates high in first and second generation; workforce participation rates low.

• Increasing evidence that as a whole immigration damages interests of native workers (Dustmann, Hatton and Tani)

Gross inflows by selected purpose of migration, 2001. Source: OECD 2003 fig 1.3

0 10 20 30 40 50 60 70 80 90 100

Australia 2

Switzerland

United Kingdom 3

Portugal

Canada

Norway 4

Denmark

France 5

United States 6

Sweden 7

Workers Family reunification Refugees

Workforce Participation Rate 2000-1. Source: OECD 2003 table 1.14

30

35

40

45

50

55

60

65

70

75

80

85

90

Denmark France Germany Netherlands Switzerland Italy Spain

Nationals M Foreigners M Nationals F Foreigners F

Unemployment Rate 2000-1. Source

OECD 2003 table 1.14

0

5

10

15

20

25

30

Denmark France Germany Netherlands Switzerland Italy Spain

Nationals M Foreigners M Nationals F Foreigners F

Net migration for purposes of work, UK 1992 - 2001thousands

year Inflow Outflow Balance1991 41 57 -161992 40 59 -191993 41 77 -361994 52 56 -41995 51 70 -181996 66 81 -151997 62 75 -131998 83 64 191999 90 70 202000 105 95 102001 120 83 372002 102 100 2

Source: International Passenger Survey,ONS Series MN table 3.9

Strategic problems of labour migration

• ‘Need’ for immigrant labour may reflect and perpetuate poor conditions and lack of training.

• Part of ‘need’ arises directly from growth of immigrant population itself; espec. London and SE..

• Immigrant labour distorts economy; creates ‘dependence’, maintains unsatisfactory enterprises with poor conditions (e.g.NHS).

• Permanent population acquired for transient jobs (Bradford, Oldham, etc.)

• Excessive priority to demands of employers.

Effects on employment and wages

• Economic theory represents depressing effects of immigration on wages as a counter-inflationary benefit. Some studies argue that this does not happen. But:

• UK evidence: higher unemployment ( 2% - 6% per 10% immigrant increase), + higher wages (Dustmann et al).

• US evidence: 1980 - 2000 more jobless among low-skilled (high school dropouts), reduced wages 7% (Borjas 2004)

• EU: 83 native jobs lost per 100 additional immigrants (Angrist and Kugler 2003)

• Immigration to South depresses in-migration from areas of high unemployment in N (Hatton and Tani 2003).

Further considerationsMost studies including UK (e.g. Gott et al. p. 29) ignore

other likely cost differences: HealthEducation. Housing and land.CrimeRace relationsAsylumRemittances

Additional infrastructure (water, roads), congestionNon-economic effects on rural and urban environmentEthnic and social change

Effects of different migration assumptions on household formation, 1996 - 2021.

Assumes each extra 40k immigration yields 450k households by 2021.

A B C D E F0 -731 3069 0 0 -19 Zero migration

65 0 3800 731 24 0 1996 projected level103 428 4228 1159 38 11 2002 projected level154 1001 4801 1733 56 26 2001 actual level

A Net immigration assumptionB Additional dwellings by 2021C Total projected dwellingsD Projected dwellings due to immigration above zero levelE % projected dwellings due to immigration above zero levelF % projected dwellings due to immigration over 1996 assumption

Projected growth of population of immigrant or foreign origin 2000 - 2050 as percent of total

population

0

5

10

15

20

25

30

352000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

perc

ent

Germany medium variant USA medium variant

Netherlands base scenario Denmark base scenario

UK high migration

Projected growth of population of immigrant or foreign origin 2000 - 2050 as percent of total population, with zero net

migration

0

5

10

15

20

25

30

3520

00

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

perc

ent

Germany medium variant USA medium variant Denmark base scenario

Germany zero mig US zero mig Denmark zero mig

Conclusions• Immigrants cannot, on balance, do much for us; but UK

can do much for immigrants.• UK future population futures relatively benign .• ‘Replacement’ migration for total and working-age

population difficult, for age-structure a fantasy.• Economic consequences of Mr Blunkett as conventionally

measured are marginal, probably negative in UK; any benefits accrue to elite and to immigrants.

• Broader economic costs probably more severe.• Social, political, environmental costs much more important

than economic considerations?• What problems do we have, to which large-scale migration

and its discontents could possibly be the answer?• Why does government persist in so risky and unprofitable

a programme?