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Alan Manning

January 31st, 2024

The discussion on immigration needs to improve

0 comments | 21 shares

Estimated reading time: 5 minutes

Alan Manning

January 31st, 2024

The discussion on immigration needs to improve

0 comments | 21 shares

Estimated reading time: 5 minutes

Those who believe in a more open, liberal approach to immigration often frame their argument as being on the side of “good economics” versus “bad politics”. Alan Manning explains why the arguments presented as “good economics” are often unconvincing; those on this side of the argument really need to up their game.


Post-pandemic net migration has risen in many countries. Although there are good reasons to think much of this is temporary, many countries, including the UK, have responded by making their immigration policies more restrictive.

Those who believe in a more open, liberal approach to immigration argue that this is “good economics” but closer scrutiny shows these arguments are often not as strong as they think or could be.

To illustrate this I consider three articles from respected sources. I apologise to the authors for singling them out; I could have chosen many others who put forward similar arguments. I chose them because I think they are representative, not because they are especially bad. They are an Economist editorial (“How to detoxify the politics of migration”), a Financial Times op-ed “Immigration crackdowns are good politics but bad economics” and a Guardian article “Why Home Office visa plans will be ‘nail in the coffin’ for UK hospitality ”.

The Economist editorial points out that “the share of the world’s people who live outside their country of birth is just 3.6 per cent; it has barely changed since 1960, when it was 3.1 per cent”, implying immigration anxiety is a fuss about nothing. This is highly misleading; it is in the high-income countries where concerns about immigration are focused and there the share of migrants has doubled in the last 30 years and continues to rise. Can this really be described as “barely changed”? In most of these countries, the share of migrants is at historical highs.

Migrants are over-represented as founders of unicorn businesses but, like the Nobel Laureates, this is a tiny number of people.

The Economist goes on to outline some economic benefits from immigration: immigrants are four times likelier to win a Nobel science prize than the native-born. True, but this is 45 people since 2000 so the chance of an immigrant winning a Nobel is so small that it can hardly be used to argue for a generally open immigration policy (though perhaps more open for some small selective groups of high-flying scientists). The Economist goes on: “Immigrants in America are nearly twice as likely to start a company as the native-born”. They could have given other less striking sources, for example a 2011 OECD report also found that “migrants are more likely to start a new business in most OECD countries” but “the survival rate of those businesses is lower than that for new businesses started by native-born entrepreneurs” so that “on average, across OECD countries, the percentage of migrant entrepreneurs differs only slightly from that of natives“. In addition “On average, a foreign-born self-employed who owns a small or medium firm creates slightly fewer [additional jobs] than their native-born counterparts” suggesting migrant businesses seem less successful. Migrants are over-represented as founders of unicorn businesses but, like the Nobel Laureates, this is a tiny number of people.

The Economist claim comes, I think, from this study but is an inaccurate summary of a misleading paper. Misleading because many companies have both local and migrant founders and the study’s headline figure is based on counting these as migrant firms. And then it compares the share of migrant firms with the share of migrants in the total population. Migrants are more likely to found firms in large part because they are more likely to be working-age; few companies are founded by children and pensioners. Adjust for this and you arrive at a conclusion similar to the OECD.

Migrants age at the same rate as everyone else. They may be young when they arrive but don’t stay that way.

You might think it is me who is missing the point, that we need working-age immigrants to deal with the challenge of an ageing population. The Financial Times op-ed argues “the US would need to let in nearly 4 million migrants a year, every year, to prevent its population growth turning negative in the coming decades”. I think the intention is to argue that high immigration is necessary to address ageing but really it makes the point that even immigration at very high levels (implying one per cent population growth per year permanently and ultimately a population over 50 per cent migrant) can only delay population decline by a few years. As a 2019 EU report put it, “Higher fertility or more immigration are not enough to cope with the challenges of population ageing”. The reason is simple; migrants age at the same rate as everyone else. They may be young when they arrive but don’t stay that way. All serious demographic work of which I am aware comes to a similar conclusion yet proponents of immigration as a solution to ageing rarely cite this work or give any impression they have ever read it.

Then there is the argument that we need migrants to deal with problems of labour shortages. I have written about why this is misleading elsewhere. Most of the shortages we hear about are not the result of too few people in a country able to do the job (a skills shortage); they are the result of too few wanting the job because of poor pay and conditions. These sectors want a ring-fenced supply of migrants so they do not have to offer competitive salaries. The Financial Times op-ed argues immigration “reduced upward pressure on wages and inflation” while the Guardian article recounts an employer who “when he advertised for a head chef in Birmingham, on a very competitive rate of £37,000, he woke up the next morning to find rival restaurants outbidding him for the same staff at £40,000”. I understand why business owners dislike this bidding war for workers but perhaps the chef might think it a good thing. Both of these articles seem to imply that wage growth would have been higher if immigration had been lower thus conceding a common criticism of immigration (that it reduces wages) while seeming to imagine they are making a case for more liberal immigration.

There is an unfortunate tendency for discussions of migration policy to lionise or demonise migrants when they are only human.

Please do not think those on the other side of the immigration debate are better; they are equally, probably more, guilty of using cherry-picked studies, misleading statistics and arguments that do not withstand much scrutiny. There is an unfortunate tendency for discussions of migration policy to lionise or demonise migrants when they are only human. If, as I do, you think we can have a more liberal, open (though with limits), humane immigration policy, please be a bit less critical of the other side and more critical of yourselves. Otherwise don’t be surprised if your arguments fail to prevail.


All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science.

Image credit: 1000 Words on Shutterstock.


 

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About the author

Alan Manning

Alan Manning

Alan Manning is Professor of Economics in the Department of Economics at LSE, and co-director of the community wellbeing programme at LSE Centre for Economic Performance. His research generally covers labour markets, with a focus on imperfect competition (monopsony), minimum wages, job polarisation, immigration, and gender.

Posted In: Immigration | Localism and the Big Society | LSE Comment
Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported
This work by British Politics and Policy at LSE is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported.