Immigration & evidence

The Lords' report on the economic impact of immigration is better than I'd feared. But I've still got two problems with it.
One is this:

We found no systematic empirical evidence to suggest that net immigration creates significant dynamic benefits for the resident population in the UK. This does not necessarily mean that such effects do not exist but that there is currently no systematic evidence for them. (par 69)

But absence of proof is not proof of absence. It's always hard to find evidence about long-run economic effects, especially if the long-run hasn't happened yet.  And there are four ways in which immigration can benefit us in the long-run, in theory:
1. As the Lords say (par 56), it increases profits.  And in the long-run, profits get spent on jobs and capital equipment. That should increase the wages of indigenous workers.
2. Immigration helps reduce (pdf) inflation. That should reduce real interest rates, which again encourages capital formation and hence boosts indigenous wages.
3. There might be benefits to indigenous wages as workers learn from skilled migrants, or as diversity helps improve creativity and international networks.
4. "Immigration keeps labour costs lower than they would be without immigrants. These lower labour costs also benefit consumers, who then pay less than they otherwise would for products and services." (par 113) But surely, if consumers face lower prices, they'll spend more on goods and services generally, to the benefit of indigenous workers. Have you never heard of the Pigou effect?
Now, the committee is right to say these effects haven't been quantified. But, equally, it gives us no reason at all to believe they are all zero.  So, surely, there must be a presumption in favour of some long-run benefits.
My second concern is this:

The available evidence suggests that immigration has had a small negative impact on the lowest-paid workers in the UK (par 78).

But what would happen if the immigrants stayed at home in low-wage countries instead?
Take Wiki from Corrie. If she hadn't come to Underworld to sew knickers, she'd probably be sewing them at home instead. Her labour supply would therefore depress wages in Poland. That in turn would reduce the prices of Polish-made knickers. Which in turn would cause British consumers, at the margin, to buy Polish knickers rather than ones from Underworld. Janice and Kelly (pictured) would therefore lose jobs and wages anyway. They'd be no better off if immigration were limited.
Even if the immigrants didn't come here, then, they could still worsen the lot of low-wage British workers - that's factor price equalization. The Lords do not consider this possibility.
So, maybe the Daily Mash is right yet again, and the Lords are erring on the side of hostility to immigrants.
However, even if I'm wrong and they're right, the case against immigration is not made. Not at all. As Tim and Allan both say, if immigration is good for immigrants and no harm to the rest of us, then it should surely be permitted on utilitarian grounds, let alone liberal ones.

Comments

[scotstoryb]

I've always enjoyed Tim Allens programs.

But it has to be said that instinctively, this makes no sense whatsoever. We had a population of 50 million or so 15 years ago, this is now 60 to 70 million and yet, there is little if no increase in GDP per head. So, these immigrants have come here, worked, stayed/left yet made no difference? If they came from the EU they can be and maybe are claimants-I detect no input, or corresponding deficit apart from us British paying for the influx.

That is good?

Balls.

STB.

[dearieme]

1) I suspect that hard-to-quantify effects are always likely to be far bigger than any small, easily quantified effect. So if you can't find a huge quantified effect, look to the unquantified. (2) I suspect that treating immigrants as one undifferentiated lump (e.g. by asking whether "immigration" is good) is manifestly daft. There's a good deal of difference between the peacable, highly educated, hard working Central Europeans who live next door to us, and some violent, uneducated, drug-smuggling gangsters who don't.

[chris]

STB - in the 15 years to 2006 (the latest for which we have data), real GDP per head rose 42.7% - code identifer IHXW here:
http://www.statistics.gov.uk/statbase/TSDdownload1.asp
This happened as the population rose 5.4%.

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There are ways in which immigration can disadvantage the existing population in the long run, too.

Immigration to Palestine in the 1930s, for example, was clearly a mixed blessing to the existing Palestinians.

Much the same might be said of the immigration of Europeans into America and Australia.

So if “there must be a presumption in favour of some long-run benefits”, should we not also have a presumption in favour of some long-run costs?

[Bob B]

"There are ways in which immigration can disadvantage the existing population in the long run, too."

Come to think of it, you might have mentioned the German invasion of Poland in 1939, the Mongol invasions of the 13th century, the Moors invading Spain in 711 or the Roman conquest of Britain in 43. What's more, the Romans stayed around until the beginning of the 5th century.

I'm reminded of that memorable episode in the Monty Python movie: The Life of Brian, where John Cleese asks: What have the Romans ever done for us?
http://www.youtube.com/watch?v=ExWfh6sGyso

What's more, the Romans weren't even the last of our troubles from arriving foreigners.

As Daniel Defoe puts in: The True-Born Englishman (1701):

The Romans first with Julius Cæsar came,
Including all the nations of that name,
Gauls, Greeks, and Lombards, and, by computation,
Auxiliaries or slaves of every nation.
With Hengist, Saxons; Danes with Sueno came,
In search of plunder, not in search of fame.

Scots, Picts, and Irish from the Hibernian shore,
And conquering William brought the Normans o'er.
All these their barbarous offspring left behind,
The dregs of armies, they of all mankind;
Blended with Britons, who before were here,
Of whom the Welsh ha' blessed the character.

From this amphibious ill-born mob began
That vain ill-natured thing, an Englishman.
The customs, surnames, languages, and manners
Of all these nations are their own explainers:
Whose relics are so lasting and so strong,
They ha' left a shibboleth upon our tongue,
By which with easy search you may distinguish
Your Roman-Saxon-Danish-Norman English.
http://www.luminarium.org/editions/trueborn.htm

[Matthew Cain]

dearime - I hope you are right but I suspect otherwise. Take the Olympics, for example. There is little evidence that it has any long term advantage despite vested interests throwing lots of money at trying to prove it.

[MJW]

The point you conveniently seem to be missing is whether or not mass, loosely controlled immigration is as economically beneficial as a more robust immigration system could be. At present part of the immigration inflow is economically positive and part of it is negative, as a rational actor the government should be encouraging the former as much as possible and discouraging the latter as much as possible.

How much economic sense does it make to financially encourage and support a lumpen-proletariat (or whatever we want to call them), whilst at the same time importing immigrants to meet the labour demand that might otherwise be met by that lumpen-proletariat? Now I’m not one for crude lump of labour arguments, but it’s idiocy to both morally and financially support the right of a lumpen-proletariat not to work, whilst at the same time importing substitute labour which is highly likely to compete with that lumpen-proletariat (and to a wider extent the rest of the indigenous population) for socio-economic resources (e.g. housing, healthcare, education etc).

If the question is does the UK need immigration then the answer is almost certainly, if the question is does the UK need mass, loosely controlled immigration then the answer is probably not as much as it needs more selective, tighter controlled immigration.

[Bob B]

MJW: "I’m not one for crude lump of labour arguments, but it’s idiocy to both morally and financially support the right of a lumpen-proletariat not to work."

Good point IMO. The challenging implementation problems are - to put numbers on it:

- getting the 1.24 million so-called NEETS into work:

"You can see the thinking – it is aimed to reduce the number of Neets (young people between 16 and 24, not employed or in education or training), which currently stands at 1.24 million, and is reported to have risen by 15 per cent since 1997. Where I live, in Barnsley, 8.1 per cent fall into this category."
http://www.yorkshirepost.co.uk/columnists/Jayne-Dowle-A-Shameless-generation.3873620.jp

- weaning a million or so of those currently receiving Incapacity Benefits [IB] back into work:

"New incapacity benefit tests are to be introduced, which ministers say will mean fewer sick and disabled people will qualify for being unable to work. . . The Department for Work and Pensions estimates that about 2.64 million people currently claim incapacity benefits. . . Mr Hain said the true cost of people claiming incapacity benefit in 2006-07 was £12.5 billion."
http://news.bbc.co.uk/1/hi/uk/7101106.stm

Compare that £12.5 billion annual cost of IB payments with this:

"We know that migrants contributed to our economy to the tune of £6 billion to GDP in 2006."
http://www.bia.homeoffice.gov.uk/sitecontent/newsarticles/newpbsbegins

[Alex]

"1) I suspect that hard-to-quantify effects are always likely to be far bigger than any small, easily quantified effect. So if you can't find a huge quantified effect, look to the unquantified."

Argument from ignorance. And strangely enough, this unquantified effect turns out to support your prior prejudices - who could have guessed?

Dearieme: risible.

What amuses me about the whole affair, anyway, is old Enron Wakeham discovering that GDP growth suddenly doesn't matter, having made a career out of arguing that we should throw anyone and everyone under the bus for a fraction of a basis point more GDP growth. Further, I nearly shit myself laughing when I read him saying that if immigrants worked, and spent their wages, this would create more demand for labour, and therefore, QED, there would be just as many job vacancies as before - and therefore we should be opposed to immigration.

An exercise for the reader: what would Wakeham's opinion have been, had we substituted "company directors" and "profits" for "immigrants" and "wages"?

[Bob B]

"old Enron Wakeham"

That had previously registered with me but I thought we should leave that for another day and focus on the substantive migration issues.

The one aside is to remark that the Lords are evidently remarkably insensitive (or obtuse) about recent history to put Wakeham up as their spokesman on this when he was the chairman of Enron's audit committee.