Sunday, May 29, 2016
Plenty of migrants - but plenty of jobs for UK workers too
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

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My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

The economic debate over EU membership rages on, with the heavy weaponry overwhelmingly on one side. I can only hope there will be a ceasefire on June 24 but I cannot promise it.

So in the past few days we have had the Institute for Fiscal Studies confirming the conclusion of this column on May 1st, “There’s no pot of gold at the end of the Brexit rainbow”, and that there will not be the Leave campaign’s dodgy £350m a week figure to spend on the National Health Service or anything else.

Because the public finances will suffer in net terms from Brexit, on all plausible assumptions, there will be less to spend on services, not more. The IFS, for pointing out this simple truth, got accused by the teenagers who run the Vote Leave campaign of being a propaganda arm of the European commission or, even more absurdly, by Nigel Farage – EU-funded for the past 17 years – of being biased because it gets some funding from the EU.

The IFS’s great achievement over decades has been to rise above politics, informing the debate. Its intervention on the likely consequences for the public finances of a Brexit vote maintained that tradition.

What about the Treasury’s prediction of a short-term Brexit shock of between 3.5% and 6% of gross domestic product, and up to 820,000 fewer jobs than under a Remain scenario? Given that it probably did not need to do it, or be asked to do it, did the Treasury lay it on a bit thick?

Perhaps. Confidence effects are hard to measure, and they could be smaller or bigger than the Treasury assumes. In the political chaos that would follow Brexit, a rapid handover to a government composed of prominent Brexiteers would put the wind up many in the markets and in business. And hte direction of travel of the Treasury's assessment is similar to other, independent analyses.

One criticism of the Treasury exercise I would defend it against is that it did not take into account the monetary policy response to a Brexit vote. If interest rates were cut, in other words, it could mitigate some short-term confidence effects. The reason the Treasury was right not to include such a response is that Mark Carney has made clear it could go either way; interest rates could rise or fall. Even if they were cut from 0.5% to zero, I doubt there would be much of an impact on the economy or confidence. It could even be seen as a panic move.

Anyway, all this is grist to my mill. I shall pull together the economics in a couple of weeks’ time. For now, let me focus on a topic of the moment, one on which Vote Leave feels more comfortable, immigration.

Immigration is subject to more deliberate misreporting and scaremongering than any other subject. If there’s Project Fear on one side on the economy, there’s more Project Fear on the other on immigration. Anti-immigrant sentiment is stoked up as aggressively now as at any time I can remember. Partly because of this immigration, as I wrote when last in this territory in February, is economically beneficial but has become politically toxic, even in areas where there is not a large immigrant population.

This was the context in which the Office for National Statistics released its latest migration statistics. They showed net migration of 333,000 in the 12 months to last December – in other words 2015 – up a little, 20,000, though not in a “statistically significant” way, on the figure for 2014. Net migration, which measures the difference between long-term arrivals and departures, rose compared with 2014 because of a drop in emigration.

As before, and as has always been the case since we joined the European Community in 1973, non-EU net migration exceeded EU migration, though only slightly. EU net migration into the UK was 184,000, non-EU migration 188,000. The 333,000 number for overall net migration arises from 39,000 of net emigration by British citizens.

The ONS also provided some useful information on short-term migration. A couple of weeks ago, many newspapers ran stories about “hidden” migrants, people who come to Britain for between one and 12 months. They do, and always have, some for seasonal work, some for study, some for other reasons. But British people travel abroad for these reasons too. In the year to June 2014, there were on average nearly twice as many short-term emigrants – people from Britain leaving for between one and 12 months (420,000) – as short-term immigrants (241,000). The effect of short-term migration was to reduce not add to the population.

When people have a problem with immigrants that is not simply dislike of foreigners it usually arises from two sources. One is the additional pressure they impose on public services. The figures are, however, clear on this. HMRC data show that migrants who arrived in the past four years paid £2.5bn more in taxes in 2013-14 than they received in tax credits and benefits. That money is currently being used, at least in part, to reduce the budget deficit. But it is also as available as anybody else’s taxes to pay for public services.

The other problem people have with immigration is the “they’re taking our jobs” objection. David Davis, the former shadow home secretary, who I normally have a lot of time for, described the EU as “a job transfer machine – switching employment from British workers to those on the continent”. He is not alone. Many people think that the jobs created in Britain in recent years have mainly gone to eastern Europeans.

Leaving aside the fact that this is also an area of regular misreporting – new jobs and a net increase in employment are not the same thing – the true picture is very different. Since January-March 2010, the post-recession low-point for employment, the number of UK-born workers in employment has risen by 1.1m to a new record level of 26.25m. Not only was the number a record, but so, in 2015, was the proportion of UK-born people aged 16-64 in employment, 74.3%. In the six years to the first quarter of this year. there was a rise from 70.7% to 74.6% in the UK-born employment rate.

There was, it should be said, also a net rise of 633,000 in the number of EU migrants from the new eastern European member countries in work - more than 80% of those of working age do so - and one of 309,000 in those from long-standing EU counries in western Europe. But this rise occurred alongside, not instead of, a sustained increase in UK-born employment.

Employment among UK nationals rose even more, by over 1.5m, in the six years to the first quarter accounting for two-thirds of the overall rise in employment It has also never been higher as a percentage of the 16-64 workforce.

Could there have been a bigger increase in UK-born or UK nationals' employment? Maybe a little, but probably not by much. Given that a significant proportion of the 16-64 workforce is in full-time education and not working, or looking after children and other family members, or unable to work for other reasons, the current UK-born employment rate is probably quite close to the maximum.

What about the kind of migrants we have? Would not we do better with the much-vaunted points-based system, based on the Australian model, promoted by Boris Johnson and Michael Gove, as well as Ukip? Well, we have such a system for non-EU immigration, and even its best friends would say it is not working that well.

As for applying such a system to immigration from Europe in the event of Brexit, even Migration Watch criticises it for its extreme complexity and for the fact that it is a system intended to encourage immigration; Australia’s net migration per capita is roughly three times that of the UK. It is, it says, “thoroughly unsuitable” for Britain.

The majority of EU migrants to Britain would still qualify under skilled-labour criteria under a points-based system. But this additional layer of bureaucracy, whether the onus would be on workers or those seeking to recruit them, would make it harder for firms to fill gaps in their workforces. Those who say they would reduce red tape would merely tangle business up in more of it. And Britain’s labour market would become more inflexible.