NIESR Report: Reducing Migration will Damage UK Economy

Today, National Institute of Economic and Social Research (NIESR) has revealed that David Cameron’s plans to reduce migration will cause serious damage to the UK economy. According to the independent think tank, the Conservative’s plans to reduce migration to the “tens of thousands” would cause the UK economy to sharply decrease, wages would be reduced – leading to higher income taxes. 

Immigration Restrictions will slow UK Economy & Increase Taxes

David Cameron has said that he will reduce net migration as he believes that is what UK voters want. This has caused major concern as the UK is part of the European Union, which  allows free movement of labour across the 28 member states,  it seems that Cameron’s only option to fulfill this pledge would be to reduce non-EU migration.

According to the research conducted by NIESR, by 2060 the UK Gross Domestic Product (GDP) would be 11% lower. The think tank stated:

“Achieving [the Conservative] target would require reducing recent net migration numbers by a factor of about two … The results show that such a significant reduction in net migration has strong negative effects on the economy. By 2060 the levels of both GDP and GDP per person fall by 11% and 2.7% respectively. Moreover, this policy has a significant impact on public finances. To keep the government budget balanced, the effective labour income tax rate has to be increased by 2.2 percentage points in the lower migration scenario.”

Katerina Lisenkova and Marcel Mérette of the NIESR, and Miguel Sánchez-Martínez of the University of Ottowa, studied the potential impact if Cameron’s target to reduce migration will have on the UK economy. They found the following:

  •  By 2060 GDP per person will be 2.7% lower than otherwise. This is due migrants being ‘net fiscal contributors’ – meaning they pay more in tax than they take out in benefits;
  • Due to the UK’s ageing population public spending as a portion of GDP would rise by 1.4% without the tax contributions of working migrants;
  • Potentially leading to higher taxes on earnings to pay for social care of the elderly; and
  • household finances would suffer as net wages were 3.3% lower with the migration curbs than they would have been in 2060 because of the higher taxation.

Dr Carlos Vargas-Silva: Decline in the Number of Recent Migrant Workers in the UK

According to  Migration Observatory at the University of Oxford, there has been a decline of 28% in the number of non-EEA highly skilled Recent Migrant Workers (RMW) in the UK since 2007. However, there has been a 53% rise within the EEA, with skilled migrants coming from countries such as France, Germany and Spain.

The number of non-EEA highly skilled RMW have shown to be the most effected by the Government’s policy to decrease to tens of thousands. The figures show highly skilled migration decreased by 30%, from 155,000 in 2007 to 109,000 in 2010. This number decreased by a further 39% in 2013 to 94,000, in comparison to 2007.

Dr Carlos Vargas-Silva, co-author of the report said:

“There has been a significant decline in the number of recent migrant workers in the UK who have the highest levels of education and who are in top occupations since 2007, but this decline is driven by a decrease in non-EEA migration. Since 2011 the number of these recent migrant workers who are from EEA countries has increased. Policy makers need to look at whether this has been caused by a “balloon effect” where policies designed to squeeze one sort of migration lead to another sort increasing in size.”

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