Reducing UK immigration would have "strong negative effects" on the economy
UK Prime Minister David Cameron’s plans to slash immigration to the nation would damage the economy in the long term, according to a new study.
A paper published by the National Institute of Economic and Social Research (NIESR) this week estimated that Cameron’s model could reduce UK GDP by 11% by 2060. The hypotheses contributing to this dramatic outcome are supported by a variety of IZA World of Labor articles.
The NIESR paper predicts that Cameron's drastic cuts to migration would lower GDP per capita by 2.7% over the same period, noting that, on average, migrants are fiscal contributors. This mirrors research from Corrado Giulietti which shows that migrants pay more in tax than they receive in benefits and public service usage.
With the UK's aging population, the NIESR also noted that reducing tax contributions from working migrants would cause public spending as a portion of GDP to rise by 1.4%. James P. Smith writes more fully about taxpayer effects of immigration, and finds that it benefits economies in the long-term.
Higher taxes would also have a knock-on effect on household finances; the NIESR predicts that net wages would be slashed by 3.3%. Giovanni Peri discusses how immigration affects the wages of native workers in more detail, with evidence to suggest that it can boost productivity and wages in the long-term.
According to the Office for National Statistics (ONS), migration to the UK was largely driven by countries in the European Union (EU), which allows free movement of labor across its member states.
The EU’s open borders are currently hampering Cameron’s attempts at reaching his migration target; however, James Hampshire of the Sussex Centre for Migration Research asserts that such borders are fundamental.
Writing for a publication by Chatham House, Hampshire said that undoing free movement of workers would reduce the talent pool available to UK businesses, and could ultimately be “the undoing of the EU.”
Evidence suggests that migration barriers are not the most effective way to regulate national fiscal outcomes. Holger Hinte posits that more active integration strategies can result in the strongest economic benefits.
Voters may accuse immigrants of weakening employment prospects and welfare for natives, but large quantities of empirical evidence suggests otherwise.
Read more here and share your views on Twitter @IZAWorldofLabor and on our LinkedIn group.
Related articles:
The welfare magnet hypothesis and the welfare take-up of migrants, by Corrado Giulietti
Taxpayer effects of immigration, by James P. Smith
Do immigrant workers depress the wages of native workers? by Giovanni Peri
What determines the net fiscal effects of migration, by Holger Hinte