Cutting immigration will hobble economic growth. It’s that simple. New research I have conducted with Citigroup suggests two-thirds of US growth since 2011 is directly attributable to migration. In the UK, if immigration had been frozen in 1990 so that the number of migrants remained constant, the economy would be at least 9 per cent smaller than it is now. That is equivalent to a real loss in gross domestic product of more than £175bn over 15 years. In Germany, if immigration had been similarly frozen the net economic loss would be 6 per cent, or €155bn.
These figures do not include the wider, long-term benefits of immigration, in particular the disproportionate contributions skilled migrants make to innovation and wealth creation.
Migration is risky and self-selects entrepreneurial people. In the UK, immigrants are twice as likely as British-born individuals to start their own business. In the US, migrants found about 30 per cent of all businesses, even though they are just 14 per cent of the population. Migrants also tend to be more successful in these endeavours. More than half of US “unicorns” (start-ups valued at more than $1bn) were founded by immigrants, as were 40 per cent of Fortune 500 companies. The same pattern repeats itself elsewhere.
In the US, immigrants are two to three times more likely than US-born individuals to start a company, create a patented innovation or win a Nobel Prize or Academy Award.
It can be a virtuous circle. Migrants are vital initial contributors to innovative and dynamic economies. Fuelled by access to global talent, these countries grow, and attract more migrants.
Immigrants typically are educated elsewhere and leave a country before retirement. That means they pay significantly more in tax than they receive in benefits. Their presence usually is associated with higher wages, higher productivity, lower unemployment and higher female workforce participation.
But there is a growing disconnect between the positive economic impact and increasingly negative perceptions of immigration. That is because the benefits are not evenly shared. Migration has propelled the most productive regions forward, widening regional disparities. It is hard to make the case for immigration to a laid-off factory worker in Wisconsin on the basis of benefits accrued to Silicon Valley. Or of the benefits to dynamic cities such as London to people who cannot afford to live in them.
The Citigroup-Oxford Martin School research found that attitudes towards migration are often disconnected from its actual impact. Countries with some of the lowest levels of foreign-born people, such as Poland and Hungary (each below 2 per cent) are most opposed to immigration, even though both countries have low fertility rates, high rates of ageing, and rising labour shortages.
Within countries, there is often an inverse relationship between the scale of migration and local sentiment. Cities such as London or Melbourne, where well over a third of the population is foreign born, are much more welcoming than some rural areas and small towns where migrants comprise a smaller share of the population.
The increasing political focus on migration stems from a different cause: some politicians use surges in numbers, or isolated examples of crime, to build support. Much of their appeal seeks to build on wider resentment with stagnating income growth and austerity. While these concerns need to be listened to and addressed, cutting immigration is not the answer. Our work suggests that further controls on immigration will only slow growth, exacerbate inequality, undermine social cohesion and lead to a vicious cycle of further controls on migrants. The race to the bottom by politicians to show how tough they are on immigration will hurt us all.
- Professor Ian Goldin is Director of the Oxford Martin Programme on Technological and Economic Change and Professor of Globalisation and Development at Oxford University. Read his Citi-Oxford Martin School GPS report, Migration and the Economy: Economic Realities, Social Impacts and Political Choices, here.
This article first appeared in the Financial Times on 9 September, 2018.