Sunday, July 3, 2016

What is the economic effect of a cut in immigration?

I finally see how neoliberal economists think, and New Labour for that matter. In this article from the blog, 'Economics -Help (helping to simplify economics), they look how the coming loss of immigration will affect the UK economy. The whole article just looks at the business affects of immigration and does not consider the social effects at all. As they say, economists know the price of everything and the value of nothing.

My old company never trained any apprentices for years, so I guess that helped towards making high short term profits and the directors got good bonuses. Then as the workforce started to age and retire they used skilled Eastern European immigrants to make up for shortages. There's loads of British youngsters doing horrible jobs who would have loved to have well paid skilled jobs but they were neglected and many don't even have jobs at all  That's the neoliberal business model, and the British have had enough of it.

The UK saw net migration of 330,000 in the last year. If net migration were to fall significantly – how would this affect the UK economy?

Net migration is generally difficult to predict, but there are good reasons to assume this is likely to fall in future years. Net migration will likely fall because:
  • Climate post-Brexit has seen a rise in racist incidents and hostility towards migrants. This will deter many from coming, and may even encourage some migrant workers to move elsewhere.
  • Lower UK economic growth and higher unemployment will reduce economic incentive of people to come and work in the UK.
  • UK main political parties seem committed (at the moment) to ending free movement of labour, whatever the cost in terms of losing full access to Single Market.
If the UK were to see a fall in immigration, how would that affect the economy?
1. Lower economic growth.  Net migration, ceteris paribus, leads to higher real GDP. This is because net migration, with more people of working age coming to the UK, increases the labour supply and increases aggregate demand (migrants spend in UK). If migration falls, then this boost to real GDP will be lost, and we will have a relatively lower real GDP.


The UK has a skills shortage in many industries and sectors. These include highly skilled professions, such as doctors, nurses and plumbers. A fall in net migration could cause more vacancies in these areas. This could lead to waiting lists rising in the NHS and a shortage of plumbers, builders.
However, supporters of cutting net migration argue that we can have the best of both worlds, allowing skilled workers to still come, only stopping ‘unskilled workers’. In this case, we can pick and choose which migrants come.
However, this kind of selective immigration policy will be difficult to implement in practise and may require much more stringent border controls and checks. Also, If UK leaves the EU, it may make the UK less attractive for skilled workers that we want to attract.
Another argument is that the UK should be self-sufficient in skilled labour. If we need to employ migrant labour to fill labour shortages, a better solution is to increase training for these jobs. However, this is easier said than done. It will take a long time, and also may require changing cultural attitudes – e.g. in UK graduate degree is generally seen as more desirable than practical vocational qualifications, such as plumbing and electrician.


Ignacio said...

"lower economic growth"


I'm done with the GDP arguments, the people who keeps repeating them is the same people who is running around like headless chickens crying about "populism!". They don't get it...

Kaivey said...


Random said...

Remember we will be cutting unskilled EU migrants who wouldn't get a work visa. That frees up slots for higher skilled individuals across the globe - but they should only be filled if there is a genuine skill shortage.

Ryan Harris said...

I think you have to step back and look at how the immigration debate is framed to understand the shift that is occurring. Above in the article, you've done well at reproducing the mainstream elite (academics, politicians, business leaders) argument by those who are safely holed up (or mired) in the impenetrable concrete palaces of their creation. Look at your preface and how you defined worker-and-employer relations as central....

The people who are demanding change in immigration priorities are people that are no longer attached to the old fashioned two-party system which largely represented their employer-employee relationships and related identity in the political world.
Fewer and fewer participate in the old fashioned corporate structure. Those in rural areas in particular have been highly innovative in boosting their productivity outside the corporate world. To those in government, universities, and companies, it is probably mostly invisible.
Anyone who rejects this old outmoded view of the economic world is now termed a racist, crazy, angry loser or other common label. But really if you are willing to ponder the significance, it represents a breakdown of the old capitalist ideal of company and employee which dominated since the breakdown of the fuedal agrarian order. It is no coincidence the "innovative" companies right now (uber/airbnb etc) are also riding the wave of increased productivity that comes with eliminating the managers and formal company structure that defined our lives, the big cities that arose and the suburban breeding ghettos that produced children were necessarily dependent on immigration for skilled and unskilled workers, and those who refused to move to the cities or refused to allow others to move were viewed with hostility and suspicion.

In the growing sharing economy of software and ideas which have becomes all but free, and peer-centric commerce which is replacing old centrally directed corporate structures, and ending regulatory monopolies, employer and employee relationships are never going to be the same. Money and capital, along with ideas flow cheaply and freely, but jobs, pollution, and real resources are made scarce, so immigration is no long a paradigmatic necessity for people who aren't dependent on the centralized command-control designed corporations. Thanks to statistics, big data and cheap rates, Capital is also available and cheap to everyone, whether Rolls Royce's next Jet Engine or the guy next door making bee-boxes has access to market funding.
The corporations aren't dead and gone but they are losing control of politics and the sooner people understand that, the better, and perhaps we can move beyond the racist labels and talk about immigration in a way that is cognizant that the 'bitter losers' supporting Trump and UKIP are simply operating in the newer reality that the old folks don't yet realize exist because they don't participate in, and haven't been exposed to the newer facets of the economy yet and remain quite ignorant.

Ignacio said...

Ryan I answered (kind of) your question about high unemployment in Spain on this post:

In case you still are curious.

Re. what you say, one of the problems right now is that there is a divide between the goods . I wouldn't dump every 'brexiter' in the same category either, but in polls the reasons for voting in favor of Brexit were varied and 'racism' was not one of the main ones either.

I just have read Austria will be repeating elections due to possible fraud, the traditional party divides there have completely disappeared as the contest was between Greens (winner by slight margin) and 'Liberals' which according to mainstream is a far-right party. Austria has always been a bit ahead of other countries in continental Europe, but is consistent with the Brexit trend and other things you mention in your post.

One of the problems right now though is that there is a big divide between the traditional means of productions and organization with traditional corporate structures and government lobbying and other forms of production, many of which barely produce any monetary income for the producers or is a pure subsistence economy while parasites still rip off most of the surplus (Uber is a good example!).

At the end of the day people still needs a monetary income and the manufactured goods produced by traditional corporations, food, houses, etc. While this situation clears up there will be a lot of pain, and the result of all it is yet to be seen, as it could easily end up on serfdom and some sort of new feudal relation...

Of what use is if I invest 100's of hours on open source software if traditional corporations and their overlords are still extracting rents and charging for breathing air, charging money you have to acquire from participating in the controlling system?

Unless we truly acquire control and sovereignty over our monetary system this is not going to change for the better, as long as most of those goods (specially the necessary ones, like housing, food, energy, etc.) are still traded still within the system.

The next steep is to see a larger expansion of decentralized energy production, and an extension of local food produce commerce outside of the mainstream system. If those practices are not extended I cannot see real change.

Random said...

"Of what use is if I invest 100's of hours on open source software"

In a different world, you get paid for it on the Job Guarantee.

Tom Hickey said...

Just as feudalism was created and was dependent on the field, so to capitalism created and was dependent on the factory. Now with agribusiness and exported capital and foreign factories the norm in the developed world, a new model is taking shape and some people are getting scraped by the still rough edges. The pundits and media still don't know how to deal with this, so they create explanatory narratives.

Ryan Harris said...
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VFM said...

If population growth drives economic growth, lets boost the population, and hence the economy, by importing a bunch of Third Worlders. What could go wrong?

Kaivey said...

The real problem is imperialist capitalism, which drives the third world countries into poverty, so that millions of people feel forced to go and leave their families and friends behind, and then go to live in a strange place where they are often exploited again. Let's hope we can sort out the terrible poverty that's in Africa and in many other parts of the world.

Ralph Musgrave said...

It's completely unrealistic to expect profit motivated firms to spend an adequate amount on education and training. Education and training is a job for the state, and it's the state in almost every country that actually funds the vast majority of education and training.

Random said...

Agree with Ralph.

Ryan Harris said...
This comment has been removed by the author.
Neil Wilson said...


One country's 'skilled immigrants' is another country's 'brain drain'.

If you expect any state to train and educate people to a high degree, then they can't be thieved by other states who can't be bothered.

That is after all what happened in firms. The ones that did the training stopped doing the training because of the free-rider problem. The result was no training and pushing the whole process up to the state level where we do the same with 'immigrants'.