The UK’s Migration Advisory Committee published its long-awaited report on work migration in the European Economic Area this week. It had been hoped that it would offer a basis of officially sanctioned evidence that could take some of the political heat out of the formulation of a new immigration policy for Britain. That hope remains: certainly the full report with attachments provides a state of the art stocktaking of how European immigration affects the British economy.
There are no surprises for those who have looked dispassionately at this question before. The evidence the MAC thoroughly lays out (and summarises in a useful table) confirms what expert researchers have been saying consistently: immigration, in particular from eastern Europe, has not harmed Britain in the way claimed by those campaigning to leave the EU and has had largely modest but positive economic effects (certainly on public finances, and probably on productivity and even subjective well-being).
Immigration does seem to have slightly held back wage growth at the low end (by 5 percentage points over a 25-year period) and added to it at the high end. But this effect is very small, and much smaller than the total growth in wages at all levels. This is illustrated below, from my colleague Chris Giles’s compilation of the most important findings in the report.
On the whole, then, free movement of people between European countries has been benign for the British economy. Yet the committee argues that seen in isolation, it makes most sense for the UK to end the preferential treatment of European citizens after Brexit. (It takes no view on whether maintaining such preferences is something the government should offer as a quid pro quo in a future UK-EU trade relationship.) Instead it recommends a system that increases access for higher-paid immigrants from all countries, while restricting access for lower-paid immigrants.
While I advise all those interested to look at the details of the committee’s evidence, I would like to take issue with the logic of its recommendations. Here are some of the things that puzzle me.
First, the MAC demonstrates that European immigration under EU free movement rules has had, in some ways, significantly better economic consequences for Britain than rest-of-world immigration (this is clear for public finances), even though the government has been able to select the immigrants it wants for the latter but had to allow in virtually all comers for the former. Why doesn’t this entail a presumption that on economic grounds, the future immigration system would do well to prefer European migrants?
Second, the MAC’s preference for higher-skilled immigrants may sound commonsensical and no doubt aligns it with public opinion. For public finances, it is clear that the impact of immigration is more positive the more highly paid the migrants. But the committee also argues for maintaining salary thresholds for “Tier 2” work visa eligibility in order to avoid “downward pressure on average earnings”, which it itself has shown is minimal. (In fact the committee worries that the current rules for Tier 2 might hold down wages by tying workers to employers and therefore reduce labour market competition.)
More importantly, the committee is dismissive of sectors that use low-skilled labour. “Undoubtedly some sectors will complain vociferously about being faced with an alleged cliff-edge in their supply of labour,” the report says, but these sectors, argues MAC chair Alan Manning, are “not necessarily the parts of the UK economy that we want to be growing”. Why not? Presumably because they might be a drain on public finances or have low labour productivity. But economic activity pays a return to capital, not just to labour, and the earnings on UK investments in sectors staffed with low-skilled migrant labour should at least figure in an economic assessment of immigration rules. Making light of the difficulty for these businesses if free movement is ended is a bit like dismissing the dependence of certain manufacturing sectors on just-in-time frictionless European supply chains.
Third, the ease with which the MAC is willing to see free movement go borders on the dilettantesque. We read that: “The problem with free movement is that it leaves migration to the UK solely up to migrants and UK residents have no control over the level and mix of migration.” Would the economists on the committee say the same thing about trade?: “The problem with free trade is that it leaves imports into the UK solely up to foreign sellers and UK residents have no control over the level and mix of imports.” This is absurd; imports are bought and migrants are hired precisely because UK residents want to buy or hire them. What is meant is presumably [suggested tweak: Presumably, what is meant is that there is no central decision on the quantity of migrants (or imported goods). But the committee itself argues for abolishing the cap in Tier 2 work visas, which also means the number of (high-skilled and total) immigrants would escape any centralised control.
Finally, this is ostensibly a report about migration, but it looks only at immigration. There is no attempt here to quantify the benefits of free movement to British citizens who emigrate for work. Since immigration regimes are highly reciprocal between countries, these economic benefits will be curtailed if free movement ends — but there is no mention of that.
The MAC is not alone in treating British economic migrants as an afterthought, if that. But that leaves a sense that despite its good research work, it has felt obliged to reflect a public mood distinctly unmoored from the evidence. That is understandable from politicians. It is not what expert committees are for.