current affairs politics

The costs and benefits of immigration

Yesterday David Cameron gave a big speech on immigration. My usual response to big speeches on immigration is ‘here we go again’. I don’t know if it’s the same everywhere, but we seem pretty much unable to hold a serious conversation about immigration – ie one that’s based on facts rather than tabloid insinuations.

Cameron’s speech is apparently in response to “the genuine concerns of hard working people”, although it may have as much to do with Lynton Crosby and his election strategies. There’s nothing particularly controversial in the government’s plans, but the reasons for them are still warped towards the aforementioned tabloids. There is a concern, says the Prime Minister, that “some people might be able to come and take advantage of our generosity without making a proper contribution to our country.”

He specifically singles out Romania and Bulgaria, whose citizens will have the right to move to Britain next year. Cameron wants to make sure that people are only allowed in because “they want to contribute to our country not because they are drawn by the attractiveness of our benefits system or by the opportunity to use our public services.”

As Romanian recruitment agency swiftly protested, Romanians don’t come to Britain either to contribute to Britain or to draw benefits. They come here to work. Most take three to six month contracts, and 90% of them then go home again having earned far more in that time than they could have done at home. They also point out that far from sponging off the NHS, most Romanians go home for medical treatment because it’s cheaper.

The idea that people migrate to Britain for the primary purpose of sponging off the welfare state is daft. But if you don’t read the tabloids, you may read a paper that errs in the other direction. There’s no shortage of headlines and front pages declaring the net benefits to the economy from migration, how they work harder and pay more tax.

The truth, as usual, is somewhere in between. The Migration Observatory in Oxford recently put together something of a literature review, as a briefing on the fiscal impacts of immigration. It should be required reading for politicians about to give major speeches on the topic, as well as newspaper editors.

What the Observatory suggests is that it’s far more complicated to work out the fiscal effects of immigration than you might expect. There are lots of variables, and results are mixed. Nobody had thought to try and objectively work out whether immigration was a good or bad thing for the economy until 2002. Since then there have been at least four different attempts and they’ve all found different things:

  • A Home Office study concluded that in 1999-2000 immigrants contributed more in taxes (£31.2 bn) than they used in services (£28.8bn), and thus added roughly £2.5 billion to the economy. That’s a study you’ll often hear quoted.
  • However, the Institute for Public Policy Research (IPPR) re-ran the Home Office model in 2005 with five years’ worth of data rather than just the one, and got a different result. In 2003-2004, immigration represented a net loss of 0.4 bn.
  • The third big attempt to make sense of the problem comes from Migration Watch, the go-to think tank for anti-immigration sound bites. They declared that immigration was a net loss to Britain of £1 bn in 1999-2000, and £5 bn in 2003-3004.
  • Finally, an academic study (Rowthorn, 2008) found that in 2003-2004, immigration was a net benefit of £0.6 billion.

There are several lessons to learn from these divergent results. First, whether immigration is an economic benefit or loss can change from year to year. It depends on the state of public spending, what the economy is doing, and immigration trends – where people are coming from and what skills they bring.

Secondly, even just looking at a single year’s data, it’s not easy to tell where immigration begins and ends and you have to make some judgement calls. What do you do with children of immigrant families, for example? When some think tanks calculate the impact of immigration, they count children born in Britain as British, as they legally would be. When Migration Watch measured it, they counted all children as immigrants too, including children born to mixed couples. Children don’t pay taxes, so the perceived loss to Britain naturally shot up.

Finally, it should be apparent that this weighing of benefit and loss has to be seen in context. It’s all very well to say that immigrants cost us money, but do they cost more money than the average Briton? The IPPR included this in their study, adding a a ratio of tax contribution to service consumption. In 1999-2000, when immigration was positive, it was 1.06. The average Briton was also making a positive contribution, but only just – 1.01. Three years later when immigration was a net loss, the migrant contribution to consumption ratio was 0.99 – but the average Briton was a bigger drain on public spending at 0.88.

We’ll be hearing lots more about immigration over the next couple of years, and it will probably be an election issue. We should be prepared to ask more questions, put things in context, and resist easy answers.


  1. Hi, Having read a bit about imigration and knowing some imigrants, and I also know people who work with, among others, under privledged imigrant families, I have come to a conclusion, and it may be shocking to some people.

    I think imigrants should be treated exactly the same as anyone else who has the legal right to be here, just as we would expect to be treated the same if we were to move to somewhere else. I’m not silly enough to expect it to actually happen that way, but it should.

    That being said I think that all the talk of imigrants coming to the UK to ‘take advantage’ of the system seems to me to say that the system isn’t working properly. If we are worried about people coming here to be layabouts sponging off the welfare state and not contributing then we have a system that is allowing that for people who are already here, people who have never worked and are doing their best not to work.

    Obviously I’m not talking about people who can’t work (obviously the definition of ‘cant’ is open to discussion especially when you watch some of those ‘disabled’ atheletes in the Olympics – they would shame the average able bodied person)

    I know this is getting off the topic of Immigration, but if we had a system that didn’t reward laziness then we wouldn’t have this talk about people taking advantage of the system.


  2. I think most people are missing the point in the discussions about immigration, and welfare cheats, which is best described by Owen Jones in his book ;Chavs – the demonisation of the working class’. Working class people have been exploited, abused, cheated, fragmented, isolated and systematically misinformed for as long as capitalism has existed. It is hard for us to bite the hand that feeds us, so we turn our anger on anyone further down the pecking order of life and feel furious with them instead. Its easier. They live next door and annoy us. It benefits our oppressors for us to deflect our anger this way and so they stoke it up with lies and nonsense.

    It is the economic inequality within wealthy countries which is the problem – not the ‘needs’ of the poor but the exploitation of the poor.

    I saw on the news last night a report about a working class bloke in Croydon who had been arrested during the ‘riots’ for stealing and eating a ginger biscuit. He was put into a high security prison where he later died of neglect and staff bungling when he had a heart attack. What are we supposed to do with our anger in the face of such injustices we face every day and which get more and more extreme?

    What would be helpful would be to remind us that working class people, black, white, able or disabled need to be united in our defence of our humanity, and our struggle for a decent life for all.

  3. The immigration debate is about money because it can’t be about what people really care about, do they want to be neighbours with foreigners? A desire to be with your own people is a fairly basic human emotion. Those outside your tribe represent a threat, they are competition for resources.

    Most people feel more comfortable with those who they share a common culture and language. This is natural but to express it risks one being labelled as a racist or a bigot so people find other reasons. (Why they all flocking here? = bigot is one example)

    Now this desire to be with your own can range from slight uncomfortableness to xenophonia. Looking at Britain’s experience since the Windrush is not one of disaster, but neither is it unalloyed success. The migration into the UK over the last 60 years has been the largest in a thousand years and has never had a political mandate (no party manifesto ever proposed what occurred).

    There is evidence that immigration undermines social cohesion. Countries with culturally similar citizens are more likely to support strong welfare states. The Nordic states were very homogeneous when they embarked on their cradle to grave welfare states, as was Britain in 1945. There is a correlation between rising numbers of foreign born people in the UK and the decline of support in the welfare state.

    So basically the debate will be about numbers but it should be wider than that.

  4. Yes, once people are here and living in Britain we shouldn’t treat anyone differently. You’re creating second-class citizens otherwise.

    There are legitimate questions around immigration – is Britain overpopulated? Is lack of integration damaging communities? How are schools and hospitals coping? What are the effects of immigration on wages, rents, etc? The objection that doesn’t hold is demonising immigrants as scroungers, and that’s the one the Prime Minister has put front and centre.

    It’s shameful, to be quite honest. It’s pandering to a tabloid misconception for political gain, just the sort of thing that turns me off politics.

    1. Well, should a politician lead public opinion or follow it? Also since it is my belief that immigration is eroding the public’s support for the welfare state, partly because of the belief that immigrants are ‘scroungers’, then it makes sense to address those concerns, however misplaced they may be. Trying to maintain support for the welfare state is hardly shameful. I mean do you dispute that there is genuine concern among many people in the UK that some people might be able to come and take advantage of our generosity without making a proper contribution to our country? There clearly is and a dry numbers game won’t convince them since as I said, it isn’t about money.

      It is odd that since your blog is centred around the idea that money isn’t everything you write an entry on weighing immigration on purely a profit/loss basis.

      1. It makes sense to address those issues on the basis of fact, not rumour.

        Since Cameron is suggesting that immigration is a drain on government coffers and the economy, I’m replying on his own terms. In no way is that the only way to look at the issue.

  5. Click to access 82.pdf

    In this report, in paragraph 217, you wil see that the House of Lords select commitee explain that large scale immigration has had a negative effect on low wage earners.
    Immigrants should be discourged from coming here and lowering my wages.End of story.

    1. Let’s just quote that paragraph in full:

      “The available evidence suggests that immigration has had a small negative impact on the lowest-paid workers in the UK, and a small positive impact on the earnings of higher-paid workers. Resident workers whose wages have been adversely affected by immigration are likely to include a significant proportion of previous immigrants and workers from ethnic minority groups.”

      Immigration keeps wages lower, that’s well known. The flipside of that is lower prices for consumers, including the prices you pay for goods and services. So this far from ‘end of story’.

      1. I think it is wrong to blame workers from other countries for our low wages. It is the ignoring of the minimum wage by greedy businessmen and the disempowering of the Unions to keep fighting for the universal right to a living wage which is the problem.

        People from countries much poorer than ours can come here and earn enough in a few years to return home and buy a house or set up their own business, whilst young ‘native’ people here doing the same work for the same money might remain trapped in poverty, economically unable to leave their parent’s home, for ever. And this is increasingly true even for university graduates. This inequality confuses the picture around the lack of motivation of our young people to work their socks off when they know it won’t get them anywhere.

        Raise the minimum wage by a lot I say, and enforce it. Just think how many difficulties this would solve.

          1. Don’t forget, that just as the flip side of lower wages is lower prices, high wages mean higher prices. A living wage would raise prices.

  6. So the flipside of immigration is lower consumer prices as the country benefits from lower labour costs but minimum wage should be increased to a livingwage??
    The welfare/Living standard of the resident indigenous population should be the primary concern when discussing Immigration.Especially the bottom half in terms of earning power.

    It makes perfect sense to blame foreign workers for lower wages, It is near to impossible for employers to pay less than minimum wage, illegally at least except for apprentices and job centre benefit serfs.The increased supply of low wage workers means that demand is decreased and employers are able to employ at minimum wage as opposed to workers being able to charge a higher rate for their labour.Also with less foreign workers,more jobs would be available for local workers, which means the state wouldn’t have to pay out so much in jsa.

    If you truly believe that the country as a whole is better of with lower wages for low wage workers you might as well do away with minimum wage.I would prefer to live in an equal society where working people can earn a comfortable living wage.That is creating an equitable society.

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