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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

UK Government Report Gives Annual £6 billion Positive Spin To Migrant Workers

Politics / Immigration Oct 16, 2007 - 08:18 PM GMT

By: Nadeem_Walayat

Politics UK Migrant workersA new report from the governments Migration Impact Forum (Treasury and Home Office departments) concludes that migrant workers contribute to the British Economy to the tune of £6 billion pounds a year.


The report also stated that there is net annual migration to the UK of approx. 200,000 a year, with migrant workers on average earning more than their British counterparts for the same job.

However some of the reports findings do not make sense and smell more of political spin than facts, such as an increase in the worker population pool does not result in British people losing their jobs. Which is a pretty farcical statement, as the migrant workforce has increased by 70% over the last 10 years, then that extra pool of labour will to some extent take jobs that would have been done by British workers.

The report also makes the statement that worker migration has had no significant impact on unemployment rates amongst British citizens ? A 70% increase in skilled competitive and highly motivated migrant worker pool having no significant impact on UK unemployment?

UK unemploymeny currently stands at 5.5% (ILO) despite a phenomenal increase in UK economic growth. Not withstanding that the true rate of UK unemployment using the governments own statistics is many times higher than the headline rate. For instance recent ONS statistics class 1.65 million as unemployed. However this excludes 8 million people of working age who are classed as 'economically inactive' or what commonsense would suggest unemployed. Therefore the true rate of unemployment in the UK is nearly 30%, and clearly impacted by a significant degree by migrant workers which amount to some 12.5% of those employed. As the pool of 8 million 'economically inactive' citizens are costing the nation in terms of public spending to the tune of at least £50 billions per year and possibly as high as £70 billions. Thus even a one million cut would reduce the annual cost by an estimated £9 billions, coupled with increased tax revenues, which is far greater than the £6 billions of reported positive migrant contribution to the economy.

The report also fails to address the costs to the public sector, which is disproportionately high because the public sector has repeatedly shown itself to be highly unproductive where generally a 10% increase in demand would require an 100% increase in expenditure as the expectation would be for just a 10% increase in output. Therefore a 2% rise in demand due to increase in the migrant population base over the last 5 years would be expected to result in an expectation of 20% increase in costs, which if failed to materialize results in breakdown of services as many areas of Britian are witnessing. Some areas of Britian have seen as much as a 20% increase in population due to migrant workers with the associated increase in public spending budgets failing to match due to failure to recognize the inherent unproductive nature of the public sector at the marginal end of the spending spectrum i.e. impacts of increases in expenditure that normally result in 90p of waste for every additional £1 spent.

Whilst the exact %'s can be disputed, what cannot be disputed is the fact that there are clear examples of public sector waste and un productivity which has been most evident in the NHS that despite a tripling in expenditure, is barely showing a 30% increase in output.

Therefore the true cost of the increase in migrant population at 2% of the general population is more likely to be in the order of £10 billions which is far greater than the government reported benefit of £6 billions. However the real impact being felt is much greater due to the failure of the unproductive public sector to meet the extra demand competitively. This is clearly evident to those living in areas where migrant workers have settled in significant numbers as they wonder why the public services are failing to cope despite announcements of increases in expenditure.

The obvious solution is to reduce the size of the public sector rather than flushing ever more money down the proverbial public sector toilet, unfortunately this realisation is not going to take place under New Labour that has seen the public sector grow from 34% of GDP to about 40% of GDP, this despite an unprecedented increase in UK GDP growth for the life time of the labour government.

The only way to make the public sector competitive is to privatize the sacred cows such as the NHS and to fully open them up to market forces. Which would not only make the services more competitive but provide better service, much better than the recent headlines of thousands of patients dieing unnecessary deaths in NHS hospitals due to incompetence.

The conclusion is that when all things are considered, there is little net gain from migrant workers to the UK economy, and likely a large net negative when the economically inactive are taken into account.

By Nadeem Walayat
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Nadeem Walayat is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 100 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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