Supplementary memorandum by Migrationwatch
UK on ITEM Club Special Report: Migration and the UK economy
Ernst & Young published on 18 December a
special report on migration and the UK economy.
The press release, entitled "Foreign workers
have allowed 3% growth without inflation", was relentlessly
positive but there were some important points in the report itself
that were not highlighted in the release:
a) Immigration numbers
The report confused various terms, claiming
that A8 immigrants accounted for 37% of "arrivals" in
2006. In fact they were 15.6% of the total inflow and 18% of the
non British inflow. They were 22% of net foreign immigration.
b) GDP per head
The report admitted that the lower wage rates
of the most recent immigrants implied that the rise in GDP per
head (rather than GDP) might be small or even negative.
c) Outlook for growth
The report stated (page 5) that, over the period
2007-16, "immigration at current levels, should it continue,
would add about 0.3% per annum to trend growth". The report
did not mention that immigration at current levels will add approximately
0.4% annually to population. The impact on GDP per head would
therefore again be somewhat negative.
d) Impact on youth
The report recognised (page 9) that there had
been a "surprising" rise of around 100,000 in unemployment
in the 18-24 age group (excluding those in full time education)
since early 2004. This accounted for about half the overall rise
in unemployment over the period. The report thought it possible
that "native" youngsters may have been losing out in
the battle for entry level jobs. Rigidities arising from the minimum
wage might have been another factor. The press statement quoted
the Chairman of Ernst & Young as saying that "business
has to do something to address the fact that the UK has one of
the lowest levels of youth employment among all the major OECD
countries and re-engage with a lost generation who have slipped
through the net".
e) Productivity
The report notes that total factor productivity
growth (that part of actual growth not explained by the growth
of labour and capital inputs) between 2002 and 2006 totalled 0.8%—"below
the 1.2% seen in the 1995-2000 upswing and also below the long
term average (since 1973) of 1%". This is a significant result.
f) The alternative
The report notes that we do not know what would
have happened to domestic labour supply in the absence of increased
immigration. "It might have proved surprisingly elastic via
increased participation rates in marginal groups". This,
as the report acknowledges, was the case in the late 1980s.
CONCLUSION
The press release states clearly the view of
the Item Club:
ITEM believes it is important that current and
future governments continue to keep an open mind and open doors
to economic migrants. The UK economy needs the current rate of
growth of immigration to be sustained particularly as our UK-born
working pool is growing more slowly than the pensioner population.
Unfortunately, much in this report is evidence
in the opposite direction. As for the implication that immigration
can help with pensions, The House of Lords Economic Affairs Committee
dismissed this argument in November 2003. They reported:
"We conclude that . . . it is neither appropriate
nor feasible to attempt to counter the trend towards a more aged
society in the UK through a manipulation of immigration policy".
1 January 2008
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