Our immigration system quite clearly is not working as it should. The Office for Budget Responsibility found that low-wage migrants can cost the taxpayer £150,000 each by the time they reach the state pension age. By contrast, migrants earning 30% more than the average wage contribute a net revenue boost of £925,000 in the same period. The economic costs and benefits of immigration are not uniform.
And yet it is low wage immigration that has hugely increased. Recent analysis by Karl Williams of the Centre for Policy Studies showed that around three in five workers on a skilled visa will end up being net recipients, and over half of them are what the OBR terms a ‘low wage migrant’.
It matters what kind of immigration we incentivise if we want to turbocharge economic growth that can help rebuild our public services.
Everyone can see the economic value of skilled engineers and scientists. But instead, successive governments have designed an immigration system that incentivises employers to hire foreign workers on low wages to undercut domestic workers and avoid investing in training and labour-saving technology. This has become a feature, not a bug, in how we hand out work visas.
Overall numbers have been far too high for far too long, especially when compared to historical norms. Mass migration, while not necessarily the cause of all of our economic woes, is propping up a failing economic model based on subsiding certain sectors.
But turning off the taps will not solve the problem alone. We need to change the incentives so we can attract the best talent from across the world. In a new report for the Adam Smith Institute, my co-author Tom Jones and I set out pro-market proposals to help wean the British economy from this dependency.
We believe that parliament should set caps on the overall numbers, based on data-driven debate, but the allocation of work visas should be based on market incentives. To ensure work visas are secured for the best of global talent, we support introducing an auction system for the annual issuing of a fixed number of work visas. Employers would have to submit sealed bids for the foreign workers they want to hire, forcing them to pay the true value of the labour they want to recruit. This could be supplemented by an auctioning programme for temporary work visas based on the Singapore model. The revenue raised from these auctions can then be invested in the public realm.
To turn Britain into a real hub for the scientific and technological breakthroughs of the future, we need to design programmes to convince the best of global talent to come here. El Salvador and Canada are already taking part in the bidding war for human capital. This means using a very limited round of work visas for highly specific and elite-oriented streams of talent in fields such as artificial intelligence, life sciences and space exploration. Tax domiciles who employ more than 100 workers in Britain should be automatically granted permanent residency. Pathways for high-skilled workers from the United States, Canada, Australia and New Zealand should be established.
Despite the results of the general election, the centre-right is alive with ideas. Right-wing progressivism, Anglofuturism, techno-optimism and the abundance agenda are just some of the ideas that have captured the imaginations of younger generations. From housing to taxation, energy to childcare, the economic model of the past thirty years has failed. Immigration has been used as a sticking plaster while structural weaknesses went unaddressed or were worsened by anti-growth ideologies. To get Britain growing again, we need to start selecting and attracting the world’s best and the brightest.
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