Examination of Witnesses (Questions 30
- 34)
TUESDAY 9 OCTOBER 2007
Professor Robert Rowthorn
Q20 Lord Macdonald of Tradeston:
But you are making only a token contribution to the world's ills
whereas it might have a pretty serious impact on your own poorer
section of society.
Professor Rowthorn: I think it probably would.
Q21 Lord Macdonald of Tradeston:
How would you stop that if the majority of people did not want
to make that gesture?
Professor Rowthorn: I do not know. I came along
here firmly determined not to take any political position on anything.
What I am pointing out is what the alternatives are. I of course
have my private views on this.
Q22 Lord Macdonald of Tradeston:
Could I ask then specifically how much you think wages would have
to rise in order to fill with British workers the low-paid jobs
currently performed by migrants?
Professor Rowthorn: It depends what kinds of
jobs you are talking about. If you are talking about catering,
for example, a modest amount. If you are talking about some of
the jobs in more remote areas, for example, in agriculture, I
think you would probably find it very hard to get people. You
have to remember that quite a lot of the migrant labour is seasonal
labour, Ukrainian students, for example, and one of the things
about that is that the benefits to them are not simply economic;
they come and they eventually learn English and they experience
another culture. It must be said that the evidence seems to be
that the local workers most hurt were not born here; they are
the previous generation of immigrants. The previous generation
of immigrants are the ones who seem to suffer most competition
from the new migrants. The problem is not just that the migrants
are selected but that many of the east Europeans come because
they want to learn English so they want to practise English. They
have strong motives for coming. It was exactly the same argument
that there used to be in the Post Office when they got people
from school to earn extra money at Christmas time and the unions
were always concerned that they would be undercut. It seems to
me the argument is an unimpeachable one, that to defend the locals
you basically have to restrict entry by others. You might say,
of course, that that is a very bad thing to do and many trade
unions were criticised for that. They were criticised for putting
the interests of their own "insiders" above the interests
of outsiders, but it is a standard trade union principle. Why
the TUC has taken its present position I do not know.
Q23 Lord Lamont of Lerwick:
You are really clear that you do not think the effects of immigration
on GDP per capita are very great. One of the arguments
that is sometimes put forward is that in this brave new world
of unlimited labour (and the British economy has sometimes run
up against bottlenecks in the past) it has raised the long term
and sustainable growth of the economy, but I take it you think
that is nonsense.
Professor Rowthorn: I cannot see that it can
raise the long term growth rate of GDP per capita, although if
you had very capable immigrants it might raise the level of it—well,
it certainly would raise the level of it. If you increase the
population by 5% then sooner or later GDP will increase by 5%,
but that may not affect GDP per capita. In terms of our
own self-interest, do we have an interest in having a bigger gross
domestic product? If five million people come in and everything
extra they produce they get themselves, that is very good for
them; it is of no great benefit to the locals. It does not mean
you should not let them in but you should be clear that they are
the beneficiaries.
Q24 Lord Lamont of Lerwick:
You mentioned mechanisation and investment in plant and machinery,
and you have referred to tomatoes in California. Can you think
of any other conspicuous examples of where investment might have
replaced unskilled labour because on the face of it, when we look
at the very rapid growth of the services sector in the south of
England, much of it done with immigrants, I would have thought
it would be quite difficult to imagine that much of that could
be mechanised.
Professor Rowthorn: I agree, but you have to
ask yourself, if you did not have the supply what would employers
do? They might find ways of bringing people from elsewhere in
the country. Indeed, they might find ways of bringing them from
elsewhere in London because unemployment is actually very high
in London, and it might become a matter of urgency to the people
concerned, most of whom, it must be said, are from ethnic minorities,
so it is not a simple racial issue. They might find ways of helping
locals to acquire skills and get into work. It is a challenge
that you may need to meet and the cost of these people is significant,
not just in human terms; it is also significant to the taxpayer.
Q25 Chairman:
I wonder if you would say a word about illegal immigrants. Is
there any evidence that they have any economic effect that is
not obviously the same as others have?
Professor Rowthorn: I have to say that is really
beyond my competence. I can express a general theoretical view
that illegal immigrants tend to provide more competition for locals
because they are in a weaker position compared to employees and
they cannot create trouble because they will get deported. Of
course, that is one of the arguments in the United States. Illegal
workers, are not thrown out and there are no employer sanctions
for using them because the employers do not want them, so they
are a rather docile labour pool.
Q26 Lord Sheldon:
You believe that the fiscal impact of immigration is broadly neutral.
What do you think of the fiscal effects over a longer time frame?
Professor Rowthorn: Over a long time frame it
depends upon the types of migrants. I will give you a good example.
Take east European migrants that come into the country. Most of
them who come are without family dependants and their net fiscal
contribution is probably positive simply because they do not use
the welfare state much and they pay value added tax. They are
mostly low paid workers; about 80% are pretty close to the minimum
wage. If they have families and they stay in that position, then,
of course, they will be entitled to a whole range of welfare benefits.
In fact, we have the strange situation where they can have children
at home and after a year here they can get child benefit which
they send home. Such factors would probably make their fiscal
contribution go negative. The other thing is that the migrant
population is generally relatively young and, of course, as they
age they will make a whole range of claims on the welfare state
and on the taxpayer. If you take a given a cohort of migrants,
initially they may come in and they are beneficial from a tax
point of view. In the course of time they become negative and
then, of course, they die off, so that particular cohort has a
positive effect at first and then a negative one afterwards. The
overall effect depends on how skilled they are but I think unskilled
migrants on low pay with families in general have a negative impact
over their fiscal lifecycle. That is what I would imagine. Most
models which examine the impact of immigration on the fiscal position
assume a continued flow of migration. In other words, you get
in some cases a small benefit from immigration but to maintain
that benefit you have to have more immigration in future, and
more and more, so it is not, as it were, a once-and-for-all gain;
to preserve it you require a continual flow of immigration. In
a number of countries people have done models in which they have
tried to look forwards (they are mainly Scandinavians but not
entirely), and they have found that the impact of unskilled migrants
on the fiscal balance tends to be negative over their lifetime
here and that of skilled migrants tends to be positive. The reason
why the overall fiscal effects are small is that you have a mixture
of migrants. If you had, say, 10,000 brilliant entrepreneurs who
came into the country and they set up new businesses and raised
productivity dramatically, et cetera, that would have a very big
positive and permanent impact. But, if somebody says immigration
does not have much effect on the fiscal balance, behind that statement
is some idea that you have a mixture of immigrants. After all,
immigrants who come to the country and never get a job, which
is true of some, are a big burden. People who come into the country,
earn a lot of money, add a lot to the GDP, pay a lot of taxes,
send their children to private school, have private health, et
cetera, probably make a very big fiscal contribution.
Q27 Chairman:
But what about those who send the substantial amounts they earn
back to their host country? What effect does that have on our
economy?
Professor Rowthorn: It weakens the balance of
payments, I suppose. I know people make a lot of this issue but
I am not sure it is very important.
Q28 Lord Lamont of Lerwick:
But they account for 20% of some countries' GDP.
Professor Rowthorn: I mean from our point of
view. That is absolutely right. In some Pacific islands their
main economic activity—
Q29 Lord Lamont of Lerwick:
European countries too.
Professor Rowthorn: Yes, but the Pacific islands
particularly, their main activity—
Q30 Lord Lamont of Lerwick:
Albania, Moldova.
Professor Rowthorn: Yes, but for the smaller
islands their main activity is breeding children, which they export.
Their major export is children, as it were, grown-up children.
Seriously, they live on aid and remittances, and obviously for
some east Europeans this is true. That is why I said you have
to consider things other than our own self-interest.
Q31 Lord Sheldon:
There is surely a long-term matter here because when they come
in they start contributing to the economy and it is only some
considerable time later, when they bring their family in or things
like that, that the advantages decline.
Professor Rowthorn: It may not be that considerable.
It is not that many years. The problem is that you cannot analyse
the immigration problem in the short term. You have to have a
long time perspective. That is what is wrong with people saying
that 180,000 net immigration is not very much; it does not add
much to the population per year, but, of course, if you accumulate
it, it does. I think you have to take a long-term perspective
on these things. My own long-term perspective would be to try
and spell out what our own national interest is, if you like,
the narrow interest, and then see how we can balance this against
the interests of others.
Q32 Lord Layard:
Following that up, looking at it from a policy point of view,
there are a lot of things where we have no freedom of manoeuvre.
We have no freedom of manoeuvre over EU migrants. We indeed have
now de facto no freedom of manoeuvre over people coming
to work in the cities, so should not the debate and the analysis
focus on the effects of those types of immigrants over which we
have some freedom of manoeuvre, which I suppose is mainly immigrants
from the Third World? I just wondered if you could say a bit about
how focusing the debate that way might change things from the
point of view of the overall presentation you have made so far,
and indeed give us some idea of what fraction of the existing
net immigration is from the Third World.
Professor Rowthorn: There are a number of items
which are going to be important here. I think it is important
to take a long view. Immigration from the existing east European
so-called A8 countries, the latest wave of entrants, is going
to tail off. It might take ten or 15 years to tail off but my
guess it that it will tail off, and probably, I would imagine,
faster than people think, the net flows, that is. The real question
is, what about the next wave of countries that join the European
Union, if Turkey joins, for example, or it may get some associate
status, some more advanced status than it has now? What would
be our view towards migration from there? When we said we would
have free migration from the A8 countries the prediction was that
it would lead to virtually no immigration into the country; I
think 13,000 was the maximum figure cited in a study. In actual
fact it has turned out to be hundreds of thousands and that, of
course, could happen with Turkey, it could happen with the Ukraine
and so on. If we wanted to control that immigration, that would
have a big effect on the net flows in the longer term. Another
question, for example, is spousal migration. We have something
like 50,000 spouses a year entering the country at the moment.
There has been a huge increase in the last 15 years. The flows
going in the other direction are much smaller although there are
no definite figures. That is an item about which we could say
that this is to some degree a form of disguised economic migration
because it means that people from poorer countries in general
when they marry tend to go to richer countries. I am just pointing
out the things one could do. Personally, I am very reluctant to
interfere in people's family decisions, but that is a possibility.
David Blunkett thought that it was very harmful because it prevented
the integration of certain communities and he appealed to people
to find spouses at home. The other thing is that we could enforce
more vigorously the laws on illegal working here. The question
in that context is that it is not just to stop the people who
are currently present illegally but the people who will enter
in the future. These are all possibilities. I only mention these
possibilities; I am not advocating them. I am simply saying that
if I were a civil servant asked, as it were, to recommend how
I could do it, and it was not my job to express moral judgments,
those are some of the things I might list.
Chairman: Has anybody got a question
they have not asked that they feel they want to ask, or have you,
Professor, got anything to say that you feel you need to say that
you have not said?
Q33 Lord Skidelsky:
There is one question that was not asked and you may not want
to answer it. What is your view of current evidence on the social
costs and benefits of immigration?
Professor Rowthorn: I have prepared nothing
for that. I have not thought about it for some time. I think there
are quite serious problems. Trevor Phillips has been talking about
the quite significant problems of integration, one of which is
the problem of segregation due to people living in different areas,
for example, and I think that problem might get worse with more
immigration, or, paradoxically, it might get better because it
might mean that previous generations of immigrants move out of
London and their existing places and settle in other parts of
the country, I think there are potentially serious problems with
immigration and social cohesion but I prefer not to discuss them
now because I have to say my views are not terribly clear on them.
Q34 Lord Layard:
Could we ask about the housing market?
Professor Rowthorn: Yes. There was a report
done in 2000 by the Joseph Rowntree Commission which said that
immigration was one of the main factors for housing demand in
the south east of the country, where the growing demand for land
for housing causes a lot of friction. At one time people used
to say that the main cause of rising housing demand was smaller
families, for example, ageing of the population, but if you take
a long-term perspective the dominant element in it will be population
growth due to migration and that will cause a continuing rise
in the demand for housing. Some people do not mind the south east
becoming more and more urbanised but other people do. One of the
reasons that people give for going to New Zealand, for example,
is that they like going to places which have a very low population
density. That may not be their true reason but that is the reason
they give.
Chairman: Can I thank you very much.
We have covered a lot of ground and you have been very helpful
to us right at the beginning of our inquiry. You have also given
us a lot of written evidence and we are extremely grateful to
you for getting us off to a good start. Thank you very much indeed.
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