Sunday, December 17, 2006
Migrants make the revolving door spin
Posted by David Smith at 11:00 AM
Category: David Smith's other articles

People moving out, people moving in — there’s a song lyric there somewhere, but I can’t quite place it. While record numbers are coming to Britain, mainly in search of jobs, there’s also a significant flow in the other direction.

Last year 565,000 people came from abroad to live here, while 380,000 moved out, a net inflow of 185,000. The Treasury is assuming that the inflow will continue at about this level — 185,000 to 190,000 — to 2011.

The Treasury is upbeat about the economic impact of this; it was pivotal in revising up Britain’s “trend” growth rate to 2.75% in the pre-budget report. My sense is, however, that it is not selling the benefits of immigration as hard as it was. A report it published last month on long-term challenges claimed only “a small but positive impact on the UK economy”.

Among the outflows of people are some migrants returning home but also significant numbers of Brits, as the Institute for Public Policy Research reminded us. There are now more expatriate Brits than in the days of empire and the Raj, 5.5m at the latest count (a quarter of them in Australia), and leaving here at a rate of about 200,000 a year.

Most go in search of a better quality of life, or better weather, because Britain is too expensive to live in, or because of a new job or a relocation of their existing job. However, a minority move because they do not like what Britain has become. I shall return to that later.

Although most Brits who leave are of working age, a significant minority are retired — between a fifth and a third of our expatriates are in Spain, America, Australia and Canada. The vast majority of immigrants are of working age.

In net terms, there’s a bit of a Dracula effect here; we’re sucking in young blood.

There is also, and this is often forgotten, significant people movement within Britain, as a new report from Experian, Attracting Talent, points out. Traditionally people in Britain have been reluctant to move in search of work — they are “geographically immobile”. But that seems to be changing, perhaps because of the greater availability of flats and houses to rent. The report expects the traditional pattern of internal migration to reinforce itself in the coming years, with London and southeast England proving a magnet for educated young people from the rest of Britain.

Internal and external migration will have a big impact on the regional make-up of the population in coming years, with London and the southeast seeing bigger gains than the rest of Britain, gaining an average 180,000 people a year during 2006-10 and 270,000 annually in 2011-15. After that, according to official projections, Scotland faces population declines up to the middle of the century, even with a migrant-fuelled rise in the UK population from its present 60m to 70m.

Diane Coyle of Enlightenment Economics argues that we should treat cross-border migration exactly the same as internal migration. They are both manifestations of the free movement of people. Set anything free — goods, services, capital and people — and you generate economic gains.

It used to be that migration within Britain led to resentment and social tensions. Now, with small exceptions — anti-English sentiment in Scotland may be one — this does not happen. Will we look back in the future and wonder why there was ever a fuss about cross-border migration? Migrant workers coming into Britain not only tend to be younger than Brits heading abroad but they are also well educated, according to both the Experian report and research published in the Bank of England’s latest quarterly bulletin.

“New immigrants are more educated than both UK-born workers and previous immigrant waves, but are much more likely to be working in low-skilled occupations,” said the Bank in its December bulletin. It was looking at the economic characteristics of migrants and their impact on the supply side of the economy.

Of the new migrants, 45% had continued in education in their home country (mainly the new east European EU states) until 21 or above; 49% had completed secondary school and 6% had left school before 16. That compares with 17%, 66% and 17% respectively for the UK-born working-age population (which includes older people who joined the workforce when the school leaving age was lower). The average “new” immigrant is about 30.

What does this tell us about migrant workers? We know they are disproportionately concentrated in what the Bank describes as “elementary” jobs. They have plenty of brains and education, in other words, but are not required to use them much. It could be that the new migrants are a bit like young people from Australia and New Zealand, who come to Britain to work for a while and generate some savings, but with no ambition to stay for ever.

Or, like immigrants throughout history, they could be doing basic jobs to get a toehold in the labour market, from where they will advance, possibly quite rapidly.

Neither scenario offers much comfort to one particular group in society. The number of young people in Britain, 16-24, not in employment, education or training (Neets) stands at 1.24m. The number of male 16 to 24-year-old Neets has risen by 27% to 575,000 since the spring of 1997, while the number of female Neets is also up, but only by 6% to 669,000.

David Willetts, the Tory shadow education secretary, locates the problem firmly in educational shortcomings. Neets tend to do badly at primary school, leaving without being able to read or write properly, and then getting stuck in the slow lane at secondary school. Also, children who have neither parent working, or a single parent who does not work, are much more likely to end up as Neets.

It is a big and growing problem and it presents a considerable dilemma. Should we discourage educated immigrants in the hope that poorly-educated Neets can be channelled into jobs and training? The New Deal, which is supposed to tackle the problem, has become a revolving door back to benefits.

But if we discourage immigrants, we could end up with both labour shortages and unemployable Neets. The answer lies in education, which means it will take a long time. Meanwhile, the Neets on our streets will continue to encourage many Britons to seek a better life elsewhere.

PS: Inflation hit a “record” last week of 2.7%, which tells us that the government’s preferred measure, the consumer prices index, has not been published for that long (it was actually at its highest since February 1996). But inflation was also up from 3.7% to 3.9% on the retail prices index (RPI), and from 3.2% to 3.4% on the Bank of England’s old target measure, the RPI excluding mortgage interest payments.

The figures were disappointing — though no higher than the Bank was expecting. However, they confirm that the danger of further rate rises in the new year has not disappeared, particularly with pay growth and inflation expectations ticking higher, although the Bank and the Treasury expect inflation to return to the 2% target in the early months of next year. Pay developments over the next few weeks are the key.

One component of inflation still galloping away is energy prices, with gas and electricity bills up an average 30% over the past 12 months, according to the Office for National Statistics. Curious then that this year there appear to be more Christmas-light extravaganzas outside ordinary homes than ever before, gobbling up electricity.

What do these giant neon Santas and reindeers tell us? It could be: (a) that even a rise of a third in fuel prices has not had much impact on consumption; (b) that there are people out there who have not read Sir Nicholas Stern’s report on the economics of climate change; (c) both — one spectacularly ostentatious example I saw had a couple of 4x4s in the drive for good measure.

Without wanting to be a killjoy, however, this also tells us something about Britain today. Not far from these domestic versions of Blackpool illuminations there will be a pensioner who has to keep the heating turned down because of high energy bills.

From The Sunday Times, December 17 2006

Comments

Ball of Confusion - Temptations (1970)

Posted by: Mace at December 17, 2006 05:59 PM

David mentioned the fact that if an economic gain is created, some people will migrate towards it. At the moment Eastern European immigrant workers cannot claim "benefits". What happens after a year when they become eligible and a significant percentage realise that it is easier to live off benefit rather than work?

Posted by: simon jenkins at December 18, 2006 01:09 PM

Thanks for the reminder about the song title.

As I understand it, A8 migrants are entitled to benefit after a record of 12 months uniterrupted work. So plenty should have passed that milestone, without a mass shift to claiming benefits. The risk, I suspect, would come with a big employment downturn here, when migrants could prefer to stay in the UK on benefits rather than return home.

Posted by: David Smith at December 18, 2006 02:30 PM

"Set anything free — goods, services, capital and people — and you generate economic gains." Isn't that a bit of a simplification? Set the sale of heroine free and you would create a great deal of economic benefit for the dealers and growers at the expense of the users. Free markets are generally a good mechanism for price setting, but there are plenty of examples where markets fail and deliver sub-optimal results. The harm caused by massive low-skilled immigration is widespread and obvious, ranging from events like 7/7 to the degradation of inner-cities (just take a drive around East London if you need anymore evidence), and yet, there are still the "free-market" ideologues (who, not surprisingly, almost invariably come from those social groups most likely to benefit from unrestricted immigration) claiming that it's a net benefit to society.

Allow unrestricted flow of labor for unskilled jobs and you create economic benefit for some, but at the expense of many others. The main beneficiaries of high levels of immigration are the middle-class consumers of services that benefit from cheaper low skilled labor and existing home owners who see property prices appreciating, but that is outweighed by the losers: tax payers, users of government services, anyone who doesn't own a home, native born low-skill workers and the countries that are losing highly skilled labour as immigrants move to the UK.

For starters, allowing immigration into a country that offers generous (or at least semi-generous) benefits for the unemployed makes no sense. Sure, most immigrants aren't eligible for benefits, but native born workers who are eligible opt for benefits instead of working because immigration pushes wages down for low skilled jobs. Anyone who argues that this isn't the case is denying that the labor market is really a market. Then, of course, immigrants have children who are often poorly integrated into society,
are eligible for benefits, and use them, creating an entire cycle of immigration and welfare dependency. This is the most insidious aspect of British immigration policy, in that it represents a bargain between ideologues on the Left and the Right which undermines the future of the country. The Left gets generous funding for social welfare; the Right gets cheap low skilled labour. Tax payers lose out as they have to fund out of control social spending, and users of government services like education, housing and health care lose out as these services are over-stretched providing for immigrants.

Second, the belief that educated immigrants are simply replacing poorly educated native-born British is misguided on several fronts. I found both the IPPR report on migration and the response to it in the media very disturbing. There was a discussion of the meaning of the report on BBC Radio 4, but it mainly focused on whether British retirees would be happier in Spain or France, rather than the fact that large numbers of educated British are unable to find suitable employment here in Britain that would allow them to pay for the high cost of living. Britain is making a huge investment in human capital through the educational system that is being thrown away through emigration.

Education is a good that is poorly suited for free markets. There are multiple market failures, from the fact that end consumers (children) are not the decision makers (parents generally play that role) about how much and what type of education to consume, to the lack of access to private capital to fund investment in education, all of which means that education is largely purchased and funded by societies as a whole, rather than through free markets. Britain is funding an educational system designed to support a highly-educated, highly-compensated work force, with a commensurate rate of taxation, but a good portion of that human capital is being shipped off to Australia, Canada and the US to be replaced by low wage, low skill, low tax paying, immigrant labor. Combine this with the level of taxation required to fund non-working, native born labor and the high real estate costs created by immigration and tight building controls, and no wonder that middle class individuals can't afford to live in Britain.

Education is also far less fungible than imagined. Many of these discussions treat native born and immigrant labor as easily interchangeable, when they're not. There's a reason all these college educate immigrants are working in low skilled positions. A college degree in Pakistan or some other developing country teaches you nothing about the language, social skills, teamwork and leadership required to be successful at a high level in a British workplace. Many immigrants (not all, but the majority) simply aren't able to integrate into high level British jobs. At the same time, emigration of people who are viewed as highly-skilled in their native country, but end up in low skilled jobs in Britain, represents a huge loss of human capital for their native countries. Societies paying to educate their populace, only to see them move away to another country where they take low skill jobs, is a monumental market failure, even though the individual ends up better off. They only end up better off because they're not paying for the cost of their education.

I've always been intrigued by why it is that people come to believe so strongly in ideology. All evidence can point to an obvious truth, but ideologues insist the opposite is the "real" truth, and if society would just change itself to be consistent with the assumptions they've built into their model of how things should work, then their theoretically correct answer would be right. Immigration is the perfect example of this. The harm is staring everyone in the face, but no one will admit it.

(OK, yes, I know this is a tirade, but it seems necessary in this case.)

Posted by: RichB at December 20, 2006 08:01 PM

YOUR KIDS FUTURE

This is an editorial on the web site economy in crisis. Do you think Americans should be concerned with our kid’s future due to poorly negotiated trade and immigration policy?

PREPARE YOUR KIDS FOR THE FUTURE — AS A SERVANT

EC-In 1994, more than 1 in 8 jobs in America was in manufacturing. In 2014, if US government (Bureau of Labor Statistics) projections are to be believed, that figure will have slipped to less than 1 in 12.

The government is actually telling us in black and white that the policies that they are enacting will decrease absolute and relative manufacturing employment to levels below that of the 1950’s – over 2 million jobs below. In the 1950’s, 30% of US employees were in manufacturing – almost one in three jobs! This country was a relative manufacturing superpower.

In less than 20 years since America put in place some of its most self-devastating policy decisions (NAFTA, WTO, CAFTA, etc.), this country will have almost completely converted from a self-sufficient sovereign state, capable of manufacturing what it needs to sustain and protect itself, to a country of servants – serfs, working at the behest of foreign employers or engaged in the sales, marketing, and distribution of foreign-made goods – working at their discretion, for wages they determine, and forced to pay their prices for needed goods. This is the definition of a servant.

Posted by: John Konop at December 21, 2006 09:29 PM
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