Brokenshire vs. Cable: Is immigration good or bad for the economy?

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The divisions which have been long known to divide the parties in the coalition came into spectacular view last week when two government ministers clashed in their interpretation of immigration facts in speeches given on separate public platforms.

To make the contest even more vivid a context was provided by the publication of a report setting out the analysis of the impact of immigration on employment undertaken by experts working at the Department for Business, Innovation and Skills (BIS) and the Home office.

The issue that the two minister, Business Secretary and senior figure in the Liberal Democrats, Vince Cable, and the newly appointed Conservative Minister for Immigration and Security, James Brokenshire, seems simple enough: has the level of immigration coming into the UK over the last fifteen years or so been bad for the British economy, or good?

For a long time the consensus amongst the economists has been that immigration has an overall positive effect which comes from increased labour market flexibility which allows businesses and services to make use of new technologies and innovations in the management of workforces. There is less agreement on just how large or significant this net benefit is, but even the biggest curmudgeons have conceded that it is on the positive side of the balance.

But agreement on this point has not moved the political side of the argument on very far. In a world of great complexity, news which is overall good across the board can obscure the fact that there have been some who have lost out. Knowing more about this is vitally important in order that decisions be taken as to what needs to be done to mitigate any harm that has arisen.

This, essentially, is the importance of understanding the evidence reviewed in the BIS/Home Office report. The authors helpfully summarised their views into three succinct points, paraphrased thus:

Overall there is relatively little evidence that migration has caused higher levels of unemployment amongst UK natives from the labour market in periods when the economy has been strong. However there is evidence for some labour market displacement in recent years when the economy was in recession.
During a recession, and when net migration volumes are high as in recent years, it appears that the labour market adjusts at a slower rate and some short-term impacts are observed.
Where there has been a displacement effect from a particular cohort of migrants, this dissipates over time – that is, any displacement impacts from one set of new arrivals gradually decline as the labour market adjusts, as predicted by economic theory.
brokenshireIf politicians were honest enough to address the implications of this summary of the evidence they would conclude that it really says little more than “get the economy out of recession and whatever negative effects have emerged from the impact of immigration will vanish.”

This is essentially the lesson that Mr Cable has taken from the report and it was the position he argued for in his Mansion House speech last week. Though it was just one fairly brief section of a talk on the wider state of the UK economy the Lib Dem minister set out the unequivocal view that immigration happens as normal consequence of a market economy that is required to function in conditions where trade and commerce have been globalised. As he put it, “Bear down on immigrants, and you lose some of the most dynamic, innovative and imaginative workers in your economy.”

The contrast with James Brokenshire’s speech could not be sharper. Whereas Cable sees the demand for migration arising from the circumstances of the globalisation of the economy, the immigration attributes it to the fecklessness of a slither of British society motivated by a selfish desire to protect their own comfort. The blame he loaded on a ‘metropolitan elite’ wanting cheap tradesman and nannies has got him into trouble with government and parliamentary colleagues who are taking advantage of the perks that come from labour market conditions which are flush with people willing to provide these services, but the bigger truth is that the creature comforts provided to the wealthy professional classes accounts for no more than a tiny fraction of the demand for migrants.

Across sectors like food processing and production, nowadays the biggest branch of manufacturing in the UK, the demand for migrants is effectively driven by the great body of ordinary consumers, whose modest wage levels have made the relatively low prices on offer at supermarket chains a critical part of their monthly budgets. The fillip that migrants gave to the flexibility of supply chains, from the farm fields, the packhouses and processing plants, with the possibility of just-in-time gang labour operating on zero hours contracts, has been a big part of the reason why the cost of living remained relatively stable throughout most of the noughties.

Similarly, though Daily Mail columnists and many MPs sneer at households that are on the lookout for plumbers and central heating engineers whose prices they can afford, or the services of carers for children or infirm adults, the fact is these people are not any sort of elite worth talking about, but ordinary women and men struggling very hard to make ends meet. For this group the appearance of Polish builders and Filipino nannies has been a godsend which has allowed heads to remain just above the water.

From this perspective there is a defence of immigration to be mounted from the standpoint of the ‘squeezed middle’, otherwise and more accurately described as the hard-pressed wage earners who have been battered from pillar to post by the impact, not of migration, but the global economic crisis that has ripped through the economy since 2008.

And now we have heard representatives of the Lib Dems and the Conservatives offer their different views on this issue, and it is becoming much clearer what issues are at stake in this discussion. It is nothing less than whether migrants, and indeed people who employ migrants, or purchase the goods and services provided by migrant labour, are to blame for the many things that are wrong in Britain today; or is it the wider failings of the this model of free market capitalism which have caused the economy to switch so rapidly from growth to deep and enduring recession?

cable vinceThe coalition government is deeply split on these issues, and on this point of fundamental importance, the Labour opposition has been largely silent. As we get deeper into election territory the business of sorting out our current, messy and often ill-informed public discussion on migration might well come down to whether Labour comes down on the Conservative side of the argument, or builds and refines the perspective offered by Vince Cable and co.

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