Is immigration important for the United Kingdom’s economy? – Blog post
An immigrant is defined as a person who permanently moves to a foreign country to live there. Immigration has been a controversial point for the UK especially with the arrival of Brexit. Immigration can and has impacted the economy in various ways and is a vital part in the economic growth of the UK.
How much of the population is made up of immigrants?
A 2011 Census Analysis performed by the Office of National Statistics and produced jointly with the Home Office explores the ethnicity and religion of those born outside the UK. In 2011 13% of the population (7.5 million people) in England and Wales were born overseas.
What the 2011 Census also showed us was that 46% (3.4 million) of the foreign-born population had identified themselves with a white ethnic group. 33% (2.4 million) identified as Asian or Asian-British and there was only 13% who identified with Black/African/Caribbean/Black British. However, of the 56 million non- foreign inhabitants of England and Wales. 3% were Black/Caribbean/African/Black British, 8% were Asian and 86% were white.
Nonetheless, this Census was proof that the UK was getting more ethnically diverse with their being a constant increase in the scale of ethnic groups since 1991. Since 1991 there has been a decrease in the amount of people identifying with a White ethnic group. It has decreased from 94% to 86% in 20 years. However, this could also be due to immigrants having children and not necessarily immigration.
How much of the UK work force is made up of immigrants?
An investigation from The Migration Observatory by the university of Oxford showed that roughly 17% of the people employed in the UK in 2018, were born abroad. Of this 17%, 10% of them are non-EU born and 7% are EU born.
Furthermore, it showed that male migrants are more likely to be in work than UK born citizens. With the percentage of male migrants in work was 83%, whereas the percentage of UK born was 79% in 2018. Likewise, statistics showed that unemployed migrants were less likely to claim unemployed benefits over the unemployed UK born. Being 18% of unemployed migrants claimed benefits compared to 26% of unemployed UK born workers.
Nevertheless, immigrants take up many high skilled jobs. Migrants workers born in India, East and Southeast Asia and EU-14 countries had a larger possibility of ending up in a high skilled job rather than UK born. In 2018, 45% of workers born in India were in high-skilled jobs such as IT and communication specialist. On average, in 2018 there were 30% of foreign-born immigrants in high-skilled jobs compared to 28% of UK born workers in high skilled jobs. On the other hand, migrants are also more likely to be in low skilled jobs as well. As data also shows that 15% of foreign-born workers are located in low-skilled jobs compared to 10% of UK born workers. Likewise, in 2018 it shows that a third of workers born in new EU member states were situated in retail and manufacturing jobs.
The UK’s ageing population
Older people in the UK are taking up a larger proportion of the population. It was recorded by AGEUK that of the 52 million people living in the UK that nearly 12 million people are aged 65+. Among this 5.4 million of them are aged 75+, 1.6 million are 85+ and 500,000 people are 90+. Statistics have shown that in some regions there can be as many as 33% of the population being over 65+.
The ageing population has occurred due to the improvement of medicine and technology and as a result the average life expectancy has increased from 77 years in 1996 to 81 years in 2016. What this means is that many pensioners are living longer. This means businesses and the government will have to pay out more pensions. However, the birth rate has also decreased being 2.93 births per women in 1964 to only 1.80 births per women in 2016. What this means is that the UKs population is getting older; however, the workforce is decreasing as there are less children being brought into the UK.
As a result, in the future there will be less jobs being filled for a company. This means that the company will have less workforce and won’t be able to supple as much goods as before. Moreover, it means that if there are less of a young population that many companies will go out of business as their target audience is teenagers. Therefore, some companies might not be able to pay their pensioners as they won’t be able to afford it. In addition, there will be a large decrease in the workforce meaning less tax for the government.
Nevertheless, immigration is a good solution to combat the UK’s ageing population as they can increase the workforce. This means that businesses have a wider variety of people to sell to and a larger workforce to output more goods and services. It also means the government is getting more tax which can be again put into the economy.
The Circular flow of income
The circular flow of income model is a basic economic concept which roughly shows how money flows through the economy. Households provide firms with work and other factors of production in return for income. Households also spend their money with firms in return for goods and services. Excluding, other factors such as savings or taxes, the circular flow of income model represents the basic understanding of how economies function.
One thing that immigration does for the economy is increase the labour force. This was proven as it previously states that roughly 15% of the UK’s workforce is of a non-white ethnic group. What this does is increase the factors of production for firms meaning they get more labour. Ultimately, this can increase the supply of many products which can further result in them being lowered in price. Moreover, most immigrants will work below minimum wage. As a result, the cost of production for many businesses will go down meaning they can lower the cost of their goods and services. Additionally, immigrants can do more of the less desirable jobs and as a result will make the economy more efficient. This is proven as statistics shows that migrants were more likely to work the night shift and in non-permanent jobs over UK born workers. Likewise, the increase in the labour force means more taxes for the government which can be put into education and healthcare. Finally, many immigrants who come over are already educated and are expert workers which can improve the skill of the workforce and ultimately improve their efficiency. They can also apply for jobs where there is a distinct lack of workers. For example, for the NHS. Of the 1.2 million workers in the NHS, 139,000 are foreign. Boris Johnson also plans on brining in more immigrants to help increase the workforce of the NHS.
The increase in the workforce means that the quantity of goods supplied, and quantity of goods demanded will dramatically increase as an increase labour force has the capacity to produce more goods. Due to this, the amount of economic activity in the economy increases which subsequently leads to economic growth.
However, one problem that occurs with immigration is the fact that many of the workers will send money back to their homeland or back to their family to the country they originated from. Consequently, the amount of money flowing the economy decreases as money is being taken out of the economy.
Businesses
Most immigrants that come to the UK are already very well educated. Because of this they can start-up businesses. This can provide many benefits for the economy. The most basic one being the increase in the amount of businesses means an increase in the amount of jobs available. As a result of this more goods and services are being produced in the economy as the labour force has increased. This will subsequently lead to economic growth there is more economic activity. Nonetheless, the increase in the number of workers means the increase in the amount of expenditure in the country as these workers are going to want to spend their wages. Meaning that the increased rise in supply is met with an increase rise in demand. Moreover, the increase in the supply means that the UK can be more self-sufficient as people would not need to import as many goods from overseas if they are able to buy it in the UK. Thus, less money will be going overseas and out the UK economy. This will also reduce our imports which is very beneficial as you want your imports to be less than your exports. This is because if you have more imports than exports you have a trade deficit which can cause a country to become in debt.
Not only this but many successful UK businesses are influenced by immigrants. Zirra reports shows that of the UK’s top ten unicorn businesses (ones valued over £1billion). There is at least one immigrant in the founding team. Not only this but, there have been many businesses based of different foreign cultures and foods brought by immigrants. For example, there are roughly 8,500 Indian restaurants in the UK which can supply hundreds of thousands of jobs. Likewise, there are over 7,000 Chinese restaurants in England alone. This will account for a lot of expenditure and money going through the economy and shows that immigration is responsible for some of the most successful restaurants in the UK.
Finally, immigrants are proven statistically to have higher chances at starting businesses. A 2016 study from the Global Entrepreneurship Monitor (GEM) found that immigrants are 3x more likely to entrepreneurial than people born and brought up in the UK. The report found that immigrants in the UK show the highest level of “Total Early-Stage Entrepreneurial Activity.” A more recent study in 2014 showed that 1 in 7 businesses in the UK are founded by immigrants.
Education
Many immigrants study in the UK due to its brilliant education. A report from September 11th, 2019 states that there are roughly 450,000 foreign students studying at UK universities. As a result of this it will lead to a greater skilled workforce as these students will then go onto educated and high-class jobs that are required in the economy. This will again increase the potential production capacity of the workforce as there are more skilled workers.
Lower-class
Many studies show that immigration affect the lower-class citizens the worst in the economy. Studies from University College London finds that an influx of immigrants the size of 1% of the UK born population leads to a 0.6% decline in wages of the 5% lowest paid workers in the UK economy and increase in the wages in the higher paid workers. This is because, since immigrants are more likely to work for lower wages, it makes them a more desirable workforce than the UK born workers. This means immigrants are more desired workers and for UK born workers to want to keep their jobs they must accept the lower wages. As a result, business owners increase their wages as they spend less on the cost of production as the wages are lowered.
Due to this, many lower-class people rightfully hate immigration. This is because, immigration has harsh effects on the quality of lives of the lower 5% of the UK born workforce and badly effects their standard of living.
Economic effects of too high immigration
A study from the Bank of England showed that when immigration gets too high it can negatively affect wages. It showed that if immigration were to rise by 10%, on average wages would fall by roughly 0.31%. However, this was worse for the semi/ unskilled sector being that a 10% rise in immigration could lead to over a 2% decrease in wages. This is due, to the fact the job market will become more competitive as there will be a higher demand for jobs.
Furthermore, it can be assumed judging by ONS data and the ministry of housing, that due to the rise in immigration over the last 25 years, from 1991 to 2016, house prices have increased over 20%. This is due to the constant increase of the demand for housing which caused the dramatic increase in price. Moreover, England already has a housing crisis where 320,000 people are homeless in Britain alone. This is because houses are too expensive and there are not enough to meet the demand of people. Therefore, the constant rising population will make this significantly worse as it will only increase the demand and the price of housing. In places like Leeds, house prices are 7x the average yearly wage making them extortionate. It is estimated that England need roughly 240,000-250,000 houses to be built a year to tackle this problem and increasing immigration will only make this number higher. This will have a huge economic affect as it will cost close to billions to do so.
CONCLUSION
To conclude, immigration is an integral part of the UKs economy as it has many benefits. It drastically affects the labour force as it increases the labour force and supplies the UK with many beneficial jobs. Along with increasing the potential production capacity of the UK. Although, it does affect people’s wages and jobs it also supplies many jobs to the UK’s economy and is the reason for many people’s sources of income in the first place.