The truth is that immigration can make us all richer

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Does the European economy gain or lose from immigration? Gordon Brown thinks it gains – and the voters in France clearly have a rather different perspective on such matters.

And not just in France. The issue has, of course, suddenly been thrust to the fore by the showing of Jean-Marie Le Pen in France, but continental European concern about immigration has come dramatically to the fore over the past year.

In November immigration was a key element in the defeat of the centre-left government in Denmark and in February in the election of a right-wing coalition in Portugal. It also seems likely to be a key issue in the Dutch elections next month and, in all probability, the German elections in autumn.

Yet alongside this political pressure lies the economic case for immigration. Europe is becoming, with Japan, the oldest region in the world in the sense that it will have the highest proportion of people over the age of 65. While some countries are ageing faster than others – Italy, Spain and Germany are becoming the oldest – the size of the working population in every European country, with the possible exception of Ireland, will soon start to fall. Yet there are millions of young, hard-working people who wish to come in.

In addition to the demographic pressure there is skill pressure. In every European country, even those with high unemployment such as Germany and France, there are serious skill shortages, particularly in the hi-tech industries. Many, not all of course, of the potential immigrants are highly skilled. The US has benefited from this pool of talent, for the Indian subcontinent in particular has been a huge supplier of skilled labour to Silicon Valley. Europe, by and large, has made it difficult for such talent to come in.

The UK is in an intriguing position here for it seems that immigration-driven rise in population is a key reason why the Chancellor has increased the Treasury estimate of our potential growth rate. That, at least, was what he said in Washington at the weekend meeting of the Group of Seven, the first time, as far as I recall, this point has been made by a British minister. Set this alongside the new citizenship requirements proposed by the Home Secretary and we are moving, it seems, a little towards the US model of welcoming the economic boost that immigration gives but requiring an explicit commitment to the country in exchange.

But is there really such a boost? We live in democracies, and if European governments cannot convince their electorates that the countries will be richer as a result of immigration, those electorates will not allow it. There are some inevitable social costs to migration and to offset those, European governments have to make the economic case for it – and vague assertions that Britain will have a faster growth rate won't do.

In fact there is solid evidence that immigration has benefited the host country, and some that the "donor" country benefits too. The theory is that if people move country to a better job they are making best use of their human capital. That higher return helps the country where it is generated but also – because they often send money back home – may well benefit the place they came from.

An OECD paper called Trends in Immigration and Economic Consequences, published last year, concluded that in general there was a small net gain to output per head in the host country, no obvious negative impact on unemployment and negligible impact on the cost of providing public services. It also noted that increased immigration could limit the adverse effect on living standards and government budgets from ageing populations, though it couldn't solve that problem.

Not convinced by academic studies? Look at what has happened in practice in North America, where there has been huge immigration from the south. The US has boomed and remittances to Latin America and the Caribbean were running at more than $15bn a year in 2000, vastly greater than the flow of aid. You might argue that it would be better to keep the people and have a smaller flow. But that is surely an argument for Latin American governments following policies that keep their qualified people on board, rather than stopping those people do the best for themselves and their families by emigrating.

If the economic case for seeking to attract skilled immigrants to Europe is pretty clear, what should governments do? I suggest two guiding rules. The first is to make that economic case honestly. That would mean being frank with Europe's citizens about the economic pressures the region faces and the part that immigration can and cannot play in alleviating those pressures. It would also mean being honest about costs as well as benefits, for claiming that there are no costs at all is not credible.

The second is to be honest to would-be migrants, setting out what qualifications are needed to get fast-track entry, and ending the whole "asylum-seeker" charade. We need to explain the conditions on which we welcome foreign talent. By making that clear to others, it would also help us to clarify our own minds about what we as societies really want.

Easy to say; hard to put in practice? But what is the alternative to honesty? The sort of thing that is happening in France.