Pulling Up the Ladder (A Development Critique of Changes in UK Migration Policy)

This post is originally appeared on Owen Abroad: Thoughts from Owen in Africa.During the mass migration between the middle of the nineteenth century and the outbreak of the first world war, about a third of Europeans migrated from their country of birth, mainly to America.  Today levels of migration are proportionately lower, because nation states have imposed much tighter restrictions on the movement of people than at any time in human history.Earlier this year, Lant Pritchett and Michael Clemens laid down a challenge to development policy thinking:

Development is about people, not places; the development benefits of labor mobility are enormous; and the costs of greater labor mobility, sorely feared, are often exaggerated. The next step for global development policy might be to take labor mobility seriously as a powerful weapon in the fight to give all people on earth the same opportunities that most readers of this chapter now enjoy.

The benefits of migration for developmentWe know that migration can make a hugely important contribution to development.  It benefits the migrants themselves, enabling them to increase their own incomes and lift themselves and their families out of poverty. It also benefits the countries from which migrants come, as Ireland and Norway found in the nineteenth century. Remittances to less developed countries are now about $325 billion per year, much more than $120 billion a year of official aid. These remittances, for the most part, go directly into the hands of low-income people and they rise faster than aid after natural disasters.  Migration is also an important driver of technology transfer and knowledge sharing which contributes to long term economic growth.  It can improve leadership and governance: two thirds of developing-country heads of state or heads of government studied and lived abroad before they returned to lead. Of the 21 cabinet ministers of Singapore, 20 have an advanced degree from outside Asia and almost all have extensive work experience outside Asia.Economists have estimated that a relaxation of rich countries’ restrictions on temporary labour mobility of about 3% of their labour forces would raise developing country welfare by an amount roughly equal to total annual global aid flows (see here and here). The British government already knows this: the papers were co-authored by Alan Winters, now Chief Economist at DFID.  Unlike aid, a small increase in labour mobility would cost rich countries nothing: on the contrary, it would cause their own economies to grow.Why so little reaction to changes in UK policy?Yet supporters of international development have been reluctant to take up the cause of increasing immigration, perhaps because it is politically unpopular in rich countries. (Michael Clemens at the Center for Global Development, and Sarah Mulley at IPPR stand tall as honourable exceptions to this generalisation.)Fear of championing a politically unpopular cause might be why there has been little reaction in development circles to last week’s announcement of changes to UK immigration policy.The new British stance is likely to have significant adverse effects on people in developing countries.  Because free movement of people within the EU is guaranteed by treaty, the UK government can cut total migration only by clamping down on migration from countries outside the EU.  Under the previous policy, people from developing countries faced implicit discrimination because of the “previous salary” provisions; now Tier 1 General immigration has been almost completely abolished, closing off one one possible route for immigrants from developing countries. The government has announced that it will sharply reduce the number of students coming from abroad. Students make up almost two thirds of the non-EU migrants entering the UK each year.  More than 40% of the student visas are for study below degree level, which the government plans to end altogether.  I have not been able to find a breakdown of the country of origin of these students, but it is a fair bet that the majority are from developing countries. The government also plans to end completely the link between temporary migration (eg for students) and the ability to settle permanently, and it is consulting about stopping post-study visas.  All this is a very big deal for developing countries, both because it will reduce immigration from developing countries and because it will limit access to education and skills transfer.I was struck that that the possible impact on development and poverty was not mentioned by any member of Parliament in the debate.  Do MPs not know that this will have a significant impact on developing countries, or do they not care?As well as being bad news for developing countries, the policy of reducing the number of students from abroad is also bad news for Britain – not just for educational institutions whose markets will shrink, but for the loss of lifelong connections that former students in Britain take away with them, with adverse effects for our reputation, influence and commerce abroad.The impact on rich countries of immigrationImmigration remains a hugely sensitive political issue in the UK.  Some people are concerned about the economic effects: on jobs and incomes, and increased demand for public services such as education, housing and welfare.  These economic worries don’t stand up to scrutiny. The suggested impact on jobs relies on the mistaken idea that ‘there is only so much work to be done’ and that a job given to an immigrant is one fewer for someone else.  Immigrants increase demand in the economy as well as the labour supply, so immigration will not, on its own, lead to an increase in unemployment.  Nor does immigration reduce wages for native-born workers – on the contrary, the evidence is that immigration leads to a small but positive increase in wages resulting from increased demand. There may be some negative effects on the wages of low-paid workers, especially on the wages of previous immigrants; but given that the overall effect is positive, these distributional effects can easily be offset with appropriate tax and spending policies.  On balance, immigrants make a huge contribution to the economy.  Nor is immigration a drain on the public finances.  A UK Home Office study estimated that immigrants paid in 10% more in taxes than they received in public services and benefits, compared to only a 5% ‘surplus’ for the UK-born population.  A subsequent study by IPPR found that in times of deficit, immigrants made a small contribution to the deficit, albeit smaller than UK-born citizens.  Either way, the effect on public finances is small.  It suggests, however, that the government should be more agile about ensuring that spending on public services responds quickly to changing population patterns so that public services in particular communities do not come under pressure when there is a rise in the number of immigrants there.Other people are concerned about the social effect of increasing diversity of distinctive cultures in our society. Providing reassurance about that is beyond my competence as an economist; but speaking personally I value living in a diverse society and dislike intolerance of difference.I don’t want to be dismissive of the fears and concerns of the population about greater immigration, though the evidence suggests that the overall economic effects are positive.  But even if there were negative effects, that would have to be weighed against the hugely positive impact for both the immigrants themselves, and for developing countries as a whole.   We have obligations to other people, including those who did not have the good fortune to be born in the UK; and almost any other way of discharging those obligations will be more expensive to us than permitting greater migration, which is likely to be on balance to our advantage.Recognising the impact on global povertyI’m an optimist, but I’m not delusional:  I know that concern about global poverty is not going to convince politicians to open the country’s borders in the face of domestic political concerns about immigration.  But that does not mean that development advocates should surrender. If the government is determined to have a tighter immigration policy, let’s make sure that the details of the policy are development friendly.  The business lobby has managed to persuade the government to relax restrictions on transfers within firms. If overall immigration is capped, and powerful lobbyists secure a relaxation of the kinds of immigration they favour, the burden of the reductions will fall on those who have little voice and nobody willing to speak for them.The absence of any apparent interest in the development impact of this new immigration policy has convinced me that there should be a requirement on the government to publish a quantified poverty impact assessment of any policy proposals which are likely to have a significant effect on the people of the developing world, including immigration, trade, intellectual property, climate change, and arms sales.  I don’t imagine that this would change policies overnight, but a requirement to produce and publish such an analysis might concentrate the minds of policy-makers and and their advisers on whether there are ways to adjust the details of the policy in a way which does less harm, and perhaps some good, for development.Under the International Development (Reporting and Transparency) Act 2006, the UK Secretary of State for International Development is required to publish an annual report containing “such general or specific observations as he thinks appropriate on the effects of policies and programmes pursued by Government departments on (a) the promotion of sustainable development in countries outside the United Kingdom, (b) the reduction of poverty in such countries.” I hope that the Secretary of State, who has a strong personal commitment to transparency, will consider it appropriate to include in the next report observations about the effect on development and poverty of these changes to immigration policy.Finally, Gideon Rachman of the Financial Times notes in his blog that the government’s new immigration policy won’t tackle the underlying problems that has made this a political issue. He concludes:

So, unable effectively to tackle the kind of immigration that actually upsets people, the British government is taking aim at the one group of migrants that are largely uncontroversial and that unambiguously contribute to the country’s well-being. What idiocy.