HOUSE OF LORD'S REPORT
UNDERMINES EU IMMIGRATION POLICY
The EU is basing its immigration policy on three economic arguments, all of which were comprehensively rejected by the recent report by the House of Lords Select Committee on Economic Affairs, entitled ‘The Economic Impact of Immigration’ (available on the House of Lords’ website).
Significantly, this Committee was about as heavyweight as it was possible to be! All the members were distinguished and included two former Chancellors. The report was unanimous, clear and elegantly written.
Moreover, its argument in general follows that of the study produced by the National Academy of Sciences at the request of the US Congress in 1997 and comes to many of the same conclusions.
France, which has taken over the EU presidency on July 1st, has, according to the Figaro 30/5/08, said its “sujet prioritaire qu’est l’immigration”. Bruce Hortefeux, who is the responsible minister and who is ‘proche de Nicholas Sarkozy’, has proposed a “pacte pour l’immigration”. So we need to take notice of what the French Presidency is prioritizing even if the EU is being sidetracked with clearing up the political wreckage following the Irish referendum.
As with the pronouncements by the EU Council of Ministers and the EU Commission on the subject of migration, Hortefeux’s proposal does not bother with an analysis of the main effects of population change, who would be the likely immigrants and what would be the prospects of integration which will vary according to their cultural difference and other reasons, nor does it engage with the arguments against the touted benefits of immigration to the host population.
Commission President Barroso and then Commissioner Frattini made speeches on 23rd October 2007 introducing the Commission’s immigration proposals, referring back to the EU Council’s decisions at Tampere (1999) and The Hague (2004) but massively elaborating these.
The reasons given by Barroso and Frattini for a continent-wide immigration policy were remarkably sketchy. They are reported in total in this article. They were then supported by a mountain of bureaucratic legislative and regulatory proposals which, of course, are the Commission’s raison d’être.
Barroso said, “It is no secret that our demographics work against the Union; we will have a shortage of labour and skills in the future – this is already the case in some sectors. Our economies and the internal market are dependent on a skilled and mobile workforce. If we want to boost growth and jobs and address demographic change, we must act now. And it only makes sense to act together at the European level”.
Franco Frattini, then the Commissioner in Charge of Immigration Issues, set out his proposals on 13/9/07 in Lisbon:
“We need to consolidate the development of the EU’s migration acquis. On the other hand, this process will include deepening our policies inter alia by means of new legislative proposals and new concepts.”
And his justification was:
“Labour and skills’ shortages are already noticeable in a number of sectors and they will tend to increase. Eurostat’s long-term demographic projections indicate that the total population is expected to decline by 2025 and the working age population by 2011.”
Trying to disentangle these arguments, it is possible to identify three themes.
First, the aim is to boost jobs and growth, that is, overall GDP and not what the House of Lords considers should be the principal economic goal, that is, ‘the per capita income (as a measure of the standard of living) of the resident population’.
Second, it is stated there is a skills’ shortage and a labour shortage now and immigration will solve this, partly or wholly.
Third, demographic change will lead to less workers in the future and, therefore, replacement immigration is necessary.
It is worth looking at how the House of Lords discussed each of these three arguments and how they rejected each one.
First, boosting jobs and growth rather than considering ‘the per capita income of the resident population’. This is what the House of Lords’ report stated.
“GDP – which measures the total output created by immigrants and pre-existing residents in the UK – is an irrelevant and misleading measure for the economic impacts of immigration on the existing population. The total size of an economy is not an indicator of prosperity or of residents’ living standards.”
“GDP per capita is a better measure than GDP because it takes account of the fact that immigration increases not only GDP but also population. However, even GDP per capita is an imperfect criterion for measuring the economic impacts of immigration on the resident population because it includes the per capita income of immigrants, which may raise or lower GDP per capita through a compositional effect.”
“Rather than referring to total GDP when discussing the economic impacts of immigration, the government should focus on the per capita income (as a measure of the standard of living) of the resident population.”
Although the Lords did not draw out the economic lessons, but referred to them elsewhere in their analyses, immigration without capital reduces wealth and capital per head. This reduction has to be offset against any alleged beneficial income effects. In addition, the net fiscal impact of immigrants arriving into a welfare state must also be taken into account
Second, the House of Lords rejected the notion that any existing labour or skills’ shortage can be rectified by mass immigration:
“Rising immigration has not resulted in a decline in vacancies because the number of jobs in an economy is not fixed. Immigration increases both the supply of labour and, over time, the demand for labour, thus creating new vacancies. As William Simpson of the CBI explained, “immigrants do not just plug existing holes in the labour market … they create new demands for products and services which are already available, but also those that cater to the immigration population. So this will, in a dynamic economy, lead to creating new vacancies” as companies seek to recruit more employees to increase production to meet this extra demand. (Q 103) In other words, because immigration expands the overall economy, it cannot be expected to be an effective policy pool for significantly reducing vacancies. Vacancies are, to a certain extent, a sign of a healthy labour market and economy. They cannot be a good reason for encouraging large-scale labour immigration.”
Third, the House of Lords rejected the idea of mass immigration to counter demographic change and ‘solve’ the problem of a fall in the number of workers in the under 65 age group:
“It is frequently argued that immigrants are needed to defuse the “pensions time bomb” by helping to support an increasing population of elderly people in the UK. This argument is usually made in the context of Britain’s rising dependency ration – the ratio of pensioners and children to the working age population. The IPPR presented estimates of the income tax increases required to help maintain the UK pension system if net Immigration was to decline (p.302).”
“A number of witnesses suggested that the argument that immigrants are needed to help maintain the UK pension system is greatly overstated. First, immigrants too grow old and eventually add to the old-age population drawing pensions.”
“Second, as Lord Turner of Ecchinswell pointed out in his recent lecture at the London School of Economics (LSE), arguments for high immigration to reduce the dependency ratio are usually made on the basis of figures which assume that the retirement age remains unchanged, an assumption he described as ‘absurd’.”
“And, as Lord Turner pointed out, a policy of seeking to keep the dependency ratio down via high immigration would require not just a period of high immigration and population growth, but permanent population growth and an ever increasing absolute level of net immigration given that immigrants themselves grow old.”
“Arguments in favour of high immigration to defuse the “pensions time bomb” do not stand up to scrutiny as they are based on the unreasonable assumption of a static retirement age as people live longer, and ignore the fact that, in time, immigrants too will grow old and draw pensions. Increasing the official retirement age will significantly reduce the increase in the dependency ratio and is the only viable way to do so.”
It is fair to say that the British government do not totally agree with these arguments of the House of Lords (the Government reply to the First Report from the House of Lords Committee on Economic Affairs – House of Lords’ website) but its qualifications were scanty and half-hearted and, in the case of the pensions’ ‘time bomb’ downright misleading.
Barroso is now proposing an intake of twenty million workers (plus dependants) with the right to a ‘blue card’ and circular migration, that is the right to move freely between one EU country and another, based on arguments that have been directly contradicted by the House of Lords;’ report.
Despite Britain’s opt outs, the fatuous idea of free movement of persons as well as the voluntary opt-in of the Blair government to certain EU asylum and immigration measures, has meant that there are now reports (BBC 26/3/08) of refugees who have gained access to EU citizenship elsewhere in the EU migrating for the second time – to Britain. Somalis are moving to Leicester, Ghanaians to Milton Keynes and the pro-immigration centre on Migration at Oxford University reports “a substantial movement of Tamils from continental Europe to the UK is under way”. The reason is obvious and why Britain suffers from freedom of movement. The BBC reported “But many of the people I spoke to, including many Tamils and Ghanaians in Milton Keynes, said getting their children educated in English was a key factor in deciding to migrate a second time”. Frattini’s proposals for ‘blue cards’ and ‘circular migration’ will intensify this movement if accepted by the UK.
It is the economic illiterates, like Barroso and Frattini, who now make policy in the EU on immigration as on other issues. The House of Lords remains a constructive and distinguished think tank but, as a whole, it voted to give away more of Parliament’s powers and endorsed the Lisbon Treaty, although some on the Home Affairs’ Committee voted against.
Sarkozy’s grand project for a ‘pact of immigration’ is another area of EU policy where the EU’s political class has aims which are in conflict with the wishes of the people. The popular discontent is slowly forcing its way up the political structures of some EU states. Italy’s new government contains some strong ministers who are determined to end illegal immigration while the Zapotero government in Spain has done a volte-face and is now proposing to pay legal immigrants to return home.
The House of Lords’ report has done an immense service in countering false economic arguments put forward by the EU Commission.
FUTURUS/4 July 2008
Significantly, this Committee was about as heavyweight as it was possible to be! All the members were distinguished and included two former Chancellors. The report was unanimous, clear and elegantly written.
Moreover, its argument in general follows that of the study produced by the National Academy of Sciences at the request of the US Congress in 1997 and comes to many of the same conclusions.
France, which has taken over the EU presidency on July 1st, has, according to the Figaro 30/5/08, said its “sujet prioritaire qu’est l’immigration”. Bruce Hortefeux, who is the responsible minister and who is ‘proche de Nicholas Sarkozy’, has proposed a “pacte pour l’immigration”. So we need to take notice of what the French Presidency is prioritizing even if the EU is being sidetracked with clearing up the political wreckage following the Irish referendum.
As with the pronouncements by the EU Council of Ministers and the EU Commission on the subject of migration, Hortefeux’s proposal does not bother with an analysis of the main effects of population change, who would be the likely immigrants and what would be the prospects of integration which will vary according to their cultural difference and other reasons, nor does it engage with the arguments against the touted benefits of immigration to the host population.
Commission President Barroso and then Commissioner Frattini made speeches on 23rd October 2007 introducing the Commission’s immigration proposals, referring back to the EU Council’s decisions at Tampere (1999) and The Hague (2004) but massively elaborating these.
The reasons given by Barroso and Frattini for a continent-wide immigration policy were remarkably sketchy. They are reported in total in this article. They were then supported by a mountain of bureaucratic legislative and regulatory proposals which, of course, are the Commission’s raison d’être.
Barroso said, “It is no secret that our demographics work against the Union; we will have a shortage of labour and skills in the future – this is already the case in some sectors. Our economies and the internal market are dependent on a skilled and mobile workforce. If we want to boost growth and jobs and address demographic change, we must act now. And it only makes sense to act together at the European level”.
Franco Frattini, then the Commissioner in Charge of Immigration Issues, set out his proposals on 13/9/07 in Lisbon:
“We need to consolidate the development of the EU’s migration acquis. On the other hand, this process will include deepening our policies inter alia by means of new legislative proposals and new concepts.”
And his justification was:
“Labour and skills’ shortages are already noticeable in a number of sectors and they will tend to increase. Eurostat’s long-term demographic projections indicate that the total population is expected to decline by 2025 and the working age population by 2011.”
Trying to disentangle these arguments, it is possible to identify three themes.
First, the aim is to boost jobs and growth, that is, overall GDP and not what the House of Lords considers should be the principal economic goal, that is, ‘the per capita income (as a measure of the standard of living) of the resident population’.
Second, it is stated there is a skills’ shortage and a labour shortage now and immigration will solve this, partly or wholly.
Third, demographic change will lead to less workers in the future and, therefore, replacement immigration is necessary.
It is worth looking at how the House of Lords discussed each of these three arguments and how they rejected each one.
First, boosting jobs and growth rather than considering ‘the per capita income of the resident population’. This is what the House of Lords’ report stated.
“GDP – which measures the total output created by immigrants and pre-existing residents in the UK – is an irrelevant and misleading measure for the economic impacts of immigration on the existing population. The total size of an economy is not an indicator of prosperity or of residents’ living standards.”
“GDP per capita is a better measure than GDP because it takes account of the fact that immigration increases not only GDP but also population. However, even GDP per capita is an imperfect criterion for measuring the economic impacts of immigration on the resident population because it includes the per capita income of immigrants, which may raise or lower GDP per capita through a compositional effect.”
“Rather than referring to total GDP when discussing the economic impacts of immigration, the government should focus on the per capita income (as a measure of the standard of living) of the resident population.”
Although the Lords did not draw out the economic lessons, but referred to them elsewhere in their analyses, immigration without capital reduces wealth and capital per head. This reduction has to be offset against any alleged beneficial income effects. In addition, the net fiscal impact of immigrants arriving into a welfare state must also be taken into account
Second, the House of Lords rejected the notion that any existing labour or skills’ shortage can be rectified by mass immigration:
“Rising immigration has not resulted in a decline in vacancies because the number of jobs in an economy is not fixed. Immigration increases both the supply of labour and, over time, the demand for labour, thus creating new vacancies. As William Simpson of the CBI explained, “immigrants do not just plug existing holes in the labour market … they create new demands for products and services which are already available, but also those that cater to the immigration population. So this will, in a dynamic economy, lead to creating new vacancies” as companies seek to recruit more employees to increase production to meet this extra demand. (Q 103) In other words, because immigration expands the overall economy, it cannot be expected to be an effective policy pool for significantly reducing vacancies. Vacancies are, to a certain extent, a sign of a healthy labour market and economy. They cannot be a good reason for encouraging large-scale labour immigration.”
Third, the House of Lords rejected the idea of mass immigration to counter demographic change and ‘solve’ the problem of a fall in the number of workers in the under 65 age group:
“It is frequently argued that immigrants are needed to defuse the “pensions time bomb” by helping to support an increasing population of elderly people in the UK. This argument is usually made in the context of Britain’s rising dependency ration – the ratio of pensioners and children to the working age population. The IPPR presented estimates of the income tax increases required to help maintain the UK pension system if net Immigration was to decline (p.302).”
“A number of witnesses suggested that the argument that immigrants are needed to help maintain the UK pension system is greatly overstated. First, immigrants too grow old and eventually add to the old-age population drawing pensions.”
“Second, as Lord Turner of Ecchinswell pointed out in his recent lecture at the London School of Economics (LSE), arguments for high immigration to reduce the dependency ratio are usually made on the basis of figures which assume that the retirement age remains unchanged, an assumption he described as ‘absurd’.”
“And, as Lord Turner pointed out, a policy of seeking to keep the dependency ratio down via high immigration would require not just a period of high immigration and population growth, but permanent population growth and an ever increasing absolute level of net immigration given that immigrants themselves grow old.”
“Arguments in favour of high immigration to defuse the “pensions time bomb” do not stand up to scrutiny as they are based on the unreasonable assumption of a static retirement age as people live longer, and ignore the fact that, in time, immigrants too will grow old and draw pensions. Increasing the official retirement age will significantly reduce the increase in the dependency ratio and is the only viable way to do so.”
It is fair to say that the British government do not totally agree with these arguments of the House of Lords (the Government reply to the First Report from the House of Lords Committee on Economic Affairs – House of Lords’ website) but its qualifications were scanty and half-hearted and, in the case of the pensions’ ‘time bomb’ downright misleading.
Barroso is now proposing an intake of twenty million workers (plus dependants) with the right to a ‘blue card’ and circular migration, that is the right to move freely between one EU country and another, based on arguments that have been directly contradicted by the House of Lords;’ report.
Despite Britain’s opt outs, the fatuous idea of free movement of persons as well as the voluntary opt-in of the Blair government to certain EU asylum and immigration measures, has meant that there are now reports (BBC 26/3/08) of refugees who have gained access to EU citizenship elsewhere in the EU migrating for the second time – to Britain. Somalis are moving to Leicester, Ghanaians to Milton Keynes and the pro-immigration centre on Migration at Oxford University reports “a substantial movement of Tamils from continental Europe to the UK is under way”. The reason is obvious and why Britain suffers from freedom of movement. The BBC reported “But many of the people I spoke to, including many Tamils and Ghanaians in Milton Keynes, said getting their children educated in English was a key factor in deciding to migrate a second time”. Frattini’s proposals for ‘blue cards’ and ‘circular migration’ will intensify this movement if accepted by the UK.
It is the economic illiterates, like Barroso and Frattini, who now make policy in the EU on immigration as on other issues. The House of Lords remains a constructive and distinguished think tank but, as a whole, it voted to give away more of Parliament’s powers and endorsed the Lisbon Treaty, although some on the Home Affairs’ Committee voted against.
Sarkozy’s grand project for a ‘pact of immigration’ is another area of EU policy where the EU’s political class has aims which are in conflict with the wishes of the people. The popular discontent is slowly forcing its way up the political structures of some EU states. Italy’s new government contains some strong ministers who are determined to end illegal immigration while the Zapotero government in Spain has done a volte-face and is now proposing to pay legal immigrants to return home.
The House of Lords’ report has done an immense service in countering false economic arguments put forward by the EU Commission.
FUTURUS/4 July 2008