October 2016 newsletter – British Science Association Festival of Science – UK migration: separating fact and fiction

The British Science Association’s Festival of Science was held this year from 6th to 9th September at the University of Swansea. This report somes from David Dickinson1, Recorder to the Economics Section.

The Economics Section President for 2016, Prof Christian Dustmann (UCL), organised a session titled UK migration: separating fact and fiction, speaking along with Prof Tommaso Frattini (Milan).

Dustmann began by recognising that, when he started researching on migration at the end of the 1980’s, it was a New World phenomenon. Over time it has become global and of particular interest in Europe. He pointed out that, whilst migration has become a defining political issue in the UK, and more so than in Europe, the UK is somewhere in the middle of countries when looking at the percentage of immigrants in the population, and in the increase in the foreign born population. He noted that, in looking across countries there was a high level of heterogeneity, with countries differing significantly in the country of origin and educational level of the migrants they receive. This made it difficult to draw general conclusions from any work done for one particular country. The UK stands out among European countries in the exceptionally high level of education of its immigrant population.

When discussing attitudes to immigration, Dustmann noted that economic factors were not a key determining issue. Social and cultural factors are much more important, as his research with David Card and Ian Preston has shown. He pointed out that it is quite typical that people do not know basic facts about migration, and he illustrated that by showing that individuals vastly overestimate the numbers of immigrants in their country, with higher overestimates the lower someone’s educational level.

In understanding what are the economic effects of migration, Dustmann emphasised that it is very difficult to establish causality since we do not have a counterfactual with which to compare. To construct this missing counterfactual is the key challenge in empirical work that determines e.g. the effects of immigration on the labour market. For the UK, the existing evidence does not indicate a clear impact of immigration on employment, and only very modest effects on wages at the low end of the wage distribution, but positive effects further up the distribution. He illustrated that migrants tend to upgrade their labour status over time, often starting in work which is below their skill and educational attainment and moving up into more appropriate skill level employment over time.

Frattini then took over and focused on the fiscal consequences of migration, which have been a major cause of concern. The demand for public services is dependent on the demographic composition of the population, and thus immigration poses additional and possibly different demands on public services. However, he emphasised that in order to address the overall fiscal impact of immigration one has to take into account that migrants work and hence contribute to the revenue governments receive. Assessment of fiscal contribution of immigrants requires assigning each individual the estimated tax contribution, and the expenditures in terms of benefit payments and public services. The analysis requires detailed data on the various items of government revenues and expenditures, so that the researcher can estimate for all items the amount which is attributable to each individual or group of individuals. There are many conceptual issues that need to be addressed, such as how to allocate the education immigrants bring with them, the cost of which has been borne by the country of origin; how to treat second generation immigrants: or how to allocate the cost of providing public goods. In this context, Frattini argued it is important to distinguish between pure public goods, the cost of which is determined independent of the size of the population (e.g. providing security for a country's borders) compared to congestible public goods which became more used as population expanded (e.g. schools). Finally he presented evidence for the UK that immigrants are less likely to claim benefits or live in social housing than the native population. Further detailed analysis of the fiscal contribution of immigrants shows that those who came to the UK after 2000, and in particular those from EU countries, made a substantial net fiscal contribution.

The highly engaged audience asked questions throughout the session and raised a range of issues when the session concluded, providing evidence that migration is a source of major public interest and that the public wish to understand better the key issues which underpin the debate.

Thanks go to the British Science Association and the Royal Economic Society for providing support for this event.

1. University of Birmingham