The Niesr On Immigration– Maximising Our Population For Minimum Gain?


Economics, Policy, Population

1. This quarter’s National Institute Economic Review is a special immigration edition. The key paper essentially claims that Britain will be worse off if net migration is reduced to the tens of thousands, as the government has pledged.

2. Using a dynamic overlapping generations computable general equilibrium model (tell that to the man on the street with falling real wages) the paper simulates the economic impacts of demographic change, and suggests that  if immigration were reduced to the tens of thousands (it is assumed that this means 99,000, although the paper is sufficiently opaque not to state explicitly what the low migration scenario is) GDP could be 11 percent lower and GDP per head 2.7 percent lower in 2060 than with net migration of 200,000 a year.  It suggests that everyone would then have to pay more tax in order to balance the books.

3. This supposed benefit of an extra 2.7 percent in GDP per capita by the end of a fifty year period (of high migration) works out as a very small, almost trivial, annual benefit. 

4. The NIESR is clear that they have taken no account of any other impact of a much larger population but it impossible to isolate these findings from the wider impact of a huge population increase.  They seem to be suggesting that immigration is a rather handy way of improve our future finances yet they only give one side of the story.

5. The consequence of the baseline projection –which assumes net migration of 200,000 per year – is that by 2060 the population of the UK will be 81.5 million. This is an increase of nearly 17.5 million on today’s population of 64 million. Government achievement of net migration in the tens of thousands (let us say 100,000) would lead to a population increase of around 11.7 million by 2060 [1] Thus the extra 2.7% increase in GDP per capita over 50 years requires an additional population about 5.7 million higher than the government’s preferred scenario.     It is a sobering thought that even achievement of net migration of 100,000 a year would add nearly 12 million to the population of the UK by 2060.  

6. The NIESR state ‘we do not capture the negative externalities resulting from, for instance, congestion. It does not take a genius to realise that England’s already densely congested London and the South East  (major destinations for migrants) may well struggle with these additional millions.

7. The NIESR simulation merely suggests that, if everything else stayed the same but more working age people were imported from abroad, then there would be more to pay tax and share the burden of government spending. But there are far better ways of achieving a similar outcome than increasing the population by a huge number. For example, there are large numbers of over-50s who are not in the labour market so by encouraging them to remain in work we can increase the size of the workforce without increasing the size of the population. The government has already laid out plans to increase the state retirement age in line with life expectancy which is a step in the right direction. But more significantly, the NIESR says nothing at all about the scope for increasing the quality rather than the quantity of the UK workforce and growing the economy through innovation, investment and productivity improvements.

8. The OBR made clear in their 2013 report that immigration was not a long term solution to spending pressures related to population ageing, it merely delays the inevitable. We would go further; immigration as a solution to age-related spending pressures not only kicks the can down the road for a while, it also causes more problems than it solves by creating a country that is so densely populated that any benefit from migration is likely to be hugely outweighed by the costs of congestion and overcrowding a point recently made very clearly by Professor Rowthorn. [2] Worse still, this scenario requires continued and increasing levels of net migration in order to sustain this age structure.[3] This can only end in an ever more crowded island and an increasingly frustrated population who have consistently signalled their desire for a much lower level of immigration.

 [1] This is based on the 2012-Based Low Migration Scenario Population Projection whereby net migration falls to 105,000 per year. The population based on net migration of 100,000 or slightly lower as is government policy will lead to smaller population growth, all other things being equal. 

[2] Robert Rowthorn, Large-scale Immigration: Its economic and demographic consequences for the UK, July 2014, URL: http://www.civitas.org.uk/pdf/LargescaleImmigration

[3] Ibid. 

 

 

6th August 2014

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