The economy is desperately in need of more productive young immigrants

A demographic timebomb is threatening influx of Eastern European workers to the UK

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I am an immigrant.  Moving countries, as I did with my family in 1989, isn’t easy even when the country you move to has the same language. 

George Bernard Shaw was right: they really are two countries divided by a common language.  I continue to be shocked by how little Americans know about the UK. I have even been asked if the British celebrate Christmas. Most people know more about Mexico than they do about Britain.

When people get together and discuss stuff from their childhood such as TV programmes and sports it’s another world to me – I want to talk cricket and Morecambe and Wise. My sister was visiting over the summer and was telling a story to some highly educated American friends of mine about Sir Steve Redgrave. I had to stop her and tell her nobody here had ever heard of him! Who?

Just think how strange it must be for a Bangladeshi, a Pole, a Bulgarian, a Romanian or even an American to move to the UK, especially when a “prejudiced” political party has as its principal focus to scapegoat them while the Government has vans going around telling foreigners to go home. They don’t know which stores to go to or which sort of biscuits or butter to buy: everything seems strange.

Across the world there is a mobility or movers premium, because moving is costly and difficult. Plus the incumbent population benefits from lower prices often because the new arrivals do jobs that others don’t want to do or at a lower price.

The UK has been fortunate enough to receive a large number of young, highly motivated and well qualified English speaking and mobile East Europeans (A10), especially Poles over the last decade, not least because we were the only major country that allowed them to come and work in 2004 when they joined the EU.

I have talked to colleagues in Germany who have argued that it was a big mistake for Germany to allow the UK to get all the good ones who would inevitably stay once they had visited even for short work spells. Now they can live and work anywhere in the EU, but more than 750,000 came to work permanently in the UK.

The numbers from the A8 employed in the UK has risen from 64,000 in 2004 to 683,000 now. At the same time the numbers from Bulgaria and Romania (the A2) have risen from 12,000 to 141,000 and may well rise further next year when restrictions are lifted. About half the total rise in employment since the beginning of 2004 is accounted for by these A10 workers, which made the UK economy more productive.

The table makes clear that the A10 (A2+A8) folks came to work. Their employment rate – the proportion of the population aged 16 and over that is employed – is much higher than it is for UK nationals and especially so for the A8. 

Non-EU employment rates are especially low. Of course, given they reside and work in the UK as EU residents they are entitled to the same benefits and tax breaks as everyone else and they are entitled to send their kids to school and, when they get sick, they and their spouses and kids use the NHS. They also bring their demand for goods with them and they spend and save and raise national income.

Shame on them – not!

The flow of these highly productive young people, especially young men from Eastern Europe that a dynamic economy desperately needs, is unlikely to continue for long as the home countries are suffering from a demographic time bomb.

Across all the A10 countries the collapse of the birth rate when the Berlin Wall came down means that the number of young people is falling precipitously year by year. The collapse is especially notable in Romania, where the number of five-year- olds is less than half the number of 45-year- olds. Overall the number of ten-year-olds in these Accession countries is about 60 per cent of the number of 30-year-olds, so this is likely a very temporary flow.

There is little likelihood this flow will continue for long. In any case what drives migrant flows is differences in GDP per capita and given the lack of growth in the UK most other European countries such as Germany, Austria, Sweden and Denmark, look like more attractive places for migrants to go to – they have jobs available. 

A new paper by Christian Dustmann, who is definitively the number one expert on migration in the UK, and his student, Tommaso Frattini*, examines the fiscal impact of immigration to the UK economy and found that European immigrants, the majority of whom have been from the A10, and found that those who arrived since 2000 have made especially large positive fiscal contributions, even during periods of budget deficits.

We are better off with them than without them.  They conclude that “rather than being a drain on the UK’s fiscal system – immigrants arriving since the early 2000s have made substantial net contributions to its public finances, a reality that contrasts starkly with the view often maintained in public debate. This conclusion is further supported by our evidence on the degree to which immigrants receive tax credits and benefits compared to natives. Recent immigrants are 45 per cent less likely to receive state benefits or tax credits”. 

Of course this generated a visceral response from right wing Tory MP Douglas Carswell, who claimed the authors only highlighted the positive impacts of immigration, which they didn’t. Ludicrously he concluded “we do not need ‘experts’ to tell us what to think any more”. So no problem: anyone can do brain surgery. 

Personally I choose the distinguished professor over the biased amateur with an axe to grind. In response to these attacks, Dustmann and Frattini responded that their paper estimates the net impact (duh!) of immigration, follows best practice in the literature, uses the best available data source and hence conclude that Carswell’s criticisms are wrongheaded and change absolutely nothing.

Indeed, they argue that they choose worst case scenarios from the immigrants’ standpoint: “we have at all points leaned towards conclusions that understate immigrants’ contributions”. There is absolutely zero evidence, as in none, that these hardworking folks from Eastern Europe are a bunch of scroungers.  Pity the poor immigrant.

*Christian Dustmann and Tommaso Frattini, ‘The Fiscal Effects of Immigration to the UK’, CREAM Discussion Paper #22/13, 2013

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