Cambridge University Economist: Claims By The UK Gov’t That Immigrants Increase "The Prosperity Of The British People…Are Profoundly Misleading"

Cambridge University Economist: Claims By The UK Gov't That Immigrants Increase “The Prosperity of The British People… Are Profoundly Misleading”.

As you will note, his conclusions are similar to those drawn in 1990 by The Economic Council of Canada and like those of a recent Australian government report and those of Harvard economist George Borjas.

We also provide two links to show a current significant contrast between the Government of Canada and the UK Conservative Party. The Government of Canada has announced that it will solicit the immigrant vote in Canada's next election. However, the UK Conservative Party has announced that, if elected, it will cut UK immigration levels.

(1) Tories Target Specific Ethnic Voters (Canada)

(2) Cameron Targets Lower Immigration (UK)

For a historical and very ironic perspective on why Canada has high immigration levels and the catering of Canada's 1990 Conservative government to the immigrant vote, we also provide the following link:

McDougall Wins Battle To Increase Immigration (Canada–1990)


Cambridge University Economist: Claims By The UK Gov't That Immigrants Increase “The Prosperity of The British People… Are Profoundly Misleading”.

We need an honest immigration debate

By Bob Rowthorn
Professor of Economics
Cambridge University
For The Sunday Telegraph
October 21, 2007

Immigration is a contentious topic. But there is widespread agreement in official circles to one proposition: immigrants contribute enormously to increasing the prosperity of the British people. The consensus that immigration has economically beneficial effects was on display last week, when the Government released a report by its own experts. Migrants contribute 6 billion to the GDP was the headline in many newspapers. And the report indeed confirmed the orthodoxy that the Exchequer is better off with immigration than without it as Liam Byrne, the Home Office Minister, has insisted.

Such claims are profoundly misleading. What matters to the existing population is not how migration affects the economy as a whole, but how it affects them individually. Migration may increase the size of the national cake, but it also increases the number of people who are entitled to a slice of this cake.

There is a whole section of the report devoted to the contribution of migrants to GDP per capita. It claims that, since 1998, immigrants have added 3.1 per cent to Britains GDP. That is true. But there is another, critical fact: during the same period, immigrants have added 3.8 per cent to the total British population. Put those two together and you get the result that the additional amount produced by immigrants has been smaller than the number of people they have added to the population.

The conclusion is inescapable: the result of immigration since 1998 has been to lower per capita GDP, or output per individual worker, not to increase it. The effect is very small, and within the margin of statistical error. But if you are willing to rely on the figures, the one thing you cannot conclude is that immigration has increased per capita GDP.

Yet this is precisely what is often meant by those who insist that immigration has been enormously beneficial to the economy. Putting the GDP and population figures together is not complicated economics. But somehow the report never manages to do it, and so never manages to reach the obvious conclusion. I dont know whether that failure is deliberate or not but it is certainly misleading.

Now consider the issue of whether immigrants are net contributors or net consumers of taxes. The report is sure that they contribute significantly more than they consume, and indeed that immigrants usually contribute more than native-born Britons. It maintains that in the long run, it is likely that the net fiscal contribution of an immigrant will be greater than that of a non-immigrant. The reason the report gives is that the UK is receiving the fiscal contribution of their work without paying for the education and training that enables them to work. That is true of highly skilled migrants whose education has been expensive but this is a relatively small factor when it comes to less skilled migrants, most of whom do not work or hold down low paid jobs which do not require much education to perform.

More importantly, well paid and highly educated immigrants are likely to contribute much more in taxes than they consume in tax-funded services. The same is true, of course, of native Britons just as it is true that immigrants and Britons who are not well-educated who end up unemployed or in minimum wage jobs will be net consumers of taxes. Many immigrants fall into that category: many immigrant workers from developing countries, for example, bring wives who do not work, and have children who will not enter the labour market for many years. Many of the migrants from Eastern European countries have ended up in jobs which pay little more than the minimum wage: between May 2004 and March 2007, 77 per cent of the 623,575 national insurance certificates awarded to Eastern European migrants were for jobs which paid between 4.50 and 5.99. People on so low a level of pay receive back more in terms of tax-credits and other Government benefits than they contribute in taxes.

There are, to be sure, plenty of immigrants (from Premier League footballers to hedge fund traders) who earn enormous sums and pay large amounts in taxes. But these must be balanced against those who will pay little or no tax and over the course of their time here will absorb a lot of government expenditure.

Depending how it is measured, the net contribution of immigrants in taxes lies between minus 1.2 per cent to plus 0.6 per cent of government expenditure. Whether the contribution of immigration turns out to be positive or negative, the figures suggest its effect on government finances is very small. Immigrants, as a group, have not been, and are probably not going to be, a fiscal burden on the rest of society but then neither are they going to provide a significant surplus for the rest of us. Their fiscal impact is largely neutral. Britain is not unique in this respect: the same result has been found in many other countries which have experienced migration on the same scale as we have done in the past decade.

How does immigration affect the employment prospects of native-born workers? The reports message is upbeat. It claims that the empirical studies that have been done around the world have uncovered little or no evidence that immigration harms employment.

But that is not, in fact, an accurate report of the state of academic research on the topic. More than one study has found that, for every 100 male immigrants, perhaps half that number (sometimes less, sometimes more) of native male jobs will be lost. The statistical significance of some of these estimates is low, so they cannot all be taken as firm evidence. They are, however, consistent with the conclusion that immigration has a large impact on unemployment. They should make us sceptical of the bland reassurance, so often repeated, that immigration does not harm the economic prospects of native-born workers.

The economic costs and benefits of immigration are not evenly or uniformly distributed. To those who are competing with immigrants for jobs to the existing residents who have low levels of skill and education the effect of immigration is going to be largely negative. The most affected are likely to be previous immigrants, many of whom belong to ethnic minorities. For those who can afford to employ nannies or cleaners or builders, the impact of immigration will be largely beneficial, because it increases the pool of available workers and keeps their wages from increasing.

Immigration, if it continues at the present rate of a net inflow of around 200,000 people a year, is going to add around 20 million to Britains population over the next 50 years. Official press releases from the Office of National Statistics do not accurately report that fact, because they do not take account of the children that immigrants will have. It is not easy to see how the South East which is where most immigrants settle, because that is where the jobs are will be able to cope with so large an additional population.

None of this shows that immigration is necessarily a bad thing and, for the record, I do not believe that it is. There are plenty of arguments in favour of immigration which have nothing whatever to do with the mythical economic benefits for the rest of us. One of them is that immigration, whether or not it improves the lives of everyone else, does usually improve the lives of immigrants. There is a strong case for believing that we have a duty to share the benefits of our society with the impoverished people from the developing world, who sometimes risk their lives to get here, or from Eastern Europe.

But lets have an honest debate about the effects and consequences of immigration, not one based on misleading statistics or evasion of the truth. At the moment, the Government seems to want to conduct the discussion on the basis that it is better that people should not know what the truth is. I cannot believe that ignorance is a rational or ethical basis for making a decision on so important a topic. If we do not debate the effects of immigration honestly and truthfully, we will all come to regret it.

Bob Rowthorn is professor of economics at Cambridge University