Tuesday, 18 December 2012

The Truth About Immigration

A recent report shows that the right-wing anti-immigration UK Independence Party (UKIP) has risen six points to gain 10 per cent of support, which is as good as it has ever been for the party.  Euroscepticism, rises in unemployment and increased immigration are probably the primary reasons for this occurrence.  Of course, the kind of people who support UKIP are the kind of people who think rises in unemployment and increased immigration are causally linked – “If it weren’t for all those bloody immigrants our British folk would have more jobs” is what they assert.  They are wrong.    

Given that geographical borders are a human invention, I see no rational reason to have any preference, or treat more favourably, a man from Britain over a man from anywhere else in the world.  But let’s pretend we have to for the sake of the anti-immigration folk – what’s usually asked is, are immigrants really bad for the British job market?  But that’s the wrong question – the right question is whether immigrants make us economically and culturally richer.  Even that isn’t the nicest question we can ask, because it only views migration by what we can gain, not by what the person coming into our country has to gain (which is usually much more).  But yes immigration does make us richer – both financially and culturally – but it has to be the right kind of immigration.  By ‘right’ I mean the right kind of immigrant – one who is willing to assimilate himself into the UK’s language and culture, not remain aloof in non-English speaking enclaves that are detached from the rest of he country (although I understand their temptation to do this – if you or I went to live in, say, Turkey or Singapore, we’d probably gravitate towards the more familiar English communities if we could find them). 

Here’s one way immigration makes us richer. Say you have a British worker earning £10 per hour, and he won’t work for less.  If an immigrant comes in and will do the same job for £7 per hour, then as a result is Britain better or worse off on the whole?  Purely in terms of economics, Britain is better off because the British worker was being paid £3 too much (in net terms).  Of course, this sort of thing doesn’t reach a low ebb because we have the minimum wage, and it doesn’t even apply exclusively to immigration.  If you have a Mancunian worker earning £10 per hour, and he won’t work for less, and a Liverpudlian comes in and will do the same job for £7 per hour, the nation is better off because we were paying a man £10 per hour to do a job that we could get done for £7 per hour. 

Most right-wing journalists and politicians seem to be under the assumption that the costs of immigration can be measured by the number of British people who leave their jobs as a result.  But this simple caricatured picture of the Eastern European replacing a British worker on a higher salary is pretty much the opposite of what is happening.  Think about it; any employee who leaves his job rather than taking the wage decrease must either be transferring to a job with similar wages, or he must have better alternatives ready at hand.  The employees who cannot easily leave and as a consequence must take a pay cut are the ones hurt the most.    

Every immigrant is a potential employee, customer, buyer and seller, and provider of services. He bids down wages, but that's a double-edged sword, because while it’s bad for his fellow workers, it's good for employers and consumers.  There is a wider picture though; the costs of immigration are borne by British workers who are hurt by the aforementioned falling wages, and the benefits are reaped by British employers and company owners (who profit from those same falling wages).  The employees’ loss is the employers’ gain, so they cancel each other out.  But there is a wider gain for the British economy because employers and company owners enjoy an additional benefit when the fall in wages enables more profitable expansions to the business, which, nationally, results in lower prices (in some cases) and lower unemployment (in other cases). 

Moreover, and I don’t have any statistical figures to hand, but even when wage drops occur for Brits, they are almost certainly dwarfed (at least in relative terms) by the gains for immigrants.  A Brit who takes a £2 per hour wage drop is probably giving (indirectly) something like a £7 hourly gain to the kind of people for whom that sort of gain is essential for feeding their family. 

So on balance immigrants don't harm the UK; because immigration makes us richer, not poorer.  Also, in the longer run, the excess profits that immigration engenders get competed away and show up with lower prices for consumer goods. Even consumers benefit here; if your wage falls by 5% while prices fall by 10% you're benefiting. 

Contrary to poplar opinion, the minimum wage doesn’t impact this situation all that much. A minimum wage does two things. It shifts capital from employers in an unstable competitive market to low paid workers, and it induces some employers to let their staff go because they cannot afford the wages. If you’re getting £7 per hour and only bringing £6 per hour worth of benefits to your company, you’ll likely find yourself on the dole. In that sense, it is possible to argue that for the good of low-paid workers there should be no minimum wage at all – which is interesting because the minimum wage is supposed to be for the benefit of the low-paid, unskilled workers.  If you are a lower paid man or woman going from here to there in different jobs, you will find less work available with every rise in the minimum wage – and the higher the rate the more unemployment.

This might amount to a road block for young, unskilled workers and the unemployed – which is why tax credits are a more effective method because they target those who have children or high level benefits, and need high wages to make it worth their while signing off benefits, but who don’t have the skills or experience to command that kind of salary.  An efficient tax credit system will leave such people almost unaffected by immigration, certainly with regard to the economy.

There are some notable costs of immigrants coming into our country; most obviously the issues surrounding sex trafficking, drug gangs, and rise of Islamic fundamentalism – but you don’t have to be an immigrant to be involved in those activities – many indigenous folk get involved too.  Yes the Government needs better border control, but it’s a terribly difficult task for any Government to realistically keep a check on the numbers coming in illegally. 

All in all, immigration benefits a nation.  Yes there are sceptics, but here’s an amusing way to catch them out.  The next time someone says there are too many immigrants in the UK, ask them how many immigrants there are.  They will usually say they don’t know – to which you can respond by asking how they can say there are too many immigrants when they don’t know how many there are in the first place. If they try to be clever and give you a figure, ask them how they can know the number when apparently the Government doesn’t even know.