Theresa May made a huge error about how immigration affects the economy
It also gives us the opportunity to learn that May doesn't know much about economics. She got key bits of evidence from the OECD and her own Ministry flat wrong. Even The Telegraph, normally sympathetic to Conservatives, gave her a bad review: "awful, ugly, misleading, cynical and irresponsible."
May said it was her job to "keep the numbers down" because otherwise "it's impossible to build a cohesive society." Those words are essentially dog whistles to supporters of Nigel Farage and UKIP, whose anti-immigrant policies have been syphoning votes from the right of the Tory Party.
But it was her assertion that immigration is economically bad for Britain that has made people most angry. That's because there is widespread agreement between economists of all stripes that immigration is generally correlated to:
- increases in GDP
- increases in taxes paid
- increases in the ratio of productive workers to the number of retired people their work must support.
Because when immigration is too high, when the pace of change is too fast, it's impossible to build a cohesive society. It's difficult for schools and hospitals and core infrastructure like housing and transport to cope. And we know that for people in low-paid jobs, wages are forced down even further while some people are forced out of work altogether.
... But even if we could manage all the consequences of mass immigration, Britain does not need net migration in the hundreds of thousands every year. Of course, immigrants plug skills shortages and it's right that we should try to attract the best talent in the world, but not every person coming to Britain right now is a skilled electrician, engineer or doctor. The evidence - from the OECD, the House of Lords Economic Affairs Committee and many academics - shows that while there are benefits of selective and controlled immigration, at best the net economic and fiscal effect of high immigration is close to zero. So there is no case, in the national interest, for immigration of the scale we have experienced over the last decade.
The OECD says the exact opposite. Here is one of its discussion papers: It says, "Migrants contribute more in taxes and social contributions than they receive in benefits."
The OECD isn't some random outlier. While the economic benefit of immigration can be mixed - perhaps not all 1.7 million Syrian refugees should be moved from Turkey to the UK next week - economists broadly agree that an influx of new workers into an economy is likely to lead to more money being spent, and more taxes paid on the wages they earn.
The result is that immigrants make a net positive contribution to the economy, even if they sometimes also cost us what "we pay in benefits" to get there, as May put it. In the UK, this net contribution is £2.5 billion per year, according to this Home Office study from 2002:
The estimates suggest that for the fiscal year 1999-2000 migrants in the UK contributed GBP 31.2 billion in taxes and used benefits and state services valued at GBP 28.8 billion. Therefore, the net fiscal contribution of migrants was approximately GBP + 2.5 billion.
That's the same Home Office that May is currently in charge of.
A US study came to the same conclusion. The Center for Immigration Studies - which is not a somewhat anti-immigration think tank - says:
George Borjas, the nation's leading immigration economist estimates that the presence of immigrant workers (legal and illegal) in the labor market makes the U.S. economy (GDP) an estimated 11 percent larger ($1.6 trillion) each year.
It may feel like immigrants are competing with you for jobs when they arrive, but that's not actually what happens. Their economic activity simply creates a bunch more jobs, and the rising tide lifts all boats. Globally, if all immigration barriers came down, "the estimated gains are often in the range of 50-150
percent of world GDP," according to Michael Clemens, who wrote a paper for the Center for Global Development.
Of the 1.7 million Syrian refugees who are now displaced all over Europe, Germany has pledged to take in 800,000. The UK has offered places to only 20,000.
One of us is going to get the benefit of that, and the other is not.
