Wednesday, 6 May 2015

Analysis: The migration conversation

by  Ian Preston
  
What do the election manifestos say about migration? Ian Preston, professor of economics at University College London, gives his analysis.

Of the five main nationwide parties, three – UKIP, the Conservatives and Labour – emphasise in their manifestos a need to deal with the negative aspects of immigration. UKIP argues that the high inflows of the past two decades have damaged labour market prospects of the British-born and placed pressure on public services. By withdrawing from the EU, it proposes to introduce a visa system covering migration from all sources which would place a five-year moratorium on any unskilled migration and heavily restrict the numbers of visas issued for high-skilled labour.

The Conservative Party also stresses the harm to public services and re-endorses an aspiration to cut net migration to the tens of thousands. Labour, without committing itself on whether or not such concerns are justified, acknowledges a need to address public concern on labour market and public service effects. None of these propose any significant relaxation and all propose at least modest tightenings in certain respects.

By contrast, the Liberal Democrat and Green manifestos concentrate on the positive side of the free flow of people. Their policies are correspondingly modestly liberal, at least proposing to reverse some tightenings introduced by the outgoing government. Both would reintroduce some sort of post-study work visa for foreign students, scrapped in 2012. The Greens would also scrap minimum income requirements for spousal immigration, a measure brought in during 2012.

The labour market impact of immigration is something that economists have studied in depth in many countries. Little persuasive evidence has emerged to support a picture of adverse effects on average wages or on employment, either in the UK or elsewhere. Economies appear to have many ways to adapt to absorb changes in the size and composition of the labour force without native employment or average wages needing to suffer. Immigrants to the UK are typically young and well-educated but nonetheless work, at least in the early years after arrival, towards the lower end of the wage distribution. If there are any negative effects on wages, they are probably felt here, albeit that such effects if they exist are small and probably temporary. Some of the manifestos do show particular keenness to address effects on the least well paid.

Immigrants make use of public services and rapid changes in numbers may involve costs of adjustment. However, evidence suggests that immigrants use public health services no more intensively than natives, that the presence of non-English speaking children in schools does not hinder education of native children and that immigration is unassociated with increases in crime. Nor do immigrants draw heavily on welfare benefits; on the contrary, recent immigrants are less likely to claim than natives. Empirical support for the idea of extensive welfare tourism is tenuous.

What immigrants do do is pay taxes and they do so to an extent that means that, broadly considered, the net fiscal contribution of immigrants since the turn of the century has almost surely been positive, particularly in regards to immigrants from within Europe but also those from outside. This is at a time when there have been large public deficits. From the point of view of public finance, immigration therefore helps relieve the burden of public service provision rather than adding to it. Of course, over time, young and healthy immigrants will age and draw more heavily on the public sector, but some will return to their place of origin and those who stay will raise children who will help pay for their needs.

These are not the only economic effects of immigration. Suggestive evidence from the US and elsewhere points to the positive contribution free movement can make to innovation, trade and entrepreneurship. None of these issues figure in the discussion within the manifestos but their importance is possibly greater than any of the feared labour market or public service provision effects which do seem to concern the parties.

It is understandable that immigration can give rise to public concern because its problematic aspects may be the most immediately visible. When an immigrant, say, takes a job that might have gone to someone British-born or sits ahead of someone British-born in the wait to see a doctor, this is more easily observed than when the same immigrant creates demand for work by spending their income or helps fund public services by paying their taxes. Failing to address public concern may leave it to grow and will encourage public disillusionment.

Nonetheless, if one looks at opinion survey data, not only in the UK but across Europe, then one has to doubt whether economic issues are at the root of most public disquiet. Although it is the older, less educated voters – those arguably most vulnerable to labour market competition or most dependent on public services – who are least accepting of immigration, the strongest associations with attitudes to immigration are not with opinions about its economic consequences but with responses to its cultural and social impact.

Acknowledgement: This piece was published first at The Geographical.


Friday, 24 April 2015

Here’s where Britain’s political parties stand (and fall down) on immigration

by Ian Preston

Centre for Research and Analysis of Migration (CReAM) at University College London

Immigration clearly ranks as one of the most important issues for voters in the lead up to the UK’s election. But public opinion doesn't always match up with the evidence, and political parties can be led in different directions by both. With this in mind, the following takes stock of the different policies about immigration, as outlined in the parties' manifestos.

Where do they stand?

UKIP makes the strongest claims about immigration causing harm. The Conservative and Labour manifestos also tend to emphasise the negatives of immigration, real or perceived.

Labour says the number of low-skilled immigrants is too high and points to no high-skilled categories where they’d welcome increase. Both the Conservatives and UKIP want migration to be lower overall. In their 2010 manifesto, the Conservatives proposed to reduce net migration to the tens of thousands – a “goal” which the coalition government dramatically missed. This time around, the party refers only to an “ambition”.

In contrast, the Liberal Democrats and the Green Party stress the benefits of immigration. Both parties propose more open policies, such as the restoration of post-study work visas for students and – in the case of the Greens – the abolition of minimum income requirements for the entry of spouses. The Greens are the most thoughtful on the global context, but their openness toward immigration is tempered by some scepticism toward immigration for business reasons or by the more affluent, citing worries about impacts on small businesses and house prices.

Among parties standing only in some parts of the UK, the SNPPlaid Cymru and the Alliance Party are all fairly liberal, and concerned with the regional suitability of immigration criteria. Of the Northern Irish parties, the Ulster Unionist Party and the Democratic Unionist Party support immigration in moderation, while the nationalist Social Democratic and Labour Party and Sinn Féin are more or less silent on the matter.

An EU issue

UKIP’s approach is the most innovative and the most restrictive. The party wants to make sharp cuts to levels of immigration; an approach which is tied to their core proposal of withdrawing from the EU. Instead, the party wants to establish a points-based system which treats Commonwealth migrants comparably to European ones.

The Conservatives tie the issue of migration to a renegotiation of the terms of EU membership, as do the UUP. These parties question whether free movement meets the needs of established EU members. On the other hand, the SDLP’s positive comments on “free flow of people” within the EU is as close as the party comes to discussing immigration.

EU withdrawal is advocated also by several parties outside the mainstream whose manifestos talk at length about immigration. The Communist Party and Socialist Labour Party on the left, for example, regard the EU as an organisation promoting capitalist interests at workers' expense. Both propose immigration policies outside the EU with humanitarian emphasis. The Socialist Labour Party propose a policy of zero net migration with priority for Commonwealth immigrants. For the English Democrats on the right, withdrawal not only from the EU but from a wide range of international agreements is regarded as essential to regaining full border control.

Boon, or burden on benefits?

For several parties, concerns about immigration from the EU focus on migrant benefit claims. Yet evidence suggests there is little reason to consider this a serious problem, and that restricting entitlements is unlikely therefore to discourage immigration.

The Conservatives, Labour, UKIP and DUP all want to delay receipt of benefits by migrants in various ways. The Conservative and Labour manifestos propose to rule out payment of child benefit for children abroad. This will raise issues with EU law, whether renegotiating terms of the UK’s EU membership or not.

Stresses on public services are a prominent theme in the Conservative, Labour and UKIP manifestos alike. The Conservatives propose a fund to alleviate such pressures, which bears similarities to a fund scrapped early in the last parliament.

The best evidence suggests that migrants pay taxes which more than cover the cost of benefits received, in cash or in kind. The net contribution of migrants should alleviate the cost of providing public services.

Where’s the evidence?

Costs imposed by migrants on the NHS are mentioned by the Conservatives, and are repeatedly emphasised in UKIP’s discussion of immigration. In fact, immigrants are typically healthier than natives on arrival, becoming more like them the longer they stay, and make similar use of health services.

Nonetheless, UKIP would require that most migrants arrive with private insurance. Unsurprisingly, the issue is also prominent for the National Health Action party. It proposes that stronger efforts be made to recover the costs of treating migrants, but opposes refusing treatment to anyone on ethical, economic and medical grounds.

Crime is another issue raised by Conservatives, Labour and UKIP in relation to immigration. In fact, evidence suggests migration is unassociated with changes in crime rates.

Housing also figures in some manifestos. The Conservative party worry about use of social housing, and UKIP about housing shortages. The Greens, on the other hand, worry about richer migrants pushing up house prices. Research on migration and housing is still developing, but evidence does not point to strong upward pressure on house prices.

Revival of student opportunity

UKIP alone discusses the burden which immigration imposes on schools. Such a burden might simply arise from growing numbers, or it might follow from the difficulty of educating children of mixed backgrounds together. The international evidence on the latter is ambiguous, but negative effects of high proportions of non-native speakers in the classroom on the performance of British-born children seems to be ruled out.

Instead, the treatment of foreign university students is the biggest issue linking education and migration. Liberal Democrats, Conservatives and Labour promise crackdowns on bogus institutions.

UKIP and the Lib Dems pledge to separate students in official statistics. Since the Lib Dems are not proposing to base targets on such statistics, the point of this is unclear. For UKIP, who do want to keep immigration down, but are not so averse to students, it makes more sense to exclude students from the count.

The most significant proposal here is reintroduction of the post-study work route, abolished under the current government, whereby students are permitted to work for two years after completing study. The Greens promise unconditional restoration, Plaid and the SNP propose restoration for students in Wales or Scotland, and the Lib Dems propose a reintroduction specifically for STEM (science, technology, engineering and mathematics) graduates.

STEM students have been shown to be particularly associated) with innovation, trade and entrepreneurship – issues which are largely absent from the discussion about migration in any manifesto.

Little effect on labour

cap on skilled immigration would be retained by Conservative, Labour and UKIP. Indeed, UKIP would put a five-year moratorium on any unskilled immigration whatsoever, and restrict skilled immigration to 50,000 visas per year. By way of comparison, about 221,000 highly skilled non-student migrants are estimated to have entered the UK for work in the three years prior to 2013.

Evidence on how immigration affects average wages and employment finds no significant adverse effects. If there are labour market effects, then they hit workers on the lowest wages. The Conservatives, Labour, the Lib Dems and the Greens all propose crackdowns on exploitation, through new legislation or greater monitoring.

Questions of language proficiency appear in the manifestos of Conservatives, Labour, Lib Dems and Greens. The emphasis shifts from testing migrants' English to offering English lessons, as the tone of the manifesto becomes more liberal.

Regional differences

To the extent that labour market restrictions are set nationally, they may be inappropriate for the demands of particular regionsPlaid, the SNP and the Alliance Party (in Northern Ireland) all call for greater regional sensitivity of policy in various respects, and complain about policies set to suit the south of England. But the unionist parties of Northern Ireland make no similar calls, and the nationalist parties of Northern Ireland say nothing on the issue.

One respect in which policy may be regionally discriminatory is nationally set income thresholds for family union, which may hurt families more in lower income regions. Some suggest such policies are intrinsically unjust. Plaid proposes a review; the Greens would drop the policy altogether. The Conservatives alone propose a toughening, while UKIP worries about sham marriages.

Full exit checksfrequently promised and already partly delivered, are proposed by Conservatives, Labour, Lib Dems and UKIP. Labour and UKIP both promise to expand border staff.

Protecting the persecuted

All main parties except the Conservatives reaffirm support for protecting victims of persecution. Labour, the Lib Dems and the Greens would end indefinite detention. The Lib Dems and the Greens go further, advocating allowing asylum seekers to work.

For those whose asylum claims fail, the Greens suggest a review of legal status, while the Lib Dems would abolish the Azure card system. The Greens want applicability of legal aid to immigration and asylum work extended.

Acknowledgement: This piece was published first at The Conversation.

Monday, 20 April 2015

Manifesto Check: Lib Dems take a more liberal approach to immigration

by Ian Preston

Centre for Research and Analysis of Migration (CReAM) at University College London.

When asked about immigration in the recent leaders' debate, Nick Clegg sought to draw a distinction between “good” and “bad” immigration. The Liberal Democrat manifesto does not try to push this distinction. Immigration is presented as primarily a good thing. The party believes in Britain as an “open, trading nation”, “within the European Union and beyond” and celebrates openness to “visitors who boost our economy”, “migrant workers who play a vital role in business and public services” and “refugees fleeing persecution”.

Although the Liberal Democrats were part of a coalition that has tightened immigration policy in several ways, in its manifesto, the party positions itself to push for a relatively liberal approach to future decision making.

A liberal approach

The post-study work visa – which allowed graduates of UK universities to stay and work for up to two years – was removed by the coalition government. Some commentators have called for its restoration. Although the party does not propose to fully reopen the route, its manifesto does contain a proposal to reintroduce a post-study work visa specifically for STEM (science, technology, engineering and mathematics) graduates, if work is found within six months of their degree.

Popular opinion tends to be relatively welcoming to students as immigrants. And there is evidence from the US that foreign-born STEM students in particular may contribute significantly to innovation, productivity growth and wages in the country they migrate to.

High-skilled immigration from outside the European Union is currently capped. The party commits itself to “continue to allow high-skilled immigration to support key sectors,” but there is no specific word on what will happen to the cap.

More broadly, there is no mention of a target for overall net numbers of migrants coming to the country. The manifesto does pledge that students will be separated within official statistics. But it is difficult to see the purpose of this suggestion if the number is not to be subject to a target, given that the official statistics – which are prepared to international standards – already distinguish students.

The English language skills of immigrants are mentioned as pertinent to employment prospects, and to schools. Language assessments are proposed for new claimants of the Jobseekers Allowance. English lessons are to be encouraged for parents, where schools have high proportions of pupils with English as a second language.

Better treatment for asylum seekers

Several reforms to the treatment of asylum seekers are announced. Indefinite detention is to be ended. The manifesto also promises to abandon the Azure card scheme, which restricts where and how refused asylum seekers can spend their weekly allowance, and effectively requires them to identify themselves as such when they do.

There are also changes to asylum seekers' rights to work. Typically, asylum seekers are not allowed to work, unless their case has lasted over a year through no fault of their own. The justification for the current policy is supposedly “to protect local labour markets”. But this seems weak, given that there is no more reason to think refugee migration should be harmful to local employment or wages than economic migration. The manifesto promises, not only to allow asylum seekers to work after six months, but to require work to be sought as a condition of benefit receipt. In light of the evidence, this seems sensible.

Not a problem

Rather than characterising immigration itself as a problem, the manifesto pledges to “tackle weaknesses” in the immigration system, which threaten to “undermine confidence” in it. The party proposes inspections, efficiency improvements and reviews aimed at restoring faith in the system.

Fears about the effects of immigration on the labour market and on public services feature prominently in assessments of public attitudes. Yet there are reasons to doubt how well-founded such fears are.

In the manifesto, there is no discussion – let alone endorsement – of such concerns, but there is a proposal for annual assessment of skill and labour market shortfalls and surpluses, impact on the economy, public services and communities. Such assessments are already regularly carried out by the Migration Advisory Committee. The manifesto proposes to make them annual, and to put them at the centre of a presentation to parliament.

There are also promises to ensure tougher policing of abuses of the system in both education and work. But these are not at all specific in the case of educational institutions, and simply described as a doubling of inspections to check for compliance with employment law in the case of employers.

Further proposed changes to the system appear to be mainly administrative. The party pledges to ensure fast processing of work, tourist and family visas and of asylum claims, but does not provide any details about how they are to be achieved, and at what cost.

The promise to restore full exit checks has been frequently made by many parties, and large steps have already been made to implement it.

Except for a call for the speedy issue of visas, there is no discussion of changes to policy on family migration.

Acknowledgement: This piece was published first at The Conversation.

Manifesto Check: Labour’s immigration policies are led by public opinion, not evidence

by Ian Preston

Centre for Research and Analysis of Migration (CReAM) at University College London.

Labour’s commitment to controlling immigration had already been made clear by its announcement as one of Labour’s five election pledges. But the party’s manifesto goes further to explain the policies, and how they would be implemented.

The party declares that it wishes to “look outward”, while recognising “public anxiety” and the people’s need “to feel secure in the strength of our borders.” The manifesto identifies specific public concerns, such as effects on wages, public services and “our shared way of life”. Public anxiety is undeniable, and according to research, social concerns may be more significant than economic ones.

No view is advanced by Labour as to whether these concerns are well-founded: research suggests that economic concerns, for example, are not. The evidence fails to point persuasively to any adverse impact on average wages or employment. As regards public finances, research shows that recent immigrants both contribute more in taxes than they withdraw in calls on public services and provide much of the staffing for some parts of the public sector.

Restricting immigration might assuage public concern, but it could also fail to achieve gains in average wages, and lead to less healthy public finances.

Different types of immigrants

Public opinion distinguishes between different types of immigrants. For example, the British public tends to be more positive about students, highly-skilled migrants and close family members, than about low-skilled economic migrants, extended family members, refugees and those who enter or stay in the country illegally.

Labour’s manifesto promises to mildly tighten, or to maintain the tightness of, restrictions on unpopular forms of migration. Although the party mentions some of the benefits of some forms of immigration – such as overseas students – it does not make any proposals to relax restrictions for these groups.

The manifesto claims that under a Labour government, immigration by serious criminals will be more strongly policed. Inevitably, immigrants include some people who will commit crimes and some people who will be victims of crimes. But many studies in a number of countries have failed to find a convincing association between migration flows and crime rates.

Labour also plans to crack down on the abuse of short-term student visas, although how this policy will differ to the kind of tightening that has already been pursued is unclear. There is a risk of discouragement to innovation from limiting graduate recruitment and the party welcomes the contributions of overseas students, but there are no explicit proposals for changes to terms of entry for this group (such as reviving a post-study work route).

Labour’s manifesto criticises the Conservatives for undermining public trust by committing to a target that was not met. The party makes no commitment to any defined number or cap on overall immigration, and there is therefore no discussion about which types of immigrants should be considered in any target. But the party does state a view that low skilled migration “needs to come down” and does commit to retaining the cap on migration for workers from outside the EU, currently set at a little over 20 thousand for employer-sponsored skilled migrants.

The European issue

In its section on Europe, the manifesto promises to “secure reforms to immigration and social security rules, as well as pushing for stronger transitional controls”. Evidence that welfare tourism is a serious problem is actually slim, so the extent to which this might substantially discourage European migration is doubtful. Nevertheless, the party pledges to revoke the right to send child benefits abroad, and promises to implement a two-year delay on benefit receipt for EU migrants.

The implementation of such policies would face issues of compatibility with EU law. As a result, how easy these changes are to implement will depend on the extent to which they are regarded as inhibiting freedom of movement for work, and on the negotiating abilities of a Labour government within the EU.

Labour also promises to protect low wages against exploitative immigration, with bans on recruitment agencies hiring exclusively from abroad, and an extension of Gangmaster Licensing law (which currently covers only agriculture and food processing). It is true that the strongest evidence of any negative effects of immigration on wages occurs at the bottom end of the distribution, so this measure seems appropriately targeted.

Alongside these proposed tightenings, there are also administrative changes. The party commits itself to full checks on exits, a promise frequently made by different parties over the past decade and already partially implemented. In principle, if realised, this should improve monitoring of net migration numbers. More border staff are promised, financed by a charge on non-visa visitors of a small – but unspecified – magnitude.

There are some proposals to address rights and welfare of migrants. There is a promise to end indefinite detention, and to end detention altogether for pregnant women and victims of trafficking and abuse. Labour pledges to provide refuge to genuine victims of persecution, but there is no explicit commitment to numbers. The UK currently does less than its EU neighbours in terms of sheltering Syrian refugees.

There is no mention of any change to rules on family migration.

Acknowledgement: This piece was published first at The Conversation.

Manifesto Check: Plaid Cymru wants immigration policy to address Welsh needs

by Ian Preston

Centre for Research and Analysis of Migration (CReAM) at University College London.

Wales has a lower immigrant population than almost any other region in the UK. Plaid Cymru’s manifesto adopts an unabashedly positive tone, much more focused on the benefits of immigration – referring to migrants as “world-class experts and those who can help run our public services” – compared to what we might expect from some of the other parties. Unsurprisingly, the need for immigration policy to recognise the specific needs of Wales is a central theme. Plaid wants to pursue immigration policies in accordance with the needs of the Welsh labour market, but such changes could be difficult to implement in the current context.

One size doesn’t fit all

Immigration rules are a form of labour market restriction that may match the needs of some regions better than others. For instance, restrictive policies based on a UK-wide assessment that there are no skill shortages may be ill-suited to the needs of regions where skills are in short supply – particularly if those regions find it difficult to attract skilled workers from within the country.
Assessmentsof skill shortages made by the Migration Advisory Committee (MAC) as a basis for decisions on visa policy can take into account submissions by regional bodies, but are not currently region-specific, except for the special consideration of Scotland. The Plaid Cymru manifesto proposes the creation of a Welsh Migration Service to assess Welsh skill needs and liaise with the MAC. It also contains a proposal, for example, that the Welsh government should be allowed to decide which companies can sponsor immigrant workers within Wales.

Students and spouses

It also goes further, proposing relaxation of the immigration policies specific to Wales. The case has been made for region-specificvisas in the UK more generally, and this policy represents a step toward the idea of region-specific visas for Wales.
The manifesto proposes, for example, the reintroduction of the post-study work route specifically for students at Welsh universities. This would allow for overseas university students to remain within the country for a period after completing their studies. This route was was scrapped by the UK government in 2012, based on arguments that it was prone to abuse and facilitated entry too easily into unskilled work. But it can also be argued that scrapping this route was bad for national skill retention and bad for university student recruitment. For Plaid’s policy to work as intended, those granted the right to stay would need to be effectively constrained to the Welsh labour market.
The current UK government has also tightened entry rules for foreign spouses, requiring a minimum income in order, supposedly, to prevent immigrating spouses from becoming a fiscal burden. Some argue that the whole idea of restricting the right to live in the country with a foreign-born spouse by income is unjust. Since thresholds are set nationally, the policy is also arguably regionally discriminatory. The Plaid Cymru manifesto proposes a review.

An unfair advantage?

The only respect in which the manifesto suggests a tightening of policy is a strengthening of gangmaster licensing law – specific to agriculture and food processing – so as to “protect local workers” and prevent “unfair advantage” being gained through employment of migrants. There is evidence that immigrants tend to work at low wages, at least in years soon after arrival. Whatever small negative effects there are of this tend to be at that end of the wage distribution. The proposal here is rather vague though, in terms of what is meant by “unfair advantage”, and in how it would be policed.
The manifesto also raises issues of immigrant welfare. Specifically, it proposes that Wales become a “Country of Sanctuary” – an extension to the City of Sanctuary idea – declaring Wales to be a place of safety for those fleeing persecution. Particular mention is made of refugees from Syria and Iraq. Finally, there is also a commitment to pursue prevention of slavery which is surely unexceptionable.

Acknowledgement: This piece was published first at The Conversation.

Friday, 30 May 2014

What do we know about immigration?

by Christian Dustmann and Ian Preston

Centre for Research and Analysis of Migration (CReAM) at University College London.

In the current heightened political climate, consideration of the factors which determine immigration policy should be based on the best available evidence. We at the Centre for Research and Analysis of Migration have composed a briefing, intended to promote discussion that is informed and not alarmist, low key and not polemical. In that note we point out the challenges for researchers in measuring the social and economic consequences of immigration, backed up with detail and references to appropriate academic study in the respective field.

Restrictive immigration policies are a curtailment of individual freedom of movement that causes real harm both to individuals already in the receiving country and to potential immigrants. Families are prevented from being together, innovative and productive economic relationships are prevented from happening, fleeing persecution is made more difficult. To justify this requires strong reasons and reasons that are rooted in evidence rather than anecdote.

Advocates of tighter immigration control believe that reasons can be found in negative consequences for receiving countries.  For instance, wages may be depressed by inflows of labour; changes in the character of receiving neighbourhoods may cause cultural dislocation; pressure on public spending can worsen the state of public finances; pressure on public services may lead to deterioration in the quality of services to local populations.  All of these could, if true, be reasons for caution in immigration policy but it is not obvious that any of them are true. Immigration could be economically invigorating, promoting innovation and raising wages; local cultures could be enriched by the diversity that comes with immigration; taxes paid by young and productive immigrants could ease pressures on the public exchequer; staff born abroad could be essential to delivery of public services.

Whether or not any of these issues should be what determines immigration policy, it is surely true that discussion should be driven by something more substantial than hearsay and hunches. Measurement of the effects of immigration on receiving countries is challenging, fraught as it is within the need to separate genuinely causal from merely coincidental relationships and there is a great deal still to be understood. Nonetheless, we find the progress made by academic researchers in better understanding the phenomenon of immigration and in opening up new avenues of research to be encouraging. New scholars choosing migration studies as the topic of their academic career and new data sources paired with new methodology have provided new insights into phenomena that were previously not well understood. For instance, research is making progress in understanding the impact immigration has on innovation and entrepreneurship, on opportunities which immigration opens up for native-born individuals and in assessing the effects immigration has on the labour market and the economy of receiving countries, not just through employment and wage adjustments, but also through new trade opportunities and technological advances. In the briefing we try to summarise the best available research on some of the most critical impacts.

There are still many open questions that need addressing and the balance of evidence can always shift as research progresses, but there seems to us little basis in existing research to fear the consequences of or to feel the need to apologise for supporting a relatively open and progressive immigration policy.

Wednesday, 12 March 2014

Reply to the Report ‘An Assessment of the Fiscal Effects of Immigration to the UK’ by Migration Watch

by Christian Dustmann and Tommaso Frattini

Centre for Research and Analysis of Migration (CReAM) at University College London.

Migration Watch (MW) has released for publication on Thursday 13 March 2014 a report entitled ‘An Assessment of the Fiscal Effects of Immigration to the UK’.

In this report MW claims that our research paper on ‘The Fiscal Effects of Immigration to the UK’ [http://www.cream-migration.org/publ_uploads/CDP_22_13.pdf], released on November 5 2013, has some flaws that invalidate our main results, namely that EEA immigrants who came to the UK since 2000 have contributed over the last 11 substantially more in revenues than they received in state expenditures. This contrasts with the UK-born, who over the same period contributed substantially less than they received.

MW states that our main results – that EEA immigrants who came to the UK since 2000 have contributed over the last 11 years substantially more in revenues than they have received in state expenditures – is ‘simply wrong’ because it relies on the assumptions that that (page 7, point xi (a) of their report):

(1) [Migrant] employees earn the same as the UK-born population; (2) Self-employed migrants contribute far more than those employed; (3) Migrants own the same investments, property and other assets as the UK-born and long-term residents from the day they arrive in the UK. 

Their first claim is simply incorrect. At no point do we make assumption (1). We rather allocate earnings (and the ensuing tax receipts) according to the figures on earnings for immigrants and natives that we obtain from the UK Labour Force Survey (LFS). 

Further, their second claim is also incorrect. At no point do we make assumption (2). In fact, in the absence of information on self-employed earnings, we allocate tax payments of the self-employed according to the shares of income tax payments computed for employees. This may rather lead to an underestimate of the income taxes paid by immigrants, as relatively more immigrants are self-employed. 

Finally, we have responded to the third point in an earlier reply from November (ignored in the piece by MW), where we compute an extreme scenario where recent immigrants pay no corporate taxes and business rates whatsoever, and allocate these taxes to long term residents only. We still find that recent EU immigrant make a positive contribution, while the net contribution of natives remains negative.

MW’s main criticism is based on a fundamental misapprehension of what we are doing. MW’s main argument builds on a serious misinterpretation of the way we estimate income tax contributions and NIC payments of immigrants. MW claims that we assume that migrant employees earn the same as the UK-born population, and that self-employed migrants contribute more than those who are in salaried employment. But at no point do we make any of these assumptions, nor is there anything in our paper that suggests that in any way. It is therefore puzzling to us why their piece attacks our work so violently, based on a complete misapprehension of what we are doing. 

More precisely, data in the UK LFS does not collect information on self-employment earnings. Despite this shortcoming, the LFS is the best available data source for our purposes, as it contains consistent wage data and information on country of birth over a long time period. It is well known that the Annual Survey of Hours and Earnings (ASHE) that MW suggests as a more reliable data source (point 36, page 23) does not contain information on the earnings of self-employed either, and, more importantly, does not have any information on country of birth, which is obviously crucial for analysis on the fiscal impact of immigration.

Thus, in the absence of information on earnings of the self-employed, we use the LFS to construct the share of income tax and National Insurance contributions payments made by native and immigrant employees based on their reported earnings. We then use these shares to allocate the total amount of income tax and NIC revenues to immigrants and natives, including that paid by the self-employed. This strategy does not require making either assumption (1) or (2) above, as MW claims we do. Further, since self-employment is more common among recent EEA immigrants than among natives, this choice may lead to an underestimate of total EEA immigrant tax payments, exactly the opposite to what they claim.

MW also criticises the way we have allocated corporate tax payments. We assume that company ownership (i.e. share ownership) is similarly distributed between the native and immigrant population, and we clearly state this assumption in our paper (page 13). MW’s criticism is not new, and we have already responded to it in an earlier reply [http://www.cream-migration.org/commentsarticle.php?blog=2]. In the same reply, we also respond to a related criticism, which MW raises again, about the way we allocate business rate revenues, based on the share of self-employed in each population group. MW – and other commentators before – argued that this may be incorrect because business rates are primarily paid by large businesses.

As an example, MW says that Sainsburys pays £400 million a year in business rates (no source is given). But as we explained in our earlier response, ‘the allocation of corporate taxation and business rates raises complicated questions of incidence. The fact that businesses write the cheques does not mean that the burdens do not fall ultimately on people. Whether those people are customers, shareholders, property owners or whoever, depends upon how economic decisions and, as a consequence, prices respond to taxation and is not a straightforward question.’ Coming back to MW’s example, the burden of business rates may be borne by consumers in terms of higher prices or local property owners in terms of lower rents, and so on.

In our previous reply, we have also computed the total fiscal contribution of recent EEA immigrants under the extreme (and clearly implausible) assumption that recent immigrants do not pay any corporate taxes or business rates, and we have allocated these taxes to long term residents. Even in this case, which represents an extreme lower bound on the tax payments of recent immigrants, we still find that EEA immigrants made a substantial overall positive net fiscal contribution, while the contribution of natives remains negative. It is disappointing that MW ignores this reply in their piece.

To summarise, MW’s main criticism is based on a stark misapprehension of our methodology. The report is written in a derogatory language seemingly attempting to undermine our reputation with suggestions that we do not adequately describe our methodology or comment on all our results. We are in fact very open about our methodology - which has been acknowledged even by earlier critics of our work (including Prof M. Stone, cited approvingly in their report, who comments that ‘we set out our assumptions with commendable clarity’ [page 3 here: http://www.civitas.org.uk/pdf/assumptionsandwizardry.pdf]).

Their strongly worded criticism is all the more surprising as the MW report is based on a substantial amount of guesswork, does not provide clear indication of how their figures are computed, and is at times sloppy or simply wrong. For example, the authors must have misread section 2.2.3 of our paper and/or earlier research of ours (Dustmann, 1997; and Dustmann, Fasani and Speciale 2013), as this research never claims that the level of consumption for migrants may be 20% lower than that of the indigenous population. Also, there seem to be calculation mistakes in some of the figures in their tables.

We welcome constructive criticism of our work, and we have engaged responsively and transparently with outside researchers who have raised criticisms since we believe that only an open and fact-based debate can do justice to a subject as sensitive as immigration. 

MW chose to circulate their critique to the media earlier this week without sending it to us so we have not had the chance to point out errors to them as we would have been able if they believed in conducting debate similarly openly. Although the report cites some of the reports that are critical of our work, MW has chosen to ignore detailed replies already made, notwithstanding the fact that they are easily available on the CReAM webpage [http://www.cream-migration.org/comments.php], were brought to their attention at the time, and already respond to some of their criticisms.