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Wednesday, November 05, 2014

'Benefit tourism' is a red herring but welfare and low-income migration are inextricably linked

Today’s UCL report on the fiscal impact of migration to the UK has understandably provoked a lot of interest.

The top line findings are that:
  • Between 1995 and 2011, migrants from EEA countries made a positive fiscal contribution over that period of more than £4bn, while those from non-EEA countries made a negative contribution of £118bn, compared to an overall negative native fiscal contribution of £591bn.
  • The positive net fiscal contribution of recent immigrant cohorts (those arriving since 2000) from the A10 (the ten Central and East European EU member states that joined since 2004) amounted to almost £5bn, while the net fiscal contributions of recent European immigrants from the rest of the EU totalled £15bn. Recent non-European immigrants’ net contribution was likewise positive, at about £5bn. Over the same period, the net fiscal contribution of native UK born was negative, amounting to almost £617bn.
The obvious conclusion to draw from such studies is that the economic case for EU migration is clear and that ‘benefit tourism’ is simply a myth in the immigration debate (as others point out, there are social and economic arguments for and against migration). Open Europe has consistently sided with those who argue that on net, EU migration is positive for the UK, also from a purely transactional point of view.

Why then the focus on EU migrants’ access to welfare?

We and others have suggested that the Government should prioritise this as an issue for negotiations on the reform of EU free movement - rather than seeking to impose caps on the number of EU migrants or end free movement. Not because we think the majority of EU migrants are ‘benefit tourists’ but because that, unlike many other EU states, the UK offers effective income support to low-paid migrants. This creates some unintended consequences.

Again, at the aggregate level, free movement brings economic benefits. But the aggregate net benefit masks net losers (similarly, there is no such thing as a typical EU migrant – they perform different jobs, earn different wages and, if they are entitled to claim welfare, may not do so). Nevertheless, it is the duty of governments to come up with policies that mitigate the effect on those who might lose out from migration.

The labour market is the obvious area where the impact of migration is felt differently. The evidence overwhelmingly supports the view that low-skilled and low-wage workers can be adversely affected in the form of greater competition for jobs and a depressing effect on wages, even if the magnitude of this tends to be overstated. Higher-paid workers tend to gain.

This is where welfare does come into it – particularly for a country such as the UK which supports low incomes with fairly generous levels of income support in various forms. ‘Benefit tourism’ is indeed a red herring, in the sense that the vast majority of migrants move to work, not to ‘sponge off the state’. However, as our recent pamphlet argued, it is hard to justify to domestic electorates in economic and social terms why low-paid migrant workers should be immediately entitled to income support paid for by their new host country. These relaxed rules on access to state top-ups not only act as an extra incentive to migrate into low-income jobs, they prevent national governments from targeting these policies at their own citizens.

Many have suggested that reform to EU access to welfare rules is simply about tackling ‘abuse’ and ‘welfare tourism’. This not only stigmatises migrants, the vast majority of whom do not ‘abuse’ the system but simply abide by the current rules, it devalues the fundamental point – which is that it is probably not politically sustainable for national governments, in some instances from the get-go, to subsidise low-income migration via their welfare systems.

Two additional points. First, such a system need not mean that EU migrants are left to fend entirely for themselves, only that like in most other EU countries, benefits are tied to contributions through employment. For example, non-EU migrants who have a right to live in the UK but 'without recourse to public funds' are entitled to basic safety net benefits tied to their National Insurance contributions, but not income support. There are also discussions to be had about raising the floor for working conditions in general, including revisions to the minimum wage.

However, secondly, the UK should also be aware of the trade-offs involved. Fewer EU migrants and higher wages - if that is the objective - could well make the UK a less competitive place.


Jesper said...

Hmm: "higher wages - if that is the objective - could well make the UK a less competitive place. "

so how are people expected to pay back what they borrowed and continue to consume if wages aren't allowed to go up and costs (deflation/inflation) are forced up?

The report is filled with models and data. Yet it does not seem to take into account the rather unequal access to opportunity. Go to the right private school and the opportunities to make a career are increased manifold. The gain in income for the high-paid from migration (which does not hurt competitiveness?) tend to come from their positions of power to decrease wages for the lower paid. Once in that position then almost anyone can do that but getting to that position depends on which school has been attended....

& has luck would have it the increased migration makes it easier for the higher paid to push down the wages for others so they appear to be doing something well.

The claim that migrants are often overqualified for the jobs they do is yet another reason to doubt if there is meritocracy. The claim that migrants are overqualified is from the report.

jon livesey said...

"The obvious conclusion to draw from such studies is that the economic case for EU migration is clear and that ‘benefit tourism’ is simply a myth in the immigration debate"

No, that's not the obvious conclusion. Since the data in the study were collected over the period from 1995, we have to ask how the pattern of EU migration to the UK has changed.

If in 1995 EU arrivals were mostly well-educated bankers, and today they are mostly low-skilled, then data from 1995 are pretty much irrelevant, and the average from 1995 to today are only marginally relevant.

I think that you've got the "free movement" bee in your bonnet to such an extent that you can't ask fairly obvious statistical questions.

Denis Cooper said...

Of course "benefit tourism" is a red herring, I've always said that it is a secondary issue.

Anybody who still believes that the Tory party is opposed to mass immigration into our country, against the clear wishes of the great majority of the citizens, really hasn't been watching events over the past five years or more.

Firstly, start talking about "net" immigration to disguise the true magnitude of immigration, 473,000 or about 0.8% of the population in the year up to March 2014 alone, and that is just the officially recognised legal immigration.

Secondly, focus public attention on some of the relatively marginal components of the inflow and then claim to have dealt with them or to be about to deal with them - the students at bogus colleges, and the bogus marriages, and the comparatively small numbers camping in France in the hope of making an illegal entry, the criminals and the more blatant "benefit tourists" - while taking great care to leave the major inflows untouched, or even make efforts to increase them.

That is the size of it, and the question is why those leading the Tory party have so little regard for those who elected them that they are behaving like this.

Denis Cooper said...

Could I also point out that if a country only attracts immigrants who are fit, single and childless young adults then its government does not have to bear the same level of costs for their healthcare, and for the healthcare and educational and social care of offspring, as for the average of the existing population with a normal age distribution; that is, unless they stay in the country long enough to have children, and then later age and start to ail, and end up being a burden on the taxpayer just like members of the existing population.

I can't say for sure whether or not this UCL study has taken those longer term effects into account, but I strongly suspect that it hasn't and the pattern of net fiscal effects summarised above tends to confirm that.

Of course in principle that could be sorted out by deciding that only young, healthy and childless immigrants will be allowed to stay in the country, and once they no longer fulfil those conditions they must leave, and to ensure that they can be expelled they will never be permitted to become citizens no matter how long they have been in the country; but there is no chance that such a harsh, in fact inhumane, policy would ever be put in place in the UK, and instead we would only continue with what is just a demographic Ponzi scheme.

Denis Cooper said...

Finally could I point out that few immigrants bring any significant capital with them, and yet they are each being given a free share of our country and all the infrastructure which has been built up at the expense of many previous generations of the existing population. By allowing and encouraging such immigration on a large scale our government is in effect gradually selling off our country to foreigners to pay for its excessive current spending, just as in the past an aristocratic family which found itself in financial straits would sell off parts of the estate piecemeal. And in the same way, our politicians are totally disregarding the views of the established population who are treated as if they were no more that tenants on the government's private estate rather than citizens of a democratic country.

Anonymous said...

Absolutely right Denis. The other factor that is frequently overlooked is that mass economic migration will dramatically change the social, political and civic nature of our country. Instead of slow but steady integration with existing society we can already see the rise of cultural ghettoes, self-imposed apartheid (deliberate non-integration and even hostility) and an attempt by some to impose their cultural values on the indigenous population (e.g: Birmingham school scandal, Tower Hamlets et al).

Rik said...

1. A division between EU and non-EU is as such a logical one. However so are a few others. But isit is mainly a division for legal reasons not for economical, social, cultural, fiscal ones.
From a social, fiscal and economic perspective a more logical one is between well educated and non or semi educated immigrants. With a high correlation between problems in these areas and undereducation.

2. Taking such big groups simply never works, you need simply more distinction.
With more of that you can optimise.
There are 3rd world immigrants everybody wil like to see in their country and there are groups of EU immigrants (and substantial ones), that are simply a pest at worst and have negative added value at best.

3. Going for welfare misuse is probably as good as it gets within the present rules. Otherwise simply the rules should be changed. At least longer term.

4. probably a good idea go borderline and change strategy to avoid an even more massive influx before the rules can be changed one way or another.

Average Englishman said...

As Denis has pointed out there are many questions that can be raised against the veracity of the statistics and the conclusions that OE has drawn from them. The good people of Clacton and I suspect Rochester & Strood however have come to their own conclusions, not from statisrics but from their own day-to-day personal experiences.

Mass immigration may be good for UK PLC and the high level managers and investors associated with it but it is bad news for most indigenous UK citizens because it reduces their access to essential services and facilities (small things like health care and housing); it keeps pressure on their wages to keep them low and it changes their cultural environment in a way that is neither wanted nor acceptable to them. There are now parts of this country that look like areas of the third world and have standards to match such as:- female genital mutilation (not a problem that I recall from my youth), brainwashing of children with extreme religeous ideologies (not exactly the Christmas Nativity show that I remember), Sharia law (not exactly an established English way of doing things); the suppression of women's rights (I accept that this is more of an extension of an existing theme to some degree but still not progress), Halal meat and in my view related animal cruelty; people everywhere that do not have English as a first language and do not consider themselves as being at home here. I could go on and on and on, and no amount of blather from Open Europe telling me that its all for the financial best of the country is going to convince me and millions of my fellow countrymen otherwise. Wise up guys; this is a lost argument.

R Davis said...

Mass migration is/are peoples FORCED out by - INCLUDING THE EU NATIONS,
The Middle East - UK / US / GERMANY / RUSSIA / the list goes on - all plundered & caused/thwarted chaos so as to steal.
Then they created ISRAEL / la guardia / the guard dog - to protect their assets.
Then we complain ....
"should we give them welfare"
So we let them starve because they are dispossessed & driven out of their own nation.
Who cares -
Money / Currency is just a means of exchange & not an object of love.

Anonymous said...

I wonder why low-paid migrant workers should be immediately entitled to income support from host country, they know where thy go and why they move to this or that country, so they should know what to rely on to. For sure, being foreigners, they have less options for getting extra money in the form of payday loans from North'n'Loans for instance, but still it's their own choice to come and to trade themselves at such a low price, so the responsibility is on them as well.