Lessons in Basic Economics for Liberals

Ralph Musgrave

( An introduction to dimwit pro-immigration arguments in the British press, in particular The Guardian.   Note: the URL of this site was www.guardiancockups.com till recently.

*   This site does not aim to criticise The Guardian newspaper as a whole - just its immigration policy.
*   For non-UK residents:    The Guardian is the UK's leading left of centre quality daily newspaper.

Under each of the headings below, in small print, are references to articles making the relevant claim for immigration.

The tone of the paragraphs below is less than entirely polite.  This is in response to members of the liberal elite who tend to describe anyone concerned about immigration as a xenophobe, racist, etc.  If you have abstained from this sort of offensive language, the insults below do not apply to you.

1.   Immigration brings economic growth ?
2.   Immigrants fill vacancies ?
3.   Immigrants support pensioners ?
4.   The Health Service relies on immigrants ?
5.   Immigrants do the jobs the British wont ?
6.   An amnesty for illegal immigrants ?
7.   Immigration makes us a larger more powerful country ?
8.   The many languages in London helps British exports ?

STOP PRESS !   In 2008, five years after setting up this site, the UK House of Lords finished a long enquiry into immigration. Those conducting the enquiry included two professors of economics and two former chancellors of the exchequer. Their conclusion was that mass immigration brought "no significant economic benefit" for existing UK residents. What can I say, apart from "told you so"?

Other provocative economics sites by the same author:
"Let's cut the national debt and expand the stimulus"
Government borrowing is pointless.

9.   Employers welcome immigrants.

10.   We're a nation of immigrants.
11.   Corruption amongst immigrants.
12.   Immigrants raise output per head ?
13.   Immigrants keep prices down ?
14.   We need unskilled immigrants ?
15.   Immigrants keep interest rates down ?
16.   Immigrants make a 2.5bn a year fiscal contribution?
17.   Guardian "statistics" on immigration.
18.   Immigration makes the economy "vibrant and dynamic"?
19.   Conclusion.

1.   Immigration brings economic growth ?

Claimed, for example, by Heather Stewart, Guardian, 7.8.02 , 12th para, or Guardian leader 11.1.05, Independent, p.1, 14.3.05, Guardian, Financial section, article by Larry Elliot, 18.12.07

It is obvious to the average headless chicken that immigration brings economic growth in that the more people in the country, the larger the country's total output, other things being equal. Expand the population by X%, and you'll get extra "economic growth" of about X%.  At least that's what you get assuming immigrants are as productive as natives.

Even if immigrants are half as productive as natives, you still get extra "economic growth"  - for the country as a whole.  ( But no extra economic growth per head of course )

Well "economic growth" is good isnt it ?  No - fraid not.  Economic growth is of no use whatever to natives unless it brings increased output per head.  And there is little evidence that immigration brings this.  (See appendix below for more on this.)  In any case, half the advocates of the "economic growth" point are not even concerned with output per head (the concept may be too difficult for them).  That is, half of them simply take the output of immigrants, divide it by the UK's total output, and call the resulting fraction "economic growth attributable to immigrants".

So at best ( and still assuming immigrants are as productive as natives ) immigration brings no economic benefits for natives.  But even that is unduly charitable. What immigration does do is result in more countryside being destroyed by the extra houses, shops, etc required by immigrants: in about the most overcrowded country on Earth - the UK  So the net result of immigration is this: you are no better off, while that walk you used to go on through the countryside is now a walk through an industrial estate.  In short you are worse off !

And this site is nowhere near the first the point out the nonsense behind the "economic growth" argument.  Hundreds of others have pointed it out, but to little avail: the pro-immigration thickos, time wasters, liars and ignoramuses continue to repeat the "economic growth" argument.  Many of these people are in high places.  For example one lot work in the Home Office (see Home Office, p.11) and another lot write for the National Institute of Economic and Social Research (see Riley, p.8)

Another nonsensical element to the "economic growth" argument is thus. The argument no more proves the case for migration from country A to country B than it does for migration the other way.
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Now suppose one of the above two countries is developed and the other is less developed.  There is just as much to be said for migration from the developed to the less developed country as there is for migration the other way.  In the former case, technologically sophisticated folk from the developed country might be able to raise the technological competence and thus the living standards of the less developed country.  And as for migration from undeveloped to developed countries, immigrants can send part of their earnings home, which alleviates poverty is less developed countries.  But liberals almost invariably laud the latter form of migration, not the former.  Often as not, they not they are not bothered about denuding the poorest countries of the latter's best talents.

The above is just one of the many strands of evidence on this and the companion site on multiculturalism, that liberals are motivated by a desire to appear original and controversial by attacking or diluting their own culture.

Obviously immigration should not be halted entirely: if countries can help each other out with temporary shortages or surpluses of specific skills, that is beneficial - or to put it in economics jargon, this reduces frictional unemployment.  But this is wholly different to the permanent large scale immigration favoured by the liberal elite.  Indeed this "temporary shortage" point would not on its own result in any net immigration.  To illustrate, if this is the only reason for migration, the number of Brits going to France to help deal with temporary shortages will approximately equal the number of French people coming to the UK to help deal with temporary shortages.  Result: no net migration either way.

2.   Immigrants fill vacancies and perform vital functions in the UK ?

Claimed, for example, by the Guardian leader 11.1.05, The Independent leader 5.4.04, and Sunday Times, 27.2.05, p.8, Independent,p.1,14.3.05, see also Tony Blair's speech to the CBI, "Fact" No.1, 27.4.04)

This idea can be demolished by looking at either the evidence or the theory.  We'll start with the evidence.

The USA has accepted immigrants at the rate of around a million per year for the last two hundred years !   Well that should fill a few vacancies !   But amazingly the number of vacancies in the US never goes down !  The number of "vital jobs" left undone remains constant.

Those who think immigrants reduce labour shortages will doubtless be baffled. One way of explaining the above "mystery" is thus.

There is a problem having an immigrant fill a vacancy:  the immigrant has to eat and be housed.  Never have guessed that, would you ?   In other words the immigrant necessitates additional farm workers, supermarket check-out staff, builders and so on.

Now if the aim of immigration is to fill vacancies, the aim begins to look a bit silly if it turns out, as it does, that in achieving the aim, a whole lot more vacancies have been created !

Put another way, immigrants, when they arrive and start earning money, do not burn the money !   Wouldnt have guessed that either would you ?  No - what immigrants do with their money is spend it !   They go out and buy food  ( amongst other things )  which necessitates more supermarket staff  ( amongst other things ).
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To summarise, immigration does not solve the "jobs left undone" problem (or the "doing the jobs that we wont" problem).  For every vacancy an immigrant fills, approximately one more is created !

Technical points.

To put the above in economics jargon, immigration improves labour supply, which is anti inflationary, which enables governments to raise demand, which creates more jobs and more vacancies.  Another interesting technical point is that prior to when governments started to control demand (in the 1940s), the free market seems to have been not too bad at controlling it - witness the US in the 1800s.  Though as against that the free market blotted its copy book in the 1929 crash.

A minor qualification could be made to the above paragraphs to the effect that immigrants do not spend all the money they earn: some of it is remitted back to their countries of origin to support family members there. This doubtless helps less developed countries, but it is no use to UK citizens: this activity brings a deterioration in the balance of payments which lowers living standards for native UK citizens, which in turn further undermines the above claim that immigrants do the UK some sort of favour by taking jobs here.

For some intelligent ideas on getting indigenous labour to fill vacancies, http://employerlastresort.blogspot.com/2009/03/employer-of-last-resort.html

3.  Immigrants can support pensioners ?

Claimed, for example, by Ashley Seager, Guardian, 1.11.04 plus Tim Garton Ash, Guardian, 8.6.04 and Heather Stewart, Observer, 13.2.05.

Immigrants tend to be young, which means they increase the tax-paying / working age population which, according to the cerebrally challenged, means immigrants can help support pensioners.  There is just one problem with this idea:    immigrants are human beings ( wow ! ) and like all human beings they grow old !

Put another way, immigrants end up as pensioners just like everyone else.  And this means that if one uses immigration to finance pensions one faces an exponential increase in the population ( obvious to anyone with a grasp of basic maths ).

The actual extent of the population increase that results from using immigration alone to deal with pensions is startling.  A study by Denton claims the population would increase 20 to 30 fold in a hundred years.  Another study by the UN and obviously using different assumptions claims the population would double every fifty years.  This cost/benefit ratio is the worst in the history of the phrase "cost/benefit ratio".

Doubtless some liberal elite worthies might try and claim that immigration can at least help with the pensions problem.  This is a bit like arguing that while burning your furniture to keep warm is daft, nevertheless, burning some furniture to raise the temperature of your living room just a little, might be an idea.  The answer to this false logic is that, whether its immigration or furniture burning, the cost / benefit ratio is likely be the same regardless of how much use one makes of the "solution" !!

4.   The Health Service relies on immigrants ?

Claimed, for example, by The Independent, 2.3.04, p. 1, and leading article, also Polly Toynbee, Guardian, 7th April 2004, p2l, lst para

There is a high concentration of immigrants in the Health Service, from which a number of simple folk have deduced that the Health Service could not function without them.  There is a heavy concentration of men in the construction industry (talk about political incorrectness). Do we conclude that this industry would collapse without men? If so, the implication would seem to be that women cannot do architecture or plumbing, and that suggestion is ever so un PC, so the suggestion cannot be true.  (It's always nice to set one PC idea against another!).

Or perhaps in pointing to the number of immigrants in the health service the pro- immigration brigade are not making a specific point about health so much as trying to suggest that the economy would be short of labour without immigrants.  This idea is demolished in section 2 above.

Of course if every immigrant suddenly disappeared from the Heath Service, chaos would ensue until replacements were trained, and this would take several years.  But exactly the same point applies to any other major industry if half its skilled employees suddenly vanished.

5.   Immigrants do the jobs the British wont ?

Claimed, for example, by Nick Pearce, Guardian, 9.2.05, p.25

Too right - for example British females are strangely reluctant to work as prostitutes servicing 20 men a day in exchange for a starvation wage and the occasional beating.  This is what some immigrant females are forced into.

But apart from this sort of sub-minimum wage, illegal activity, there are certainly a number of low paid jobs that the natives of developed countries shun and which are performed by immigrants.  But the problem with this argument is that immigrants sooner or later turn native !   Sooner or later they gain skills and begin to shun the worst jobs.  Thus even more immigrants are required !

Exactly how long the process continues, we are not normally told.  In the case of the UK does it continue till there is no standing room ?

Another reason we should not worry about "jobs the natives wont do" is that in any economy ( particularly where output per head is rising ), new and productive jobs constantly appear, while old / unproductive jobs fall by the wayside.  The latter tend to be low paid, and a quite reasonable policy to adopt towards them is to ignore them: leave the vacancies unfilled.  If of course these jobs are vital, then its up to the customer and employer to offer adequate rewards for the jobs.  And the latter is just part of the process whereby the rewards for every job gradually rise in any economy where output per head is rising.  This rise in the real wage applies to both skilled work and unskilled work, for which there is a real need or demand.
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There are actually an almost infinite number of vacancies in the UK ( or any other country ) if you include every conceivable and potential low paid menial job.  For example most of us if offered a gardener or housekeeper at 50p an hour would jump at the offer: that's about ten million vacancies !    Disaster !   Do we import ten million immigrants to solve the "problem" ? 

A possible counter-argument to the above is that many immigrants to the UK and US do menial agricultural jobs, and if wages in this sector rose, more food would be imported.  The first answer to this is that there is nothing wrong with importing stuff (nor exporting it).  Of course most countries like to grow some minimum percentage of their own food, but this decision is for central government: it is not for people arguing the merits and demerits of immigration.  Moreover, when governments decide to boost or protect agriculture, none of them do so by deliberately importing hoards of immigrants: normal procedure (as is the case with supporting any industry) is subsidies - agricultural subsidies in the case of agriculture.  And lastly, imported food is very likely to have come of developing countries: in other words importing food is just as likely to help the poor as is allowing in migrants prepared to work for low wages.

A final piece of nonsense that sometimes appears as part of the "do the jobs the locals wont" argument is the suggestion that native Brits are layabouts in contrast to hard working immigrants.  The reality is that the employment rate amongst native Brits at around 78% is higher that that of immigrants, at 70%.  If anything, it is immigrants that are layabouts. (Figures are derived from an IPPR study: "Britain's Immigrants: An Economic Profile", 2007, see table at the end of www.ethnic.ndo.co.uk/imm.doc).  See also Dustmann, p.27.

6.  An amnesty for illegal immigrants is better than restricting immigration ?

Claimed by Nick Pearce and others, Guardian, p.25, 9.2.05

This claim for immigration is unusual - in contrast to the above first five claims, which are common.  It is all the more strange, coming as it does from IPPR, a left of centre "think tank".  "Think tanks" are supposedly staffed by clever folk.  Well, dont be fooled - they make as many cock ups as the rest of us.

The above claim makes a howler which students of elementary economics get the rap for:  it confuses a stock with a flow.

Here is an illustration.  The amount of water in a pond on a stream is a stock whereas the amount of water flowing down the stream per hour is a flow.  Comparing the two is like comparing chalk to cheese.

For example, with a view to reducing the flow a mile downstream from the pond someone who did not understand the difference between a stock and a flow might claim that one could either empty the pond or reduce the flow entering the stream at its source.  It is true that both of these in the short term reduce the flow downstream.  But if one is interested in the longer term, emptying the pond is a pretty daft suggestion:  it quickly fills up again, and the stream further down hill resumes its original flow. ( Boring elementary stuff this isnt it ?  But "sophisticated" think tank personnel need it explaining to them, so it seems. )
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In the case of immigration, restricting immigration influences a flow whereas re-categorising the illegal immigrants currently in a country is to deal with a stock.

But what is doubly ridiculous about this "think tank" proposition is that it is comparable to saying emptying the pond is better than increasing the flow at the stream's source.  Not only is a stock being compared with a flow, but the two alternatives have opposite effects on the eventual flow further downstream.

It seems there is not a great deal of thinking taking place in the London based left of centre "think tanks".  This possibly explains why the present UK Labour government rather ignores them and has adopted a large number of right wing Thatcherite policies.

7.   Immigration makes us a larger more powerful country ?

Claimed, for example, by Martin Kettle, Guardian, 25.1.05, p.22

The average 10 year old has doubtless realised that the more people in a country, the more powerful it is other things being equal. But what of it ?  Leichtenstein is a minute country.  Its population must be the most miserable on the face of the Earth !  Why isnt the United Nations riding to the rescue ?  Well perhaps it has something to do with the fact that Leichtenstein has the highest wage and salary levels in the World.  They'll be crying their eyes out all day over that, won't they ?

But on a more serious level, the mistake in this "powerful country" argument is very much the same as the mistake it item No 1 above.  No 1 above failed to distinguish between GNP and "GNP per head".  Likewise this "powerful country" argument fails to distinguish between the total power possessed by a country and the power per person.

If a county doubles its population and doubles its "power" this does not result in any increased amount of power per person.  Of course it is possible, even likely, that a country's power is more than directly related to its GNP or population.  For example the power wielded by the US may well be more than would be expected just from its GNP or population.  But is this morally right ?  Is it right to wield more power than one deserves ?  According "anti-imperialist" left of centre journalists, it would seem it is.
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And its not just ostensibly left wing journalists who are jingoistic empire builders in disguise.  Robin Cook, the former UK foreign minister (and supposedly left of centre) was always keen to see the UK "punch above its weight".  Civilised people have no desire to punch other countries metaphorically or physically.  And then there is smiling Tony Blair, second in command of white man's most recent and umteenth crusade to the Middle East.

So why would self proclaimed left of centre journalists employ the most jingoistic, right of centre arguments imaginable ?  It's because they're scraping the bottom of the barrel for pro-immigration arguments - they are desperate.

8.   The many languages spoken in London help British exports ?

This claim was made by Robin Cook ( the UK's former foreign minister ) in his famous "Tikka Masala" speech in 2001, but the claim appears often enough in the left of centre press.  The claim is nonsense and for several reasons.

1. London was the World premier financial and trading centre long before the arrival of large numbers of third world immigrants post World War II.  Indeed, the UK has declined relative to other countries since the arrival of these immigrants.  From which it could be argued the UK would have been better off without the immigrants ( though of course this is to answer one crass argument with an almost equally crass one ).

2. Only about one percent of immigrants work in jobs which directly use their language skills and involve international trade.  To argue that taking hoards of immigrants on the grounds that one percent of them can do a specific job is as dumb as buying the entire contents of your local hardware store on the grounds that you need one screwdriver.  So next time you see a ten foot high pile of unused tools in someone's garden, you'll know who owns the house: it'll be Robin Cook or a PC journalist.
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3. Germany has been a highly successful exporting country for most of the last five decades (though its economic performance has declined somewhat in the last decade). And Germany has managed it without large numbers of immigrants from around the World.  Moreover the immigrants it does have come largely from one country: Turkey.  This is not much help in exporting to the rest of the World where about 95% of Germany's exports go.

4. Immigrants lose their native language after a generation or two !  Thus to exploit immigrants' language skills to any extent requires a never ending stream of immigrants - till when ?  Till there's no standing room ?

5. Of all the countries in the World, the country for which the "immigrants help exports" argument is the least relevant is the UK, and for two reasons.

First, one of the UK's major export markets is North America.  Perhaps the pro-immigration brigade have not gathered this, but the language in North America is English.

Second, as far as exporting to non-English speaking areas goes, command of the native language is less important for English speakers than for those with a different native language because English is the main international language.

9.   Employers welcome immigrants.

Well, of course they do !  Nothing improves an employer's bottom line like a plentiful supply of enthusiastic or even desperate job seekers outside the employer's door.  Even better, are immigrants not acquainted with UK minimum wage rules and other employment legislation.

As George Borjas, one of America's leading experts on migration has showed, immigration boosts profits and depresses the wages of those at the bottom end of the pay scales.

10.   We're a nation of immigrants.

e.g. claimed by Robin Cook in his Tikka Masala speech and Yasmin Alibhai-Brown, Independent, p.33, 11.4.05

We are a nation of immigrants, therefore we should continue to take immigrants ?  The argument that one should continue to do whatever one has done in the past is a favourite amongst the near senile: those who can only repeat, like robots, what they did in the past.

Hong Kong is a nation of immigrants. Three centuries ago it was empty. Then Europeans turned it into a port, and about five million Chinese swarmed in.  Presumably this proves further millions should swarm in, with the result that they'd all live in thirty story high blocks of flats instead of the current average of around fifteen stories.  And as to Hong Kong residents at ground level, half of them would be going around "piggy-back" on top of the other half, for want of space.

At the opposite extreme, had Hong Kong not been turned into a port and not taken immigrants in large numbers, that would prove it should not be turned into a port in the future, despite being a good natural harbour.  Liberal logic is a strange subject.

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Also the statement that "we are a nation of immigrants" is certainly misleading if not a lie.  Immigration in the centuries prior to WWII was negligible compared to post WWII.  Put another way, it is not immigration as such that bothers ninety percent of those who complain about it, but the scale.  Thus the statement that "we are a nation of immigrants" is an evasion of the issue.  Or in most cases, a deliberate evasion, i.e. a lie.

11.   Corruption amongst immigrants.

There are a large number of studies of the economics of immigration.  Some find that immigrants do not influence output per head (e.g. Borjas). Some find immigrants reduce it a bit and some find that immigrants increase it a bit.  In short, it is pretty obvious that the economic effects of migration are not dramatic.

But these studies almost invariably ignore what is generally agreed to be one of the most important determinants of national output, namely the extent of corruption.  Corruption is relatively common in many, and possibly most countries that are net exporters of migrants.  Indeed, to a large extent it explains the migration.  And this corruption could be purely cultural, or it could be in the blood.  That is, it could be nature or nurture.

In either case, immigrants will bring this corruption with them.  But the silence on this issue is deafening and for reasons that are so obvious as to be boring.  The explanation of course is that it is the height of political incorrectness to suggest a deficiency in a non-white race.  Thus anyone who values their job is just not goint to delve into this area.  Frank Ellis, the Leeds university lecturer suggested in 2006 suggested that different races had different IQs and was suspended from his job.

A measure of the extreme bigotry amongst the politically correct in the area of mental differences between races is that fact that Eysenk, one of the first psychologists to look at the IQ of differences races, found himself on the receiving end of vitriolic abuse simply for examining the question.  The politically correct do not want reality examining if they suspect reality conflicts with their own pre-conceptions.

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When two groups of humans (or any animal) are separated for tens of thousands of years ( like say the Japanese and Europeans) they evolve in different ways.  Clear physical differences arise.  Why it should be impossible for mental differences to not also arise, is something the politically correct have never explained.  Or rather, they are too thick or bigoted to even ask the question.  Moreover, it seems that human evolution has actually speeded up in the last few thousand years, which will have accentuated the above differences (Harpending)

But getting back to the corruption in some developing countries, it could be that this corruption is purely cultural, rather than genetic, and that immigrants drop this undesirable cultural habit on landing in Europe or North America.  But the evidence is not encouraging.  A study of electoral fraud by Micheal Pinto-Duschinsky of Brunel university in 2007 found that the majority of cases of electoral fraud occurred in areas with large Asian populations.

Assuming immigrants do bring a measure of corruption with them, this will presumably boost their earnings, since the whole point of corruption is financial gain.  And if the latter is a prevalent phenomenon, this makes a nonsense of attempts to measure the economic effect of migration. 

12.   Immigration raises output per head?

George Borjas, one of America's leading experts on immigration, claims immigration has a negligible effect on output per head, as do others.  But there is never complete agreement on anything in economics, and there are those who claim immigration does raise output per head a small amount.  In an article published by NBER ("Re-thinking the gains from immigration") the authors, I.P. Ottaviano & G.Peri claim immigrants raise output per head because they tend to fill posts where the relevant skills are in short supply, and certainly where immigrants do this, the initial effect will be to raise output per head.

One reason for the latter is that labour shortages are the root cause of inflation, and it is fear of inflation that causes governments to restrain demand. Thus if a significant number of vacancies are filled where the relevant skills are in very short supply, this enables governments to raise demand by more than is needed simply to employ the immigrants.  And the higher the proportion of the workforce that is employed, the higher is the average output per head of the workforce.

A second reason why filling "acute labour shortage vacancies" raises output per head is that these jobs are likely to be well paid.

But is this effect permanent? Its doubtful: the skills that are in surplus and short supply are constantly changing.  Immigrants (and natives) whose skills are in short supply one year, will quite likely find the skills to be in surplus five years down the road.  In 2002-5 there was a shortage of plumbers in the UK.  This lead to the import of large numbers of Polish plumbers and increased numbers of UK natives acquiring the skill.  Now the shortage has been largely alleviated according to a press report in Jan. 2006, and plumbers are now paid much the same as carpenters, bricklayers, etc.

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Certainly the above benefit derived from immigration is temporary assuming the immigrants stay in the host country.  Of course, if the immigrants leave the country as soon as their skills are no longer in acute shortage, things are totally different.  In this scenario, the rise in employment/reduced inflation is permanent.  Indeed, to a greater or lesser extent this explains how Switzerland managed to combine ultra low levels of unemployment with good control of inflation between about 1950 and 1970.  The Swiss had a habit of importing Italian labour as soon as labour shortages appeared in any sector of their economy, and then sending the labour home to Italy as soon as it was no longer required.( see for example Fluckiger (1985))

But of course this policy of sending foreign labour packing as soon as it is no longer required is viewed as socially unacceptable in Europe and North America nowadays.

13.  Immigrants keep prices down ?

Claimed, for example, in "Migration: A Welcome Opportunity", Royal Society of the Arts, section 4.3., and by Simon Jenkins, Guardian, 8.3.06.

It might not be immediately obvious, but the argument that immigrants keep prices down is essentially the same as the argument that immigrants raise output per head, dealt with in 12 above.  To recap, the argument in 12 above was that where immigrants fill vacancies in areas of particular labour shortage, this is counter inflationary, which allows a rise in demand by more than is needed just to employ the immigrants.  Thus a larger proportion of the country's workforce is employed.  This in turn raises output per head, because the higher the proportion of the workforce employed, the higher the workforce's output per head, other things being equal.  To put this another way, where immigrants fill the above "labour shortage" vacancies, the level of unemployment at which inflation becomes a problem will drop (known to economists as the "Natural level of employment" or NAIRU ( Non Accelerating Inflation Rate of Unemployment).

This can all be summarised thus.  Where immigrants (or anyone else) fill vacancies in acute labour shortage areas, the country will as a result be able to enjoy one of two advantages (or some combination of the two advantages).  Either the country will be able to reduce unemployment, which will raise output per head.  Or it will be able to leave employment (and unemployment) at about the same level, and instead reduce inflation.

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The flaw in this argument is of course the same as the flaw in 12 above, namely that labour shortages and surpluses are constantly changing, Thus if there is a beneficial effect from immigration along the above lines in a given year, this benefit will probably evaporate a year or two later.

A variation on the "immigrants keep prices down" argument is advanced by the Royal Society of Arts's publication "Immigration: A Welcome Opportunity" (section 4.3).  The argument is that if we did not have low wage immigrant agricultural workers we would have to raise the pay for agricultural work (shock, horror), and this would mean importing more food.  The Royal Society of Arts does not enlarge on exactly what is wrong with imports.  Perhaps they are not aware of the fact that we import and export tens of billions of pounds of stuff every year and that the mix of stuff exported and imported is constantly changing.

14.  We need unskilled immigrants ?

Claimed, for example, by Simon Jenkins, Guardian, 8.3.06.

The unskilled are almost always over-represented amongst the unemployed.  So what, exactly, does it mean to suggest there is a shortage of unskilled labour ? One possible meaning is that there are a finite number of employers who cannot find unskilled labour.  But this "finite shortage" of unskilled labour is inevitable even during an economic downturn: of the million or so employers in the country, you can be sure that at least 1% (i.e. ten thousand employers) cannot find, instantaneously, the unskilled labour they want even during an economic depression.

And what do we do about "unskilled labour shortages" during a depression? Importing more unskilled labour when long queues of labour (skilled and unskilled) are looking for work is clearly fatuous.  The only cure for labour shortages that exist even during depressions is to make labour markets more efficient, that is, improve the matching of unemployed labour to vacancies.

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In contrast to economic depressions, there is "full employment", that is the situation where demand cannot be raised any further for fear of inflation.  In this scenario, there are obviously many more unskilled labour shortages than during a depression.  So what would happen if immigrant labour were used to deal with these shortages ?  The answer was given in section 5 above: alleviating labour shortages alleviates inflation which allows a rise in demand, which produces more labour shortages !

Its all nonsense !

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15.   Immigrants keep interest rates down ?

Guardian, 27.2.07, p.26

Half inch high headlines regularly appear in the UK's left of centre press claiming that immigrants reduce interest rates.  Unfortunately the academic studies which form the basis of these headlines say nothing about immigration definitely reducing interest rates.  One of these studies is a Pricewaterhouse work (Hawksworth) which itself is largely based on a Bank of England study (Blanchflower).  What the Pricewaterhouse study actually says on immigration and interest rates is "Quantifying this effect is very difficult given the large range of other factors affecting inflation and interest rates" (p.31).  The Bank of England study is equally uncertain. 

Immigrants probably do result in a temporary drop in interest rates, but as is shown below this is of no benefit to natives (despite the fact that interest rate reductions normally do bring benefits all round).  But before that, here is a rough guide to the main factors that need to be "quantified" in order to estimate the "immigrants reduce interest rates" effect.

* The Bank of England study claims that "immigrants are extra consumers....and they raise... demand" (p.24).  This is a reference to "Say's law".  J.B.Say was an 18th/19th century French economist who proposed that surplus labour automatically creates the demand needed to create employment for itself.  There is general agreement amongst economists that Say's law works to some extent, but there is widespread disagreement on exactly how well it works.  To the extent that it does not work, interest rates would need to be reduced temporarily so as to create work for an influx of immigrants. 

* To the extent that immigrants remit their earnings back to their country of origin, interest rates would have to be lowered further than would otherwise be the case, as the Bank's study rightly points out.

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* To the extent that immigrants consist of millionaires drawn to the UK by the latter's favourable tax regime (or other factors), and to the extent that such millionaires splash out on houses, cars, etc on arrival, this will increase demand and would result in interest rates having to be higher than would otherwise be the case.  This could at the extreme mean that immigration caused a rise in interest rates.

* Anyone who thinks they can quantify the above factors with any accuracy is suffering from delusions of grandeur!

Now for the explanation as to why an interest rate reduction will not benefit natives.  Perhaps the most obvious effect of an interest rate reduction is on savers and borrowers.  However, the total amount saved is roughly equal to the total amount borrowed, so this point is irrelevant.

Interest rate reductions are normally good news all round, mainly because they bring economic expansion and reduced unemployment.  However an interest rate reduction consequent to immigration is quite different. The effect of immigration is to cause slack in the immigrant sector of the labour market but there is no reason to suppose it causes slack in the native sector.  Thus an interest rate reduction in reaction to this immigration is designed almost by definition to create jobs for immigrants but not for natives!

Another, and quite different channel via which immigrants might reduce interest rates is that if a group of immigrants are particularly flexible, skilled or hard working the effect would be counter-inflationary, which in turn would result in lower interest rates.  But there is no evidence that immigrants are outstandingly skilled or hard working compared to natives.  For example a study by the Home Office (Gott, p.9) shows that the proporiton of native Brits going out to work is much higher than the equivalent proportion of immigrants!

16.  Immigrants make a 2.5bn a year fiscal contribution?

For years the UK government has claimed that immigrants pay about 2.5bn a year more in tax than they withdraw from the public purse.  The latest Government publication to make this claim was published in October 2007 (see "Home Office" in the references below).  Now why does this publication appear under "Home Office" when every other publication referred to here is under the name of the author?  Well, there doesnt seem to be an author!  The be more exact, none of the economists working for the Government seemed to be willing to claim authorship.  This is unusual: normally economists are happy to claim authorship.  It furthers their career.

So what is going one here?  Could it be that the economists working for the UK Government knew they would be laughing stock of their profession had they claimed authorship of such a blantantly political and biased document?

As for the more substantial arguments behind the 2.5bn claim, these appear in another Home Office publication (Gott).  The authors of this work say that the arguments behind the 2.5bn claim are "unsophisticated and tentative".  The Guardian featured the above October 2007 Home Office pubication on its front page (17.10.07), but mysteriously the words unsophisticated and tentate did not appear.  Would you credit it?

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One "unsophisticated" aspect of Gott's work is that it ignores the large drain on the public purse caused by immigrants: the additional roads, railways and other investments that immigrants necessitate. 

One work which attempts to quantify the cost of these investments is Scholefield.  Scholefield must be given credit for drawing attention to this point, but his calcuations are a bit suspect, so the exact number of billions that these investments involve will not be featured here for the moment.

Why would a government try to give a false impression about immigration?  The answer is that the UK government has allowed in far more immigrants than the average UK citizen is happy with.  No one likes admitting to have made a mistake, so instead of admitting to a mistake, one strategy is to claim that what one has done, far from being a mistake, is the best thing since sliced bread.  This is not a level of dishonesty to which most of us sink, but then politicians are in a different league. 

Finally, the Home Office publication repeats the nonsense, dealt with in "1" at the very beginning of this site about immigrants bringing "economic growth". 

17.  Guardian "statistics" on immigration.

In a leading article, hilariously entitled "Facts not Fears", The Guardian (21.2.08) claims that immigrants make up 4% of the UK population.  The actual proportion of the population born overseas is just over 10%.  The sources for this 10% figure are at the end of this section.

Of course anyone can make a mistake with figures, and we all make the odd spelling mistake.  But there are some mistakes which raise the question as to whether the perpetrators have any idea what they are on about.  If a geography teacher made a mistake in adding up the marks scored by a pupil in an exam, that would be excusable: we all make that sort of mistake.  But what if the geography teacher wrote on the blackboard that the English Channel was three kilometers wide at its narrowest point, and failed to notice their own mistake? That indicates cluelessness.

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It seems that few Guardian readers noticed the mistake: no letters appeared over the following days rectifying the mistake.  This is because Guardian articles like other broadsheet articles contain long words and long sentences.  And nothing impresses effete pseudo-intellectuals like long words and long sentences.  The Times article dealt with just below is an example.

Sources:   National Statistics gives immigrants as a proportion of the UK population as 8.3% in 2001. See http://www.statistics.gov.uk/cci/nugget.asp?id=1312. This rises to 9.7% in 2005 (see "Britain's Immigrants" published in 2007 by IPPR (p.10).  Net immigration is running at 190,000 a year (See "Home Office" in references below, p.7). Thus the total should be comfortably over 10% by 2008.

18.  Immigration makes the economy "vibrant and dynamic"?

Claimed by The Times leading article, 2.4.08 and in an article by Daniel Finklestein on the facing page.

A sure sign of ignorance, incompetence, pretentiousness and a range of other non virtues is the use of impressive sounding, but meaningless phraseology, like "vibrant" and "dynamic".  These two words are just not used by economists: they are nonsense on stilts.  But the words are popular in politically correct circles and on the political left.

If the word dynamic is being used to refer to rates of economic growth, then the UK had the most dynamic economy in the world in the 1800s despite negligible levels of immigration compared today.  Same goes for Japan between around 1850 and 1990. And China and India who have managed spectacular rates of growth for about the last decade despite levels of immigration which are near zero relative to their populations.

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Further evidence incompetence in the above Times article by Daniel Finkelstein was that he spent two hundred words explaining that immigrants benefit from migrating!  Ninety nine percent of Sun readers worked that one out ten years ago.  No wonder some men gawp at page three of the Sun: its more intellectually demanding than some of the articles in our broadsheet newspapers.

19.  Conclusion.

An obvious possible criticism of this site is that the weakest pro-immigration arguments have been deliberately set out above and demolished, while the stronger pro-immigration arguments have been ignored.  One answer to this quite reasonable suspicion is that greater minds than the author's have searched for and failed to find any convincing pro immigration arguments, e.g. Anthony Browne, environmental editor of The Times.

Second, if you have any persuasive pro-immigration arguments, contact the author (details below). This site will be altered accordingly.

The number of false arguments put for immigration is suspicious. In other words if an individual, particularly one not tutored in economics, gets some aspect of the economics of immigration wrong, that is understandable. But here we have a bunch of relatively well educated folk making a large number of "mistakes". This is not coincidence.  There are clearly psychological factors at work.  So what is the explanation ?
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Political Correctness: the new religion.

Perhaps the explanation is that with the decline in traditional religion in the UK, there is a gap in the market.  There is an unmet human need: the need for religion.  And the new religion is political correctness, one of the main elements of which is a belief in multiculturalism (as others, e.g.Lileks, have pointed out).

Political correctness certainly has most of the elements of religion.  First, it involves moralising.  Second, it has its mantra: it involves ( in the case of multiculturalism ) the repetition of the same words over and over.  And like any religion, while some of the moralising is valid and no more than common sense, there are also a number of nutty elements. For Bhuddists it is twiddling prayer wheels.  For Muslims it is doing back exercises while facing Mecca.  For Jews, it is doing back exercises while facing the Wailing Wall.  And for the politically correct, it is advocating multiculturalism and immigration.

A third common element in religion is the sacrifice of something valuable: an object d'art, an animal, and sometimes even people.  Likewise, political correctness involves attacking or sacrificing one's own culture or civilisation.

Contact author: ralph at fram dot ndo dot co dot uk


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