Tuesday, 5 November 2013

The UK's Skills Deficit and the Gains of Immigration

A recent article by the Financial Times (which can be found here) draws attention to the fact that - contrary to the populist line espoused by certain tabloid newspapers – migrant workers have made significant economic and fiscal contributions to the UK over the past decade or so.

One of the studies on which the discussion is based comes from the Centre for Research and Analysis of Migration at UCL and finds that between 2001 and 2011, immigrants from the EEA (European Economic Area) contributed £22.1bn more than they received in benefits. In other words, the average immigrant is helping improve our desperately weak public finances and not draining them away as certain newspapers would have you believe (Exhibit A).

Another study by the National Institute for Economic and Social Research points to the fact that industries with higher shares of migrant workers actually have higher labour productivity. In other words, these industries are producing more value per worker and are thus making significant contributions to the emerging economic recovery, this being particularly true in the manufacturing and real estate sectors. This can be interpreted as skilled migrant workers increasing the productivity and thus the growth of certain industries to the benefit of the economy as a whole.

So what does this all mean exactly? Well firstly it shows that predicating anti-immigration policies on the ‘fiscal burden’ argument is pretty erroneous and has no real basis. This Daily Mail fabricated idea of “benefit tourism” is at best, misguided, and at worst, malicious and incendiary.  And secondly it draws attention to the fact that yes, benefit claimants are on the rise, but an unfounded xenophobic attack on those who come to the UK to seek a better life is completely wrong; both morally and factually. Unfortunately, it is all too predictable. ‘When times are hard, blame someone else’ is not a motto that is exclusive to this crisis or even this country – the waves of violence against immigrants in South Africa in 2008 are evidence of just how a jobs crisis can sow the seeds of xenophobic sentiment, potentially escalating into a very dangerous scenario indeed.  

The burden of benefits on our public deficit is well documented, so where exactly is this drain occurring? What we really need is to get a real picture of where the rise in UK benefit claimants is coming for, and to do so it is necessary to look a little more inward. Findings from the same UCL study described above show that between 2001 and 2011, native Britons contributed less to the system than what they cost, a deficit of 11 percent in fact. It seems obvious to say it, but the cause of rising benefit claimants is unemployment – not immigrants.

So why are native Britons struggling in labour markets and what can be done about it?

A recent government-commissioned report headed by Professor John Perkins, chief scientific adviser to the Department for Business, found that a fifth of jobs in key industries are being filled by migrants due to a lack of skilled British graduates. Are anti-immigration policies really the answer to this? If we close the doors and shut out skilled labour, will these jobs go vacant? And in that case, what happens to these key industries?

It seems to me that the foresight regarding education policies and the structure of our economy has been lacking.  In light of the recent evidence, the Government has insisted it is making almost £49 million in funding available to raise engineering skills, but how long will it take for such measures to come to fruition?  Almost a million 16 to 24-year-olds in the UK are currently without a job or education place, as they find themselves leaving schools and universities with insufficient skills to match the current demands of labour markets. This is what is happening NOW. It seems that in the decade leading up to the Great Recession our policymakers were wholly oblivious of this looming threat, and had the policy measures now being taken been implemented a decade ago, we wouldn’t find ourselves in this current predicament.