22 November 2016

Why isn’t the Government hailing the benefits of migration?


Britain has a huge problem with immigration – or so many people think.

The reality of immigration is generally positive,  yet public perceptions are often negative – and that leads to illiberal, deeply flawed government policy.

It is telling that while few people think immigration is negative for them personally, many believe it is detrimental to the country as a whole. In a new IEA paper, “Free to move: the costs and consequences of restrictions on immigration“, I dispel the negative myths about migration and argue that Britain ought to open up to the world, not close itself off.

Statistics quoted in the study confound many misperceptions about migration. Migrants are actually only 13 per cent of the UK population, not 25 per cent or more, as people typically think.

Net migration – arrivals minus departures – adds 0.5 per cent to the population a year, less than in supposedly “tough-on-immigration” Australia.

Migrants don’t typically depress local wages or deprive British people of work. Overall they pay more in taxes than they take out in benefits and services, so any strains on local services can only be put down to the failure of government bureaucracies to respond quickly to changing needs – not least from British people moving around the country.

The main causes of rising house prices (another gripe blamed on immigrants) are cheap, widely available credit, government subsidies and a planning system that prevents housing supply and infrastructure development responding to rising demand.

Migrants are also less likely to be in social housing than economically equivalent Britons and generally no likelier to commit crime.

More often than not, complaints against immigrants are symptoms of broader concerns.

Many white working-class men feel they have lost status with the decline of manufacturing jobs, the entry of women into the labour market and moves to reduce discrimination against others.

Elderly people, nostalgic for an idealised past, may express that through opposition to immigration. But if their real objection is to modern liberal Britain in general, stopping immigration would scarcely address their discontent, since it wouldn’t turn the clock back to the fifties.

In many cases, negative perceptions of immigration are due to prejudice. People with an emotional dislike of foreigners tend to come up with pseudo-rational arguments to justify their xenophobia.

For example, when immigrants are working, they are taking our jobs; when they are unemployed, they are scrounging off the state. When they are rich, they are driving house prices up; when they are poor, they are driving standards down. Immigrants can’t win: they are damned if they do and damned if they don’t.

As for the threat that immigrants supposedly pose to our national identity, surely Britishness is now based on civic values not ethnicity – or are Sajid Javid and Mo Farah not truly British?

Studies also show that increased diversity does not reduce social cohesion in Britain. Indeed, London’s diversity is part of its appeal to most Londoners and enhances their feeling of belonging to the city.

Far from harming Britain, openness to migration actually brings big economic and cultural benefits – precisely because migrants are different; with diverse attributes, skills, perspectives and experiences that can complement ever-changing local resources, needs and circumstances.

Immigrants do jobs that most Britons spurn – such as pick strawberries, prepare food, clean offices and care for the elderly – freeing locals to do better-paid, higher-skilled jobs that they prefer.

They bring skills that Britain lacks – as doctors, teachers, computer programmers and engineers, for instance – which in turn enhances the productivity and wages of their British colleagues. Their contacts and know-how can open up new trade and investment opportunities.

Their willingness to move helps the economy adapt more readily to change. Their taxes fund public services and welfare benefits for British people while helping to service the massive public debt.

Their youth is a huge bonus to an ageing society with a shrinking native workforce, because young migrant workers complement older, more experienced local ones, help pay for the growing ranks of pensioners and support population numbers, thus spurring investment and growth.

Culturally, immigrants broaden our horizons, create new friendships and relationships,  stimulate new art, literature and music introduce us to a wider choice of cuisine. While some people say they dislike increased diversity, they also tend to cheer black football players in an England shirt, enjoy a curry or a Chinese takeaway and listen to jazz or R&B music. Even Nigel Farage has a German wife.

Free trade is generally seen to be a good thing. It fosters more efficient specialisation and dynamic clusters, boosts competition and growth, and provides a greater diversity of products for consumers for a lower cost. Open migration can bring similar benefits, because migration is, in effect, a form of international trade.

If you go abroad to have surgery, it’s called trade; if the surgeon comes to Britain, it’s called migration – yet the operations are analogous.

Likewise, if a British company outsources work to an Indian company and the work is done in Bangalore, it is called trade; if the Indian programmers come do the work in Birmingham, it is called migration. The UK Government’s desire to promote the former but obstruct the latter is contradictory, as India’s prime minister, Narendra Modi, reminded Theresa May on her recent visit.

In cases where services have to be delivered locally – such as care for the elderly, catering and construction – international trade is only possible with labour mobility. So if Poland’s comparative advantage lies in construction services, Poles need to be able to move to Britain for us to trade.

International flows of goods, services, capital and labour are intrinsically intertwined. That’s why freedom of movement is an essential element of the EU single market. If you disagree, ask yourself how much of a single market Britain would be if people couldn’t move freely between London and the rest of the country.

Economic studies that are partial and static underestimate migration’s dynamic benefits. By raising the diversity of skills and ideas and spurring entrepreneurial activity, it enhances economic dynamism. Studies that try to capture these dynamic gains find that migration boosts productivity growth significantly – and thus makes us all better off.

Migrants’ diverse perspectives and experiences can help spark new ideas and technologies – and as dynamic outsiders, many start businesses that create wealth and employ Britons.

Britain’s most valuable technology company, ARM Holdings, which designs the chips in most smartphones, was co-founded by an Austrian immigrant. Britain’s most successful low-cost airline, EasyJet, was founded by a Greek entrepreneur.

Many of the entrepreneurs in London’s Tech City are foreign. Indeed, a quarter of UK start-ups were founded by non-UK EU nationals. Overall, newcomers are nearly twice as likely to start a business as locals.

The Government ought to be trying to make the most of these economic gains, mitigating costs attributed to migration and trying to shift public opinion. But instead it panders to anti-immigrant prejudice and wants to restrict net migration to “tens of thousands” of people a year.

For now, Britain has a dual immigration system: citizens from the European Economic Area (EEA) – the EU plus a few other European countries – can enter freely, while non-EEA citizens must meet elaborate conditions to obtain a visa.

Political debate generally presumes that a system that provides “control” over migration is inherently superior. Yet the self-selected EEA migrants who have freely chosen to move to the UK have proved to be particularly beneficial. They are often highly educated, are much more likely to be employed than British people and are particularly large net contributors to public finances.

In contrast, the bureaucratic controls that seek to limit non-EU migration and select the “right” migrants are misguided, fail to achieve their stated aims and impose all sorts of additional costs.

It is immoral that UK citizens now need to be earning more than £18,500 a year in order to obtain a visa for their spouse to live with them in Britain. By what right does government dictate whom we can share our love life with? This is Romeo and Juliet against a backdrop of 21st-century bureaucracy.

Absurdly, the Government is trying to cut international student numbers at a time when the global market for education is growing fast and Britain has clear strengths, notably a world-class university sector that provides English-language tuition much more affordably than America.

The work visa tiers are arbitrary and absurd, with Government officials trying to second-guess the needs of the entire economy. Just imagine how ridiculous it would be if the Government tried to micromanage who could come work in London and who couldn’t. Why should it work any better for migration into Britain?

More fundamentally, governments cannot anticipate how migrants will contribute to Britain in future.

By definition, new opportunities open up once they move here, including ones they create themselves. Nobody could have guessed, when he arrived in the United States as a child refugee from the Soviet Union, that Sergey Brin would go on to co-found Google. Had he been denied entry, America would never have realised the opportunity that had been missed.

How many potential Brins does Britain turn away – and at what cost?

Since the flexibility of free movement for EEA citizens partly compensates for the rigidities and absurdities of our immigration controls for non-EEA citizens, the costs to the economy could be much greater if a post-Brexit Britain scraps free movement.

There is a better way forward.

Britain should seek to extend two-way free movement to other willing partners, perhaps starting with Australia and New Zealand, working towards broader freedom of movement.

While there is no evidence that Britain’s welfare state, or even Sweden’s much more generous one, acts as a magnet for migrants, free movement to work need not imply immediate welfare rights.

A second-best alternative would be to emulate Sweden’s labour migration policy.

Companies based there are able to hire people of all skill levels from anywhere in the world on two-year renewable visas, with no limit on entry numbers. It is an open, flexible and non-discriminatory system, which reassures voters that migrants are coming only to work.

At the very least, entry rules should be simpler, more coherent and non-discriminatory. The latest statement of changes to the immigration rules alone is 79 pages long and there have been 48 such changes since 2010!

The target to lower net migration should be scrapped, as should the quotas on work visas. A skills-neutral work-permit system could replace them. Student visas could be granted to anyone registering for a UK education course, with foreign students free to seek work following their studies.

Asylum seekers could be allowed to work while their asylum claims are processed, minimising their initial fiscal cost and fast-tracking their entry into the labour market and society.

The Government says that it wants to be a global champion of free trade. In a globalised economy where trade is increasingly in services, it should have no truck with labour-market protectionism.

Philippe Legrain is a visiting senior fellow at the London School of Economics’ European Institute and author of the IEA report, " Free to move: the costs and consequences of immigration"