Winner of the New Statesman SPERI Prize in Political Economy 2016

Sunday, 8 January 2017

Tough on the causes of immigration

In Tony Blair’s recent intervention on Brexit, I kept expecting to read “we need to be tough on immigration, and tough on the causes of immigration”. For those who do not know, when he was Shadow Home Secretary in 1993, Tony Blair came up with the slogan: tough on crime, tough on the causes of crime. It was a brilliant piece of political spin. The public had the perception that the Conservatives were tougher than Labour in dealing with crime. What Blair did with this slogan was to counterattack by suggesting that the Conservatives might be tough in the sense of locking people up, but maybe a smarter strategy would be to go for the causes rather than just the symptoms of the problem.

He didn’t say that about immigration. But I wish some of those who argue that we need to restrict immigration by more would say something like: “Rather than control immigration, we should do something about the causes of immigration”. There currently seems to be a presumption that if you decide immigration is too high, you automatically argue for some form of direct immigration controls and numerical targets to guide these controls. That does not follow. Indeed you could argue that it should not follow. Having some bureaucrat decide whether a firm should or should not be able to employ someone from overseas is likely to be arbitrary and inefficient. Having a points system to do the same risks being a blunt instrument that leads to many bad individual outcomes

You would think, in particular, that those politicians that extol the virtues of a free and flexible labour markets, and argue that we need to reduce red tape for UK business, would push this line, and argue for indirect rather than direct control of immigration..But there may be a good political reason why they do not. One of the political advantages of direct controls is that they hide the costs to firms of those controls.

Suppose, for the sake of argument (and against the evidence), that we agreed that immigration imposed some form of cost on society. The obvious solution, for an economist, would be to impose a tax on firms that employed immigrants. Indeed Theresa May floated such an idea in early 2016. But that immediately makes it clear to the public that controlling immigration has costs, and allows the business sector to lobby hard against this tax. A much milder idea of ‘naming and shaming’ firms that employed immigrants was floated at the last Conservative party conference, but was quickly dropped for similar reasons. As Brexit polls showed, many people only favour immigration controls when they think there will be no cost to them personally. Even government ministers behave in a similar way. The moment you make it clear that reducing immigration will harm business, support falls.

While this might be a concern for those who want to use immigration as a political weapon (to deflect attention from the consequence of austerity, for example), it should not be for others (in the Labour party, for example) who simply want to appease public opinion. Above all else, focusing on the causes of immigration rather than direct controls should produce a much more honest public debate.



30 comments:

  1. The genius of Blair (not something you will hear me say often) with that slogan is that it allows people with radical different views to agree with him, so gets him good PR without committing him to any particular policy.

    But to get to the point, a discussion of the causes of immigration would be a profound good. It raises all kinds of important issues that Labour could take advantage of. The domestic under-supply of doctors, nurses and other skilled workers, for example.

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  2. "...focusing on the causes of immigration rather than direct controls should produce a much more honest public debate."

    Oh?
    What can one do against the cause of immigration except by spending huge amounts of taxpayers' money? And enriching the corrupt elites of the countries from which immigrants try to flee?

    So what is your recipe? A new form of colonialism so one can boss around the leaders of those countries?

    Remember that the 19th century form of colonialism was a losing business.

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    1. This is the latest iteration of "try to save EU membership by trying to save freedom of movement using arguments which will never be accepted by the public". I respect SW-L and am sure he means well. This is a fool's errand.

      If you mean foreign aid, Anonymous, it does work but only if the projects are chosen and managed by the donor government. Budgetary aid is always misspent or stolen.

      But if SW-L supports foreign aid to reduce (er, Eastern European??) poverty, it doesn't mean he can't oppose freedom of movement too. If we want economic immigration on humanitarian grounds (Romanians coming here get higher pay and a better life), we can argue for no immigration and an increase in foreign aid on the same grounds. We'd be giving them a better life in their own country, but denying them the chance to live here to get it.

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    2. «But if SW-L supports foreign aid to reduce (er, Eastern European??) poverty, it doesn't mean he can't oppose freedom of movement too. [ ... ] We'd be giving them a better life in their own country, but denying them the chance to live here to get it»

      But that would be pointless: if poles and romanians could have nice jobs in Poland and Romania thanks to development programmes most would rather stay in their home country than endure the rather miserable life of a low-income immigrants in the UK, even at wage difference of 2-3 times; but current wage differences are 5-10 times. They would not have the motivation to mass-migrate to the UK and try to beat low-income english workers in the race to the bottom. When it was just french, germans, italians, dutch, ... moving around the EU and to the UK, they did not so because UK wages are very much higher then at home, in many cases quite the reverse.

      And freedom of movement benefits UK citizens too: during the 1990s huge recession quite a few looked for work on the continent, and even today many UK engineers for example go to work in Germany or Holland where they are paid better and have more secure jobs than in the UK, never mind all the immigrants to Spain or France as they are sunnier.

      The key is that New Labour with the enthusiastic support of the Conservatives lobbied hard within the EU to open it to several very poor eastern countries without any significant development programmes, because they aimed at pleasing their rentier voters with many cheap immigrants. Same for the Conservatives lobbying the other EU countries to grant open immigration if not full membership to Turkey.

      Germany had the same problem with East Germany: how many low-income East Germans emigrated to the UK or France etc? Many emigrated to west Germany, but many remained because the german government provided development support to East Germany (even if much still remains to be done). And after just 20 years it has reversed:

      http://fpif.org/migration-fall-berlin-wall-east-west/
      http://www.telegraph.co.uk/news/worldnews/europe/germany/10466089/East-to-west-German-migration-trickles-to-a-halt-23-years-after-reunification.html

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  3. I think Gordon Brown came up with 'tough on crime, tough on the causes of crime', which probably suggests why Blair did not return to it.

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  4. SW-L opposes a points system for immigrants because that leads to “many bad individual outcomes”. I’m sure it does. Likewise having laws against murder & theft leads to “many bad individual outcomes” in that the criminal justice system will never be anywhere near perfect.

    The advantage of a points system is that it TENDS to result in us getting the immigrants we want, while letting us to reject those we don’t want or need.

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    1. We can also, and already do, have laws about what will get you deported. Then when the points system has imported someone who is considered undesirable he gets removed later.

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  5. Well the direct causes of immigration *for immigrants* is just one: higher real wages in the target countries than in the source countries. So the direct solution is either to drive down wages in the UK to the romanian (and nigerian) levels, which is the plan in "Britannia Unchained", or to drive up the wages in Romania (and Nigeria), or both, until "equilibrium" is reached.

    For workers both in the UK and Romania the ideal solution of course would be to invest in creating jobs in Romania in production targeted at the Romanian market, rather than for export back to the UK.

    But the indirect cause of immigration is that powerful lobbies in the target countries make a lot of money out of immigration and offshoring: property owners in the UK benefit greatly from upward pressure on rents and downward pressure on wages from immigration, which would largely vanish if romanians could find good wage jobs in Romania itself; also business owners in the UK benefit from downward pressure on UK wages only if the investment in Romania are in production for export back to the UK and not for local markets.

    UK workers would benefit from investment in jobs in Romania that raised standards of living and consumption there, both as to greater leverage in the UK distribution of income, and as to ability to export more to Romania, but their interests have for decades found no representation, and both New Labour and Conservative governments were explicit in representing only the interests of then property and business owning middle and upper classes.

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    1. "romanian (and nigerian) levels"

      Those levels can decrease though, due to right wing govts throughout the world pushing down wages. Unrealistic. We can't pull the whole world out of poverty. Cut the coat to the cloth.

      "export more to Romania"

      Why? That is sending goods/services out the country. Vote loser.

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  6. You are correct that it is very odd for people who claim to believe in the free market to argue that, through immigration controls, Governments should tell firms who to employ.Part of the answer is that immigration has been quite cynically used by the right to engender support for their policies.

    Politically May will have to get the net immigration figures down and keep David Cameron's twice broken promise. However I suspect that in the farms of East Anglia, Eastern European migrants will be replaced not by British workers but by temporary or seasonal workers from .... Eastern Europe.

    The EU migration of recent years was nearly all employment driven and reflected our unbalanced economy(overheating in the South East) and dysfunctional labour market . These problems still need to be tackled.

    I have to say that I think that complete freedom of movement is politically dead in the UK. The country will need to develop a migration policy in line with the wishes of different parts of the country.

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  7. I don't know what you mean by indirect immigration controls. We could reduce immigration by at least a 100k a year by training enough doctors,nurses,IT specialists and engineers but this is costly and needs many years to realize. I agree reducing migration is costly, but as usual you ignore the costs of population growth, particularly in housing and transport. You should look beyond GDP figures and consider the costs being incurred in substandard housing, high rents, long commutes and blighted lives. You need to stop cherry-picking statistics and start contributing to a grown up debate.

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    1. «consider the costs being incurred in substandard housing, high rents, long commutes and blighted lives»

      A very substantial part of voters consider the benefits in cheaper gardening, building, cleaning services and in bigger better property prices and rents. While they enjoy an easy, comfortable, lifestyle on their final salary pensions, or their safe wages, in their nice large suburban or London 3-4 bedroom houses bought 20-30 years ago, and without having to save a penny of their income because their property capital gains give them massive free equity thanks to the BoE and the Treasury.

      There are many winners among voters from neoliberal policies, and many losers don't bother to vote because both major parties have been offering only neoliberal policies, with or without identity politics.

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  8. Gravity modelling when run fully predicts that in the long run everybody in the world will move to exactly the same place.

    So essentially Megacity One.

    The question then is will Simon be Judge Dredd?

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  9. I don't buy it. Imposing a tax on employers who hire immigrants would seem to mean more jobs for citizens; and since it also reduces competition among laborers, it could be sold as putting upward pressure on wages. It thus is a tax politicians could sell to the people. The reason parties don't go that way is not fear of unpopularity with the people but fear of unpopularity with powerful interests.

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    1. «not fear of unpopularity with the people but fear of unpopularity with powerful interests»

      But the «powerful interests» are a lot, a lot of voters: those who have a safe job, those who have a good pension, those who own property in the south, those who run a small building business or a large business, want cheaper servants and more renters. And only 60% of those entitles to vote bother to vote, and mostly they are those who benefit from cheaper wages and higher rents, and genera elections are first-past-the-post, so a large number of votes don't matter.

      The referendum result was a fluke, because it was done on a national proportional base, more people than usual voted, and many of the beneficiaries from lower wages and higher rents voted "Leave" because of "romantic" notions based on imperial nostalgia.

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  10. I look forward to your post on the causes.

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    1. ...and how to change them.

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  11. I would suggest that the greatest barrier to any kind of intelligent debate on immigration, the economy, or any other important issue is that we are cursed with an appalling press. I would have thought that the press would wish to challenge the government and press them hard on a whole range of issues rather than accepting and promoting the populist claptrap that is destroying the country.

    A good example was the dreadful interview with Theresa May on Sky News yesterday. The PM was asked to comment on the recent statement by the Red Cross that we are in the midst of a humanitarian crisis in the NHS. Not only did she fail to address the question at all but she came out with the same completely meaningless platitudes that she is becoming so well known for. The Sky interviewer rolled over and accepted her response! Furthermore, not a single journalist (to my knowledge) has enquired as to the whereabouts of our dreadful Secretary of State for Health.

    Unless the press can be persuaded to do their job I fear for the future of this country.

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  12. There is a way that immigration could be dramatically reduced without imposing additional payroll taxes on business. This would be to introduce a citizens' basic income (CBI) that would be payable to natives. At the point of transition, the income of all employed citizens would be unchanged: it would simply now be divided into CBI + wage.

    This would allow wages (but not incomes) to be reduced to a level below that of source countries, so depressing labour supply. For higher-wage jobs this would make little difference - i.e. the "loss" of the CBI component for an immigrant would be trivial for a highly-paid professional - but it would be dramatic for low-paid jobs.

    The consequent loss of immigrant labour would not be fully made up by natives (due to lack of skills, interest and low wages), which would oblige business either to increase wages (but short of status quo ante) and/or to invest to increase productivity.

    Of course, there are two further implications to this. First, progressive income (and capital gains/dividends) taxes would have to increase to fund the CBI, which would mean a reduction in post-tax inequality. Second, a CBI would improve labour's bargaining power, which would amplify the pressure for productivity gains.

    NB: I'm not advocating this particularly, merely noting that a potential solution exists, and one that would even allow for a compromise over free movement with the EU. You can draw your own conclusions as to why politicians are reluctant to pursue a policy that is nativist, egalitarian and pro-investment.

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    1. «a citizens' basic income (CBI) that would be payable to natives»

      This would require funding the CBI with either:

      * Extra taxes/NI contributions only on native workers, thus making them substantially more expensive than immigrants.

      * Extra taxes/NI contributions from everybody (or even just on immigrant workers), that would create two classes of taxpayers, with the same tax level but different entitlements (or higher tax levels for lower entitlements). This would be probably illegal under EU rules, and outside the EU would be equivalent to an extra tax on employers for every job given to immigrants. In either case creating "first class" and "second class" taxpayers would be rather socially corrosive.

      The USA solution has been to "suspend" enforcement of immigration and labour laws with respect to illegal immigrants in the "black economy", so that they neither pay taxes/NI contributions nor they are entitled to any benefits (which, according to "This is London" by B Judah, is also the effective status of many pole/romanian workers even if they are EU citizens).

      Of course no taxes/no rights/no benefits makes illegal immigrants much preferred by many employers, who avoid any complications via agencies.

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    2. «a policy that is nativist, egalitarian and pro-investment»

      Instead the historically chosen policy in "rich countries" has been to make immigrant workers pay extra taxes in the form of a large up-front "immigration fee".

      An up-front tax has the "advantages" that poor immigrants would have to borrow to pay it, thus both enriching lenders with very high interest rates and turning the immigrants into indentured servants. That solution thus would have big advantages for some important constituencies, so it would have powerful political support.

      Having got rid of the relevant annoying restrictions from EU membership, the UK ruling classes may then make the best of their new found freedom.

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  13. The cause of immigration is the UK providing more and better opportunities than the migrants' home economies, such as Poland, Romania, and France.
    I'm not sure what you have in mind to end that, but I will be interested to learn what you have in mind.

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  14. We know that immigration is beneficial to the economy. We think that people don't like immigration because of the 'stealing of jobs'. Do we have evidence that the people who feel that way would do these jobs (especially those like food picking)? Do we fee that they are qualified?
    So potentially it highlights that education and skills of our workforce are woefully inadequate and that we need a regional policy/funding for areas with higher immigration.
    But as a nation we are not willing thanks to years of ignoring the problem and years of the media's negativity to talk about how we fund better education and regional policy.

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    1. If immigrants were not available for jobs like food picking, their wages could rise to attract British workers. Before the EU expanded, obviously Eastern Europeans were not available.

      Unless you think the media will change or that "as a nation we" are going to change enough people's minds (when we have plenty of other policies to campaign for instead), immigration of hundreds of thousands has got to end.

      Immigration isn't beneficial to the economy when it helps pro-austerity governments get elected in the aftermath of a Great Recession. That's a hell of a lot of economic cost per immigrant isn't it?

      People are well-educated enough to see that no regional policy/funding for areas with higher immigration is necessary, if the immigration stops. You won't convince anyone that way. Why the commitment to maintain immigration even at the cost of Tory victories? Why not a commitment to stop Tory victories even at the cost of immigrants being turned away? We already turn away unskilled non-EU immigration because Labour banned it.

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  15. Bill Mitchell has just written an excellent piece that Simon should read.

    Austerity is the problem for Britain not Brexit.

    http://bilbo.economicoutlook.net/blog/?p=35140#more-35140


    It shows quite clearly how bad NIESR and NiGEM actually are and the group think around them both.

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    1. «Bill Mitchell has just written an excellent piece that Simon should read. Austerity is the problem for Britain not Brexit.»

      SimonWL like BillM have been against "austerity" too. Even when they misuses "austerity" to mean a reduction in a large fiscal deficit compensated for by a massively loose monetary policy, that is not "austerity" at all, but redistribution amidst a rather expansionary overall policy.

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  16. We often read that we can't just take into account the taxes migrants pay as that omits their costs in the price of housing, pressure on the NHS and schools, and that they are a net cost. However, that would apply to all lower paid workers born and bred here or not. In fact the lower paid do the work without which much profit would not be earned. They do create the wealth, much of which goes to their employer.

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  17. "Suppose, for the sake of argument (and against the evidence), that we agreed that immigration imposed some form of cost on society."

    To cite an IMF study as 'evidence' betrays a misunderstanding of the word. The IMF report would be torn to shreds in a court of law because the IMF does not know, nor does anyone else, how many immigrants are in the country at any one time ; and the concept of an immigration cost is simply too nebulous to quantify.

    When it comes to immigration, all we've got is gut instinct and political prejudice. Both are less dishonest than academic or quango expertise.

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    1. «"that immigration imposed some form of cost on society."»

      The cleverness in this statement is not in the «too nebulous to quantify», but in disregarding the distributional impact as in «on society». As SimonWL has written in another post:

      «I’ve been told of one meeting where the response to the argument that EU membership had increased GDP was ‘maybe your GDP but not my GDP’»

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  18. The cause of immigration is that it is legal.

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