Memorandum by Professor Robert Rowthorn,
Since 1997 a new UK immigration policy has displaced
previous policy aims, which were focused on minimizing settlement.
Large-scale immigration is now seen as essential for the UK's
economic well-being, and measures have been introduced to increase
inflows. The benefits claimed include fiscal advantages, increased
prosperity, a ready supply of labour and improvements to the age-structure.
Fears that large-scale immigration might damage the interests
of unskilled workers are discounted.
This submission examines these claims. It concludes
that the economic consequences of large-scale immigration are
mostly minor, negative or transient, that the interests of more
vulnerable sections of the domestic population may well be damaged,
and that any economic benefits are unlikely to bear comparison
with its substantial impact on population growth. Such findings
are in line with those from other developed countries.
Although it does not benefit the UK population
as a whole, large-scale immigration does benefit migrants, their
families and sometimes their countries of origin. It can be argued
that UK migration policy should take the interests of these other
parties. This issue is not addressed in the present submission.
Immigration has been increasing for many years,
but the pace has accelerated noticeably since Labour came to power
in 1997. The net inflow of non-British citizens into the UK trebled
in the eight years from 1997 onwards, and there was also an increase
in the net outflow of British citizens (Figure 1). In 2005, 474,000
non-British citizens entered the country as long-term immigrants
and 181,000 left, making a net gain of 292,000 (after rounding).
In the same year, 198,000 British citizens left the country as
long-term emigrants and 91,000 returned from long-term emigration
making a net loss of 107,000. Many people fear that cumulated
over decades, these flows will have a serious impact on the sense
of national identity and historical continuity, especially when
viewed against the background of increasing separatist tendencies
in Wales and Scotland. Opinion polls regularly show widespread
public concern about these developments. However, in this document,
I restrict myself to narrower economic issues.
I argue that, taken as a whole, the large-scale
immigration is of minor economic benefit to the existing population
of the UK as a whole, although it is certainly of benefit to the
immigrants, their families and sometimes their countries of origin.
Large-scale immigration will lead to a rapid and sustained growth
in population with negative economic and environmental consequences
in the form of overcrowding, congestion, pressure on housing and
public services, and loss of environmental amenities. It also
undermines the labour market position of the most vulnerable and
least skilled sections of the local workforce, including many
in the ethnic minority population, who must compete against the
immigrants. There are, of course, domestic beneficiaries of large-scale
migration. These include employers who can obtain good workers
at close to the minimum wage, or even less, and the consumers
of goods and services that rely heavily on migrant labour.
1. Demographic Issues
Figure 2 shows projections of future UK population
under various assumptions about migration. Three of these projections
are taken directly from the Government Actuary's Department (GAD)
website, and the other is my own estimate based on information
provided on this website.
All of these projections assume the same age-specific birth and
death rates and they differ only in what they assume about international
migration. Details are as follows:
A. Natural Change. This shows what
GAD projects would happen if there were no migration at all. Under
this variant the population rises for a time and then declines
to about 53 million by 2074.
B. Zero Net Migration. This is my
own estimate of what would happen if as many people left the UK
each year as entered. Since immigrants are on average younger
than emigrants, they will have more children in the future. This
helps to retard the decline in population. By exporting some of
our older people and importing an equal number of younger foreigners,
we ensure that more children are eventually born in the UK and
thereby add 3 million to the national population by 2074.
C. Principal Projection. This shows
what GAD considers is most likely to happen. It assumes that net
migration (all nationalities combined) averages 145,000 per year.
Under this projection, population increases quite rapidly at first
and then starts to flatten off, reaching approximately 71 million
D. High Migration. This shows what
GAD projects would happen if net migration were to average 205,000
per annum. Note that this is the average rate of net migration
actually observed during the latest two years for which statistics
Under this variant, population reaches almost 77 million by 2074.
By comparing the above projections, we can get
an idea of how international migration might affect the UK population
in the future. Total population under the High Migration variant
(D) is about 24 million larger by 2074 than under the Natural
Change variant (A). This difference is entirely due to migration.
Some 14 million of the total is because more people enter the
country than leave, and 10 million to the fact that the immigrants
are mostly young and bear children in the UK.
It is important to recognise the role of extra
births in the context of migration. Estimates by GAD imply that,
at the margin, for every extra 1,000 migrants who settle in the
country, the eventual population increase is around 1,400. This
knock-on effect is only felt after a delay and its existence is
concealed in ONS publications such as press releases and Population
Trends. These focus only on the immediate impact of migration
and ignore the additional children that will be born in the country
as a result of migration.
Predicting immigration is difficult since long-run
trends are often masked by short-run fluctuations. There has been
a prolonged upward trend in immigration from the New Commonwealth
(mainly Africa and South Asia), although this growth has been
interrupted recently. This may be merely a blip, in which case
immigration from these areas will eventually resume its upward
path, or perhaps immigration from the New Commonwealth has now
stabilised. Either way, net immigration from this area is still
There was also a massive, unexpected upsurge in migration from
Eastern Europe following EU enlargement. As economic conditions
in Eastern Europe improve, this flow should slow down as fewer
people come to this country to work and some of the migrants already
here return home. However, there will eventually be a new influx
of immigrants when existing restrictions on migration from Bulgaria
and Romania lapse, and further down the line there may be a much
greater influx if Turkey joins EU. Given the uncertainties involved,
it is difficult to say with any confidence what the rate of net
migration is likely to be in coming decades. However, it does
seem that the figure of 145,000 assumed by GAD for its Principal
Projection is on the low side. In the absence of new measures
to contain the flow, it seems likely that immigration will exceed
this amount, perhaps by a considerable margin. Indeed, the figure
of 145,000 has been exceeded every year from 1999 onwards (Figure
There is also another point to consider. The
projections presented in Figure 1 assume that immigrants have
the same fertility as the existing UK population. This assumption
is not supported by the evidence. For example, in 2001, the total
fertility rates of women born in Bangladesh and Pakistan were
equal to 3.9 and 4.7, respectively, as compared to 1.6 for women
born in this country.
Most immigrant groups do not have as many children, but even so
the overall total fertility rate for women born overseas was 2.2,
which is significantly higher than the figure for women born in
the UK. This helps to explain why the share of live births to
women born abroad has risen from 12.9% in 1995 to 21.9% in 2006.
When such discrepancies are taken into account, the eventual impact
of a given rate of immigration may be even larger than the above
All of the above projections assume a total
fertility rate (TFR) equal to 1.73. In fact, the birth rate has
been rising in recent years and provisional figures for 2006 indicate
a TFR of 1.84 for the UK as a whole.
If this birth rate is sustained in the future it will have a substantial
impact on the population. If it is combined with a high rate of
immigration, such as we have observed in the recent past, the
effect will be dramatic. Figure 4 shows what happens to population
with a TFR = 1.84 and net migration = 205,000. By 2074, population
exceeds 81 million. This is 10 million greater than under the
GAD Principal Projection, which is currently taken as the benchmark
for discussions about future population in the UK.
Figure 4 also shows what happens to population
with a TFR = 1.84 and zero net migration. This gives some idea
how population would evolve with existing birth rates but a tough
immigration policy that ensured that the same number of people
entered the country as left. Under this projection population
grows for a time slowly for a time and then starts to fall rather
slowly. By the end of the period, population is virtually the
same as at the beginning. Given current birth rates, if the objective
of public policy were to stabilise UK population, a policy of
zero net migration would be the way to achieve it.
Migration and fertility affect the age-structure
of the population. They are often seen as a way of rejuvenating
the population and thereby sharing the cost of supporting those
who are too old to work. There are many ways of measuring age-structure.
Here I use a simple measure which is defined as follows:
This is a mixed measure which is mainly influenced
what happens to the age-structure of the population. It is also
influenced by changes in the age at which men and women become
eligible for a state pension. The potential support ratio (PSR)
indicates how many individuals there are of official "working-age"
who are potentially available to support each person of official
Figure 5 shows what happens to the PSR under
a variety of assumptions about migration. The projections correspond
to those shown for population in Figure 1. In each case the PSR
falls steeply for a period of about 15 years starting around 2020,
after which time the curves start to flatten out. The steep fall
is an echo of the post-war baby boom which created a large bulge
in the age structure. Following the baby boom the birth rate fell
sharply, with the result that, as the cohort of people born in
the 1950s and early 1960s start to retire, there will be relatively
few people of working-age to support them. The diagram also indicates
how migration affects the PSR. The most interesting feature is
how little difference mass migration makes to this ratio. Under
the zero net migration variant the PSR in 2074 is 1.94 and under
the high migration scenario it is 2.11. To achieve this rather
modest change requires adding an extra 20 million persons to the
national population by 2074.
2. The Macro-Economic Benefits of Immigration
Immigration is said to be a good thing because
with a bigger national labour force the country can produce more
output. "We need immigration to keep the economy growing."
This statement raises a number of issues. Firstly, the impact
of migration on national output depends on the skills and motivation
of the immigrants and on their ability to gain suitable employment
without displacing local workers. Highly skilled or entrepreneurial
immigrants typically contribute more than less skilled immigrants,
but even the latter will contribute something to GDP provided
they can find useful employment and do not put local workers on
the dole. Secondly, there is the issue of who gains from immigration.
The fact that immigration helps the economy to grow is of no benefit
to the local population if they do not share in this extra growth.
If immigrants appropriate all of the extra income that they generate,
their entry will be of no economic benefit to the local population.
Indeed, their presence may be a burden on the local population.
For example, unskilled immigrants may earn low wages and receive
extensive financial support from the government for their families
in the form of public services, such as health and education,
together with welfare payments and tax credits. In this case,
even though they help to raise national output, they take more
out from the economy than they put in. The gap is filled by taxes
levied on the rest of the population.
There are two conventional ways of measuring
the economic benefits which immigration confers on the local population.
The first is the impact of immigration on per capita income.
Does immigration increase the amount of output per head of population?
The second is the impact of immigration on government finances.
Do the immigrants generate a fiscal surplus, so that locals have
to pay fewer taxes than before? Let us consider these in turn.
Per Capita Income
Immigration is claimed to increase per capita
income in the following ways:
Increasing the absolute size of
the national labour force. If there are increasing returns
to scale, then output per worker will rise simply because there
are more people employed in the economy. This explains why certain
types of business congregate in the same city. They produce more
when they are crowded together than they do when they are separate.
However, there is no evidence that this applies to the country
as a whole or even to the south eastern corner where the most
dynamic part of the economy is located. On the contrary, the opposite
may be true and the south eastern corner may now be operating
under diseconomies of scale. As more people crowd into this area,
increasing congestion may be damaging productivity. Of course,
productivity in this area is above the national average, but with
a smaller population, productivity might be higher still. (Sustained
population growth will also lead to a decline in the quality of
life because of the increasing density of population and pressure
on such amenities as open space).
Increasing the share of the population
that is of working age. Immigrants into the UK are mostly
of working age. Provided these immigrants can find employment,
their presence will increase the share of the population that
is working and hence may increase GDP per capita. This is the
main factor behind the government's claim that immigration helps
to increase GDP per capita.
Because they are mostly of working age, immigrants may contribute
disproportionately to national production. Conversely, because
many emigrants from the UK have retired or are close to retirement,
their departure has little effect on national production but helps
to keep down total population. However, these effects are mostly
transitory. If the immigrants remain, they get older and eventually
retire from the labour force. As the rejuvenating effect wears
off, the boost to per capita income from the injection of a given
cohort of immigrants gradually fades. To maintain this effect
requires a new injection on immigrants, and then another injection,
and so on indefinitely.
Special skills and capabilities.
Immigrants may be highly educated or have high natural abilities
which are of great use to the national economy. Provided these
talents are properly utilised, the entry of such migrants leads
to a disproportionate increase in GDP per capita. However, there
are also many immigrants who do not work or else do not have special
talents. Their contribution to national production is either zero
or small. The presence of such migrants reduces GDP per capita.
"Doing the jobs that locals
will not do". There is also a group of migrants employed
in low-skilled occupations whose contribution to the economy is
allegedly vital because they are "doing the jobs that locals
will not do". In plain English, they are doing dirty or unpleasant
jobs for wages that locals would not accept. It is misleading
to imply that such workers are making a large contribution to
the economy, since many of them could be replaced, perhaps at
somewhat greater cost, by locals who are currently engaged in
low-productivity activities or without a job. Alternatively, the
UK could abandon some of the activities which can only be kept
in operation by using low-paid migrant labour. Either of these
steps might harm the employers concerned and those who consume
their output, but it would also raise per capita GDP.
Flexibility. Migration costs
prevent many native-born workers from moving to those regions
that offer the best economic opportunities. Immigrant workers,
in contrast, form a self-selected sample of persons who have chosen
to incur such migration costs. Immigrants will choose to go to
those regions that offer them the best economic opportunities.
In doing so, they help to alleviate local labour shortages and
remove bottlenecks that are inhibiting economic expansion. This
makes the economy more flexible and contributes to economic efficiency.
However, evidence from the United States suggests that the flexibility
bonus from immigration is not very large in relation to GDP as
Some types of immigration undoubtedly raise
GDP per capita, but others do not. The net effect of any particular
type of migration is an empirical issue that depends on the precise
mix of the various types of immigration. The National Institute
has examined this issue and it finds that immigration raised GDP
by 3.1% between 1998 and 2005.
Over the same period, net immigration of non-British citizens
amounted to 3.2% of the UK population. If we take into account
the children born to migrants and migrant deaths during this period,
the effect of migration was to add around 3.5% to the UK population.
This is greater than the increase in GDP of 3.1% which the National
Institute estimates was due to immigration during the period.
If the National Institute estimate is correct, the net effect
of immigration over this period was therefore to reduce GDP per
capita slightly. However, the effect was very small and within
the margin of statistical error.
The opponents of immigration often present immigrants
as a burden on the taxpayer. They can cite many specific examples.
Many immigrants do not work or receive more from the government
in the form of benefits and public services than they pay in taxes.
Conversely, the supporters of immigration can cite many examples
where migrants pay more in taxes than is spent on them by the
government. The first systematic study of the fiscal impact of
immigration in the UK was by Gott and Johnston for the Home Office.
This study was concerned with the fiscal contribution of the migrant
population as a whole in the tax year 1999-2000. Migrants were
defined as foreign-born residents and UK-born dependent children
who have two parents who are foreign-born or are in lone-parent
households where the head of household is foreign-born. This study
was updated and slightly modified by Sriskandarajah and his colleagues
at the IPPR.
The IPPR study estimates that in the tax year
2003-2004 migrants paid £41.2 billion in tax and consumed
£41.6 billion in benefits and state services, giving a net
fiscal contribution of approximately -£0.4 billion. This
calculation can be questioned on a number of grounds. Table 1
illustrates how the calculations might be adjusted to accommodate
some of these criticisms.
Children of mixed parentage. The
first adjustment refers to expenditure. Like its predecessor,
the IPPR study assigns public expenditure on children with two
immigrant parents to the migrant population. However, the entire
expenditure on children with mixed parentage (one migrant and
one non-migrant) is ascribed to the non-migrant population. This
procedure has been criticised by MigrationWatchUK which correctly
argues that such expenditure should be split equally between the
migrant and non-migrant population.
To allow for this expenditure on migrants must be increased by
£4.9 billion. Following this adjustment the net fiscal contribution
of migrants is equal to -£5.3 billion.
Defence. It can be argued
that the armed forces are a public good whose benefits to the
existing population are not affected by the entry of migrants.
To allow for this we eliminate defence from the list of expenditures
allocated to migrants. This reduces expenditure on migrants by
Budget Balance. The next adjustment
refers to taxes. In 2003-04 the government had a fiscal deficit
and even the non-migrant population paid fewer taxes than they
received in government expenditure. To correct for this we assume
that taxes on all UK residents are raised by a uniform percentage
just sufficient to eliminate the government deficit. This increases
the amount of tax paid by migrants by £4.9 billion.
When all of these adjustments are made the fiscal
balance of migrants becomes positive and is equal to £2.6
billion (Table 1). In addition to the adjustments listed above,
there are other items which should be taken into account but are
difficult to quantify.
There is no space to discuss them here, but suffice it to say
that most of them would reduce the fiscal contribution of migrants.
However, it is unlikely that their inclusion would greatly alter
The above observations indicate the difficulties
in obtaining an accurate picture of how immigration has affected
government finances. The measurable net fiscal contribution of
the migrant population lies between -£5.3 billion and +£2.6
billion. These figures may seem large in absolute terms, but they
should be seen in perspective. They range between -0.47 and +0.23%
of GDP, between -0.83 and +0.40% of individual consumption, and
between -1.16 and +0.55% of government expenditure. In comparison
to the economy as a whole, the fiscal impact of the migrant population,
taken as a whole, is small.
Past immigration into the UK has not in aggregate
led to a significant fiscal burden on the rest of society, nor
has it provided a significant surplus. It has been broadly neutral.
In this respect, Britain is similar to other advanced economies.
In countries where there has been large scale immigration over
a fairly long period of time, the stock of migrants and their
descendants normally contains a wide spread of different types
and age groups. This explains why estimates of the fiscal contribution
of the immigrant population as a whole are typically quite small.
The positive contribution of some migrants is largely or wholly
offset by the negative contribution of others. This finding holds
across a variety of countries and methodologies. Estimates of
the net fiscal contribution of past immigration normally lie within
the range ±1% of GDP.
4. Impact on the Labour Market
In addition to its overall impact on the receiving
country, immigration may also affect the operation of the labour
market. The nature of this impact depends on the type of immigrant
concerned. Provided their talents are fully utilised, the immigration
of skilled workers or entrepreneurs will raise the demand for
unskilled labour in the recipient country and will thereby benefit
existing unskilled workers. The immigration of unskilled workers
may have the opposite effect. If the immigrants are able to compete
freely with unskilled local workers, the economic position of
the latter may get worse. The competition from cheap immigrant
labour may push down the wages of unskilled locals to the benefit
of employers and other locals who utilise their services. Alternatively,
competition from immigrant labour may deprive some locals of employment.
An indication of the potential scale of this competition in the
UK is given by the statistics on the operation of Eastern European
migrants who are registered under the worker registration scheme.
Between May 2004 and March 2007, the number of national insurance
certificates granted to such migrants was 623,575 and 77% earned
between £4.50 and £5.99 per hour.
Over this period, the statutory minimum wage was in the range
£4.50 to £5.35 per hour for adults. It is hard to believe
that competition on this scale has no effect on the economic prospects
of local workers, as many advocates of immigration claim. Indeed,
such a claim is inconsistent with the widely accepted argument
that modern technology and structural change in the economy have
destroyed many low-skill jobs and undermined the labour market
position of low-skilled workers. If workers at the bottom end
of the skill ladder are losing out because of adverse shifts in
the demand for unskilled labour, then it seems obvious that their
situation can only be made worse by making them compete with migrant
labour. Those who point out this out are often accused of a racial
preference in favour of white locals against non-white immigrants.
In the case of the UK, many of the locals who compete with low-skilled
migrants are from ethnic minorities, for example black Caribbeans,
whereas nowadays the immigrants are often white. This situation
is similar in the United States, where unskilled black workers
face competition from Hispanic migrants.
The above are merely general observations. Before
reviewing the evidence, it will be useful to consider briefly
some of the difficulties which face researchers who seek to quantify
the impact of immigration on the labour market.
The following are some of the main difficulties:
1. Causality. Immigrants tend to go
to areas where there is a strong demand for labour. These are
likely to be areas where employment for local workers is high
or rising. This could be interpreted incorrectly as evidence that
immigration into an area creates employment for locals.
2. Induced Migration. When immigrants
come into an area, this may cause locals to leave or may deter
people from moving into the area from elsewhere. The result will
be a ripple effect, whereby a migration "shock" in one
area is dissipated to the rest of the country. For example, if
there is a big inflow of migrants into London, there may be initially
a rise in local unemployment. After a time, some residents of
London may go to Scotland and fewer Scots may come to London.
As a result, unemployment may eventually increase in Scotland
and fall back again in London. This means that the conventional
"spatial correlation" method for analysing the effects
of immigration may seriously underestimate its impact. Hatton
and Tani have shown that induced migration in the UK is important
and they warn that it may result in a downward bias in the estimated
impact of migration on the labour market.
3. Measurement Error. Migration statistics
are based on samples and are subject to error. The econometric
analysis of migration normally subdivides the population into
"cells" based on such items as area, education, age
or gender. Many of these the cells have a very small number of
migrants in them and the resulting errors may be proportionately
very large. Aydemir and Borjas have shown that this may lead to
a serious underestimate of the impact of migration on the labour
A similar point about the bias arising from errors was made by
Rowthorn and Glyn.
All of the above factors lead to a downward
bias in the estimated impact of migration on the labour market.
Econometricians normally seek to correct for this bias but it
is often very difficult.
The following is a very brief survey of the
evidence about the labour market impacts of migration in this
country and abroad.
Historical Impact on the Average Worker
It is widely agreed that, taken as a whole,
past immigration in most countries has not had much affect on
the average wage of native workers. There is disagreement about
its impact on employment. Most studies find that in aggregate
the impact on native employment has been small. Many of these
studies may have a downward bias because of measurement error
and a failure to allow for induced migration. In their article
on the impact of immigration on European employment, Angrist and
Kugler avoid the latter problem because their geographical cells
are individual EU countries, between which induced migration is
likely to be small.
In some of their formulations, they find that immigration has
a large and statistically significant effect on male employment.
For each 100 male immigrants, they estimate that between 35 and
83 male native jobs will be lost.
Using Census data and the "difference in differences"
method, Dustmann and his colleagues estimate that 23-60 native
jobs will be lost for each 100 immigrants.
These estimates are also based on statistically significant coefficients.
Using less accurate LFS data, they get a smaller and less statistically
significant effect. The same is true in a later paper of theirs
which is also based on the LFS.
A more recent study by Gilpin et al gets
statistically insignificant, but sometimes very large estimates
for the impact of recent immigration from Central and Eastern
Europe on local unemployment.
Most of the "long-run" coefficients are equal to at
least 0.6, which implies that in the "long-run" 60 or
more local workers will become unemployed for each 100 immigrants
that enter the region. It must be stressed that these coefficients
are not statistically significant, but this does not mean that
they are "small" as the authors claim.
It simply means that there is too much noise to estimate them
Unskilled workersoverall impact
Economic theory would suggest that unskilled
workers lose where they have to compete with immigrants, but benefit
from the demand for their labour created by the immigration of
entrepreneurs and highly educated workers. The overall impact
of immigration depends on the relative strength of these opposing
effects. In a recent report, Dustmann et al find that most
types of worker in the UK have gained a modest amount from immigration,
whereas workers in the bottom layer have suffered a loss.
The following are some extracts from the press release summarising
"The research looks at the period from 1997
to 2005 and finds evidence of an overall positive impact on immigration
on the wages of native born workers, although the magnitude of
the effect is modest. Immigration during these years contributed
about one twentieth of the average 3% annual growth in real wages
... The report goes on to say that although the arrival of economic
migrants has benefited workers in the middle and upper part of
the wage distribution, immigration has placed downward pressure
on the wages in receipt of lower levels of pay. Over the period
considered, wages at all points of the wages distribution increased
in real terms, but wages in the lowest quarter would have increased
quicker and wages further up the distribution would have risen
more slowly if it were not for the effect of immigration."
Ottaviano and Peri reach a similar conclusion
for the USA.
Unskilled workerscompetition with immigrants
In a well-known paper, Borjas estimates that
competition from Hispanic immigrants into the USA, mainly from
Mexico, has reduced the wages of unskilled native workers, especially
blacks, by a substantial amount.
Ottaviano and Peri have criticised this finding on the grounds
that unskilled natives and unskilled immigrants are not very good
substitutes for each other.
They conclude that the effect of immigration is smaller than Borjas
claims. Using a similar methodology, Manacorda et al find
that the immigration of less-educated male workers has had quite
a large impact on the existing less-educated male workforce in
However, they also find that this effect is confined mainly to
previous immigrants. The native workforce is largely unaffected.
Many of these earlier immigrants are, presumably, from ethnic
minorities and many of them are now UK citizens. These findings
would suggest that it is unskilled members of ethnic minorities
who have been most affected by recent immigration.
The IMF argues that globalisation through trade,
investment and migration has undermined the bargaining power of
workers in the advanced economies.
The threat of competition from workers in low wage economies has
made workers in the advanced economies less militant and has reduced
the need to restrain wages through unemployment. This means there
is less inflationary pressure and that monetary policy can be
more expansionary, creating additional jobs for local workers
in the advanced economies. It is possible that the additional
jobs created from a more expansionary policy will outweigh the
loss of jobs to immigrants, in which case immigration will eventually
cause total employment for local workers to rise. In other words,
the "natural" rate of unemployment will fall.
This is a plausible argument. Note, however, that the disciplining
effect of immigration (and other forms of globalisation) depends
on the perceived threat of job loss, not on the actual loss of
jobs. It is not clear how much immigration is actually needed
to achieve this effect.
Source: International Migration, Series
MN nos. 28 and 32, ONS.
Source: Population change: UK population
increases by 349,000, ONS Press Release, 22 August 2007.
ALTERNATIVE ESTIMATES OF THE FISCAL IMPACT
OF MIGRANTS IN THE UK 2003-04
| Children of mixed parentage
| After first adjustment
| After second adjustment
| Budget balance||4.9
| After third adjustment
|Note: rows and columns may not add because of rounding errors.
10 October 2007
A long-term migrant is one who resides, or intends to reside,
for more than one year in a foreign country. Back
http://www.gad.gov.uk/Population/index.asp. Throughout this paper
I have used the 2004-based GAD projections as a starting point.
GAD is due to produce new projections which assume higher fertility
and migration rates. Back
International Migration, Series MN no 32 Table 2.1, ONS. Net migration
was 223,000 in 2004 and 185,000 in 2005. Back
The figures for net migration from the New Commonwealth for the
latest three years for which statistics are available are as follows:
2003-84,000, 2004-121,000, 2005-98,000 (International Migration,
Series MN no 32 Table 2.3, ONS). Back
Birth Statistics, Series MF1, no 34, ONS, table 9.5. Back
Live births: fertility highest for 24 Years, ONS Press Release,
7 June 2007. Back
UK fertility highest since 1980, ONS Press Release 22 August 2007. Back
GAD is due to produce new projections which assume higher fertility
and migration rates than the 2004 based Principal Projection.
As a result, the new Principal Projection will have a higher population
growth rate and the trajectory will be similar to Projection E
in Figure 4. Back
Government claims with regard to this effect are discussed in
David Coleman and Robert Rowthorn, The Economic Effects of Immigration
into the United Kingdom, Population and Development Review, 30(4):
579-624 (December 2004). Back
This paragraph is based on the following paper: George Borjas,
"Does Immigration Grease the Wheels of the Labor Market?",
Brookings Papers on Economic Activity, 2001, pp 69-119. Back
National Institute Economic Review, no 198. Borjas estimated that
the flexibility bonus of immigration was equal to 0.1% of US GDP. Back
Ceri Gott and Karl Johnston, The Migrant Population in the UK:
Fiscal Effects, Home Office, RDS Occasional Paper No 77. Back
Dhananjayan Sriskandarajah, Laurence Cooley and Howard Reed, Paying
their way: The fiscal contribution of immigrants in the UK, IPPR,
April 2005. Back
MigrationWatchUK, The Fiscal Contribution of Migrants (Revised),
Briefing Paper no 1.10. Back
This adjustment is derived from paragraph 38 of the MigrationWatchUK
briefing paper. Back
Total expenditure on defence in 2003-04 was £31.4 billion.
The IPPR study allocates this in proportion to the share of migrants
and non-migrants in the population. Back
In 2003-2004 there was an overall budget deficit of £48.5
billion. The adjustment shown in Table 1 assumes that this deficit
is eliminated by means of a uniform 11.8% increase in the amount
of tax paid by migrants and non-migrants. The extra tax paid by
the two groups is equal to £4.9 billion and £43.6 billion
respectively. An alternative procedure is as follows. After the
first two rounds of adjustment shown in Table 1 the ratio of taxes
to government expenditure is 94.7% for migrants and 88.9% for
non-migrants. As a result, migrants pay £2.5 billion more
in taxes than they would do if their tax-expenditure ratio were
the same as that of non-migrants. This can be taken as a measure
of their net fiscal transfer to the non-migrant population. It
is very similar to the figure of £2.6 billion shown in the
last row of Table 1. Back
See David Coleman and Robert Rowthorn, The Economic Effects of
Immigration into the United Kingdom, Population and Development
Review, 30(4): 579-624 (December 2004). Back
A survey of the various international studies on the fiscal impact
of migration is contained in: David Coleman and Robert Rowthorn,
The Economic Effects of Immigration into the United Kingdom, Population
and Development Review, 30(4): 579-624 (December 2004). Back
Access Monitoring Report, A8 Countries, May 2004-March 2007, A
joint online report by the Border and Immigration Agency, Department
for Work and Pensions, HM Revenue & Customs and Communities
and Local Government, 22 May 2007. Back
Hatton, T J and M Tani (2005), "Immigration and Inter-Regional
Mobility in the UK, 1982-2000", Economic Journal, vol 115,
Aydemir, A and G Borjas (2006), "Attenuation Bias in Measuring
the Wage Impact of Immigration." Turkey: Sabanci University
working paper series, November. Back
Rowthorn, R and A Glyn (2006) "Convergence and Stability
in U.S. Employment Rates", Contributions to Macroeconomics:
Vol 6: Iss 1, Article 4.
Available at: http://www.bepress.com/bejm/contributions/vol6/iss1/art4 Back
Angrist, J D and A D Kugler (2003), "Protective or Counter-Productive?
Labour Market Institutions and the Effect of Immigration on EU
Natives", Economic Journal, vol 113, no 488, June. Back
Op cit pp F318, F322. Back
These numbers are derived from the coefficients given in Table
4.1 of Dustmann, C, F Fabbri, I Preston and J Wadsworth (2003),
"The local labour market effects of immigration in the UK",
Home Office Online Report 06/03. Back
Dustmann, C, F Fabbri and I Preston (2005), "The Impact of
Immigration on the British Labour Market", Economic Journal,
vol 115, November. In fact, using LFS data they estimate that
immigration has had a minor impact on the level of employment
in aggregate, but it has reduced employment somewhat amongst workers
with an intermediate level of education. Back
Gilpin, N, M Henty, S Lemos, J Portes and C Bullen (2006), "The
impact of free movement of workers from Central and Eastern Europe
on the UK labour market", DWP Working Paper No 29. The large
estimates are to be found in section 5.11 of this paper. Back
Op cit page 49. Back
C Dustmann, I Preston and T Frattini, (2007) "A Study of
Migrant Workers and the National Minimum Wage and Enforcement
Issues that Arise", CReAM, University College London, March.
This is a report commissioned for the Low Pay Commission. Back
I P Ottaviano, and G Peri,(2006) "Rethinking the Effects
of Immigration on Wages", NBER Working Paper 12497. Back
G J Borjas, (2003), "The Labour Demand Curve Is Downward
Sloping: Reexamining the Impact of Immigration on the Labor Market",
Quarterly Journal of Economics, November, pp 1335-1374. Back
I P Ottaviano, and G Peri,(2006) "Rethinking the Effects
of Immigration on Wages", NBER Working Paper 12497. Back
M A Manacorda, A Manning and J Wadsworth (2006), "The Impact
of Immigration on the Structure of Male Wages: Theory and Evidence
from Britain", LSE, CEP Discussion Paper No 754. Back
IMF (2007) World Economic Outlook 2007, Chapter 5. Back
D G J Blanchflower, J Saleheen and C Shadforth (2007), "The
Impact of the Recent Migration from Eastern Europe on the UK Economy". Back