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Artillery Row

The immigration merry-go-round

Britain’s discourse on migration is a time-wasting charade

The Rwanda deal has been kicking up a lot of fuss in Britain. Liberals decry it as racist and pushed by people that are just, well, awful. Conservatives put all their weight behind it, as if the fate of the country were sealed within its pages. In reality, the Rwanda Bill is largely a distraction. As the din of the debate reaches ever higher pitches, the economic and demographic gears that actually drive mass migration into Britain start to take yet another revolution.

Recently, it was reported that British GDP came in substantially lower than expected, registering a contraction of 0.3 per cent. Some might receive this news with a shrug. After all, only a few months ago the country registered a similar “technical” contraction in GDP, and nothing happened. This time is different. Unemployment in Britain has been rising since the start of the summer, and the construction sector has been labouring under high interest rates and falling house prices. Indeed, the latest GDP numbers now show a clear decline in construction sector activity — especially in the market for private homes.

This implies that the probability that Britain is falling into a recession is now very high. A real recession, not a technical recession — one in which people are laid off, unemployment claims rise and the government budget falls even deeper into deficit. This recession, if it comes, will have massive implications for Britain. It could easily wipe out the Tory Party for good. It will also help clarify the economic position of Britain in a world that is changing quickly and, on many counts, is already firmly multipolar. But it should also reduce inward migration substantially.

There are currently three schools of thought when it comes to mass immigration. The first are the liberals, who extol the cultural benefits of mass migration. They say that it increases diversity in our societies and often point to the proliferation of restaurants and food stalls (although these are often located in parts of major cities that look identical to similar parts of other major cities). The second school of thought are the conservatives, who say that mass migration has much more negative consequences than the liberals let on. They point to cultural practices that are foreign to Western ways of life and to the pressure mass migration puts on government services. Finally, there are the economists and businesspeople who simply point out that, given the current economic structure, mass migration is necessary for economic growth.

This third group has gotten far too little attention from either the liberals or the conservatives. If what they are saying is true, then the entire debate on migration is misleading, or at least it is avoiding the heart of the matter. Let’s call this school of thought the immigration “realists”. The realists make a simple point: population growth in Britain is low, and to grow the economy population growth is required, especially today. Unless there is mass unemployment and thus a large pool of idle workers to hire from, there are only two sources of economic growth: productivity growth and labour force growth. Productivity is the amount of economic output that can be squeezed out of each worker. It has been flat in Britain for around 15 years. And so all that remains is labour force growth.

Without mass inward migration, labour force growth would be stagnant in Britain. Why? Because birth rates are abysmally low and have been for a long time. Since 1973 British birth rates have been below replacement rates. The baby boomers decided half a century ago that they had better things to do than raise families of adequate size to replace themselves. We are left with the consequences of their frankly selfish decisions. Recently, this low birth rate has started to bite, and the economy has started to experience labour shortages. This is what is leading to the enormous spike in inward migration that we have been seeing. People in poorer countries hear from friends and relatives that there are lots of jobs that are going unfilled in Britain, and so they pack their bags and head over. The Treasury economists are aware of this situation, so they lean on the Home Office to rubber stamp visas to get warm bodies in the door to keep the economy ticking over. This can be seen in the following chart clear as day: as unemployed workers per vacancy falls, immigration rises. Like clockwork.

There is much confusion over this amongst immigration restrictionists, who seem to think that the migrants coming to Britain are just here to sponge off the welfare state. They point, for example, to the large numbers of people being given “dependent” visas, thinking that the word “dependent” means that they will be depending on someone else. This is not typically the case. To get a work visa in Britain, you must be able to show that your job cannot be filled by someone who is already here. Work visas are not typically issued for Pret-a-Manger jobs. If your relative is already living and working here, though, you can get a dependent visa. This allows you to work any job you want. It is very likely that the Treasury is using the dependent visa system to fill the vacancies that are popping up in lower value-added jobs that cannot qualify for work visas. Prima facie this is obviously the case: if those receiving dependent visas were sponging off the system and not working, they would show up as unemployed or out of the workforce, but they are not. Ergo, they are likely here to work jobs lower down the value chain.

Now let’s circle back to the potential recession the country is facing down. If the recession sets in and people are laid off, the labour shortage will ease, and so immigration should fall. The restrictionists will welcome this, but in doing so they are only fooling themselves. Why? Because with lower levels of immigration, the public debate will shift away from the issue as if it is solved. Instead, expect policymakers to start obsessing over unemployment and how to solve it — just as they did after the last financial crisis. Yet at the same time, the deep structural problems that cause mass inward migration go unsolved — but hidden. Whilst migration will come down as unemployment increases, once the recession ends and economic activity picks back up, the labour shortages will show up once more and migration will increase. This is the immigration merry-go-round that Britain finds itself in, due to its serious problem with low birth rates.

The immigration merry-go-round is pernicious because it neutralises the ability of the country to have a real debate on the migration issue. The debate takes off towards the end of the economic cycle, when the labour market tightens up and migration soars. Then, as it builds momentum, the economy tips into recession, and everyone’s attention is diverted to the unemployment issue. The debate around housing follows a similar pattern, with NIMBYs and YIMBYs battling it out at the top of the housing market cycle — only to disappear as the cycle turns and prices collapse, as we are starting to see now.

Can we remedy this situation? First, we need to keep our eyes on the ball. If and when unemployment rises and immigration falls, this does not mean that the migration issue is settled. We need to stay focused on the low birth rates and the tepid labour force growth and continue to discuss them. We must clearly communicate that the lull in migration we will see is just that, a lull — and once the recession ends and the labour market tightens back up, it will take off again. In short, we need to stop being fooled by the economic cycle into riding the immigration merry-go-round.

Guest worker systems are not perfect, but they have worked for countries like Germany

What about solutions? Here there are two variants: permanent solutions and stopgap solutions. Permanent solutions take longer to put in place and are harder to achieve than stopgap solutions, so let us start with the latter. There are two obvious stopgap solutions that can be implemented, but they must be put in place before the labour market tightens up next time around. The first is a guest-worker system. Such a system can pull in labour that is needed when the economy is growing, but it recognises that the economy will not grow forever, at which time the workers can go home. Guest worker systems are not perfect, but they have worked for countries like Germany in the past.

The second stopgap solution is much more radical, but it was suggested by a recent poll run by political scientist Matt Goodwin. Goodwin’s poll shows that a slim majority of the British public would accept lower economic growth if it meant less migration. This policy could be implemented by the Bank of England if it were mandated to do so. Right now, the Bank targets the rate of inflation and unemployment. It aims to minimise unemployment and inflation at the same time. When the Bank considers the unemployment rate, it does not consider the rate of migration — but it could. The Bank could be instructed to target not the overall rate of unemployment, but the rate of unemployment for domestic workers. When all the domestic workers had jobs, the Bank could then move to cool the economy by raising interest rates. This would ensure that the country did not experience the recent runaway inward migration, as the Bank would cool the economy before this happened. This would be at the expense of lower growth, however. We need to debate whether this is what the country wants. The public must be made to understand the trade off and decide. If it is what the public wants, it can be implemented by handing the Bank of England a new mandate.

Finally, there is the more permanent solution. This is as simple as it is complicated: British people must have more children. Britain’s fertility rate must rise, at least back to replacement rates. How can we do this? The only option is through aggressive family policy. Britain must form a new ministry that is laser-focused on encouraging family formation and raising the fertility rate. This new “Family Office” should explore everything from specially built housing for young couples to tax breaks to subsidised loans. Nothing should be off the table. This new all-hands-on-deck family policy will be costly. It will likely have to replace much of the existing welfare state, which has become dysfunctional. The British state should stop focusing on the outcomes of individuals and start focusing on the outcomes of families. MPs like Miriam Cates are already signalling a shift in this direction, but it will require a new type of politics.

Let us not get bogged down in the Rwanda Bill. It will not implement fascism as the liberals think, nor will it solve the migration crisis as the conservatives think. It is largely a distraction to draw our attention away from the deep structural problems that are driving mass inward migration. Whilst it is easier to pretend that these structural problems do not exist and promise quick fix solutions, this will get us nowhere. We must all become immigration realists if we are to have a proper debate.

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