The UK’s Immigrant Inflow Must Perhaps Never Stop

The immigrant workforce in the UK creates profound economic impact.

The importance of the immigrant population in the UK has sometimes been undervalued. UK witnessed a significant growth in its GDP in 2005-2015 following increased net migration; and the economy would fall by $328 million if all migrant workers chose to boycott work for a day.  The daily GDP of UK would fall by 4%, should all non-British workers stop for 24 hours. The net inflow of immigrants increases aggregate demand, consequently increasing total spending in the economy. Foreign students contribute a lot of money – $2.5 billion annually – through fee payment, which is used by the government to finance higher education for local students. A large pool of immigrants will grow the economy through income tax, used by the government to finance the construction public infrastructure. Immigrants from Eastern Europe have been fiscal contributors since 2000, even when UK budgets were in deficits.

Nevertheless, the economic impact of immigration has been perceived differently in UK. There are views that immigrants take existing jobs, do not create wealth, and are seemingly pushing Britons out of work. Last year, around 17 percent of the UK’s workforce were non-UK nationals. Statistics from English National Health Service reveals that in 2015, the 1.22 million staff comprised about 235, 000 non-Britons, translating to approximately 19 per cent. Projections show that low annual net migration would lead to weaker tax revenues, dragging GDP growth, and higher public debt as a share of GDP. The long-term projections are aligned with economic findings that immigrants are likely younger than the native UK population. Consequently, they are better positioned to work and pay income tax than claim benefits. The tax benefits accrued from immigrants outdo the financial expenses imposed via pressure on both public services and local infrastructure. Immigrants promote UK’s national productivity by providing a richer labour market. Subsequently, this implies faster growth in GDP and higher per capita income for all.

Brexit followed with restriction on EU immigration to the UK may have negative consequences on the UK economy. First, the immigrants take up jobs for which British population is not willing to do. Restricting immigration will then imply serious labour shortage in both seasonal and temporal jobs. Second, businesses that rely on migrant workforce may be forced to rethink their operation model. However, automation may help subsidize the loss, particularly in the manufacturing and agricultural sectors. Further, the National Health Service (NHS) will be in “dire straits” in absence of migrant workers. This is because non-UK born immigrants constitutes 4% of registered nurses, 10% of registered doctors, and 5% of the English NHS staff. The removal of immigrant workers could impose greater pressure for illegal migration and employment. Labour shortage will adversely impact the UK economy.

Higher net migration strengthens economic growth in several ways. First, immigrants create a more flexible labour market, satisfying demand for semi-skilled jobs such as plumbing. Second, migrants provide a working age population which compensates for the retirees. Subsequently, the increased labour force reduces the dependency ratio and benefits the government by paying income tax (VAT), whose benefits are not claimed.

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