Open Europe Blog

Today’s UCL report on the fiscal impact of migration to the UK has understandably provoked a lot of interest.

The top line findings are that:

  • Between 1995 and 2011, migrants from EEA countries made a positive fiscal contribution over that period of more than £4bn, while those from non-EEA countries made a negative contribution of £118bn, compared to an overall negative native fiscal contribution of £591bn.
  • The positive net fiscal contribution of recent immigrant cohorts (those arriving since 2000) from the A10 (the ten Central and East European EU member states that joined since 2004) amounted to almost £5bn, while the net fiscal contributions of recent European immigrants from the rest of the EU totalled £15bn. Recent non-European immigrants’ net contribution was likewise positive, at about £5bn. Over the same period, the net fiscal contribution of native UK born was negative, amounting to almost £617bn.

The obvious conclusion to draw from such studies is that the economic case for EU migration is clear and that ‘benefit tourism’ is simply a myth in the immigration debate (as others point out, there are social and economic arguments for and against migration). Open Europe has consistently sided with those who argue that on net, EU migration is positive for the UK, also from a purely transactional point of view.

Why then the focus on EU migrants’ access to welfare?

We and others have suggested that the Government should prioritise this as an issue for negotiations on the reform of EU free movement – rather than seeking to impose caps on the number of EU migrants or end free movement. Not because we think the majority of EU migrants are ‘benefit tourists’ but because that, unlike many other EU states, the UK offers effective income support to low-paid migrants. This creates some unintended consequences.

Again, at the aggregate level, free movement brings economic benefits. But the aggregate net benefit masks net losers (similarly, there is no such thing as a typical EU migrant – they perform different jobs, earn different wages and, if they are entitled to claim welfare, may not do so). Nevertheless, it is the duty of governments to come up with policies that mitigate the effect on those who might lose out from migration.

The labour market is the obvious area where the impact of migration is felt differently. The evidence overwhelmingly supports the view that low-skilled and low-wage workers can be adversely affected in the form of greater competition for jobs and a depressing effect on wages, even if the magnitude of this tends to be overstated. Higher-paid workers tend to gain.

This is where welfare does come into it – particularly for a country such as the UK which supports low incomes with fairly generous levels of income support in various forms. ‘Benefit tourism’ is indeed a red herring, in the sense that the vast majority of migrants move to work, not to ‘sponge off the state’. However, as our recent pamphlet argued, it is hard to justify to domestic electorates in economic and social terms why low-paid migrant workers should be immediately entitled to income support paid for by their new host country. These relaxed rules on access to state top-ups not only act as an extra incentive to migrate into low-income jobs, they prevent national governments from targeting these policies at their own citizens.

Many have suggested that reform to EU access to welfare rules is simply about tackling ‘abuse’ and ‘welfare tourism’. This not only stigmatises migrants, the vast majority of whom do not ‘abuse’ the system but simply abide by the current rules, it devalues the fundamental point – which is that it is probably not politically sustainable for national governments, in some instances from the get-go, to subsidise low-income migration via their welfare systems.

Two additional points. First, such a system need not mean that EU migrants are left to fend entirely for themselves, only that like in most other EU countries, benefits are tied to contributions through employment. For example, non-EU migrants who have a right to live in the UK but ‘without recourse to public funds’ are entitled to basic safety net benefits tied to their National Insurance contributions, but not income support. There are also discussions to be had about raising the floor for working conditions in general, including revisions to the minimum wage.

However, secondly, the UK should also be aware of the trade-offs involved. Fewer EU migrants and higher wages – if that is the objective – could well make the UK a less competitive place.

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