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Inconvenient Truths About Migration

Article author: 
Robert Skidelsky
Article publisher: 
Project Syndicate
Article date: 
November 26, 2017
Article category: 
Immigration Impact
Medium
Article Body: 
Standard economic theory says that net inward migration, like free trade, benefits the native population after a lag. But recent research has poked large holes in that argument, while the social and political consequences of open national borders similarly suggest the appropriateness of immigration limits.
 
LONDON – Sociology, anthropology, and history have been making large inroads into the debate on immigration. It seems that Homo economicus, who lives for bread alone, has given way to someone for whom a sense of belonging is at least as important as eating...
 
Standard economic theory tells us that net inward migration, like free trade, benefits the native population only after a lag. The argument here is that if you increase the quantity of labor, its price (wages) falls. This will increase profits. The increase in profits leads to more investment, which will increase demand for labor, thereby reversing the initial fall in wages. Immigration thus enables a larger population to enjoy the same standard of living as the smaller population did before – a clear improvement in total welfare.
 
A recent study by Cambridge University economist Robert Rowthorn, however, has shown that this argument is full of holes. The so-called temporary effects in terms of displaced native workers and lower wages may last five or ten years, while the beneficial effects assume an absence of recession. And, even with no recession, if there is a continuing inflow of migrants, rather than a one-off increase in the size of the labor force, demand for labor may constantly lag behind growth in supply...
 
A second economic argument is that immigration will rejuvenate the labor force and stabilize public finances, because young, imported workers will generate the taxes required to support a rising number of pensioners. The UK population is projected to surpass 70 million before the end of the next decade, an increase of 3.6 million, or 5.5%, owing to net immigration and a surplus of births over deaths among the newcomers.
 
Rowthorn dismisses this argument. “Rejuvenation through immigration is an endless treadmill,” he says. “To maintain a once-and-for-all reduction in the dependency ratio requires a never-ending stream of immigrants. Once the inflow stops, the age structure will revert to its original trajectory.” A lower inflow and a higher retirement age would be a much better solution to population aging...
 
David Goodhart, former editor of the journal Prospect, has argued the case for restriction from a social democratic perspective... He simply takes it for granted that most people prefer to live with their own kind, and that policymakers must attend to this preference. A laissez-faire attitude to the composition of a country’s population is as untenable as indifference to its size...