|Posted on December 27, 2014 at 1:20 PM|
Written by Peter McCall
It is important to understand that people’s opinions on the topic of immigration relate to three key areas: public opinion, politics and economics. The reason that immigration, I believe, has caused such uproar in the last few years is due to the circumstances that British people found themselves in during the so-called ‘Credit Crunch’. It is, however, completely different to consider the effect of immigrant workers on the people of the UK than to consider the effect on the UK itself. Whilst taking into account political and ethical factors, as well as the media, one would be forgiven for assuming that immigrant workers were a great harm to our nation, but I do not believe the truth is so black and white. As David Goodhart expressed on the BBC Radio 4 programme ‘Immigration good for whom?’, “I think … immigration and race have been so closely entwined in this country.”
The first way in which immigrant labour affects the UK is by increasing the size of the labour supply. As there are more people in the UK, this means there are more available workers to fill vacancies which therefore causes firms to decrease the wages they offer for certain jobs, assuming all other things being equal. There is increased competitiveness in the labour market. The amount that wages fall by overall depends on the elasticity of labour demand. If labour demand is inelastic, wages are likely to decrease more than if labour demand is elastic. The elasticity of the demand for labour depends on whether or not labour can be replaced by capital. If labour demand is inelastic, for example, labour cannot be replaced by capital (to an extent) so there would not be many jobs created and so labour and capital are not good substitutes in this case.
If firms pay lower wages on average due to a larger labour market, firms’ profits are going to increase in general because their revenue is likely to stay roughly constant while their unit labour costs fall. On a national scale, if firms are increasing profits then economic growth is likely to occur due to a rise in aggregate demand due to increased investment by firms. There is also likely to be an increase in short-run aggregate supply because the price of labour is lower. As wages have decreased due to an increasing labour supply over the last ten years, productivity in the UK has actually fallen. This is because the incentive to work is lower for people as they are getting paid less. It discourages workers from working overtime which, in turn, decreases the output of firms as their staff are working fewer hours. Therefore, whilst the GDP of the UK would increase overall as new workers found jobs, the increase in GDP may or may not increase the productivity of the labour force. Typically, it would not increase productivity. One option for UK firms to avoid the decrease in productivity that may arise is to keep wages constant or to increase wages. This means fewer or no immigrants are required to fill jobs. As it is at the moment in this country, immigrants are, in my opinion, entirely necessary because firms are not willing to pay higher wages. That is, however, not the only benefit of increasing wages. It would also mean that people would have to pay more tax to the government because they would pay more of their wage as income tax than they had previously.
The effect of immigrant workers on the budget is a hot topic within the media. Debates surrounding benefits and taxes, rightly or wrongly fill the pages of tabloid newspapers. The question to ask is: ‘Do immigrant workers strengthen or weaken the budget?’. I personally agree with the head of the Office for Budget Responsibility, Robert Chote, who once said the following when talking about immigrant workers: “Because they’re more likely to be working age, they’re more likely to be paying taxes and less likely to have relatively large sums of money spent on them for education, for long-term care, for healthcare, for pension expenditure”. It is true that the large majority of immigrants in the UK tend to pay more in taxes than they take from the government as benefits. As mentioned above, immigrants also tend to be relatively young so will require very little in the way of healthcare.
In conclusion, the debate about what constitutes British identity goes on, and will continue to be a controversial topic. It is clear from reports that immigrants in the UK contribute a huge amount to the British economy. But with increases in unemployment amongst British-born residents, questions linger about how the government will deal with issues of identity, employment and the future of a multicultural United Kingdom. The debate around immigration is one that I find fascinating and the issue having such wide-spanning media coverage has only been constructive for those who truly want to find out the real truth about whether immigrant workers are beneficial to the United Kingdom. To come to a decision, David Goodhart, the leader of the Demos Advisory Group’s article in the Financial Times titled ‘The debate about immigration to Britain is over’ was what swayed me to decide that actually immigrant workers are beneficial for the UK. Without making this a political debate, the Conservative Party, under David Cameron, has reduced immigration from outside the EU (the only immigration the government can control) to the lowest level for over ten years. We will not return to the extremely high numbers of immigrants from pre-2007 years for a long time if the next government continues in the footsteps of the Conservative Party. Therefore, as immigrant workers become slightly more scarce, they are likely to be more beneficial to the UK economy. There is no doubt that there will always be a role for immigrant workers in the UK. Immigrants are an essential part of the United Kingdom’s economy. These days, with unemployment at a 25-year high, immigration is inevitably moot. For me to write that I believe immigration is beneficial to the UK at the age of 17 may seem audacious, because I have no doubt that my view on immigrant workers’ worth to the economy may be somewhat different if I were struggling to find a job due to immigrant competitors. There are many moral and ethical factors that one could bring into the debate, however, writing with my ‘Economics hat’ on has led me to believe that immigrants are beneficial to the United Kingdom for the reasons stated in this response.