Britain is convulsed with anxiety about immigration, with claims of too many EU citizens coming here, the benefits system being abused and wages being forced down. An expert on immigration looks at the evidence.
(By Jonathan Portes/Observer)
1) Didn’t the European Union just start off as a Common Market? When did free movement of workers start?
Long before the UK joined in 1973, the Treaty of Rome (1958) established what was then the European Economic Community, with four basic principles, called the “four freedoms”.
These were: free movement of labour, capital, goods and services. The objective was to establish a liberal market economy, where people could trade with each other across borders; free movement of labour was seen as part of that.
And the expected benefits were very much those that economists in general think you get from removing such barriers, allowing goods, services, capital and people to move freely within a given area.
It is true that over the years free movement rights have been progressively extended, to allow for people to move to look for jobs as well as take them; and with that, especially after eight new member states joined in 2004, mobility within the EU has greatly increased. But it’s very odd for people to say that what we’re seeing now was somehow not intended, or not what the UK signed up to. Exactly the opposite is true.
2) Did the UK government agree to allow in workers from the new member states in 2004 on the basis of a forecast that turned out to be hopelessly wrong?
This is a myth. The decision not to apply the “transitional provisions”, which would have allowed the UK to delay full free movement rights, wasn’t taken because of the supposed “Home Office forecast” (actually, not a forecast and not the work of the Home Office) that only 13,000 migrants would arrive. In fact, there were three far more important arguments for the decision.
First, a broader geopolitical one. The UK had been pressing for the countries of the former Eastern bloc to be allowed in to the EU, despite the reservations of some other countries, like France; they were seen as likely allies for the UK’s generally liberal, pro-free-trade positions in EU debates. So the decision was seen as a way of cementing our relationship with them, and in particular the Polish government.
Second, the economics. The UK economy was doing well, with lots of jobs being created. The analysis suggested that immigrant workers – particularly the reasonably well-educated and motivated ones likely to arrive from the new member states – were likely to boost the UK economy without doing much, if any, damage to the prospects for native workers.
And third, the practicalities. This aspect is often ignored, but was a very important factor at the time. The UK only had the right to apply transitional provisions restricting the ability of the new EU citizens to work legally – not stop them coming here in the first place. Turning them away at the border was never (and still isn’t) an option. And, without a “labour inspectorate” and with a relatively flexible labour market, the assumption was that the result would simply be a massive upsurge in illegal working. This hardly seemed an attractive alternative.
3) What were the impacts on jobs and wages of this move?
The short answer seems to be: not much. Indeed, it’s fairly obvious that wages are generally higher and jobs easier to come by in areas of high immigration like London, while many low migration areas have relatively depressed labour markets.
4) But how can this be? Isn’t it just the economics of supply and demand – if you increase supply of workers, wages will fall? And if an immigrant takes a job, then a British worker can’t.
No. People who say this (and many do) usually don’t actually know or understand basic economics. More immigrant workers does increase the supply of labour. But, because immigrants earn money, spend money, set up businesses and so on, it also increases the demand for labour. And it’s true that, if an immigrant takes a job, then a British worker can’t take that job – but it doesn’t meant he or she won’t find another one that may have been created, directly or indirectly, as a result of immigration. So immigration may have a negative or positive impact on jobs and wages for British workers; so far, the evidence suggests that the direct impacts have been rather small.
Over the longer run, however, the indirect impacts are likely to be larger, and here the evidence suggests that the impact is likely to be positive. Immigrants have different skills and experiences to native workers, so they complement rather than substitute for natives, helping raise wages and productivity for everybody. And, in general, economists think that competition – including in the labour market – leads to efficiency gains. Again, over time, this should result in increased productivity and hence higher wages all round. My own profession – economic research – is a good example: London is full of foreign economists, many from parts of Europe like Italy or Greece where jobs are scarcer. Most British economists would agree that we have benefited hugely overall from the openness of the academic labour market.
5 Do we have a problem in the UK with benefit tourism?
Some immigrants abuse the benefit system – as do rather more Britons. But the evidence that a significant number of people come here just to claim benefits is very thin. When the government was asked by the European commission to substantiate its claim that this was a real problem, its response was that the commission was placing too much emphasis on “quantitative evidence” (that is, numbers and facts).
The government’s own figures show that migrants are about half as likely to be in receipt of a DWP out-of-work benefit as people born here. Many migrants from the EU, however, are in low-paid work (including self-employment) and so receive tax credits; as the numbers settling here permanently have grown, and they start having kids, this has become quite a significant phenomenon. But it’s not benefit tourism.
Would any limit apply on a country-by-country basis, which would seem arbitrary and potentially unfair? Or would they apply to all EU nationals, so if we let in more Lithuanians then we’d have to let in fewer Germans? What about Brits living elsewhere in the EU, or moving there in future? What about the two million or more EU citizens currently living here? Would they be entitled to go home and then return here, or would they have to apply for a work permit next time? What about “mixed” families, an ever growing number? Would those married to a British citizen, or with a British child, be exempt? It wouldn’t be accurate to describe these proposals as half-baked – they aren’t yet anywhere near that stage.
Jonathan Portes is director of the National Institute of Economic and Social Research.