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Understanding Immigration's Economic Impact

Written by
Harry Sanders, Immigration Advice Service
Date of Publication:
21 December 2020

For years before the vote to leave the EU – a decision motivated in large part by the desire to restrict immigration into the UK – Britain has long been the seat of anti-immigrant sentiment based on the perceived detrimental impact that immigration has on the UK economy. Typical arguments, such as that the presence of migrants in the country 'increases government spending' or 'affects the efficiency of public services' are on the whole false and unfounded. Amid the first wave of COVID-19 in the UK earlier this year, the British public began to wake up to the reality of the situation; migrant NHS staff were seen risking their lives en masse to care for victims of coronavirus. Despite this partial epiphany, however, some archetypes have persisted, and migrants still battle with the rise in hate and discrimination which was a keystone in Theresa May's 'Hostile Environment'. In the hope that Britain may further wake up to the positive impact of immigration on the UK's economy, it is paramount that the true nature of this relationship is understood.

The two most frequent claims made about the impact of immigration on the UK economy is that it negatively affects the deficit and imposes a burden upon public services. It is important to note that neither of these claims are convincingly supported by academic consensus, due in no small part to the variance in methodology. For example, while one study may choose to assess the financial burden of migrants based on their taxes paid and benefits received, another may choose to include additional taxes paid (such as VAT), or another may additionally project the cost to the UK of supporting the second-generation. As such, figures vary wildly between studies and cannot be taken as gospel on their own.

That said, there are some issues on which studies do often agree on: the first is that migrants from the EEA (European Economic Area) have a more positive economic impact than non-EEA migrants; and the second is that recent migrants have a more positive impact than migrants overall.

According to a recent study by Oxford Economics, 'European migrants living in the UK contribute £2,300 more to the public purse each year than the average adult'. Contrary to popular belief, then, migrants from Europe make a net positive contribution of £78,000 over their lifespan – a statistic which completely disproves the notion that immigration inflicts economic harm upon the UK. In addition to this, it was found that the skill level of migrant workers plays a significant role in determining individual economic input. For instance, highly-skilled migrants in high-paid roles understandably paid more in taxes than lower paid-workers – though it must also be noted that many migrants were found to be working in roles well below their skill level. One can hardly blame migrants for the unavailability of work that all in Britain are currently facing regardless of nationality.

Moreover, the same study found that the negative net contribution of migrants from outside of the EU was largely due to additional spending on education, and higher estimated acceptance of benefits and tax credits. It may even be argued that this discrepancy is down to the additional difficulties for non-EEA migrants without British citizenship to receive a work permit and thus support themselves financially, though this is not accounted for in such reports. Regardless, the inclusion of second-generation costs undoubtedly skews results in favour of the persistent anti-migrant narrative.

The difference between the living situations of EEA and non-EEA migrants are key to understanding the claims made about immigration's economic impact on the UK. Primarily, the biggest difference is that EEA migrants are subject to far higher employment rates – and therefore pay larger amounts of income tax and National Insurance. Further to this, EEA migrants are typically younger, and as such their dependency on public health services is lower on top of higher employment rate. As a result of this typically higher age-range for non-EEA migrants, it is expected that they are more likely to have dependents than those from the EEA.

However, this is an over-simplification of reality. As a matter of fact, migrants of all points of origin in recent years have had a more positive financial impact than migrants from previous years. As expected, the typically younger EEA migrants between 2001 and 2011 had a net positive fiscal impact of £20bn. Similarly, though, recent non-EEA migrants accounted for a net cost of £6.2bn - £9bn less than the figures for 2014/15. There are myriad reasons for this trend, including the requirements of Visa surcharges and the changes in characteristics of new arrivals, though these do not detract from the fact that on the whole the depiction of immigration as economically harmful is largely false.

In light of these facts, it is undeniable that the discriminatory treatment of migrants by the tabloids is not simply unjust, but based on unfounded claims. To say that the recent revelation of some of these realities to the public is too-little too-late is a very sad truth; with Brexit less than two weeks away, we are hurtling towards an era of increased hostility towards migrants at a systemic level, with plans for new restrictive immigration policies due to be implemented imminently. All that can be hoped for is that in this new chapter in Britain's relationship with the outside world, we don't forget the sacrifices and contributions of those who have sought a better life as part of our communities.