Skilled Workers who arrived in 2022-23 estimated to make a net positive contribution of £47 billion to public finances
The Migration Advisory Committee (MAC) last week published a new report on the fiscal impact of immigration in the UK, setting out the methodology and findings of its analysis of migrants who arrived on Skilled Worker (SW) visas in 2022-23.
Image credit: WikipediaYou can download the 64-page report here.
Based on in-house data that combines the Family Resources Survey with Home Office and HMRC administrative records, it's the first time that the MAC has comprehensively estimated the lifetime fiscal contribution of a cohort of visa holders. It finds that the cohort of Skilled Workers who arrived in 2022-23 are expected to make a net positive contribution of about £47 billion to the public finances over their lifetimes.
The MAC stated: "Overall, the SW visa route is clearly fiscally positive for the UK. This is almost inevitable given that main applicants on the route must have a job offer paying above a set of salary thresholds. This means that these migrants have higher employment rates than UK residents since employment is a condition of the visa and as we shall demonstrate, salaries on the SW route are significantly higher than UK average wages. For the 2022-23 cohort as a whole, we estimate a present value net fiscal contribution of around £47bn over their lifetime."
However, the MAC cautions that this headline figure masks large differences within the cohort. The overall fiscal gain is generated almost entirely by main visa applicants, particularly those outside the Health and Care Worker (H&C) visa route. Dependants, by contrast, make a small net negative contribution over their lifetimes. Even among skilled workers themselves, the gains are highly concentrated, with around 72 per cent of the total coming from the top 30 per cent of earners.
Health and care workers, who entered through a dedicated visa route within the Skilled Worker system in 2022-23, were found to make a smaller but still broadly neutral contribution compared with UK residents of similar age. Lower-paid care workers were estimated to impose a modest lifetime fiscal cost, which the MAC said was comparable to that of typical UK residents and did not capture wider economic spillovers, such as enabling others to work more.
As the MAC noted, migrants' lifetime fiscal contribution is shaped mainly by two factors: the age at which they arrive in the UK and their employment outcomes. Those arriving in their 20s and 30s are more likely to be net contributors because they avoid the public costs of childhood and spend more years in work, while higher employment rates and earnings on sponsored work routes translate into stronger tax contributions.
The report further explains:
For SW (excl. H&C) main applicants …, the average lifetime contribution is a substantial +£689,000 in present value (the cumulative total of £47.7bn divided by 69,200 main applicants). This is perhaps unsurprising given the static estimates reported in the previous section and is primarily driven by the high earnings of this group. This also means that even in retirement they are only marginally negative since we would predict they will have relatively high retirement income and so still be contributing significant tax revenue. Some of the migrants only stay for a few years, whereas others remain in the UK for the rest of their lives. Because they are so fiscally positive, we lose substantial tax revenue if they leave. The lifetime net contribution of those who remain in the UK is +£931,000, whilst it is only +£174,000 for those who leave. This highlights the fiscal benefit of encouraging this cohort to stay in the UK because they make such positive fiscal contributions for most of their life. Recall that the UK resident population has a mean of -£39,000 overall lifetime contribution and a median of -£145,000. We can adjust the UK comparator group to have the same age distribution as the SW (excl. H&C) main applicants. This in effect compares the contribution of a migrant from 2022/23 onwards to that of a native with the same starting age. For this UK comparator group, the mean lifetime contribution is +£117,000 and median of -£47,000. This comparison highlights two key facts. First, part of the positive contribution of this cohort comes from the fact that they are younger than the UK resident population and so have longer to make positive tax contributions and that they do not carry the burden of previous fiscal costs during childhood. Second, even adjusting for these effects does not explain the vast majority of the difference. That is driven by the much higher earnings of this group relative to resident workers.
The contributions within this group are however very uneven. We estimate that the top 10% of earners in the SW (excl. H&C) cohort (with a minimum salary in 2022/23 of £131,000) make an average lifetime contribution of £2.7m and account for 39% of the total contribution of this cohort … . In contrast, the bottom 10% contribute 1% of the total. From a policy perspective, this highlights how effective salary thresholds can be in rationing work visas if the objective is to reduce migration whilst minimising any fiscal costs.
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For the H&C main applicants …, the lifetime fiscal contribution is positive (£54,000) but much smaller than for SW (excl. H&C) main applicants. This is a result of having far fewer highly paid workers in this group. If we again generate a UK comparator group with the same age distribution, we estimate their mean fiscal contribution to be +£114,000 and their median to be -£49,000. In other words, the H&C workers are less fiscally positive compared to UK residents of the same age (though much better than the median) – but there is still the additional benefit to the fiscal balance of having more younger workers than the UK average. We can split this group of main applicants into those who came as care workers and those who came in other health and care occupations (mainly nurses and doctors). For care workers, the lifetime contribution is estimated to be -£36,000, whilst for the other occupations it is +£166,000. Care Workers are therefore fiscally negative over their lifetimes and broadly similar to the UK median for the age group. Other H&C occupations are much more fiscally positive over their lifetimes and more positive than equivalently aged UK residents. This reflects the significantly lower wages that care workers can be paid on the visa than the other occupations. It is important to remember that these calculations do not reflect the potentially important positive spillover effects that health care workers may have on the rest of the population or on the fiscal cost of providing health and care services.
For the dependants of visa holders, the MAC finds much weaker fiscal outcomes. Adult dependants of Skilled Workers outside health and care are estimated to make a small positive lifetime contribution of around £3,000 on average, while dependants of those on the Health and Care Worker visa route are estimated to impose a net lifetime cost of about £67,000. Despite being younger than the average UK resident, dependants tend to contribute less because they have lower employment rates and very few high earners. At the median, however, the fiscal impact of Health and Care Worker dependants is broadly similar to that of UK residents of the same age.
The MAC cautioned that its estimates are subject to uncertainty and depend on assumptions about future earnings, benefit use and settlement patterns. It said it planned to extend the modelling to other visa routes, including family and humanitarian pathways, and to refine estimates as more linked administrative data become available.