The Immigration Fallacy

22/05/2013 5 Comments

Immigration has been a hot topic recently. UKIP, (who seem to be founded on nothing more than the principal that British people are the best), did extremely well at the recent local elections. The Conservatives then panicked and decided that UKIP’s popularity showed that they must become even more tough on Europe and immigration themselves.

(Ed Miliband, being as always one headline behind everyone else, proposed a government subsidy for the living wage.)

I don’t think that Ed’s policy has much going for it but that’s not the subject of this blog. Today I’d like to talk about immigration – or more specifically the main arguments against it. They seem to fall into two categories:

  • Immigrants steal our jobs!
  • Immigrants just live on benefits and don’t contribute to the economy!

I’ll take each in turn…

Immigrants steal our jobs!

The arguments goes something like this.

In the UK we have net immigration – that is, we have more people arriving to live here than we have people leaving the UK to live elsewhere. The people who arrive from overseas take jobs away from those who were born here.

It’s understandable how you would draw that conclusion. Imagine a country who has a working-age population of 20 million people of whom 1 million are unemployed. Over the next five years the working age population increases by 500,000 due to immigration. At the end of the five years there will be 1.5 million unemployed people and because people move into and out of work during this time, lots of the immigrants will have jobs and those jobs will have come at the expense of a lot of the people who had jobs before those immigrants arrived.

Simple enough, right?

Wrong. Things are not that simple. It is, in fact, perfectly possible to add people to the working-age population without increasing unemployment. How? Trickery? Sleight of hand? Government statistics? No.

During the 20th Century, the UK population increased by about 21m people. We have, in fact been adding more people without increasing unemployment for a very long time. When we add more people to the economy, more goods are made and more services are provided and this leads to economic growth and to the creation of more jobs. It is easy to think of the economy as having a finite number of jobs and employment as a “one-in, one-out” market but that is not the case.

A much more useful way of looking at it would be this:

For every 100 people I add to the population, by how much does unemployment change?

Or to move the argument back to immigration:

For every 100 immigrants I add to the population, by how much does unemployment change?

It’s an intriguing question. Fortunately, NIESR has done the analysis and guess what they found out?

(UKIP, Tories, Daily Mail – you might want to look away now.)

The results show a very small negative and generally insignificant correlation between the migrant inflow rate and the change in the claimant count rate. A hypothetical example can help give a sense of how small this coefficient really is. A 2 percentage point increase in the migrant inflow rate, akin in magnitude to the large and sudden inflow of A8 migrants in the years 2004-2006, would, according to these estimates, be associated with a fall in the claimant count rate in the order of only 0.02 percentage points.

I don’t think I am doing them a disservice here if I summarise that if we are worried about unemployment, we can quickly exclude immigration as a significant factor. The effect is nigh on nothing.

(UKIP, Tories, Daily Mail – you can look again now, it’s gone.)

Let’s look at the second argument.

Immigrants just live on benefits and don’t contribute to the economy!

Well that would account for the fact that immigrants don’t take people’s jobs. Perhaps they just turn up, don’t attempt to get a job and just claim benefits?

You might believe that if you base your beliefs on what you read in certain newspapers but the reality is clearly going to be more complicated. A better way of looking at this question would be:

Is the overall contribution of immigrants to the economy positive or negative?

Fortunately the Centre for Research and Analysis of Migration have done a comprehensive study that answers this question.

(UKIP, Tories, Daily Mail – you might want to look away now.)

Yes, it’s positive. They found that immigrants on average paid 30% more into the economy via taxes than they took out through public services. But not only was it positive – the analysis found that on average, immigrants contribute more and take away less than non-immigrants. Jonathan Portes discusses it very well here.

Conclusion

So what can we conclude? Firstly, we have very good data that shows that not only does immigration not increase unemployment but also that immigration does boost the UK economy. Although the UK economy is doing badly at the moment it isn’t the fault of immigrants – we would actually be doing even worse if it weren’t for them.

Given this, it’s bizarre that these days we always seem to find ourselves surrounded by politicians wanting to show how “tough” they are on immigration. Given the facts it’s hard to understand – but when were politicians ever concerned by those?

The UK economy is in the longest depression in living memory, longer by far than The Great Depression of the 1930s and throughout it, unemployment has remained stubbornly high.

When such a situation occurs people naturally want to look around for someone to blame and, shameful as it is, politicians have done their upmost to direct that rage onto immigrants (and the recipients of benefits). But why would they do that, given that such a campaign is completely contradicted by the facts?

To win votes by explaining the benefits of immigration takes more time and effort than it does to win votes by saying that immigrants are job-stealers and benefit scroungers.

Politicians care far less about doing the right thing and far more about winning easy votes

Oh, and regarding why they want to blame these easy targets specifically for the depression? Well that one’s easy – the depression was created by the politicians themselves.

RedEaredRabbit

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A Problem of Politics

11/05/2013 1 Comment

I don’t have children. I’ll be honest – I don’t like them very much. Many of my friends however, hold the opposing view and over the past four or five years, I have seen many of them pair off and then unfortunately, find out what happens when they combine their DNA with one another.

Before Christmas, I was out with a few such couples and their resultant chimera and at some point during the meal, two of the latter had a minor disagreement over toy-ownership and proceeded to attack one another. Their parents quickly broke up the melee and each offspring was separately told that if they behaved in such a way, Father Christmas would not bring them any presents. The threat had the desired effect and good behaviour was quickly restored.

Sometimes I wonder how future generations will look back on how we dealt with the current economic crisis. As I have mentioned on here before, I don’t think we are now dealing with an economic problem – the economics that would have engineered a recovery long ago are well understood – what we are dealing with now is purely a political problem.

At the moment we have a right-wing government whose political ideals are to seek a smaller government sector. In certain economic circumstances that kind of ideal is easier to achieve than it is in others. At the moment, as we have seen, achieving it is very difficult. When the economy has high unemployment, low demand and interest rates at the zero lower bound, cuts to public spending will not be offset, in the short-term by increases in private spending. That is, if the government makes a bunch of civil servants redundant, the private sector won’t immediately expand and give them jobs. The private sector will probably eventually adjust and take them on but that could take (and has already taken) years  to happen. While we wait for that adjustment to occur people remain unnecessarily unemployed and long term damage is done to both the well-being of those people and the economy as a whole.

As I’ve mentioned more than a few times in the past, cutting government spending under such circumstances is nothing other than negligent but if the economics says one thing, how can the government continually get away with doing the opposite? It’s not an easy question but I think I have an answer. My answer is simply the difference between economics and politics:

  • Economics is a discipline that helps us to understand the best policies to pursue in order to improve the economy
  • Politics is a discipline that helps its proponents win the next general election

But surely they would align themselves? Surely the easiest way to get elected at the next election would be to fix the economy? Right?

Wrong.

Let’s take ourselves back to the story with which I started this post. My friends could have dealt with it by explaining to each of their spawn, the importance of sharing and two individuals working together to achieve the best overall outcome for both parties. Or they could just say that Father Christmas wouldn’t turn up.

The former is a harder message to convey. The latter was much less effort to explain and much less effort for their audience to understand.

It’s the same with the economy. Explaining to people why cutting spending leads to more debt is a hard sell because it involves giving the public a basic understanding of macroeconomics and while it is only a basic one they need, it is still far easier to do this:

  • The previous government went on a spending binge that caused all of this!
  • Our country is just like an indebted household!
  • We need to immediately pay off our debts in order to recover!

And that’s an easy sell. None of those things are actually true but the truth is harder for people to understand.

Democracy has a lot going for it but never for a moment believe it’s perfect. Look at the range of subjects over which a voter has to preside. The economy, education, foreign policy, immigration, the environment, health, crime. The list goes on and on. These are not simple things to understand and yet we are all asked to decide on them every time we vote.

Politicians could spend lots of time explaining these things to people and honestly giving the pros and cons of a particular policy but it’s much easier to just go ahead and do what they want and then give us a few simple, misleading soundbites as to why it is right. When you look at it in these terms it isn’t hard to understand why politics continually fails us so badly.

It’s not just the government though. A big part of UKIP’s recent successes is because they understand this and do it better than anyone else. They say that climate change is all made up. That’s much easier than explaining that driving an SUV burns a lot of petrol and that when petrol is burnt one of the consequences is releasing carbon-dioxide into the atmosphere and that carbon dioxide in the atmosphere causes a reduction in the amount of the sun’s energy that is reflected away from the Earth and that such a reduction causes the temperature of the planet to increase. And even if you got that far, you haven’t even started on the consequences of that temperature increase.

Immigration is another example. An easy sell is telling the electorate that the economy is broken because there are hoards of foreigners arriving on our shores every day and stealing our jobs or sitting around claiming benefits. Although that isn’t true, it is much harder to educate the public on all of the very real economic benefits of immigration and so the xenophobic soundbites win and such policies become popular and everyone loses out because of them.

Our politicians owe us more than this. They should appreciate the weaknesses in the democratic system and make it their absolute duty to clearly explain the realities of the situations that we face. They should not, as they do currently, exploit the weaknesses in the democratic system for their own gains.

So anyway, what then became of my friends’ recently-created miscreants? Well they took onboard the threat, behaved as they were told and got their Christmas presents (none from me, I might add). That said, three years after the country chose to go along with the current government’s economic plan, our Christmas presents still haven’t shown up.

And when we look at what politicians are all about, should we really be surprised?

RedEaredRabbit

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