Examination of Witnesses (Questions 1
- 19)
TUESDAY 9 OCTOBER 2007
Professor Robert Rowthorn
Q1 Chairman:
You are very welcome to the Committee. You very kindly sent us
quite a lot of stuff to read, so we have had that. Is there anything
you want to say before we go to questions or can we go straight
on to the questions?
Professor Rowthorn: Just go straight on to the
questions.
Q2 Chairman:
If I may start, the number of migrant workers in the United Kingdom
has increased significantly in recent years and it is said that
there is no obvious limit to immigration. I just wondered whether
you would like to tell us whether you think numbers matter in
the analysis of the economic impacts of immigration and, if so,
why, and in that case is it possible to identify an optimal number?
Professor Rowthorn: Numbers matter because they
contribute to population growth. That is the most important aspect
of them. That is not true, of course, if you have a large number
of migrants who are temporary; they come in and leave and they
are replaced by others. That does not have so much effect, but
in practice large-scale migration does tend to lead to population
growth because a lot of people stay. The question is, what is
the negative impact of population growth? One of the impacts of
population growth is on the demand for housing. In the longer
term it is likely to be the dominant element in the growth of
housing demand and that puts pressure on space, for example. There
is already quite a lot of conflict growing about housing policy
now with the projected building of several million more houses
over the next 20 years, but if you think beyond that there will
be more and more housing demand and I think that is an important
factor. Secondly, population density will increase and that will
mean that there will be less space per head, in the south east
of the country particularly. Population growth is in my view the
biggest economic downside of large-scale immigration.
Q3 Chairman:
Have you expressed any sort of view about the optimal number of
people which you could envisage us coping with?
Professor Rowthorn: The debate on optimal population
size is always roughly centred on what you have at the time or
slightly less.
Q4 Chairman:
That is the normal view most people have, is it?
Professor Rowthorn: I think it is, that is right.
People in Australia, for example, which is a very big country,
argue that the carrying capacity of Australia is actually quite
low because of water issues. Not being an expert on water, I cannot
say whether we are going to run out of water here or not.
Q5 Lord Lamont of Lerwick:
On this precise question of "no obvious limit", could
you answer it just in relation to the labour market, leaving housing
out of it? Would you think it a lump of labour fallacy to say
that, for a given number of vacancies, if we filled those that
would not impose a limit because, with immigration going on over
the longer term, whatever the number of vacancies, probably that
number of vacancies would still be there in ten years' time if
you had an endless supply of labour coming into the country?
Professor Rowthorn: Yes. I think the evidence
is that, given time, countries can absorb any number of people,
so it is not a matter of there being a fixed amount of jobs over
the longer term. In the short term that might be different. In
other words, if there is a lot of immigration coming into an area,
for example, it might have an effect on the local labour market.
Likewise, if there were a large number coming into a country,
it might have an effect, and despite the claims that large scale
immigration has no effect on employment for locals there is some
evidence that it does. There is mixed evidence that it has an
effect here and there is some debate about it, but I would say
that the evidence on balance is yes, it does have an effect, but
that is a relatively short-term effect. One does not really know
in the long term. If you had immigration of highly skilled people,
entrepreneurs from abroad, for example, and then you had immigration
of unskilled people and you had a free market in capital and you
built enough roads and everything else, in X years' time the economy
would be like it is now, but bigger. The answer is, I think, that
there is a lot of hot air about the benefits and economic costs
of immigration because I think, by and large, they are not big
in aggregate one way or the other, with large-scale immigration
you could have a much bigger population with a similar per
capita income, so it is not terribly beneficial to the local
population but it is not terribly harmful either.
Q6 Lord Lamont of Lerwick:
But in the labour market there is no obvious limit?
Professor Rowthorn: No, absolutely not—if
you wait long enough, of course. "Of course" is perhaps
not the right term.
Q7 Lord Sheldon:
You have said that the central estimate of migration was too low,
but since then, of course, the estimate has increased. How would
you see these latest estimates?
Professor Rowthorn: The latest estimates seem
to be virtually identical to the ones I invented myself in my
submission. As far as I can tell, they hardly differ. They are
not published in full but the assumptions behind them seem to
be more or less what I assumed, and so I would imagine that the
long term projections are very similar. Migration, according to
those, implies over the next 65-70 years a growth in population
of about 24 million; in fact it would be about 24 million. If
we had what is called zero net migration, that is if we have the
same number of people coming in as leaving the country, the population
would remain roughly constant. People used to think it would fall
but now the birth rate is officially recognised as being higher
and so if we had zero net migration, which is a pretty tough target,
we would have a constant population, but with the kinds of figures
of 185,000 a year—I think I assumed that; it could be 190,000,
I do not remember—we will get an increase of population
of more than 20 million.
Q8 Chairman:
Twenty million in what period? By what date?
Professor Rowthorn: I think it is 2074. It is
a 70-year time horizon from the 2004 base. The thing is that quite
a lot of that population increase is due to the fact that migrants
are younger typically than the average population and they tend
to have more children per head. That is quite an important additional
element in population growth. It is not just the people who come
in; it is the fact that they have children. They die, of course,
but the children effect outweighs the death effect.
Q9 Lord Sheldon:
But your estimate was made some time ago. I do not see how you
could have anticipated the changes that we have seen more recently.
Professor Rowthorn: That is not true. It was
based on a 2004 basis but what I did was change the migration
assumption of the Government Actuary's Department and I changed
the fertility assumption. But I changed both of them more or less
in exactly the same way that it appears that the Government's
statisticians have changed them now. When it comes to either migration
or fertility they are projections in the sense that you give me
a number and I will make a projection. If you say, do I believe
that that is what the true figure will be, all I can do is shrug
my shoulders and say, "Who knows?".
Q10 Lord Macdonald of Tradeston:
Could I ask you about the assumption of population growth and
fertility? At one time the Irish used to have very large families
and they came down to, as it were, British levels. Would the same
be true of Asian immigrants?
Professor Rowthorn: They are coming down but
they are still quite high. The thing is that the non-Asian population—I
do not want to use the word "indigenous" because we
are all in some sense migrants—has risen somewhat, their
fertility has risen somewhat.
Q11 Lord Macdonald of Tradeston:
Did you factor in a decline in the birth rates of the young immigrants
we are having now?
Professor Rowthorn: No. All I did was look at
what the latest figure is, which has been rising. The fertility
rate in Britain on average has been rising quite strongly in the
last few years. Everyone assumes it is very low and the great
thing about demography is that once something becomes obviously
true it ceases to be true. It was obviously true we had a very
low fertility rate and then, of course, it changed.
Q12 Lord Paul:
Professor Rowthorn, how do migrants' characteristics, including
their skill levels and intentions of stay (in particular temporary
versus permanent), shape the economic impacts of immigration?
Professor Rowthorn: First of all, intentions
are not necessarily outcomes. Many people have always emigrated
to other countries temporarily but somehow have never gone back,
so I think it is outcomes, not intentions. Theoretically, if you
had a large number of temporary migrants who worked for a few
years and went home afterwards, that would obviously rejuvenate
the population, as it were, on a temporary basis, because they
grow old somewhere else, and it might have a significant fiscal
benefit. Of course, one of the things is that it depends on the
country people come from, because the Irish experience shows that
if the sending country develops dramatically then emigration flows
dry up; in fact, they may go into reverse. If you think of the
immigration from eastern Europe, that may go into reverse if these
countries develop very successfully. Even if it does not go into
reverse, it will tail off. This is one of the problems of predicting
migration from eastern Europe, that it depends on what happens
economically.
Q13 Lord Layard:
Talking about immigration from eastern Europe, you have suggested
that it has had an adverse effect on the employment prospects
of local workers. What do you think about international and UK-based
studies, such as the one carried out by the DWP in 2006, that
do not detect any significant impacts of immigration on wages
or unemployment?
Professor Rowthorn: The point is, what you mean
by statistical significance? It is like fitting a curve. The data
are scattered all over the place and you do the best fit you can
and the curve slopes upwards. Statistically it may be insignificant
but it does not mean you cannot discern an effect; it means there
is an enormous amount of noise in the system. I have to say that
on the studies done on the impact of immigration on the British
economy there has been a somewhat unfortunate presentation, I
might say spin, in which they say they do not show any effect.
For example, Dustmann did a study based upon the Census of Population
which revealed that migration had a big effect on unemployment,
a statistically significant one. The study referred to by the
DWP found that in all the sophisticated formulations migration
had a fairly strong effect but it was not statistically significant,
which means that there is an enormous amount of noise and it looks
as though it has had an effect but you cannot be sure about it.
That is not the same as saying there is no discernible effect.
It did have a discernible effect but you could not be sure about
it. There is an article by Angrist and Kugler on migration in
the European Union. It found that migration did have a big effect
on local employment and yet it is always cited as an article in
which the effect is small, which is not true. It finds that the
effect is big and the article is in the Economic Journal and is
by famous econometricians. I would say myself that there is some
evidence that immigration has a negative effect but the evidence
is not very strong in the case of the UK. To put it differently,
it is conflicting. The trouble is that in econometrics in this
area it is so difficult to come to clear estimates because there
are factors which obfuscate things, and that means that very good
econometricians can come to very different conclusions. It is
not true to say there is no evidence that immigration affects
the labour market but it is true to say that there are conflicting
views.
Q14 Lord Griffiths of Fforestfach:
I would like to go back to the question raised by Lord Paul on
the skills of immigrants and so on. Within a traditional economic
model, your assumption that immigration does not really increase
the per capita income of the citizens of a country I buy,
and yet when I go to where I have a small place in Wales I see,
for example, these east European immigrants who are fairly young,
they have left their homeland to go there and they are determined
to learn English. When it comes to serving in restaurants and
so on they have a real sharpness about them. The question I ask
myself is, are we comparing apples and apples? Is there any dynamic
effect which could work, just to test your hypothesis, which might
give some edge which we are not quite capturing?
Professor Rowthorn: Yes. There are two aspects
in which this might be true. First of all, there is the agglomeration
or economies of scale aspect that places get bigger; cities get
bigger, they are more dynamic, and the second is that immigrants
are selected, that, as it were, we tend to get the best. Some
people regard them as the best because the countries they come
from have a better work ethic, but the alternative may be that
the ones who move are the best, so we do well out of them. The
problem is that it is hard to judge but studies in the United
States suggest that that is not a terribly important effect in
aggregate. It may be true for particular sub-groups of people.
What bedevils the debate on immigration are questions like,, is
immigration a good thing, does immigration make us richer? It
is like saying, is food a good thing, does food make us healthier?
The answer is yes, but on the other hand you might eat the wrong
things or you might eat too much. The answer is that it is a meaningless
question: is immigration good for us? We could not survive without
immigration. If you think in purely self-interest terms we need
immigration. The question is how much and what kind. On the other
hand, I would say that I do not think that one can frame the migration
issue simply in terms of our own self-interest. We have to think
of the impact of immigration upon the countries that people come
from and also the fact that it offers job opportunities for the
people who come who otherwise might be poor. I have to say I felt
irritated by the notion that very large-scale immigration is of
enormous benefit to us. On the other hand, I am a bit unhappy
with the view that our policy should be solely based upon our
own self-interest.
Q15 Lord Skidelsky:
I want to go back, Robert, to your earlier discussion, and this
is in relation to your papers as well. If the aggregate effects
on a local population are near nil, not very much either way,
but there is a positive effect on the migrants, is that not an
argument for saying that aggregate welfare goes up with net immigration
if you abstract it from other costs which may be non-economic
costs?
Professor Rowthorn: One could argue that, yes.
I find the whole issue of migration to be morally a very difficult
one because there are large numbers of people who want to come
to this country or to Europe to improve themselves. You can see
them drowning periodically in the Mediterranean. I think we cast
the terms of the debate too narrowly. We have to think what our
legitimate needs are and how they balance against those of other
people, and I think we have not had that debate at all in Britain,
absolutely not at all. It explains one of the reasons why the
debate is so conflictual, because people who tend to say that
migration is good are a bit like Schindler in Schindler's List,
finding reasons for saving Jews by saying they were economically
useful to the Nazis. They think they have to prove that immigrants
are good for us. It may be that the immigrants concerned are not
particularly good for us but we might be doing them a favour by
offering them entry. I think we should debate those issues honestly.
Q16 Lord Skidelsky:
But your paper surely says that they are not particularly good
for us but they are not particularly bad for us either, and therefore
if it is good for the immigrants it is good that we should have
immigration on moral grounds or on welfare grounds.
Professor Rowthorn: I do not express any opinion
in that paper. What concerns me, to be honest with you, is much
more the impact of very large-scale migration on the cohesion
of the society, but in an economic sense it does not have that
much effect although it could do in things like housing via its
impact on population growth. I think we should think about this
issue because if we do think about it seriously we can then address
the issue of how we might have a migration policy that benefits
poorer countries and does not necessarily involve permanent settlement
here. You could, for example, with skilled people, have schemes
for African doctors, so that they come here for a time and then
they go back, and that could be tied in with the aid policy. One
can think of all kinds of things like this, but I think one has
to think in those terms and I do not think permanent settlement
is the basic way of helping poorer countries. It may be the way
of helping the particular immigrants but I think the real problem
for the world is the poverty of a number of countries, because
it is poverty of countries that is driving this large-scale migration.
Q17 Lord Kingsdown:
You said that you thought we ought to consider the importance
of it for our own resident workers in terms of immigration policy.
I think you dispute the argument that some migrants in low-skilled
occupations are making a vital contribution, "doing the jobs
that locals will not do", and then you cite two alternatives
to this: first, replacing them with British workers at higher
wages; and, secondly, abandoning some of the activities that can
be maintained only by employing low-cost migrant workers. In practice,
can you say what jobs and economic activities you have in mind?
Professor Rowthorn: The first point is that
I do not recommend it, if you read the report. What it says is
that the notion that they are doing jobs others will not do is
economic nonsense by and large. There may be one or two jobs like
that but markets exist and they exist over periods of time. If
wages are higher, eventually people will be drawn into occupations.
Underlying the notion of absolute scarcity is the notion that
the supply of labour in a particular area is not responsive to
the kinds of wages people are offered, I do find it a very strange
situation that we have several million people of working age who
are not registered as unemployed, who are able to work but who
are not in work, and people say that there is no-one around to
do the jobs. The problem with this is that it may be that the
pay is too low or it may be that these people do not have any
incentives to take the jobs, but an alternative to large-scale
immigration to fill jobs that the locals will not do is to increase
the pay and improve the conditions of these jobs and find ways
of getting locals to do them, or alternatively to mechanise some
of them. A good example of this was the Bracero programme in the
1960s.
Q18 Lord Kingsdown:
Sorry, what programme?
Professor Rowthorn: Bracero. It is Spanish for
"labourer". It was a programme in California in the
1960s. The employers said, "If we do not have all these migrant
labourers from Mexico, we will go out of business", but in
fact US government terminated the programme and employers found
ways of mechanising picking tomatoes, for example. It is, of course,
always difficult in advance to identify how something like this
can be done, but it is surprising the inventiveness of people
if they have to do it. If you say, of course, that it is a good
thing if people come here because they get a job that they would
not have otherwise and they are improving themselves, that is
a good argument on its own terms; but that is a different argument
from saying they are doing things that the local workers cannot
do. I do not say that there should be no migrant labour at all
of this kind. I am just expressing a scepticism about the notion
that somehow there is a fixed supply of labour irrespective of
the wages and conditions that are offered.
Q19 Lord Macdonald of Tradeston:
Your general point implies that there are billions of poor people
out there on the planet who might take hundreds of thousands of
jobs here in the United Kingdom that our own indigenous poor,
unskilled working class would then be denied, but the traditional
trade union view is, control the labour supply and you will force
up the wages. That is what closed shops were often about and that
is what demarcation was about. Clearly, the employers in their
evidence are pretty enthusiastic about more immigration. Perhaps,
strangely, the Trade Union Congress too are pretty positive about
it. Do you think that there are other measures to try and defend
the unskilled British working class that you would recommend?
Professor Rowthorn: As I said, my moral problem
is that there are two distinct issues. If you were really hard-nosed
about it and you did not care about outsiders at all, one way
of doing it would be to raise the minimum wage, especially in
the south of the country, and restrict immigration very severely.
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