Immigration Drives Innovation (and Equality)
The UK’s recent budget proposal, including the modernisation of the immigration system to attract the most highly skilled, globally mobile talent, is a step in the right direction. However, more must be done.
Xenophobic politicians object to migration: “they don’t pay taxes,” or “they burden our health systems” some may cry. Under the Republican government of Trump, refugee admissions fell to new lows, the fewest in forty years. Mass deportation of migrants would immediately decrease cumulative GDP over 10 years by $4.7 trillion, and farmers would have a hard time finding replacement workers.
Migration is imperative in creating a balanced and diverse global economy that allows all to prosper; it encourages innovation, provides jobs, reduces inequality and creates a richer and more diverse culture. Consequently, Rishi Sunak’s long-run policy on increasing migration through an elite points-based visa is a welcome one for many reasons.
In fact, the movement of labour is one of the most effective ways of reducing global inequality.
It provides low-skilled workers with incomes that would not be feasible in their native country. The average earnings of African migrants to Europe are $1020 a month, around three times the pay back home. This money is sent home in the form of remittances, the single largest source of income for many low-income countries. In 2019, Tonga received the highest remittances as a share of gross domestic product at 37.6% of GDP. Further, since the 1990s, remittances have exceeded development aid. Nigerian remittances add up to around eight times more than it receives from development aid and over ten times what it received in foreign investment in 2018.
A secondary impact of remittances is the support that it provides their friends and families at home. In essence, it can be seen as an internal form of universal credit for their families back home. Providing a steady stream of income, women can go to work and kids can go to school, without the health and financial worries they faced originally.
In Ghana, children in families who get help from a relative abroad are 54% more likely to attend secondary schools, boosting their futures and releasing them from the confinement of absolute poverty. This improves the productive capacity of these deprived nations and may enable them to grow too. Furthermore, it can encourage risk taking and entrepreneurial activity as they have a safety net to fall back on, creating lucrative start-ups addressing the community’s wants and needs.
Beyond providing incomes for low-skilled workers and their families, highly skilled migration can spur innovation, the target of the UK’s new points-based visa policy. It gives the top priority to those with the highest skills and greatest talents, reinforced by Jennifer Hunt’s findings that immigrants are more likely to start companies than similar natives. As a result, immigration can increase funding in SMEs in new and upcoming sectors, boosting growth and innovation in the future.
Additionally, high-skilled immigration may be able to reduce income inequality in an economy. The intellectual and entrepreneurial ability of the migrants depict which jobs they will enter, and thus who’s jobs will be put at risk. Consequently, encouraging highly skilled workers will put pressure on current tertiary sectors, as supply increases. This could be an influential factor in driving down the wages of some of the higher earners in society and allow for more even distribution across society.
Furthermore, migration helps to counteract another imbalance in society, the ever-increasing age of the human population. The ONS projects that in fifty years’ time, there are likely to be an additional 8.6 million people ages 65 years and over — a population roughly the size of London. This will cause a major shift in society that must be recognised and dealt with appropriately.
Immigration delays, but does not solve, the fiscal challenges of an ageing population. The majority of migrants are adults of a working age as children and the elderly tend to stay put in their native countries. This can provide a larger work force responsible for driving the UK economy and providing goods and services for the elderly. Without migration, Europe’s population is forecast to fall by about 10% by 2050 which could result in an inadequate supply of workers and have drastic economic and health consequences.
Many may argue that migration can put natives out of jobs and thus increase domestic unemployment. Although this may be true that people are put out of jobs, over the long-run economies are able to adjust to this and more people are put in work. The Department for Business Innovation & Skills states that:
“There is relatively little evidence that migration has caused statistically significant displacement of UK natives from the labour market in periods when the economy is strong”
Contrary to an abundant supply of labour, a lack of migration can cause labour shortages which can affect the UK’s health system. In June 2017 official figures released from the NHS show that there has been a 96 per cent reduction in the number of nurses from the EU applying to work in the UK since the Brexit vote. Coupled with an ageing population, without strong migration links, the UK economy may suffer dearly.
Despite the encouraging benefits of migration to the global economy and society, governments continue to act against it. The UK’s withdrawal from the EU is stopping the free movement of citizens in and out of Europe, with potentially impactful effects for our economy. Thankfully, Joe Biden’s victory over Trump has allowed for reforms of the migration system and therefore American’s can start seeing more migrants cross into their boarders.
Mr Sunak’s new policy is a step in the right direction; however, more must be done nationally but also globally. Opening up boarders allows mass migration driving a more equal, innovating and robust society.
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