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Immigration rhetoric is a threat to Britain’s long-term growth

A lucrative immigration problem: international students at the ISC. Jirka Matousek, CC BY

Immigration has risen to the top of the political agenda in the UK. And the popular press has been propelling the bandwagon.

“We must stop the immigrant invasion” according to the Daily Express and “enough is enough” according to the Daily Mail. The Sun columnist, Jane Moore has argued that “immigration fears are all about the numbers, not race”. But the numbers show that the fears are unfounded and that immigration is good for growth.

What is the extent of the “invasion”? According to the latest official data, net immigration was approximately 212,000 in the 2013. And why are they invading? To seek asylum according to public perceptions. The reality is of course different. The main reasons for the “invasion” are to study and to work. And these migrants have a positive effect on the British economy.

A lucrative problem

Take education – one of the few competitive sectors in the UK which is in high demand by overseas consumers. Traditionally, Britain was an exporter of manufactured goods, but now it is increasingly dependent on the export of services, creative industries and education to help pay for our chronic addiction to imports. If a young Italian downloads Grand Theft Auto (produced by Rockstar North in Edinburgh) they do not need to come to the UK but they do if they want to purchase a UK education. A recent report published by Universities UK estimates that the economic impact of non-EU students in the UK is £7.17 billion – a major contribution to GDP and the balance of trade.

Of course, some students may remain in Britain after their studies to work or establish businesses – but the vast majority will return home. The majority of overseas students are from outside the EU and face numerous hurdles if they wish to stay in the UK after they graduate – Nigel Farage will be reassured to know that if a gang of students move in next door to him they are thirteen times more likely to be from China than Romania.

As students from overseas are best considered as purchasers of UK exports, it is best to exclude them from the immigration data. And this reduces the “invasion” to a modest trickle. As shown in the chart below, net migration excluding students (overseas students studying in the UK and home students studying abroad) was 58,000 in 2013 (approximately a quarter of the net migrant total which includes students) and averaged 49,000 a year between 2004 and 2013 – well within the Tory target of net immigration being in the tens of thousands.

Net immigration looks very different when you take out the student population. ONS

The other major reason people come to the UK is to work: in 2013, 214,000 immigrants came to the UK to work; but this was almost matched by the 186,000 who left the UK to work overseas. For the sceptics, immigrant workers depress wages and cause unemployment. The reality is that these effects are minor – it is economic shocks and economic policies that are primarily responsible for the problems in the labour market. And as pointed out by the Office of Budget Responsibility, immigration helps to reduce the pressure on the public finances as immigrants are less likely to claim benefits and are more likely to pay taxes than the average citizen.

Looking ahead

More importantly, immigration is important for long-term growth. The main driver of future prosperity is innovation – and innovative places require talent from a mix of backgrounds. As shown by AnnaLee Saxenian, Silicon Valley’s workforce is ethnically diverse. Foreign-born scientists, engineers and entrepreneurs are a key part of the success of the high-technology cluster. Openness to new ideas, skills and networks is essential to generate future economic growth and closing borders will stifle future prosperity.

With such economic benefits why is the anti-immigration mania so powerful? There are two powerful forces at work. First, elements of the popular press are stirring up hatred based on anecdotes, rumours and slurs. They have been joined by a few erstwhile left-wing intellectuals and politicians who, in desperation to get in touch with the working class roots they never had, have resorted to sloppy and partial analysis. Second, in times of austerity and economic stagnation, there is a need to blame somebody else. We have seen it before. During the Great Depression of the 1930s, the Daily Mail was shouting “Hurrah for the Blackshirts”.

The period of stagnation in the 1970s saw widespread racism and the rise of the National Front. When times are hard, the blame culture focuses on “Johnny Foreigner” including immigrants and, that rare breed, EU bureaucrats. The danger is that for some, the bigotry is more palatable coming from a cheery bloke who seems at home in a pub compared to that from the blackshirted militia of the 30s or a bunch of skinheads draped in the union flag in the 70s.

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