Winner of the New Statesman SPERI Prize in Political Economy 2016

Wednesday, 1 November 2017

Links between austerity and immigration, and the power of information

This discussion by Roger Scully about why people in the Welsh Valleys voted Leave is depressing although not surprising. In essence it is immigration, bolstered by local stories of Polish people coming into communities and reducing wages. I doubt if quoting econometric studies about how little immigration influences wages would make much difference to these attitudes (although that is no excuse for people in authority who should know better ignoring these studies). I think it is attitudes like this, in places unused to immigration partly because work is not plentiful, that makes some politicians say that arguing in favour of immigration is ‘politically impossible’.

This is the first link between immigration and austerity I want to draw. The Labour party before 2015 had also decided that attacking austerity was politically impossible: ‘the argument had been lost’. Focus groups told them that people had become convinced that the government should tighten its belt because governments were just like households. The mistake here, as I wrote many times, was to assume attitudes were fixed rather than contextual. I was right: austerity is no longer a vote winner. [1]

Why might attitudes to immigration change? I strongly suspect that anti-immigration attitudes, along with suspicion about benefit claimants, become stronger in bad times. When real wages are rising it is difficult to fire people up with arguments that they would have risen even faster in the absence of immigration. But when real wages are falling, as they have been in the UK in an unprecedented way over the last decade, it is much easier to blame outsiders. Equally when public services deteriorate it is easy to blame newcomers.

It is wrong to think that this only happens among working class, left behind communities. Catalonia is a relatively rich part of Spain, and there has always been resentment about this area ‘subsidising’ the rest of the country. But it is very noticeable how support for pro-independence parties increased sharply as Spain turned to austerity, although that could also be a reaction to corruption scandals.

Here is the second link between immigration attitudes and austerity. Austerity has contributed to the slow growth in real wages and is the main cause of deteriorating public services, but often outsiders are easier to blame.

This is particularly true when it is in the interests of the governing political party and its supporters in the press to deflect criticism of austerity by pretending immigration is the real cause of people's woes. This is the third link between austerity and immigration, and it is one deliberately created and encouraged by right wing political parties. In this way Brexit has its own self-reinforcing dynamic. People vote for it because of immigration, its prospect leads to falling real wages as sterling falls and the economy falters, which adds to bad times and anti-immigrant attitudes.

If all this seems very pessimistic, it shouldn’t be. While the right will almost certainly continue to play the anti-immigration card in the short term, because they have few other cards to play, they can be opposed by a left that makes the case for immigration. As just as views on austerity have clearly changed, so can views on immigration. particularly once hard times come to an end.

However it is a mistake to imagine it is all about economics, or even ‘culture’. One of the unfortunate consequences of the culture vs economics debate over populism is the implication that one way or another views are deterministic, and the only issue is what kind of determinism. The reason I go on about the media so much is that information matters a lot too. Although people may be anti-immigration because they have xenophobic tendencies which are reinforced when times are bad, they can also be anti-immigration because they have poor information, or worse still have been fed deliberately misleading facts.

In my intray of studies to write about for some time has been this paper by Alexis Grigorieff, Christopher Roth and Diego Ubfal. (Sam Bowman reminded me it was there from this piece.) It is well known that people tend to overestimate the number of immigrants in their country. This international experiment showed that when people were given the correct information, a significant number changed their views. What is more, this change of view was permanent rather than temporary. Here is a VoxEU post about an experiment from Japan pointing in the same direction.

As well as emphasising simple information like this, politicians should expose the kind of tricks people promoting tougher controls on immigration play. The public tends to be receptive to the idea that it is beneficial for the economy to have immigrants with important skills, so they switch to calling for controls on low paid, low skilled workers. As Jonathan Portes demonstrates, that in practice can involve plenty of pretty skilled workers. The trick for pro-immigration politicians is to ask which occupations do we want to exclude: nurses, care workers, construction workers, primary school teachers, chefs? With UK unemployment relatively low, there are not many jobs where employers are not complaining of shortages.

Of course most people want to stop immigrants coming here and claiming unemployment benefit. This is why newspapers keep playing the trick of talking about the large number of migrants ‘who are not employed’, conveniently forgetting to mention that this includes people like mothers looking after children. In reality unemployment among EU immigrants is below that among the native population. In addition, we can already deport EU immigrants that remain unemployed under EU law if the government could be bothered to do so.

For politicians who do want to start making the case for immigration, the place I would start is public services. Few economists would dispute that immigrants pay more in tax than they take out in using public services. Yet most of the public believe the opposite. In this post entitled ‘Is Austerity to blame for Brexit’ I show a poll where the biggest reason people give for EU immigration being bad is its impact on the NHS. Getting the true information out there will have a big effect. Just as public attitudes to austerity can change, so can they over immigration, but only if politicians on the left start getting the facts out there.

[1] To be fair, whether I would have been right in 2014/15 if Labour had taken a clear anti-austerity line we do not know.   

23 comments:

  1. If we look at the recent debates on housing, it seems the younger generation is aware of the failure to build new homes since 1979 is the cause of the housing shortage which affects them, whereas the older generation who tend to own their homes blames immigration for the housing shortage.

    The EU referendum and votes for Labour in 2017 seem to gain popularity for those aged in their mid-forties and younger.

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    1. Quite a good point, and older people have reason to use motivated reasoning to explain it as immigration, because housebuilding would reduce the value of their homes.

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  2. But why should we change attitudes to immigration when the left already has its work cut out trying to get elected? Why take on that additional burden?

    Why does the left have to be in favour of mass immigration when its existence gives such a valuable weapon to the right that we have literally left the EU over the issue?

    Immigrants are not so valuable to the NHS that we need to absolutely ruin political debate in this country by arguing over whether to keep the current level.

    By supporting mass immigration you are, by your own admission, making it easier for the right to get away with austerity, get away with holding back our economic growth, and get away with making our public services worse. End that -- end the immigration.

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    1. «Immigrants are not so valuable to the NHS»

      The NHS has two streams of immigrants: those from low wage countries who move because of higher wages, and those from countries with similar or higher salaries who come work for the NHS for mostly personal reasons, or because it is "just a job" and location is not that important.

      The immigrants from low-wage areas are very valuable to the NHS directly because, as some New Labour minister said, they greatly reduce the running costs of the NHS. The immigrants from high-salary areas are not equally valuable to the NHS: they are valuable to the government because they come already trained, allowing the government to cut not the NHS-specific funding, but the funding to universities for expensive courses like medicine.

      «that we need to absolutely ruin political debate in this country by arguing over whether to keep the current level.»

      But look at it from the big picture point of view: mass immigration, as long as it is from countries with much lower wage levels, has several "positive" consequences for neoliberals:

      * Cheaper, more abundant hired help means more votes from affluent voters for the parties that have helped make that available.
      * Replacing uppity low-wage workers with the right to vote with docile lower-wage workers without the right to vote means bigger business profits and a more business favourable electoral climate.
      * Lower wage growth means that lower interest rates and bigger credit expansion is possible than otherwise.
      * Lower interest rate and bigger credit mean bigger asset prices faster, which also boosts the votes going to neoliberal parties, or to the neoliberal wings of existing parties.

      If the goal is to sell the "Dubai model" to mass rentiers, mass immigration of cheaper hired help from countries with low wage levels is a very good policy. There are many more rentiers today than 60 years ago, and the "Dubai model" is accordingly a lot more popular.

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  3. I agree with SW-L that immigrants are very similar to natives, as regards output per head etc. Ergo the main net effect of net immigration is simply a population increase. But when a large housing development is proposed anywhere, almost invariably the locals object. I.e. they do not regard a population increase as a net benefit.

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    1. Yep. Nobody gives a toss if immigration increases GDP, only whether it increases (or reduces) PER CAPITA GDP. Since it is plausible that it would make wages fall or stagnate, at least for some, it is not good politically. Especially in a country where the ground has already been prepared by the rightwing tabloids to scapegoat immigrants for everything.

      Problem now is immigration control is bound up with EU membership. I assume SW-L is hoping we can win ppl round on immigration and then stop Brexit under the next Labour government.

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    2. «Nobody gives a toss if immigration increases GDP»

      Business and property owners should and do give a toss about the total GDP, as that drives their sales. Consider a country with two possible growth cases:

      #1 GDP grows 30%, GDP per capita grows 60%, working populations shrinks 20%.
      #2 GDP grows 50%, GDP per capita shrinks 25%, working population has grown 100%.

      The second case obviously is much better for property and business owners: the 50% total GDP growth means sales have grown more than in the first case, the 25% per capita GDP reduction means that wage levels have gone down substantially: higher sales, lower costs.

      That's why economic plans and news are reported in terms of total GDP: they are reported from the point of view of investors.

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  4. As the two English-speaking countries in the EU, are the UK and Ireland "immigrant magnets" ?
    Why might this be ? Because an awful lot of European people were taught English as their foreign language at school ? Is this even true ? I don't know what foreign languages are taught in, say, Italian or Romanian schools.
    It's easy to imagine immigrants choosing to come to the UK or Ireland to work because they have some command of the language. I know when I once spent a summer working in Germany it was because I had been taught the language at school for five years.
    So maybe the UK really is a special place when it come to EU immigrants, despite its low level of benefits when compared with the rest of Western Europe.

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    1. «As the two English-speaking countries in the EU, are the UK and Ireland "immigrant magnets" ?»

      No. Italy, Germany, Spain and even Poland have enormous "immigrant" numbers. E.g. in Italy there are twice the number of romanians than in the UK.

      Plus within the EU, because of common citizenship, there is internal migration, just like there is internal migration between say Bristol and Reading in England or between Swansea and Glasgow in the UK.

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    2. «the UK really is a special place when it come to EU immigrants»

      In a broad sense it is not. If there are two special characteristics of the UK they are:

      * Much less enforcement of labour laws that have enormous loopholes to start with.
      * Enormous debt-fueled building boom in the south-east and London, and workers in building are particularly mobile.

      «despite its low level of benefits when compared with the rest of Western Europe.»

      They are largely irrelevant: people migrate to work, not because of benefits. Large migration flows rely as a rule on the difference between low cost of living (and wages) in the origin area and high wages (and cost of living) in the destination area, so for the worker the goal is to keep their family in the low cost of living origin areas while they earn a high wage in the destination areas.
      Just like plumbers who move from say Lincoln to London to work on a project for a year, and send back the wages to the family in Lincoln. Or on a smaller scale those who commute from Basildon to the City, every day.

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    3. A fact in a recent "Guardian" editorial caught my eye: 94% of language students in Europe study English. It wasn't clear whether that means kids in school learning a foreign language or language students in universities.
      If it refers to school-children learning a language that must mean an awful lot of young people have English as a second language.

      Centuries ago, when countries were much smaller than they are today and people in the next valley counted as foreigners, moving from Lincoln to London must have been a major step. Easy transportation and electronic communication has surely led to borders between countries becoming more porous and people becoming less parochial.
      As countries become bigger, then banding together into the EU just becomes the next step into the future.

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  5. So i don't live in england, but in regards to the NHS, the average low skill immigrant pays more than $10k in taxes towards healthcare??

    an immigrant family of lets say 5 moves there, makes $30k, yet pays more than the $10-15k cost for their healthcare? Really? I am unconvinced, but perhaps you have better data

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    1. Err, what? Most migrants come from working demographics (neither reality nor political debate is overrun with romanian or middle-eastern pensioners; instead look at how villified migrants are for primarily being young men). Cohorts consisting largely of young, working age people are known for their relative good health. It's people over 50 who have dramatically higher costs to the NHS. I'm also confused why you think NHS care is $10k per head; data for 2015/16 shows a cost of more like £2000 per person (and dramatically weighted by the older cohort, since costs for a young male in his 20s are typically only triple-figures).

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  6. I am not an economist nor a formally trained social scientist, BUT I do think there are some subtle issues that make this more complex. Sure the influence of austerity is one issue. But with regard to immigration, there are two different additional effects. One is sociological not economic, and has to do with "the other," and people who are different. The second is that there is a difference between globalization and its impact on wages and "immigration" post- the effect of globalization. People probably accord to immigration the depression of wages that has resulted from globalization and its related effect of industrial consolidation. Because of globalization and industrial consolidation work-wise people have a sense (especially vis a vis closed mines or industrial plants) that jobs and work is a "zero sum game." So if the pie of jobs is fixed and limited, then immigrants "take jobs away."

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  7. IMO an economy should be configured in such a way that the full range of people in the population are trained, equipped and employed so as to cater fully for their requirements, either directly or via traded goods and services. You can’t have it both ways. Either economically motivated mass-net-immigration is due to a failure to do that, or the immigrants are exact replicas of the existing population and so only act to increase the population density here whilst decreasing the population density where they have come from. I don’t see any reason to believe that there is a need for a relative shift in population density between the UK and Eastern European countries. Instead mass-net-immigration looks to be a way to get workers more easily than training people up or investing in better machines etc. That IMO is incompatible with a sustainable economy that works for all.

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  8. You seem to equate worries about immigration with xenophobia. But it ain't necessarily so. Is Paul Collier a xenophobe?

    Look around the world at countries which are or have been in civil war, and tell me that ethnic or religious conflict is not the usual cause. There is a whole story here that you are choosing to ignore.

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  9. Econometric studies have been a big part of the problem - and the loss of trust of so called experts. I think you really need a sociologist to talk about the impacts of immigration. And you will have to accept complexity. Something economists don't like because you will need to discuss unquantifiable things and you cannot just run a vector autogression computer model. I would say the real issues relate to identity, change, marginalisation and alienation. But the reasons for the resentment vary among regions and income groups. Of course some of these things were made worse by austerity. Nonsense about immigrants being on benefit is something easily explained by Marxian theory - it is a way that works towards the interests of the owners of capital of pitching low income earners against each other. It's classic Murdoch-fed Thatcherism.

    However, there are issues with immigration. Reliance on foreign labour can have the same similar impacts to a reliance on foreign goods and foreign capital once you have locked in that dependence. Mrs Duffy was right to ask why so many were being allowed in when there were so many unemployed - she should not have been ridiculed. And the econometric forecasts of little inward movement from Eastern European immigration and then wildly fantastic claims about their benefits were, like the econometrics that forecast to the last pound about the impact of Brexit, ended up undermining the authority of econometric fed - experts and insulting the intelligence of the general public.

    I feel the so-called experts have done damage - by both now ruling out the construction of a sensible and humane immigration programme, and of course, by ultimately forcing us out of the EU.

    Merkel has shown incredible leadership on how you go about expanding immigration and getting public support if that is your goal. Perhaps we need to learn some German economics?

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  10. «econometric studies about how little immigration influences wages»

    That "econometric studies" a bit vague, but usually immigration studies are astutely designed to result in weasel worded conclusions of far narrower actual import than "how little immigration influences wages" may sound, and I would have hoped professors would not be fooled so easily by prevarication.

    «With UK unemployment relatively low,»

    Employment statistics are astutely defined to result in numbers whose import is far more nuanced than "unemployment relatively low", and I reckon professors would not be fooled into summarizing so loosely such dissembling.

    «there are not many jobs where employers are not complaining of shortages.»

    If is part of the duty of employers to maximize profits for shareholders by pushing down costs, so they pretty much have a duty to always and regardless complain about labour shortages (and unfair price competition). It could also be argued that technically any occupation paying more than bare daily subsistence wages has a shortage of workers, or that technically there is a shortage of workers only when they start dying of hunger in the gutters.

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  11. «why people in the Welsh Valleys voted Leave is depressing although not surprising. In essence it is immigration,»

    And here we go again with our blogger and the obsession with "Leave" and immigration. Our blogger just can't give up, like the maniac "Leavers", and does not realize that "Remain" can't win the day by persuading "Leavers" that immigration does not matter, just like "Leavers" cannot be persuaded that non-EU immigration matters more, especially illegal immigration, and the loose employment laws matter even more. My understanding of the "Leave" and immigration story is:

    * Conservative and New Labour governments were very keen on EU and non-EU immigration precisely because it would push down wages (or at least the growth of median and below median wages) and T&Cs and benefits.
    * Their calculation was that lower wages under FPTP in general elections would impact negatively only people who tended to vote less often and areas whose vote did not matter, while would provide big savings to affluent voters who tended to vote more frequently and in areas whose vote does matter; plus, WIN-WIN, immigration would replace workers with a vote with workers not entitled to vote.
    * Lower wage growth would also allow lower nominal interest rates benefiting again the affluent voters in areas that matter, via bigger asset prices and business profits.
    * That calculation worked very well for a long time.
    * That calculation backfired in June 2016 because it was not a general election under FPTP, but a single issue referendum under PR. Then the "imperial nostalgic" vote of around 35% got boosted by the "english jobs for english workers" vote into going just over 50%.
    * Maniacal "Remainers" cannot be made to realize that immigration concerns were partially but substantially well founded.
    * Maniacal "Leavers" cannot be made to realize that the level of non-EU immigration mattered far more, and that the total level and the impact of immigration depends on the type of government, not EU membership, so most likely after exit the vested interests that demanded cheaper and more abundant hired help will continue to do so and asian and african immigration will expand considerably.

    Ultimately voters are far less stupid than elitists think, and the real argument for EU membership is not economic, it is political: it is for greater practical sovereignty and independence as a heavyweight within the EU than as a largely insignificant USA protectorate.
    But of course a lot of "Remainers" are also rather keen on less practical independence and sovereignty for the UK as an USA protectorate, and that's why they have been trying so hard for a half-in, half-out status wrt the EU.

    «bolstered by local stories of Polish people coming into communities and reducing wages»

    There were the same stories, equally well justified, when yorkshire miners who had lost their jobs moved to the valleys to look for work in welsh collieries.

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    1. "Their calculation was that lower wages under FPTP in general elections would impact negatively only people who tended to vote less often and areas whose vote did not matter, while would provide big savings to affluent voters who tended to vote more frequently and in areas whose vote does matter; plus, WIN-WIN, immigration would replace workers with a vote with workers not entitled to vote."

      I've always wondered why May dragged her feet over cutting EU immigration during her stint at the Home Office. Blissex, I've never seen your argument before. It certainly FEELS true.

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  12. "I doubt if quoting econometric studies about how little immigration influences wages would make much difference to these attitudes ...."

    I live in Australia. For many years now we have had a large migration from the middle East, Asian and Central Asian countries and from the sub-continent.

    These immigrants, when they find work, are invariably exploited, and invariably, it is their own country men (who own fuel stations, fast food and convenience food outlets) that exploit them. They have no experience with unions.

    The anecdotal evidence is real.

    Then there is of course our 457 visa system which allows skilled migration. This has been extensively abused and exploited. Large numbers of Chinese workers have been imported to work on construction sites involving Chinese owned mining projects.

    Globalization and immigration have worked together to destroy the system of workers rights and remuneration around the world.

    Personally, I would be very skeptical of studies which purported to show otherwise.

    I think Simon is fooling himself - he does not want to face the facts.

    Henry Rech.

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    1. This is going on here too. People working on repairing a neighbour's are poorly paid Lithuanian Russians. But the cost of the refurbishment is quite exorbitant. Apparently the money is going to a Vietnamese Chinese who is the ring leader and clearly exploiting his workers. I also witnessed work on a renovation in another house with alarming violations in safety rules.

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  13. "The trick for pro-immigration politicians is to ask which occupations do we want to exclude: nurses, care workers, construction workers, primary school teachers, chefs? With UK unemployment relatively low, there are not many jobs where employers are not complaining of shortages."

    But unemployment and underemployment is still absolutely high. And wages are low. Try renting a room for 700 pounds in London (a room, not an apartment) and try and be a primary school teacher or a care worker. Not a great life. And with globalisation we have come to rely on foreign labour. Natives will find it difficult to enter many of those professions, even if they accept the low wages. For example there is huge demand for plumbers. But the cost of training is high and then there are the high costs of living in London. So we have come to rely on foreigners to do the job. But don't think the foreigner workers always get much benefit out of this.

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