The Economics of Migration
Today’s debate surrounding migration is increasingly polarised, with public opinion in the US and Europe showing growing hostility towards migrants. The UK’s Brexit campaign was, in part, fuelled by these anxieties, and we have seen the same kind of sentiment play out in the course of the current US election campaign.
The reality, however, is that well-managed migration can benefit national economies. Despite the popular belief that a new wave of immigrants will increase unemployment, the National Institute of Economics and Social Research says there is no aggregate impact of migration on unemployment.
Similar misconceptions abound about the strain on public services. Certainly there is some initial stress while services are improved and families integrate into their new communities. However, most migrants tend to be younger and more economically active than the average person in host countries, as well as being better educated. In the UK, for example, 35% of immigrants have a university degree (compared to the UK average of 26%), whilst in the US this figure is 27%.
A study by the OECD on the fiscal impact of migration over the last 50 years also concludes that immigration is not a long-term burden on the public purse. In fact, the contrary is true. High levels of education and a young work force means that on average immigration is a net benefactor fuelling aggregate demand and improving tax receipts that are reinvested in infrastructure and social services. Immigration similarly helps supplement human capital and with a high concentration of people in healthcare and STEM (Science, Technology, Engineering and Maths) professions, R&D is improved which often has a knock on effect on productivity.
Immigration is also one way to address the growing demographic deficit (and consequent pension crisis). At the moment, it is estimated that Europe has four people of working age for every one person of pensionable age. By 2060 it is estimated that this will be two people working for every one pensioner. The same study, by the OECD, estimates that with an aging population GDP will reduce by 1.5% across Europe, and up to 5% in Germany.
Short Term Pain, Long Term Gain
Systems for integrating immigrants, especially on the scale recently witnessed in Western Europe, are often ineffective. Our politics and systems of government focus on the short-term challenges and are too impatient to realise the long-term benefits of immigration. Dividends only become clear 5-10 years later, but our debates and our systems are myopic reacting only to the immediate challenges.
School and healthcare services are often claimed to be stretched with additional burden coming from immigrants. These concerns are not without merit, but they are concerns that can and should be planned for. They are also concerns that should be listened to and to which governments should respond to appropriately, including with investment to improve services.
The elephant in the room, however, are the attacks that have been witnessed in France and Germany in recent months. It is easy when such atrocities have been committed to roll out the lazy arguments, to erect walls (both physical and metaphorical) and by doing so increase division and heighten the risk of further attacks. Security concerns have to be given the utmost consideration and clear action needs to be taken, but in the case of the attacks against France and Germany, the debate cannot ostracise the 1.6bn Muslims in the world. Political leaders need to ask more intelligent questions to understand why these attacks are happening, they need to listen to all communities and they need to make sure extremism and hate are not given the conditions to grow.
Where to go From Here?
How can we work towards a more informed debate and policy response to immigration? There is no silver bullet. To ensure that both the people migrating and the host country get the full benefit of the flow of human capital, we believe the following areas need further consideration:
1. More evidence: There are still significant evidence gaps, for example on the impact of migration on salaries and competition in labour markets.
2. The role of academics: Academics run the risk of becoming poor advocates. They should carry out relevant research and be given the right avenues to disseminate conclusions.
3. Research and evidence needs to be better communicated: The first step is to understand the concerns of those who oppose migration so they can be addressed directly.
4. The role of media: Media outlets have become increasingly divisive in their coverage. Efforts need to be made to redress this, including ensuring greater access to the sector for asylum seekers, refugees and under-represented minority groups.
5. Create prominent advocates for migration from the private sector: There is an understanding that open labour markets and migration are good for business. These benefits been to be better communicated.
6. Independent commissions: Advocate the establishment of independent commissions, like the UK’s Independent Asylum Commission, that can inform policy decisions on migration outside the constraints of politics.
In essence, these recommendations ask for open, tolerant debate about the costs and benefits of migration. This is paramount to overcome the malaise of discussion in Europe, the US and other regions and ensure we are able to counter the demographic deficit and sustain our economies.