Brexit and Migration

 

I truly dislike talking about human beings solely as resources for the economy. We are not just pieces of business machinery. Each one of us has a heart full of aspirations, emotions and memories. We are loving neighbours, mothers, brothers, sons and friends to other people who love us too. We have talent, culture and spirituality, whether it is religious or not. We share humanity with everyone. We are the Rivers of Life feeding the Oceans of Hope.

However, since the debate about migration in this EU referendum has focused mainly on how migrants contribute (or not) to the economy and on how to “control numbers”, often with demeaning language, I feel the need to share with the readers a reflection, primarily in economic terms, about migration. Sadly, these are the parameters of the debate and responses on these grounds are also needed. Unfortunately, the urgency of the situation requires it. The stakes are high.

The referendum campaign has been tarnished by very sad episodes of political abuse and even violence, including the tragic death of Jo Cox, a brave woman who defended noble ideas and values and served her community and the country with diligence and enthusiasm. Leaving the EU, as we may be about to do, led by a right-wing movement that rides high on the back of the beast of media xenophobia, fanatic patriotism, dubious democratic claims and self-interest (a movement whose messages have surprisingly captured the imagination of millions of decent Britons!), will be catastrophic for our country.

The debate about the effects of EU migration on the UK economy is simply misguided. Many Brexiters do not acknowledge that EU migrants fill in positions that the local workforce cannot. Migrants are also consumers, pumping up Britain’s GDP figures. Crucially, reputable studies have demonstrated that the value of taxes paid by EU migrants in Britain outweighs the value of the public services that they receive. It is true that different methodologies to calculate the net contributions throw out different figures. Quantifying this is not easy, as shown in this study of the University of Oxford. However, nobody  challenges the fact that EU migration into the UK has been, in fiscal terms, beneficial.

Nevertheless, one of the important points I want to make about migrants’ contribution is that there is a big elephant in the room that nobody talks about in any of the studies cited during this campaign by any of the camps. I call it the “Migrant Premium”, as there is not an easy straight forward term to define it in econometrics, but the premium falls under the well-known category of “human capital gains”. This concept extends beyond any comparison between migrants’ tax receipts and migrant’s use of public services, as it refers to the impact on the wider economy, not just on the public purse (1).

What is the “Migrant Premium”?

If we look at the figures, the cost of bringing up a child in the UK from birth to adulthood is at least £40,000 at 2016 prices. This figure only covers education and health. The cost of state schooling comes to more than £22,000 (2), whilst health costs are in the region of £1,000 a year for younger age groups (3). If we add health and university fees costs for the 19 to 22 year-old group, we have an extra £30,000 on top.

When a young non-university educated migrant comes to Britain, ready to work and pay taxes, he is saving at least £40,000 to UK Plc. If it is a graduate, just with a 3-year degree, that figure goes up to £70,000. This is the replacement cost of that influx of human capital per person.

There are many different ways to calculate the Migrant Premium and I look forward to old and new studies on this matter, but the above estimate is, if anything, on the low side. Bear in mind that we are not including here any other costs, such as maintenance, housing or any other private or public spending that the young person benefited from directly or indirectly in his or her country of origin.

The Migrant Premium surely plays a role in sustaining the U.K. Economy. Our country has been able to increase, on demand, its working and tax paying population without having to invest huge amounts of money. Migrants land in Britain and start paying taxes as they begin consuming and working.

Conversely, the Migrant Premium is a “migrant loss” for the countries whose public services have subsidised the health and education. Basically, the U.K. and other Western economies “import” ready-to-work human capital for free. Germany, when it comes to EU migration, and the United States are our main competitors in attracting human capital. Regrettably, this important asset migrants bring with them to the UK’s economy is not taken into account in any of the calculations disseminated in the media about the benefits of migration. If you find one, please share it in the comments.

Brexiters with an understanding of economics know, in broad terms, about the Migrant Premium, but they don’t want to acknowledge it because it gives breathing space to the opposite camp.

In my discussions with people who intend to vote Leave, whenever I have been successful to demonstrate the immense benefits of migration to the UK, I have then been confronted with other migration-related arguments that would justify leaving the EU. Here they are:

The all-time favourite Brexit icon: an “Australian point-based system” 

This system does not stop or reduce migration. It just provides a sense of control and allegedly filters migrants according to their “quality”. This is a very classist and perverse idea, as it could create a two tier workforce: the low-paid workers, made up primarily of UK nationals and some pre-Brexit settled down migrants, (the points system would stop people without high professional qualifications to come to the UK) and the better or well-paid workers, which, as the proposers of the points system acknowledge, will be, proportionally, made up of more and more highly educated workers from abroad. The points system would allow to fish for skills in a wider sea and perpetuate the situation of underinvestment in training and education for professions such as doctors, nurses or teachers. If their governments in their respective countries train them for us for free, why bother? I am afraid, business principles dominate Conservative-UKIP political practice.

What is the other problem with the Boris’ and Nigel’s “Australian system”?

In an economy like ours, or Australia’s, younger workforce is essential. Businesses need it desperately. That is the reason why people come here. Make no mistakes, U.K. Welfare is not available for newcomers and is not good enough in itself to justify coming here, anyway. The freedom of movement provided by membership of the EU enables changes in supply and demand for labour in any country to be self-regulated, without State intervention. Additionally, the EU is a massive space of 500 million people where to find the right professional profiles when needed.

I am not a believer of free markets as the best solution for many human needs in our society, but I have to say that I very much value the freedom of taking up whomever one thinks is best for a job, or choosing for whom one works. If I ever set up a business again and need someone to work for me, the last thing I want is to fill in immigration forms, ask prospective candidates to fill in even more forms and expect Boris Johnson’s army of Whitehall Bureaucrats to make a decision about who I should take on for a job based on the points system they have designed. There is not anything as illiberal and centralising as that. Employers know who they need and why, employees know who they would want to work for. It is their decision. The EU enshrines precisely that principle through the free movement of workers in our common space.

Some people argue in favour of this points-based system by defending that non-EU citizens should not be discriminated against EU citizens, despite the fact that non-EU migration in the UK remains stronger than EU migration according to Migration Watch. Fair enough. Let us create a system that gives non-EU citizens easier access to jobs if needed. But leaving the EU and imposing restrictions on everybody is a massive step backwards that do not really benefit anyone at all.

Undercutting and discrimination of UK nationals

The other argument used by many to defend a vote for Leave is the very legitimate concern about  local workers being undercut.

I do believe we should work harder to eradicate any business practice that effectively discriminates local workers. David Cameron stated in PM Questions this week that his Government was taking action against agencies that only recruit foreign workers. This was in response to a question by Labour Leader, Jeremy Corbyn, who has shown that working conditions and rights are again at the heart of Labour’s agenda. The enforcement of a (higher) decent minimum wage should also be pursued. Finally, as a through study by CERIC Leeds shows (4)  “The Brexit scenario would have even more detrimental effects on the employment and bargaining rights of both UK nationals and migrants.”

Population growth and public services provision

This is of course an understandable concern. In my view, however, the biggest issue about the UK’s alleged overpopulation is that there are areas in the South of England that are real magnets for UK migrants (internal) and non-UK migrants. Their economic growth out-paces everyone else’s in the country. Other areas, particularly in the North, have registered very slow growth in population recently. Blackpool and Sunderland even lost population between 2007 and 2012 (5). The density of population of the U.K. is not that high at all. We are not even in the 50 most densely populated countries in the world (6).

Obviously, the unbalanced distribution of wealth, opportunities and population in the UK has nothing to do with the EU and is a serious problem that will not be solved by leaving the EU. If anything, the poorer areas of the UK will lose out even more by leaving the EU, as the dependency on manufacturing jobs is much greater there than in the South East and this is one of the sectors who would suffer the most. Successive UK governments in the last 40 years have not done enough to redress or alleviate this imbalance. It is their (our) call.

Insofar as the provision of services, the “Migrant Impact Fund”, which was introduced by labour and withdrawn by the Tories, is back on the cards and should be used as a policy tool to ensure that a higher amount of the taxes generated by new local and foreign arrivals in any given area are dedicated to the public services of that area.

Thank you!

All in all, we should be thankful to our migrants for choosing the UK as a destination for their Migrant Premium. We all know they are also grateful and happy to be welcome amongst us. They could have chosen Germany, Holland or Finland, where in-work benefits, public services and wages are better than here, but in instead they joined us. We must be doing something right as a nation. Let us be proud of it.

Let us remain in the EU.

 

Notes

(1) Methodology: The purpose of this part of the article is to highlight the indisputable existance of a substantial Migrant Premium of at least £40,000 at the time of the arrival of the working migrant in the UK. Therefore, the valuation of that premium has been kept on the low side and “replacement costs”, as suggested by Bowman (below), have been used. This is not a longitudinal study of the actual returns of the human capital brought into the economy by each migrant over time and it assumes that the migrant is ready to take a job. There are longitudinal (over the time) studies about the benefits of migration in terms of human capital, but as I suggest when I discuss the question of tax receipt vs public expenditure (Oxford University study cited), the problem is that there are so many different methodologies used to quantify the flows of capital that we run the risk of not acknowledging the existance of obvious magnitudes such as the Migrant Premium for not having found total agreement amongst economists and statisticians on how precisely to measure it. Two recommended readings for those with a professional interest on this question:

Bowman, M.J. “Principles in the Valuation of Human capital”. Review of Income and Wealth. Volume 14, Issue 3, pages 217-246, September 1968

Schaeffer, P. “Human Capital, Migration and Brain Drain”. Journal of International Trade and Development. Volume 14, No 3, 319-335, September 2005

(2) http://www.telegraph.co.uk/finance/personalfinance/10169865/Costs-for-state-school-hits-22500-per-child.html

(3) https://www.theguardian.com/society/2016/feb/01/ageing-britain-two-fifths-nhs-budget-spent-over-65s .

(4) https://cericleeds.wordpress.com/

(5) http://www.centreforcities.org/blog/population-growth-and-migration-in-uk-cities/

(6) https://simple.wikipedia.org/wiki/List_of_countries_by_population_density

Picture credits: http://www.weforum.org https://www.weforum.org/agenda/2016/01/how-immigration-has-changed-the-world-for-the-better/

 

Corbyn’s Survival

I have just read an interesting piece of Matthew D’Ancona in the Guardian. He suggests that Labour MPs will not respect Corbyn and will bring him down. His concerns are fully justified.

What should Corbyn do when he wins?

He will have to introduce new mechanisms of participation in the party, with a strong online component, to enable members and supporters, at local and national levels, scrutinise and direct more closely the political action of Labour MPs.

Obviously, the representative nature of the mandate of MPs and their relationship with their constituencies cannot be constitutionally altered overnight.

However, Labour MPs and party officers will have to be very careful not to contradict the party members and supporters when working on parliamentary initiatives or when deciding the direction of their vote. Ideally, they would have to engage with them more regularly when designing party policy and the electoral programme.

What are the requirements for this democratic transformation of Labour?

a) the participation mechanisms will have to be fair, secure and accessible;

b) the engagement with the members and supporters will have to be sensible and gradual yet motivating and politically empowering, combining wisely presential and remote engagement;

c) the introduction of e-democracy in the Labour Party has to conceived not only as a mechanism to articulate decision-making and improve accountability but also as a

  • a learning process for the members, the supporters and the party itself
  • and as tool to build a community of practice.

There are have been cases of misuse of online participation, of course, but in this country we have now plenty of expertise to ensure these requirements are met.

If Corbyn and his supporters are committed to building a stronger organisation and become a movement for social change, this is the way forward (and the only way to ensure his survival as leader!)

Entryists fear not

The Labour Party is in turmoil. The New Labour establishment, and some sectors of the media, are terrified by the Corbyn-mania. The avalanche of new supporters is being exaggeratedly linked to Radical Left “entryists” and Tory trolls.

Interestingly, the term “natural supporter” has been used in some quarters to refer to the people who should be allowed to join Labour as supporters, as opposed to those who shouldn’t. This is, sadly, a term that does not help to differentiate much. Blair’s New Labour associated itself with the world of business and with highly successful, economically, individuals. More recently, Labour has shown support for many of the economic and social policies of the Tories. Hence almost anyone could be a “natural supporter” of Labour nowadays, even those who criticise migrants and benefit claimants, even those who defend austerity, or those who aren’t bothered about zero hour contracts.

Should the party do anything about people who are believed to have signed up as supporters or members with the intention of harming the organisation?

Yes, they should. Party officers can and should research cases of infiltration of people who have no loyalty whatsoever to the organisation, people who are not genuinely prepared to support it under any circumstances. If there are indications of ill motives, the party should challenge the people concerned in order to give them a chance to explain themselves and come clean (if they can). At this point it is very important to delegate this type of enquiry to local branches, as they know better the people in their neighbourhood.

What if someone is a member of a left wing organisation?

If the person genuinely wants to help the Labour Party to be a stronger and more appealing and successful organisation, the applicant should be allowed to become a supporter, even if s/he has been critical of Labour or s/he militates in another organisation. The key requirement should be simply good will.

The future 

I believe the future for the Left in the UK lies on the idea of multi-party platforms, as explained recently by Stephen Moss in the Guardian. This is the formula which has already catapulted the Real Left to the power in Madrid and Barcelona, in Spain. You can read more about it in an article I wrote for Left Unity.

If we want to stand effectively for the principles of social justice that inspired the creation of the Labour Party and for the future of our public services, our children and our environment, we in the Left need to get used to the idea of multi-layered and fluid organisational loyalties.