To go back on the free movement of labour within Europe would be a major mistake. We would fail to solve the very real labour market problems many workers face and end up with a dysfunctional immigration policy as well, writes Alan Manning.
An opinion poll in January 2013 found that 79% of Britons did not want the work permit restrictions on Bulgarians and Romanians to expire as scheduled early next year. It is a reasonable guess that similarly high proportions of Britons would like to limit the right to work in the UK of other Eastern Europeans who acquired those rights after the accession of the A8 countries to the EU in 2004. Opposition to EU membership is increasingly focused on opposition to the rights (to work and, perhaps social benefits) that it gives to European immigrants into the UK. In a recent article in the Independent on Sunday David Goodhart and Lodewijk Asscher, a Dutch Labour party politician who is currently Social Affairs and Employment Minister, argued that the free movement of labour within the EU needs to be re-thought as mass immigration has caused major problems, especially for lower-skilled workers.
To go back on the free movement of labour within Europe would be a major mistake.
The opposition is based on a widespread belief that immigration has led to a decline in both the standard of living and the quality of life of natives, especially those with lower levels of skill. For many years such views were widely dismissed, especially by those on the political left, as ignorant at best or bigoted at worst. But, faced with losing many votes on the issue of immigration, there is a noticeable tendency for popular views to be taken more seriously. Ed Miliband and Yvette Cooper have both acknowledged that mistakes were made by the previous Labour government on immigration policy and in particular that the level of immigration was too high.
As popular perceptions are taken more seriously, harder data seems to be increasingly ignored. But, although it seems to be becoming less fashionable, I still think it vital to look at the evidence and not just listen to testimony. Otherwise disaster looms. If one believed incorrectly that the source of the labour market problems for many British workers is immigration one might tighten immigration law, find nothing happens, conclude the law was not tight enough and head off down a path of ever-tightening immigration laws that never have the intended effects because the diagnosis was wrong in the first place. We would fail to solve the very real labour market problems many workers face and end up with a dysfunctional immigration policy as well.
Just as it seems to be increasingly accepted that the Eastern European immigration after 2004 has harmed the welfare of a large number of British workers, it seems to be forgotten that the years after the accession of the A8 countries in 2004 were amongst the years in which the unemployment rate for native British workers was the lowest in a generation. And that these were years when the earnings of the lowest paid workers increased faster than average earnings so that inequality was falling, again for the first time in a generation.
Of course the labour market has deteriorated since then, but the financial crisis was not caused by immigration. But perhaps British workers would have fared better in the recession if there had been less immigration? Maybe, but the unemployment rate has risen much less than one would have predicted given the scale of the crisis, and the dramatic fall in living standards has more to do with the collapse in investment and the poor productivity performance than immigration.
But if immigration has not had the dire effect on British workers that many seem to think, then it has probably not benefited most of them by much either. In 2008, the House of Lords produced a report in which it said that immigration had probably had little effect on the GDP per capita of natives. One can argue the case one way or the other but what is almost certainly true is that any benefits to UK citizens were not very large and much smaller than the benefits to the Eastern Europeans who came to the UK.
That imbalance in the benefits and costs is one source of the sense of unfairness that infuriates many people. And there has to be more fairness in the sharing of benefits and costs both among Britons and between Britons and immigrants. I think most people are pretty surprised to learn that the UK government has been paying child tax credits for the support of children that do not live in the UK. In the big scheme of things, the sum is not high – giving the £55m a year this costs to 50 million Britons is not going to reverse the unprecedented squeeze in living standards. But this adds to a sense of unfairness.
But this unfairness was not inevitable. A major problem with UK immigration policy has been the almost complete absence of any coherent policy to deal with the consequences of large-scale immigration in general and unexpectedly high immigration in particular. If the population rose faster after 2004 because of unexpectedly high immigration then it does not take a genius to see that the supply of housing should have been increased as well or otherwise there would be a squeeze on access to housing, both private and social. And this would have been possible with the skills the new immigrants brought with them. After all, many of the Eastern Europeans worked in construction – it’s just they were used to build the Shard and other buildings for business and not social housing.
It is essential to have a policy for managing the consequences of immigration because, contrary to what many politicians would have you believe, it is extremely difficult to control immigration flows. Think of trying to control immigration into the country as trying to control the flow of water through a tap. A simple enough task if the water pressure in the pipe is low and stable but close to impossible if it is not. And if the pressure in the pipe is high enough and the tap almost shut there is always the danger of the pipe bursting and one’s kitchen being flooded anyway.
The pressure in the immigration pipe is high and variable. It is high because the gap in living standards between the UK and many countries of the world is so big that there are a huge number of people who would like to come here if they could to get a better life for themselves and, more commonly, for their children. And it is variable because events can lead to big surges in the numbers of potential migrants. So any immigration policy is vulnerable to being overtaken by events. In the past 15 years, we have had the surge in asylum applications in the 1990s caused by conflict elsewhere in the world, the wildly inaccurate forecasts about the numbers of Eastern Europeans who would come to the UK after 2004, and the ‘bogus college’ problem a few years later.
If one deals with one problem, pressures build up elsewhere. Perhaps the increased restrictions on the availability of student visas leads to more entries on student visitor visas whose numbers don’t even count in the government’s net migration target. Enforcing immigration controls is very costly and often ineffective – in July it was reported that a database set up in September 2012 had received more than 48,000 allegations about illegal migrants but only 660 people had been removed. But the resources required to have investigated every allegation thoroughly would have been huge.
We cannot turn back the clock to a world in which migration flows were low and to limit the free flow of workers within Europe would be a retrograde step. This is not an argument for uncontrolled migration – we need to manage both the flows and, more importantly, the consequences to ensure that the benefits flow to all and the costs are not concentrated on any one group. But the debate on migration should be less about controlling the flows and more about managing the consequences.
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Alan Manning is a professor of labour economics at the London School of Economics.