The economic impacts of migration, and of immigration policy, are back in the spotlight. Today, Gus O’Donnell accused the government of “shooting itself in the foot” on growth by restricting skilled immigration. Yesterday’s two big economic reports, from Michael Heseltine and the Resolution Foundation’s Commission on Living Standards also considered the issue from different perspectives.
O’Donnell and Heseltine both highlight the potentially negative impacts on growth of immigration policy that restricts (either in principle or in practice) the ability of businesses to access a global pool of talent. Meanwhile, the Commission on Living Standards, in an exhaustive study of the causes of the “wage squeeze” that has affected low and middle earners in the UK, concludes that immigration has not been a significant factor.
So if immigration is important for growth, and doesn’t have significant effects on low and middle earners (the evidence for both these claims is strong), what’s the problem? Why does the government persist with an immigration policy that appears to make no economic sense, and why does the opposition not offer a more straightforward criticism of it? There is sometimes a feeling on the “progressive” side of the argument that this is simply a problem of politics and public opinion – if only the economic evidence could be better communicated and understood, then the path would be clear for a more “rational” (and, by implication, more liberal) immigration policy. This is wrong, for at least two reasons.
The first is that there are genuine policy challenges with respect to immigration policy that need to be addressed – this is not simply a case of politics and public opinion muddying the crystalline waters of economic evidence.
The impacts of migration on the labour market and the economy are complex. Although the finding that migration has had little impact on wages or unemployment is robust, there are some important caveats which need to be considered. Too little is known about the distributional impacts of migration. The Commission on Living Standards is right that even at the bottom end of the labour market, the impacts of migration on wages and employment seem to be very small, but this does not rule out more significant impacts on specific groups of workers (for example in some sectors in particular local areas). Nor does it take into account the fact that migration (including skilled migration) has been part of an economic model that has seen wages at the top end of the labour market become disconnected from those at the bottom. Pleas from the City to be able to bring in more highly-skilled (and highly-paid) migrants may make sense from the point of view of economic growth, but we should take seriously the argument that some kinds of growth are better than others, and that migration policy needs to be part of that discussion.
Migration also poses a range of complex policy challenges beyond labour markets and the economy, particularly at the local level – the rapid population change that can result does affect housing, public services, and community cohesion, whatever the economic benefits.
The second reason, which Heseltine recognised in his report yesterday, is that migration policy must have “public assent”. This is not just an argument for better communications. Progressives and economic liberals may find some aspects of public opinion on this issue uncomfortable, and it is always open to them to try to shift the terms of debate – but the right response can never be simply to ignore the views of the electorate. Arguments over migration cannot be left to experts or economists but must be shaped through democratic debate and choice.
So where does this leave migration policy and politics? There are three key challenges that policymakers and politicians must face up to. The first is that migration must be situated in a wider policy debate about the economy (and housing, welfare, and communities). Ed Miliband has understood this, and Labour is showing promising signs of tackling migration policy in this way. The second is that many of the real policy challenges are local ones, and need to be addressed at the local level – something that will require a big change of approach in a policy area that has traditionally been highly centralised. The government’s net migration target is about as far away from the nuanced local policy mix that is needed as it is possible to get. In light of this, the third challenge presents a paradox – although there are real policy challenges at the local level, the public don’t (on the whole) feel that immigration is a problem in their own local communities, although a large majority do feel that it is a problem for the country as a whole.
So politicians are faced with a national political problem which is cast in terms of very simple choices, and a need for nuanced and local policy solutions. The government has opted to play the political game rather than the policy one – a strategy that is at risk of unravelling under the weight of its own contradictions, and the kinds of critiques that have emerged this week. Labour are engaging seriously with the policy questions, but are still in search of a narrative on immigration – “one nation” Labour is as good a starting point as any, but much more work is needed given the party’s difficult recent history on this issue.
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