LEADING THE WAY OUT OF THE EU

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Thursday 20 September 2018

The tone may be needlessly apologetic, but the MAC report on migration from the EEA has well and truly burst the establishment’s fake consensus that open borders are in no way a bad thing.

In his forward to the Migration Advisory Committee’s report on settlers in the UK from the EU and its associated states, Professor Alan Manning attempts to dilute his committee’s explosive conclusions. In doing so, he only emphasises further their significance:

The fall in the value of the Pound after the referendum vote to leave the EU probably raised prices by 1.7 per cent – this is almost certainly a larger impact than the effect on wages and employment opportunities of residents from all the EEA migration since 2004.

There’s no disguising it, Manning in his and the Committee’s role as advisors to the government on migration, which in Brexit Britain has attained pivotal significance, has delved into the data and come up with natural conclusions. For the isolated metropolitan elites, they don’t make for pleasant reading, hence the attempt to provide spurious context.

Migrants are usually younger, and therefore consume less healthcare. They’re economically active, paying more into the treasury than they take out, so the line goes. The MAC (as the committee is better known) does not dispute it. Reassuringly however, it posits the question: why can’t the government go further? More of the healthier, high-earning migrants, fewer of the sponges on that state. That’s the essential economic policy question. The other is the social question, simply resolved by aggregate opinion. Even liberals will concede mass migration is extremely unpopular.

If blindly pro-migration moderates do not have the economic argument on their side, they have nothing. We have now well and truly won the debate. All the more puzzling then that Diane Abbott would pledge to discard the hugely popular tens of thousands of cap if Labour get elected. That prospect now looks a damn sight less likely. A recent poll for Oxford Migration Observatory found that only 13% Brits would favour an increase in immigration.

 


Labour

We believe the UK should focus on enabling higher-skilled migration coupled with a more restrictive policy on lower-skilled migration in the design of its post-Brexit system.

In order to represent a net benefit to the treasury, a migrant needs to be on a decent income. However, this is rarely the case with workers from the EU’s poorer member states accounting for the largest share of EEA migrants – note the spike in net migration after the 2004 Eastern expansion in Figure 4. Household income needs to pass £30,000 per annum before taxes exceed benefits, yet as Figure 1 indicates, the average hourly wage of labour from new member states (NMS) is no more than £9, the UK-born average is £12 and the average for Western Europeans and Scandinavians is pushing £14. The NMS figure will also be inflated by a small but significant number of highly skilled Eastern Europeans on superior wages.


Figure 1: Median real hourly pay by 
migrant group, 1997-2017

If there is one lesson to be drawn from the makeup of the EEA and its emigrant citizens living in the UK, is its heterogeneity (see figure 2 below), making a mockery of open borders. Even in the first instance, it makes no sense to have an immigration policy that denies the government any right to exercise discretion with an entire continent. It makes even less sense when that continent consists of a wide range of skills, some of which are needed, the rest not, an imbalance exacerbated by wild differences in average income.

Among the lower-skilled occupations, the report only identifies agriculture as a sector where employers may struggle to meet demand without limitless access to cheap migrant labour. In which case, the report argues, the government should raise the minimum wage before allowing migrants to join the sector.


Figure 2: Proportion of those aged 16-64 in employment by country of birth

The great irony is pro-EU liberals love to tout the economic benefits of migration, but only to justify a European integrationist ideology fundamentally lacking in economic logic. Here the MAC brutally exposes this argument’s flaws.

If – and this is not a MAC recommendation – immigration is not to be part of the negotiations with the EU and the UK is deciding its future migration system in isolation, we recommend moving to a system in which all migration is managed with no preferential access to EU citizens.

The report goes on to argue that, post-Brexit, the the Tier 2 (General) system for non-EEA citizens should be widened to apply to the all residency applications. There are only Three English-speaking countries currently in the EU, one of them is the UK, the other two are small, Ireland and Malta. Outside of Europe, there are 51, including India (population 1.2bn) and the United States (325m). Needless to say, a points-based migration system orientated towards maximizing Britain’s economic output by prioritising high skills would not favour continental Europe and her citizens. Good for the economy and the majority of voters, bad for the ideologues.

Even more encouragingly, the report recommends “the salary threshold at £30,000 should be retained”. While we would dispute expanding the list of eligible occupations – another recommendation which the likes of Abbott would surely abuse – the emphasis on sound macro-economic management is to be welcomed.

House prices

But in markets where supply is restricted and cannot easily respond to changes in demand – housing being a prominent example – prices are likely to reflect demand more than costs.


Figure 3: Housing affordability ratio116 for newly-built and existing dwellings

Credit where it is due. The report recognises the huge regional differences in the British economy, none more dramatic than in the cost of housing. The above extract applies, by no means exclusively, to London and the South East. Indeed, as cited here, a report by the Ministry of Housing, Communities and Local Government found that a 1% increase in demand translates into a 2% increase in price. The increase in demand for housing brought about by immigration in the UK has driven up prices by a staggering 20%.

It’s not rocket science. As table 3 above shows, the value of housing has outstripped wage growth significantly. Is the cause, Britain’s distinctly average birth rate or the average net million increase in migration every four years (see table 4 below)?

 

Figure 4.