Examination of Witnesses (Questions 237
- 239)
TUESDAY 20 NOVEMBER 2007
Ms Rebecca Riley, Mr Simon Kirby and Dr James Mitchell
Q237 Chairman:
Good afternoon. You are very welcome. Do you want to go straight
on to questioning or do you want to make any statements?
Ms Riley: We would be happy to go to the questions.
Q238 Chairman:
There has been much debate in recent weeks about the increase
in the number of migrant workers in the United Kingdom in the
last decade. What are the numbers of foreign-born persons and
foreign nationals working in the UK? How many of both groups have
arrived in the UK since 1997? Should an analysis of the economic
impacts of immigration focus on the impacts of foreign-born persons
or more narrowly on foreign nationals?
Mr Kirby: We have looked at this question. We
have used the first quarter of 2007 of the labour force survey
to produce these estimates and the figures we were coming out
with were for foreign born in employment, total stock for 2007
Q1 is 3.2 million or the figure was 11.4% of total employment
in the UK. Those that have arrived since 1997 for the foreign-born
are approximately 1.4 million. If we turn to the question of foreign
nationals, using that definition, the numbers are significantly
different. The total stock of foreign nationals in employment
in the UK for the same period was approximately 1.9 million. If
we take the figures for those that have arrived since 1997, it
is 1.3 million. We also had a look at the confidence intervals
around these estimates. These confidence intervals are rather
crude because we do not have access to the design effects of the
survey, but our estimate suggests that a 95% confidence interval
is plus or minus 100,000 migrant workers. It is also worth noting
that these numbers are under-estimates anyway. We are aware that
they are under-estimates. It is partly because the labour force
survey does not cover everyone in the UK. It misses out communal
residences, students in halls whose parents are not resident in
the UK. The main problems are that it only covers people that
have been resident in the UK for six months and also they are
using a grossing factor that is based on projections produced
in 2003. We know that these projections are below what the current
mid-year population estimates are. We did a rather crude exercise
and used the estimates of employment that the ONS are currently
producing which differ from what we were able to produce from
the raw numbers and applied that as our grossing factor to the
proportions we were getting. That comes out with a figure for,
for example, the foreign-born in employment that have arrived
since 1997 of 1.5 million. It increases the number by a further
100,000. In terms of the economic impacts, from our perspective
the important number is the net change in population, whether
they have a British passport or not. It is simply the addition
to the population from those that were abroad, either with a British
passport or without. Obviously, if you delve into the details,
it does matter where they are from if you have differences in
age structure and skill mix relative to the domestic population.
Q239 Lord Layard:
In your 2006 paper, you estimated that immigration from 1998 to
2005—seven years—boosted GDP by 3.1%, which has been
quoted in many of the submissions we have had as an indication
of economic benefit. Then you have to take into account also the
impact on population. I hope we are right in thinking your estimate
for the same period is 3.8% increase in the population as a result
of immigration which, taken together with the 3.1% impact on output,
means a fall in GDP per head. Is that correct?
Ms Riley: The numbers you are referring to are
correct but it is important to be clear about what exactly that
3.1% on GDP is capturing. What it is capturing is the direct effect
on GDP associated with that segment of the population. For example,
it does not take into account the fact that there is also capital
that has accumulated probably because there is this additional
population. If, for example, we were to conduct that calculation
for the population as a whole, basically ignoring the effect on
GDP of capital, we would be saying that the contribution of the
population to GDP is 68.5%, basically the wage bill share. That
illustrates the differential between whether or not you take into
account capital in calculating the GDP effect. For example, if
we looked at the wage bill share of the migrant population, calculated
at 3.8%, in that period that group of migrants accounts for about
4.5% of the wage bill share. If we assume that capital accrues
proportionally to the wage bill share, which may be higher for
migrants because they are relatively highly skilled and capital
is complementary to skilled labour, so that is a reasonable assumption,
then we would have an increase in GDP of 4.5%. That is significantly
higher than the 3.8%. Part of that difference in the wage bill
share is explained by the fact that migrants are a larger part
of employment than of the population as a whole, so they account
for 3.8% of the population but they account for 4.3% or 4.4% of
employment. There are two factors contributing to that relatively
large share of the wage bill: the high skills and, secondly, that
they account for a greater share of employment, mainly because
they are younger. They are of working age rather than being children
or above working age. The other point I wanted to make in this
context is also that GDP per head, on the calculations I have
just presented you with, might be higher because of the migration,
but it does not necessarily mean that consumption per head is
going to be higher because the capital we are talking about that
gives that increase in GDP per head has to be paid for. For example,
it may be paid by capital from abroad, in which case national
income will not rise as much as GDP; or it has to be paid by domestic
savings so consumption per head will not rise as much as GDP per
head. Those numbers are also relevant in thinking about the changes.
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