Friday, 6 February 2015

Immigration: wishful thinking by well-meaning people (2 of 4)

James Wickham: To continue the analysis, looking at broader demographic and labour market issues. [Part 1 of these four posts is here]

Problem #4 The small demographic benefits of immigration depend on massive population change
It is frequently argued that Europe needs immigration because the European populations are ageing and without immigration the population will actually decline. In fact this is only half-true: some European countries do face population decline, but not all. Furthermore, the most serious declines are not in Western Europe, but in some countries of the former Soviet bloc where the ‘transition’ to a market economy has had disastrous consequences for living standards of ordinary people. In Western Europe, the UK and France in particular do not depend on immigration to maintain their population size, the issue is most important in Germany and above all Italy.

In the UK, immigration is now the major cause of population growth. For the ‘aging population’ argument the crucial figure is the dependency ratio (the number aged over 65 per 100 aged 16-64). Recent ONS projections assume an annual net migration to the UK of 165,000 [1]. This would result in the population rising from 63.7m in 2012 to 73.3m in 2037 and to fully 86.5m in 2087. In this population the dependency ratio would rise from 26.5 in 2012 to 41.9 in 2037 and to 51.5 in 2087.

Similar projections have been made for the hypothetical situation of zero net annual migration, in which population change is purely the result of births and deaths. In this situation the total population would stay roughly stable (67.5m in 2037 falling down 40 63.8m in 2087). Nonetheless the dependency ratio would rise to 46.2 in 2037 and 61.2 in 2087. Under ‘low’ net migration (100,000 p.a.) the population would still reach 71.6m in 2037 and 80.1m in 2087; under ‘high’ net migration (225,000 p.a.) population would be 75.0m in 2037 and fully 92.9m in 2087, with corresponding dependency ratios of 40.8 and 50.5 (Rowthorn 2014: 32).

Such projections show three crucial points. Firstly, slowing the rise in the dependency ratio requires continued inflows of new migrants and consequently a significant increase in total population. Secondly, reducing the dependency ratio back to anything near its current level cannot be achieved even by completely unprecedented levels of immigration. Finally, continued high levels of immigration would accelerate the ongoing ethnic transformation of the UK and it is difficult to imagine that this will be politically acceptable (Coleman 2010).

All of this assumes that the fertility will remain well below replacement level. However, it is clear that most women in Europe already have fewer children than they would like to have – the so-called ‘child gap’ (Bernardi 2005). There are rather well known policies that can facilitate child-rearing, the most obvious being (a) flexible employment that allows women – and men – to combine parenting with paid labour and (b) adequately funded and publicly available childcare (see Castles 2003). Through such measures the Nordic welfare states have ensured that fertility rates are at approximately replacement level (e.g. Ellingsaeter 2011). Conversely, it is clear that unemployment and employment insecurity make people less likely to want to become parents (Pailhé and Solaz 2012; Vignoli et al 2012).

Finally, there are some obvious reasons to reject the conventional wisdom that the population of European countries needs to grow (Coleman and Rowthorn 2011). Growing populations impose high environmental costs, especially if the population is also affluent. Indeed, there are strong ecological arguments in favour of some reduction of population size over time. There is evidence that growing population is already experienced by some Europeans as damaging their quality of life: population pressure on the environment (‘overcrowding’) is now one reason Europeans give for emigrating (Van Dalen and Henekens 2013) [2].

Problem # 5 Immigration reduces need for training
In the UK there is a growing suspicion that the immigration of skilled labour has reduced the pressure for effective education and training (House of Lords 2008: 31; Ruhs and Anderson 2010: 313). A ready supply of skilled immigrants may make employers less concerned to retain existing skilled employees.

Skilled immigration is a policy option for both employers and governments, a choice to ‘buy not make’. This is a counter-factual argument and difficult to actually prove. However, scholars working within the ‘Varieties of Capitalism’ tradition stress that one feature of Liberal Market Economies, such as the UK and the USA, is that they invest relatively little in occupational training: these countries are also those most prone to facilitate the importation of skilled labour (Devitt 2011).

Despite all the rhetoric of the knowledge society, countries such as the USA, the UK and even Ireland can become dependent on the importation of skilled labour in the IT sector (Wickham and Bruff 2008; Salzman et al 2013; Wickham 2015). Even more problematic is the dependence of the health systems of such societies on the importation of expensively trained medical professionals from poorer countries [3].

Problem #6 Mass immigration can substitute for inclusive labour market policies
Mass immigration may well also function to reduce the pressure for inclusive labour market policies. Most European countries have faced the paradox of high unemployment, especially youth unemployment, and mass immigration into low paid jobs. One review of the literature concludes that there is quite strong evidence that immigration discourages workless natives from entering or remaining in the labour market; comparing Europe and the USA it concludes that effect on wages is larger in the USA, whereas the effect on employment is bigger in Europe (Longhi et al 2008 as cited Rowthorn 2014: 21). What exactly could be involved in this ‘employment effect’ needs further discussion.

Here the experience of the recent ‘Celtic Tiger’ boom in Ireland is relevant. The boom involved a significant expansion of employment within the existing population and a sensational inflow of immigrants, largely from the New Member States of the EU. I have described this as a ‘goldrush’ or ‘bubble’ labour market’ (Wickham 2015). The employment rate also increased for groups with traditionally relatively low employment, namely older people and above all for women.

However, this ignores that at the same time unemployment blackspots continued: unemployment remained high in areas of the North West but also in areas of booming Dublin. Many women continued to leave the labour market after their first or especially their second child, so that labour force participation amongst ‘native’ women only reached moderate European levels. All of this is hardly surprising, for Irish labour market policy was essentially one of benign neglect combined with cash handouts.

On the one hand, cash benefit levels were generous by European standards (and significantly higher than the UK) and universally accessible. On the other hand, labour market activation measures (counselling, repeat interviews, job search support) were almost non-existent (Grubb et al 2009). Even more importantly, there were almost no measures to support groups who traditionally have been most likely to become detached from the labour market – the disabled, the less educated, etc. And after literally decades of debate, nothing was done about Ireland’s childcare provision.

The NESF report ‘Creating a more inclusive labour market’ (NESF 2006) documented all this – and was ignored. Against this background, it is possible to see that labour immigration was the easy option – just bring in work-ready people, instead of developing universal childcare and supportive labour market activation [4].

Problem #7 Mass immigration can lead to settled ethnic minorities with low labour force participation
New immigrants usually have a higher labour force participation than locals (see earlier re fiscal benefits), but this is unlikely to last. In a recession new immigrants will usually be the first to lose their jobs, simply because they were the most recently hired and/or they have taken jobs that were less protected; there may be straightforward discrimination [5]. If they and their families stay, they become an ethnic minority and the ‘second generation’ is likely to have a higher level of unemployment than the native population.

Especially important here is the issue of female labour force participation. In some ethnic minorities women are significantly less likely to enter the formal labour force than native women. It is important to stress that this is by no means universal. Thus as long ago as 1991 UK census data showed that Afro-Caribbean women were significantly more likely to be economically active and in full-time employment than white women, even after controlling for household structure (Holdsworth and Dale 1997). By contrast, women from Muslim ethnic groups (in the UK Pakistani and Bangladeshi) do continue to have low labour force participation.

To this must be added the ‘left behind’ problem. Newly arrived immigrants go to where the work is. However, if the work dries up, they and their descendants are often less likely to move – the reasons presumably range from fear of discrimination to a reluctance to leave the supportive community they have established. Sections of Europe’s established ethnic minorities are concentrated in decaying industrial areas which they once serviced - most obviously the mill towns of the Northern England, but also the erstwhile coal mining areas of the Ruhr and even the manufacturing towns of France.

This makes clear that it is only new immigrants who will be kind enough to provide the flexible labour force desired by employers and governments. Furthermore, discussing labour force participation highlights that ‘immigrants’ are not homogenous, and even the division between low skill and high skill is inadequate. This becomes especially clear when we consider the alleged economic benefits of diversity.

[1] This may be a gross under-estimate. The most recent ONS release (27 November 2014) reports total net migration to the UK in year-ending June 2014 to be fully 260,000. Annual net migration to the UK peaked in 2005 at 320,000 for year ending June 2005.
[2] A bizarre feature of current work on migration is the extent to which the emigration of Europeans is almost completely unresearched. This despite the fact that emigration from the UK exceeded immigration for much of the post World War II period; since 1970 emigration has usually been in excess of 200,000 per annum; the current excess of immigration over emigration only dates from 1994 (ONS).
[3] There is an emerging consensus that in general skilled labour migration from poor to rich countries is a win/win, benefiting both sending and destination countries (skilled emigrants send remittances, transmit new knowledge etc.). The net benefits however are more dubious in the case of medical professionals.
[4] Obviously childcare and labour market activation cost money. However, they also require an inclusive national ideology and effective state institutions. Arguably during the boom these were weakened in Ireland.
[5] All these factors have combined to ensure that in Ireland NMS immigrants are now more likely to be unemployed than indigenous Irish workers.

Click here for Part 3

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