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Immigration: politics risks de-railing economic growth



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New research from Citi and the Oxford Martin School argues that leading OECD economies would be hundreds of billions of pounds worse off without the contribution of migrants to economic growth.

The new Citi Oxford Martin School GPS report – Migration and the Economy: Economic Realities, Social Impacts and Political Choices – provides fresh evidence on the implications of immigration for the growth and dynamism of economies, and on its fiscal costs and benefits.

Lead author Professor Ian Goldin, Professor of Globalisation and Development at the University of Oxford, and researchers at Citi found that migration has had a substantial impact on recent aggregate economic growth in OECD countries:

  • In the UK if immigration had been frozen in 1990, real GDP in 2014 would have been around £175bn lower
  • In Germany real GDP would have been €155bn lower
  • In the US migration has made a material contribution to long-term and also more recent growth, and the best-performing industries and regions in the US are highly dependent on migrants’ critical contribution
  • Migrants contribute disproportionately to innovation, business start-ups and economic growth.

The findings throw light on the growing disconnect between public perceptions of migration and the actual trends. While in many advanced economies immigration has become a toxic issue in election campaigns and political debate, the authors’ fiscal analysis shows no evidence of a trend of migrant ‘benefit scroungers’. While there are wide differences, in general migrants:

  • Consume fewer benefits and receive less from the public purse than native residents
  • Are predominantly of working age, improving the proportion of workers to dependents within economies
  • Have their training and education paid for by their country of origin

The report finds that migration raises levels of innovation, productivity and economic growth.

It emphasizes that although migrants are on balance highly beneficial for societies, there are costs and these need to be addressed more effectively. The concentration of migrants in particular areas puts pressure on public services and infrastructure. The authors recommend redistribution of tax receipts to address burdens on local and regional authorities, more active labour market policies, such as education and training for the unemployed, a greater focus on language, certification and other measures which will ensure that migrants contribute more fully and better utilise  their skills.

Andrew Pitt, Global Head of Research at Citi, said: “We have tackled the topic of migration and the economy in order to bring a detailed and balanced perspective to a critical global issue. The growing politicization of migration on a value basis, rather than an economic one, is making it difficult to demonstrate the economic case for migration. Failure to discuss the economic importance of the issue is increasing the risk of destructive policy errors at a time when the benefits of high skilled migration, in particular, are becoming less secure for those economies that have thus far been enjoying them. An aging population and high public debt levels risk making fiscal mis-steps of scale costly. In addition, an intense global competition for talent also risks more extensive consequences of even small mistakes in migration policy.”

Professor Goldin, Founding Director of the Oxford Martin School and Director of the Oxford Martin Programme on Technological and Economic Change, said: “Migration is highly beneficial for economic growth. On balance migration raises overall levels of income and employment in OECD economies. Migrants are exceptional people and in the US and UK are two to three times as likely to start a new business or create a patentable innovation than the rest of the population.

"Migrants in the US, UK and most other countries contribute significantly more in taxes than they receive in benefits. The depiction of a ‘tsunami’ of migrants taking jobs is not borne out by the evidence and on the contrary migrants tend to create jobs and raise overall incomes. They also facilitate higher female participation in the work force.”

He said the report finds that “perceptions regarding migration tend to exaggerate the scale of migration. People are often more comfortable with migrants in their local community than with what they regard as the national challenges that migrants pose.”

Professor Goldin said the report showed there is “very little connection between the levels or changes in migration and the politics and the rise in anti-migrant sentiment does not generally result from higher levels of migrants. The increase in anti-migrant views is being spearheaded by shifts in party politics, rather than broader social attitudes or changes in immigration.”