Squaring the circle on immigration

It had to happen. Amber Rudd, the Home Secretary, has refused to commit to a net migration target. Facing a barrage of complaints from the hospitality industry about potential staff shortages post-Brexit, Rudd appears to be softening the government's line. She told BBC Radio 5Live's Pienaar's Politics:
"My personal view is we need to continue to bring immigration down. I want to make sure that we do it in a way that supports businesses.”
So what way might that be, then? After all, her boss is on record as saying she thinks net migration should fall to the tens of thousands. Currently, it is in the hundreds of thousands: according to the latest ONS statistics, net migration for 2016 was 273,000 (net inflow), of which 164,000 was from outside the EU. Even if immigration from the EU stopped completely after Brexit, it would not be enough to bring net migration down to levels Theresa May considers "sustainable". The UK would also have to impose much more draconian restrictions on non-EU immigration. How this can be in any way supportive to business is difficult to imagine. No wonder Ms. Rudd doesn't want to have a definite net migration target.

But in the Sun, Ms. Rudd's interview with Pienaar's Politics comes across entirely differently:
THE HOME SECRETARY yesterday vowed to “push” big chains like Pret a Manger to hire more Brits – and kick their addiction to EU staff. Amid a fresh row over immigration targets, Amber Rudd said it was up to business to “look after people who are otherwise unemployed”.
And instead of quoting Ms. Rudd's business-friendly rhetoric, the Sun highlighted this comment:
“I did hear that Pret a Manger had come out and said it’s absolutely essential for us to have European workers because if we don’t we’re going to have to make more of an effort to recruit in the UK. Well, good. I’d quite like them to make more of an effort to recruit in the UK. So we will push them as well to do more in the UK.”
Oh yes, very friendly to business. Pret a Manger has already said it will try to recruit more British people. So Ms. Rudd's response is to say "we will push you to do even more". Riiight.

But I am wondering where the queues of British people waiting to work in Pret a Manger are. I haven't seen any, have you?

It is not just service industries like Pret that are under pressure to "hire British". The Sun says that manufacturers, too, need to "wean themselves off" cheap foreign labour. But where are the hordes of unemployed British that are being denied jobs?

The truth is that they don't exist. The latest Labour Force Survey shows that in the year ended February 2017, the total number of people in work rose by 312,000. Nearly three-quarters of adults aged 16-64 are in work: that is the highest proportion since 1971. Unemployment is the lowest it has been since 2004, and lower than at any time during the 1980s and 1990s:


In short, the UK does not have armies of unemployed and inactive people crowded out of jobs by high immigration. Despite net migration in the hundreds of thousands, British people are not struggling to find work.

Ah, but what about young people? Surely unemployment is higher among the young?

Well, it is - sort of. The unemployment rate among 18-24 year olds is currently 10.8%, which is about double the adult unemployment rate. Among 16-17 year olds it is much higher, over 25%.

But these percentages are deceptive. A large proportion of 16-24 year olds are economically inactive, mainly due to being at school, college or university. So although the percentage of unemployed is high, the actual numbers out of work are low. The Labour Force Survey says that in the three months to end April 2017, the number of 16-24 year olds describing themselves as "unemployed" was less than 600,000, and of those, nearly a third were students looking for part-time work. Nor do most young people remain unemployed for long. According to this Parliamentary briefing paper, at the end of February 2017 only 81,000 16-24 year olds had been out of work for more than 12 months, and the numbers are falling fast: a year before, the number of young people out of work for more than 12 months was 31,000 higher. Clearly, immigration is not stopping young people from finding work, either.

The fact is that British employment has been so successful in the last few years that now there are insufficient unemployed British people to fill the vacancies that would be left if net migration were reduced to the tens of thousands. And it would not be skilled jobs that went unfilled. Principally, it would be unskilled jobs in the hospitality, care and agricultural sectors.

The trouble is, many middle-aged and elderly voters are convinced that unemployment is still up at 1980s levels. After all, we had a recession, didn't we - and when they were young, recessions meant high unemployment. The 1980s recession was especially brutal and long-lasting: in 1985, youth unemployment was still 20%. And everyone keeps telling us that the 2008-9 recession was even worse. So there must be lots of unemployed young people. Or maybe under-employed young people, doing a few hours of casual work but desperately in need of a proper job. Stands to reason, dunnit?

The statistics tell a different story. The Labour Force Survey shows that even under-employment is no longer the problem that it was: full-time employment is rising fast. These days, the problem is low wages, not lack of jobs.

But people don't believe the statistics. Even though in the Labour Force Survey, those surveyed self-report their employment status, there is a widespread belief that the Government is fiddling the figures. Many people believe unemployment is much higher than reported. So they demand that firms should stop importing labour and employ British people. Amber Rudd's "hire British" resonates with them.

However, UKIP's policy of zero net migration resonates too, if only because it reminds older voters of their youth. Paul Nuttall clings to a romantic notion that EU migrant agricultural workers will be replaced by students picking fruit in their holidays, as he did when he was a student. I have news for you, Mr. Nuttall. These days, most students already work, not only in their holidays but during term time as well. So where is this army of student fruit pickers going to come from, pray?

UKIP's version of "back to the future", unrealistic though it is, puts Amber Rudd under pressure. She must somehow square the circle of being hardline on migration, thus attracting UKIP voters, while appeasing Tory-voting businessmen and women who fear that they will have to pay significantly higher wages once the flow of cheap labour from overseas is stemmed. Hence her confusing rhetoric, and her discomfort at being asked for hard figures. She is playing a spin game.

And it is a dangerous game, too. Of course, many people would welcome higher wages. But the other side of higher wages is higher prices. We have become accustomed to cheap food, cheap consumer goods, cheap entertainment, cheap care. So when the middle-aged and old can no longer afford to replace their cars every three years, because manufacturers have weaned themselves off their diet of cheap labour; when they have to cut down on their meals out because pubs and restaurants have put up prices in response to the higher wages demanded by their British staff; when buying fresh fruit and vegetables takes up more and more of the weekly food budget; when the cost of Granny's care home shoots through the roof.....then it will not be the 1980s that they remember. It will be the 1970s.

I wonder whom they will blame?

Related reading:

Intergenerational unfairness
Austerity and the rise of populism
Grieving for a lost empire
A dent in the surface of time


Comments

  1. I'm sorry Frances but this simply doesnt compute with me. The truth is, in the absence of full employment you can't compute anything. The employment figures cannot be as stated, where's the wage boom? Where are the jobs advertised, certainly not not on Job centre plus. There's a pret a manger in Liverpool but certainly not Blackpool or Preston as far as I know.

    I can only assume you are talking about London and the South East where some of this might be true. There are 1.6 million unemployed so let's generously say that 600k of that is frictional. That's one million unemployed, millions more underemployed and of course all the BS self employment and various state wheezes to manipulate the figures. The ONS confirm that working just one hour a week can be classed as full time.

    The problem is not immigration it's poor domestic policy. Full Employment would mean nobody was un/under employed by choice. Then we'd know exactly how many immigrants we should welcome. An added bonus would be that if unemployment is as rosy as you think it wouldn't cost anything. The other point everyone seems to ignore is that almost half the immigrants are students so they'd have to be banned totally or excluded from the figures.

    One last point, is the North/South divide really so bad? I ask because unless you'd you were writing about the UK I would have had no idea which country you were talking about. None. bill40

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    1. This comment is a fine example of exactly what I said in the post. You don't believe the statistics, you say things that aren't true (ONS does not regard working one hour a week as full time), you define "full employment" as abundance of jobs (it is not), you expect jobs to come to people not people to jobs, you create an equivalence beteeen employment and wage level that ignores completely the real cause of low wages,which is poor productivity.

      The facts are as I stated. We have record employment - and employment figures do not include self-employment, so the actual number of people working is even higher. There are places where unemployment is higher, but frankly we need to understand what the rigidities are that keep people trapped in such places while discouraging firms from locating there. The sad fact is that if British people won't move to where the jobs are, they will be unemployed and wages where they live will be low. Closing the doors to migrants will make absolutely no difference to them. All it will do is put firms in more prosperous parts of the U.K. out of business.

      You can't force firms like Pret to open outlets in places like Preston just to employ locals. There has to be local demand for their services. No industrial policy in the world can create demand. Ask yourself why places like that have no thriving cafe culture.

      Why are some British people so reluctant to move for work, and so unpleasant towards those who do move for work?

      We DO NOT have the levels of unemployment of the 1980s. Nowhere near. Time to wake up and smell the coffee. And eat the sandwiches.





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    2. There are places where unemployment is higher, but frankly we need to understand what the rigidities are that keep people trapped in such places while discouraging firms from locating there.

      Why are some British people so reluctant to move for work, and so unpleasant towards those who do move for work?

      Probably because it breaks up families and leaves the older generation (unwilling to move to big cities themselves because they crave the peace and quiet of rural and small-town areas) bereft of care and companionship?

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    3. "..you create an equivalence beteeen employment and wage level that ignores completely the real cause of low wages,which is poor productivity."

      People tend to understand quite well, the idea of supply and demand. Where economics doesn't help in the slightest is telling people that supply and demand applies to everything, except for when it's inconvenient for businesses and government to have to pay higher wages. It's then that productivity sounds like what it sounds like. The use of improbability and deceit as an excuse to avoid paying higher wages. A way of (politely?) accusing workers of being lazy.

      In terms of immigration, the assertions of the elites that they can get all the cheap labour they want from abroad, sends out the message that if it's not controlled the worker's only peaceful option is to vote to stop it completely. (Or, at least try to stop it.)

      Another thing the experts didn't see coming?


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  2. Reductions in net migration will encourage the automation of more jobs, maybe at a faster pace than otherwise would have happened. But with Brexit imposing a stranglehold on some export-led jobs, it could be self-correcting, i.e. the jobs will disappear along with the immigrants.

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  3. Wages don't rise unless there's an actual shortage of labour. They're sticky on both sides: employers don't want to raise them unless they absolutely, positively have to. With frictionless international labour markets, there are no labour shortages, and no pay rises.

    Behind every economics textbook curve is a real life zig-zag. Being *close* to full employment doesn't raise wages, if every time an employer needs to replace a worker they can effectively just send out to Eastern Europe.

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    1. Why should, for instance, a farmer raise wages to employ people, when for less they can automate?
      Why, given a rise in wages, and people reluctant to pay higher prices for goods, should a farmer produce those goods instead of changing to another more profitable crop?
      The only reason many farmers still use manual labour to gather crops is that people are cheaper than machinery: at the moment.
      Higher prices: higher wages: increased automation.
      It was always thus.

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    2. Exactly. Employment in the EU is frictionless. There is a huge supply of labour who can be here on short notice and do manual tasks. cheap flights, internet to arrange a room in a flat, mates already here to help you fit in. Need 50 people? I've got a mate who can have them here for you in a week. And quite a lot will have educational qualifications that far exceed what is required.

      The UK economy does not operate in isolation (yet!) hence national statistics show only a part of the story.

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  4. Yes, Rudd is playing a spin game on immigration here. Apologies for length, but what if the entire May "Brexit" strategy is a pure spin game as well? (With spin on immigration being a major part of why it's playing out in this particular way.)

    I put Brexit in air quotes because I think the evidence is strong that a BEANO strategy is being pursued.

    - Rudd is making no commitments on immigration for good reason.
    - May has already said that immigration won't stop during the "implementation phase".

    Now, let's stipulate that May is not in favor of Brexit in policy terms. (I think that can somewhat safely be inferred from both the referendum campaign, and the idea she likely doesn't want to govern during the economic fallout of Brexit.) Also, let's stipulate that May sees gaining full UKIP voter* support as essential to Tory electoral chances, both in 2017, and in the next election as well. (I think that can very safely be inferred from basic common sense on electoral politics.)

    So, let's combine those two, and stipulate that May is deliberately pursuing a BEANO strategy. How would things look if May wanted Brexit Existing As Name Only?

    1) Brexit goals would not be defined in policy terms. Instead, only vague generalities would be offered as goals, such as Brexit means Brexit. After all, such a goal is compatible with BEANO, and seems to quite satisfy UKIP voters.

    2) Advance notice would be given of a post-2019 "implementation phase", during which no Brexit in terms of substance would occur. (This includes the politically explosive immigration issue, of course.)

    3) Negotiations with the EU would be absurdly contentious to placate UKIP voters. And the negotiations would make zero immediate progress in order to avoid having to discuss UK concessions to EU positions that would inconveniently come up if there were progress.

    That's where we are today. It tracks perfectly to how I'd politically proceed if my stipulation of May's goals is true. Next comes an election. What then?

    4) For quite a while, more of the same. There is no profit for May in rushing to change any of the above three items. The blame the EU spin, and the lack of progress in negotiations are both highly useful for as long as they possibly can be maintained.

    5) At the last possible viable moment, the UK should concede to almost all EU exit demands of substance, while gaining a few symbolic demands in return. These symbolic demands are what is necessary to spin the exit agreement as an UK victory over the EU in the headlines.

    6) Voila! We have Brexit. The implementation phase begins. BEANO is an actual reality.

    7) May should explain the goals of the trade treaty with the EU, and state the implementation phase will be quite temporary and short, without giving an actual time frame. A vague slogan should be rolled out and repeated.

    8) Negotiations with the EU should be highly contentious to placate UKIP voters. And the negotiations should make zero immediate progress in order to avoid having to discuss UK concessions to EU positions that would inconveniently come up if there were progress.

    9) All that should leave May in a good position for the next election, which would come less than 3 years after BEANO started. The spin, (which will actually be true), is that 3 years is not a viable amount of time to reach a trade treaty and end the implementation phase.

    10) May then has until 2027 before the voters are consulted again. That gives her 8 years of BEANO to either figure out how to square the circle, or to retire and leave it up to some other sucker. (She'll be 70 years old by 2027, after all.)

    * I'm using "UKIP voter" imprecisely as shorthand to mean all "hard leave" voters who are highly motivated by the issue.

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  5. There are multiple things going on, one is an absolute belief that the government lies to us and all the figures are fiddled, so winning an argument on real data does not help.

    The truth is unemployment is at historically low levels whatever the number is, but some of the employed are in part-time jobs (not because they want flexibility but it is all they can get), some are on zero hours contracts and some are forced into "fake" self employment. However when you are talking hospitality sector and Pret, those jobs are a perfect example of what people are worried about, so in the debate they are not "proper jobs". A "proper job" is my dad went to the mine, or to the local factory and those jobs are not coming back.

    What else has changed since the "good old days", strong unions drove up wages and moved the % of profits going to worker v investor, v top end of employment. Yes some went too far and the company goes bust but the pendulum has swung.

    Open up Eastern Europe and China and India as sources of quality employees, not in terms of they can all come here but the factories can and have gone there.

    Automation has drastically changed the need for the number of employees, and the early wave of automation slashed a specific fraction of jobs, e.g. Car plant production worker, this was a skilled but not graduate role and paid significantly above the minimum level of the day. Those type of numbers got slashed. E.g my dad could work and rent his 3 bed council house, bring up 3 kids send them all to university, and have an occasional foreign holiday, because we went to university his kids have jobs which can aspire to that life, but the kids down the road who took on similar apprentice to semi skilled jobs became unemployed and then were offered minimum wages.

    The problem is let's kick out all the foreigners will not bring back manufacturing in areas it was closed down in the 70's and 80's with strong unions and coherent local communities.

    Germany inside the EU has managed to have a high value added, highly productive manufacturing sector with significant employment so the choices are nothing to do with EU and all to do with local politics.

    People are upset because they might be employed but they still fear unemployment because they fear their next job will pay less and and worse conditions. Their existing role has not had a real terms pay rise in a decade and no prospect of one and both sets of politicians talk about the minimum wage and that either does not matter because they are high enough above it, or even feels like an insult as they have clawed themselves above it and now find other people coming up behind them, having "done nothing to deserve it".

    Why does someone on minimum wage in Preston not move to the South East, because rent is higher and at least initially all they will get is minimum wage so why move, long term prospects are better but you have to survive today first, and of course politicians keep telling the lie that the good times are coming back so why move.

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  6. Ukip have it wrong. The Uk should aim for at least zero net population growth for environmental reasons and stop the slavish increase in numbers just to satisfy economic growth. Net migration should therefore be tailored to achieve this. I don't expect many people to agree with this, but it's actually needed globally now. MartinT

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    1. Interesting. Sounds like you are seeking some kind of human culling programme to satisfy your sustainability requirements. Who would be sacrificed for the greater good, and on what grounds?

      B.D.

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    2. As I said below, you're being daft, no culling necessary just improved education globally and positive encouragement of smaller families. I've even written an easy to understand blog on the topic, you might be able to follow it. http://thornberperspectives.blogspot.co.uk/2017/04/5-whys-and-its-time-for-zero-population.html Regards, MartinT

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    3. And that is happening naturally as people are getting healthier and wealthier, you don't need large families if most children survive. Average family size in the wealthiest 90% of the world is 2 children per woman. The issue is the poorest 10% where it is 5. Even so, due to smaller sizes in Asia the number of children in the world is probably going to stay at 2 billion. The projected increase of population to 11 billion will be people getting older. A rapid increase in assistance to get the poorest out of poverty might get it a little lower. Stopping it growing now would require human culling.

      Fortunately crop yields have been increasing far faster than population growth, and there are huge parts of the world where just using current techniques feed many more people.

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    4. I really don't see the environmental angle to be honest.

      Do you believe immigrants appear out of nowhere? Higher density in the UK means less density somewhere else. Immigration doesn't change the overall level of world population.

      In general higher density is good for the environment, large cities are more efficient in terms of energy use and pollution footprint. Immigration generally increases global living standards, some there is an opposite effect (better living standards means more pollutions in general), but you'd have to argue that other countries wouldn't reach UK consumption in the long term for that to be a big effect. Is your environmental plan basically keeping people in poverty?

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    5. You don't honestly see the environmental angle of population growth? Ok, simply put, people consume and produce waste. The net migration of the UK recently has been the size of a small city per annum(>300k/annum according to the ONS). How much energy and waste does a city's worth of people consume and generate respectively? How many houses, roads, schools require building and with what environmental impact. How much food and water do they consume? Answer is clearly 'A Lot'.

      Do you see yet an environmental angle? Now, if the population remains constant, then overall consumption and waste would not change, although for the UK I believe this is not the case: population is increasing, not stable.

      As for stating 'my plan is to keep people in poverty', you are extrapolating from my statements and making gross assumptions. Indeed, if the global population were lower there's perhaps a case to make that the world's resources would be less strained and poverty could be lower. Also I never said anything about stopping migration, I said 'aim for zero population growth' which is not the same thing. Is population stability, or even reduction really such a bad thing if achieved via education? MartinT

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    6. You didn't understand what I wrote.

      Immigration doesn't create a new small city in the UK every year. It moves a small city from somewhere else in the world to the UK. At first approximation the amount consumed stays the same, it's just consumed in the UK rather than somewhere else.

      Without external migration, the same economic forces that powered population growth in the UK south-east would have pushed internal UK migration in the same direction (from the north of England I would guess). Even more then they did already. A large amount of the same construction would have been needed anyway.

      Of course consumption changes when people move. There are several effects: 1) higher density usually means more efficiency 2) more efficiency means more production 3) higher incomes push towards lower population growth.

      Of those 2 are good for the environment (higher efficiency and lower population growth) and 1 bad (higher production/consumption). It could go either way. All effect are unstable, so hard to day really.

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    7. I see I've confused you, sorry about that. 1)Increasing Uk population by 300k/annum damages Uk environment. 2)Separately, increase in global population is not good for global environment(see David Attenborough et al). I'd therefore like the Uk to set an example and target zero population growth. MartinT

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    8. Martin, the British birth rate is below replacement rate, and has been since the late 1970s. See Table 4 here:

      https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/livebirths/bulletins/birthsummarytablesenglandandwales/2015

      The only reason why the UK population is rising is therefore immigration, which as the other Anonymous pointed out is a wash, globally speaking.

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    9. Frances, Global population is rising and so is the Uk population. Neither of which is good for the global and Uk environment respectively. I fully appreciate there can be economic benefits to freedom of movement and immigration; that's not my issue with it. MartinT

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    10. France I'm not sure on your figures. I believe in the UK the birth rate exceeds the death rate. Source the CIA world fact book. The European commission forecast an increase in UK population of 16 million by the middle of the century from 2013, of which just over half is immigration. So that's 2 new Londons, one from natural population growth and one from immigration.

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    11. Dipper, yes rising longevity also increases the population. So let's kill the old, ok?

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    12. Rising longevity is not increasing the population in Germany.

      UK birthrate is significantly better than much of Europe which must be a good thing. We should be able to run our country without the need for significant immigration. Just madness to import additional workers as the first response to any recruitment problem.

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  7. "But I am wondering where the queues of British people waiting to work in Pret a Manger are."

    my daughter was one. She applied to work at the Pret at our local international airport. Needless to say she didn't hear back.

    One reason for local scepticism about Pret as an employer is their recruitment method. From an online article in HR magazine (http://www.hrmagazine.co.uk/article-details/prets-people-management-secrets) the Group People Director Andrea Wareham is quoted as saying "The team in every shop recruits its own members, with each candidate spending ‘experience days’ in a store and the team members voting on whether they are hired". To be polite, and as this is online, ensuring that policy does not result in unconscious bias in recruitment might be a challenge.

    In the same article Andrea Wareham says "it’s not just a ‘McJob". Needless to say our local McDonalds appears to have no problem recruiting British workers of all races and sizes.

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  8. Where did I state anything about human culling? There's a big difference between that and an education based stabilisation/reduction in population. Perhaps you think global warming is just a myth? Please engage brain before making over the top comments. MartinT

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  9. I think you are missing the point about employment levels. Since Gordon Brown got the world of employment hooked on his "Working Tax Credit" heroine the distinction between working and not working has become blurred. Lots of people are doing low-level jobs with their income topped up by working tax credit, and for workers with families marginal tax rates in excess of 90% are normal, and once the additional benefits of being on benefits (subsidies for use of council facilities and courses) the effective tax rate is over 100%.

    Given that working longer is futile for many people attention the main way of earning extra money is through disability benefit. Currently about 2.7 million are on this. Get some decent jobs out there and that number might reduce.

    Furthermore the use of the binary working/not working misses the nature of the employment. Perhaps a more useful segmentation would be: sickness/disability/unemployed/subsidised employment/non-subsidised employment. As of 2014/5 over 3 million families received working tax credits so that together with the disabled is a massive pool of people who don't do work of sufficient remuneration to not need government subsidies.

    There seem to be a lot of organisations where the professional jobs are all done by foreigners and the role of British workers is to clean, mind the telephones, do the menial stuff. There is a huge lack of ambition for british people to achieve, as though the throw away comment of Lord Kerr "We native Brits are so bloody stupid that we need an injection of intelligent people" was actual government policy.

    So simply saying "we need these foreigners as all the Brits are employed" doesn't really convey the full picture of employment.

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    1. I guarantee you that increasing the number of jobs will not lower the number of disability claimants. For one, there's extensive prejudice; two, many disabled people are elderly; three, new jobs may not be accessable to working-age disabled people, as - get this - they're disabled.

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    2. increasing the quality of jobs will enable people to work despite disabilities. And I know of instances where people have turned down minimum wage (or close to) as that would mean coming off disability benefit and if the job does not last they cannot get back on. There are lots of little traps that keep people on benefits.

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  10. I think several posts have alluded to the problems with open door immigration. There are plenty of UK citizens who are under employed or employed on highly precarious terms e.g. zero hours contracts, who would like more hours or better conditions, but cannot achieve them because their employers can simply mass import cheap labour from Eastern Europe. Another angle on this is that importing cheap labour reduces incentives for employers to invest in training, more enlightened working practices or other productivity raising activities and this is hurting the UK economy. There have been plenty of high profile examples raised in the media where organisations simply ignore local unemployed or under-employed workers altogether because it's cheaper and easier to import Eastern Europeans.

    I don't personally advocate reducing net immigration to zero, nor do I see economic migration as overall a bad thing, but mass immigration does have some real negative social and economic side effects and I don't find it convincing that there's any kind of duty to support employers who base their business models on cheap imported (usually low skilled) labour so they don't have to invest more in their UK employees.

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  11. No discussion of migration ever considers the other side of the coin - the country losing people. The UK benefits from typically young, skilled and motivated people arriving to work. Somewhere else there is a country or region that has lost young talent, in a number of cases people who could be performing higher level tasks in medicine or engineering are making coffee in a wealthier location.
    Extending this line of thought further, I would pose the question: Is it even morally acceptable for a country to accept health workers from another country that has worse health outcomes than itself.

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    1. Is serfdom morally acceptable? That's what you are describing. People should not be allowed to live where they want and do the job they want...

      We left this system a few hundred years ago...

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    2. Danny, I think this is a very important point and one which is too often ignored.

      To my mind, countries suffering persistent emigration have far more reason to complain than countries experiencing persistent immigration. Countries that experience persistent immigration actually benefit from it in the longer term; short-term strains due to asymmetric distributional effects can be resolved with appropriate fiscal measures. In contrast, those countries experiencing persistent drain of the young and skilled suffer what we call "hysteresis", which is gradual degradation of the quality of the workforce. Hysteresis is a primary cause of long-term decline. The effects may be mitigated by remittances from migrants to their families, but unless those migrants eventually return, remittances simply slow down the rate of decline.

      Jonathan Portes has written about this in relation to Latvia:

      "Ubi solitudinem faciunt, pacem appellant" http://www.niesr.ac.uk/blog/ubi-solitudinem-faciunt-pacem-appellant#.WRy08eXyvb0

      I have also written about it here on this blog, in a series of posts about the "brain drain" from certain countries in the Eurozone:

      The movement of people (and its consequences) http://www.coppolacomment.com/2013/06/the-movement-of-people-and-its.html

      The creeping desert http://www.coppolacomment.com/2013/06/the-creeping-desert.html

      The zero-sum trade in people http://www.coppolacomment.com/2013/06/the-zero-sum-trade-in-people.html

      In the countries of the old http://www.coppolacomment.com/2013/06/in-countries-of-old.html

      The definitive work on this is by Paul Krugman. In 1991, he proposed a model in which economies of scale and low transportation costs resulted in a core-periphery geographic structure, with high-return manufacturing at the core and low-return agriculture in the periphery. In this model, workers migrated to the core from the periphery:
      https://www.princeton.edu/pr/pictures/g-k/krugman/krugman-increasing_returns_1991.pdf

      At the time, he was thinking about urbanisation and the tendency of people to migrate from rural areas to cities. But it also applies to countries, when there is economic divergence and few barriers to migration. People will migrate from poorer, largely agrarian economies such as those in Eastern Europe to richer industrialised countries like the UK and Germany. And the people who migrate will be the young and skilled, leaving behind the old and unskilled. The effect, as in Krugman's model, is to widen economic divergence.

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  12. Is the cause of low wages simply low productivity? After all, the EPI's graph showing productivity and wage growth divergence suggests that the old economists' canard of wages equally marginal product to be far less true than wages are simply what labour can bargain for.

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  13. Importing cheap labour has advantages (pointed out by Frances), but also disadvantages, as pointed out by Joseph Stiglitz:

    "If you bring together low & high-skilled labour countries, wages in high-wage ones get depressed." 0.55 here:

    https://www.youtube.com/watch?v=Zg7CfbnMwxA&feature=youtu.be&t=41

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    1. In an alternate reality, all countries have the same currency, one global central bank, one rate of UBI/benefits and the same tax rates. In such a world, large corporations couldn't hide in offshore labyrinthian tax havens, outsourcing would happen (more) for skills and not just chasing the cheapest labour, currency exchange issues would not exist.. Immigration would still happen, but as everywhere would be on a level playing field, there maybe less need for people to leave their home communities for work. Could it ever work? It would mean the end for Protectionist blocks such as 'sovereign states' and the 'EU', replaced by a global political and monetary union. Never happen? Well, it did kind of happen on Star Trek so you never know (that show went as far as eradicating money somehow). MartinT

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  15. The seems something deeply dubious about Amber Rudd and indeed almost all Home Secretaries including the last one. Perhaps there is something in Home Office tea or furniture polish that addles their brains.

    With low unemployment the options are to bring in immigrants, or to grow our own population or to get a lot more out of the existing crop.

    Immigration is by far the cheapest way, the breeding is done elsewhere, we get to import the brightest and most vigorous (mostly). The rest are not our problem.

    Or we grow our own population. But that requires affordable housing and some hope for the future. It also requires an expanded and extended education system to say nothing of childcare, schools. Slow and expensive work and the product is very variable.

    Either way we will need business parks, industrial plant etc etc needed to put more people to work. Some way around the NIMBYs will be needed.

    Or we can get more economic product out of the existing crop. Easier said than done. Humans seem educable only to a limited extent, Einsteins are few and far between. We have expanded the education systems but the economic effect seems pretty limited.

    So far as the economy is concerned Amber Rudd is on to a losing wicket. She may cut back immigration but unless we expand our own housing stock to the extent that Jo and Jill Average can start a family on the back of normal wages then the supply of workers will fall short. Back to immigration, but only after the election.

    This all points to a contradiction at the heart of the Brexit project. We cannot be like Britain in the 1950s and we cannot face the realities of Britain in the 2020s.

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    1. getting more economic product out of the existing crop would be my pick. Many people are currently under-utilised and under-skilled, largely due to the government subsiding their current employment and not funding their training.

      I challenge anyone to have a good look at what has gone on in Shirebrook and say the immigration there is beneficial to the UK. Extra police, Poles given twice as long in GP surgeries due to language problems, but at least Mike Ashley gets to make more money.

      Business parks, industrial estates only scratch the surface. The European Commission 2013 report on ageing forecasts an increase in the UK population of 16 million by the middle of this century. Doing some estimation on birth/death rates gives this as between a half and two thirds due to immigration. 16 million people is slightly less than the population of the Netherlands, so that would need roughly the infrastructure of the Netherlands, which is 7 million dwellings, a major international airport, 400 stations, 7 major teaching hospitals plus 10 other major hospitals, etc etc. and at the end of all that, you either end up with children going through our current education system and the consequent skills shortage except on a massive scale, the same stress on our infrastructure as the immigrants reach pensionable age, or else you have to believe that immigration solves our problems because immigrants are somehow genetically superior.

      Far better to confront these issues now, rather than when you've concreted over the south-east of England, imported an entire nation's worth of people, bankrupted the nation to build infrastructure, only to find it hasn't solved anything.

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    2. Roger you have made the initial assumption that population growth always must happen(somehow) and is always a positive thing. It is worth reconsidering this assumption (see my earlier points) before considering solutions. MartinT

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  16. Global population is going up whether we like it or not. Maybe it will tail off, maybe not. No one is likely to get away with any planned reduction so short of catastrophy we will just get used to it and budge up a bit.

    A population rise of 16 million is not so much. Current housebuilding runs at 200K/y and planned? to increase. That makes about 7M homes by 2050 which at 2.5 persons/home is well over 16M places. Now we can be sure our brilliant planners have of course factored in the necessary hospitals, rails, factories, business parks, airports - not. Therein lies the problem, we don't plan, we don't face consequences. Had the UK had a sane public housing policy the pressures that led to Brexit would not have emerged. Just possibly Mrs May will take off her velvet gloves and give the NIMBYs a surprise - and maybe not.

    As for immigration, Rudd will bluster but economic reality assures that nothing much is likely to happen. I am looking forward to political discomfiture round about Spring 2018 when the drumroll for hard Brexit gets a little louder.

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    1. sorry Roger I don't buy this. A 25% population increase in thirty to forty years is huge. Only Sweden is projected to have a bigger rise (36%). Many other countries e.g. Germany are projected to have significant falls in population. If you exclude the UK from the projections the projections for the rest of the EU are flat, so the increase in the UK population is nothing at all to do with global population increases. There is no clear logical explanation of why a 25% rise is good for us us but a 12% fall is a good thing for Germany. Even if you built the infrastructure there is nothing to stop the actual rate of immigration being much more. As long as we have FOM there is nothing you can do about this. Furthermore, the flip side of FOM is that places like Rumania and Bulgaria cannot make any steps to solve their economic problems, as the moment they make progress the people delivering the benefit can just pack up and move north-west.

      We currently have a situation that just about every theory of economics is impossible; full employment and simultaneous downward pressure on wages. The current situation is simply not sustainable. nothing about it adds up - population, services, finances, all out of control. If you get to grips with immigration then you start to enforce the changes necessary to get everything on an even keel and the country economically viable. Without that we will just keep getting sandbagged with more people and be unable to solve our structural problems.

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    2. Why do you put so much faith in 37 year projections by the Commission? Forecasts over that length of time are almost certainly bound to be wrong. People take the trends of the last few years often and then project them forward forever. If they did a similar exercise in 1980 how accurate do you think that would have been? Would they have forecast the fall of the Iron Curtain?

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    3. Fair question William. Firstly, it comes from the EU itself, so it is a clear statement of what the EU expects to happen. Secondly, it is the only one we've got, and based on the years since 2013 it seems to stand up quite well.

      The argument about us "needing immigration" tends to take place in the context of this being about birth-rates, death rates, ageing populations, but other similar nations are expected to have very different outcome in terms of migration even though they have similar, sometimes worse, population profiles.

      The issues come into much starter focus if you express them comparitively. Eg not "FOM is good for us" but "why is FOM from 27 countries good for us but not from similar countries that aren't in the EU? (e.g. Turkey, Ukraine). Not "we need migrants to look after our ageing populations" but "why do we need migrants when Germany and Eastern Europe which have worse ageing demographics than us, not need migrants"

      If you don't have a forecast then you are free to act only as if each issue is a point of principle, and not something which produces outcomes, as you can always dismiss responsibility for the outcomes on the grounds that no-one could have predicted it.

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    4. Thank you for you reply.

      I do not expect to be around in 2050 but, as you will probably have guessed, I am sceptical about anyone's ability to make accurate long-term forecasts. But I cannot say we will see because I probably will not!

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  17. "The trouble is, many middle-aged and elderly voters are convinced that unemployment is still up at 1980s levels. After all, we had a recession, didn't we - and when they were young, recessions meant high unemployment."


    The older/ middle age voters are probably aware of the difficulties facing younger people. There is probably some confusion with quality and quantity of jobs. Also if there was a high demand for employment then sure (as supply and demand equations work) then wages should raise. Therefore there aren't enough jobs because there isn't enough demand to raise wages. Reducing immigration reduces the supply to demand, and therefore problem solved.

    There are of course issues with the above argument, but it does more justice to the older/ middle age. As always life is probably more complex than that, it is possible to be believe the stats and think reducing immigration will help.

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  18. The tories are surfing the backlash against 38 years of neo-liberalism, and they're pulling it off. What a spectacle. What skill.

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