Sunday, 26 February 2017

Brexit and immigration: what's happening?

The latest bad news Brexit story is that net migration has fallen by 49,000, probably as a result of the referendum vote. Of course, it wasn’t treated as a bad news story in the media and was greeted with approval by the government.

The reason why it is bad news is simple: Britain needs more immigration, not less. Whole sectors of British economy and society are not sustainable without immigration at present or higher levels. These sectors span the skill range from agriculture, catering and care homes through to scientific research, medicine and finance.

The reason for this is two-fold. First, because the British economy is running at what in economists’ terms is probably full employment. That does not mean zero unemployment, as there is always a tranche of people who are unemployed for example because they are temporarily between jobs or in some cases because they are to all intents and purposes unemployable. To see what I mean, watch the instructive BBC film from 2010 on ‘the day the immigrants left’. What you will see are British people bemoaning being unemployed due to immigration but, when given the chance to do the jobs undertaken by immigrants, being for the most part completely incapable of doing so even at the most basic level of turning up on time.

It is not the case that these people are kept out of jobs by immigrants – that is the well-described ‘lump of labour fallacy’ - although it is the case that some of those currently unemployable could become employable with training and education. And this can and should occur whether or not Britain is in the EU. But training and education will not render large numbers of them capable of doing the high skill science and finance jobs that many EU immigrants undertake, or large enough numbers to fill the low skill jobs.

The second reason is demographic. Britain has an ageing population, and to sustain it entails an influx of economically active people in order to sustain economic growth and to support pension payments. It’s possible that one way of dealing with this, rather than immigration, is for British citizens to work longer before they get their pensions, and indeed it has been mooted that this will indeed be a consequence of Brexit. If so, it is unlikely to be popular with Brexiters as the responses to a report on this in the pro-Brexit Daily Express show. Nor is it likely to match the skill profile needed.

A naïve response to this is to say that if wages were higher then the British workforce could fill the gaps of immigration. The reason this is naïve is because if the people aren’t there to work then higher wages won’t create them. At best, higher wages in, say, the care sector will lead to shortages in, say, the retail sector. And whilst I’m all in favour of higher wages it will mean higher prices. Do Brexiters want to pay those, on top of the higher prices already caused by Brexit because of the collapse of sterling? In any case, as wages rise investment in mechanization becomes more attractive to companies, with rapidly developing robotic technology likely to be a growing possibility.

There’s also a lazy response to this, which is to say that immigration puts pressure on public services. It’s lazy because EU immigrants are net contributors to the public finances: the issue isn’t immigration it’s the use made of the funds contributed by immigrants. In fact free movement of labour within the EU is a particularly effective way ensuring net contribution precisely because of the ease of movement in both directions – EU migrants tend to come to work in the UK when they are economically active but not to retire in the UK.

The fact that Britain needs immigration is acknowledged, even by Brexiters. Hence David Davis and others have said that it will continue post-Brexit, something confirmed by Home Secretary Amber Rudd today. The difference, it seems, will be that it will be via some kind of work permit scheme (yet to be set out). For those who voted to leave the EU on the basis that they wanted to see less immigration, this does nothing for them. In fact, it’s becoming less and less clear what Brexit voters are getting of what they were promised. The three headline claims of the Leave campaign were an extra £350M a week for the NHS, which was immediately repudiated; regaining sovereignty, which the Brexit White Paper confirms was never lost; and a reduction in immigration, which the Brexit government now say isn’t going to happen. Plus any new trade deals with, for example, India, are likely to come with a relaxation of immigration restrictions from such countries.

Meanwhile, for those who are not concerned about immigration it just means an extra layer of bureaucracy and cost, in having to apply and pay for immigrant employment. Is it, then, a matter of no change other than increased costs for businesses (not that these are negligible, and it is strange to see a Conservative government imposing them)? No, because although at the low skill level of immigration – where all the political fuss has been – it won’t make much difference to numbers, at the high skill level it surely will. They will not be willing to go through bureaucratic hoops to come to the UK, especially when bringing families with them.

The British economy needs immigration, and free movement within the EU is by far and away the easiest way for this to happen. It enables supply and demand in labour markets to be easily matched. No other system allows this, and the benefits are not just economic because it allows all the human things around the labour market (relationships, children) to happen easily as well. Huge numbers of families in the UK (and in the rest of the EU) are now intermingled. That last point matters because migration should not just be seen in transactional, economic terms but also in cultural and human terms.

Finally, it should not be forgotten in all the talk about immigration that the hard Brexit planned by the government will also have a direct effect on every British citizen, leaver and remainer alike: we will all, at a stroke, lose our right to live, study work and retire in the EU without restriction.

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