Chris Johns: Benefits of immigration are staggering

MGI finds migrants added $6.7 trillion to world economy, and local jobs don’t suffer

“Berlin or Boston?” used to be the question, but maybe Ireland has more in common with Toronto. Photograph: Wolfgang Kaehler/LightRocket via Getty Images

“Berlin or Boston?” used to be the question, but maybe Ireland has more in common with Toronto. Photograph: Wolfgang Kaehler/LightRocket via Getty Images

 

Immigration is good for the economy. Despite rumours to the contrary, economists sometimes agree and one area of unanimous professional opinion is on the benefits that immigration bring.

Anyone who wants to argue that immigration should be stopped or curtailed cannot rely on economic, business or financial reasons for doing so. There may be other good reasons, but I can’t think of any. Indeed, logic dictates that migration is something that should be encouraged.

The McKinsey Global Institute (MGI) this week surveyed the evidence and came up with some powerful conclusions. They have quantified the global benefits of migration and the numbers are staggering.

According to MGI, the world currently has about 247 million migrants, over 90 per cent of whom have moved voluntarily, mostly for economic reasons. Some 24 million people are refugees or asylum seekers and roughly half of these are in the Middle East and North Africa: people tend to move to a neighbouring country rather than crossing continents, a fact lost in the cacophony of misinformation bandied around in the debate over Europe’s immigration woes.

Last year, migrants contributed $6.7 trillion to the world economy, or 9.4 per cent of global GDP. If the migrants had stayed at home the world would be $3 trillion poorer. North America captured the lion’s share of these benefits, with Europe not too far behind.

No long-term job losses

MGI surveys the abundant evidence on the impact of migration on domestic wages and concludes: “Extensive academic evidence shows that immigration does not harm native employment or wages . . .”

On wages and jobs there are caveats. Large scale immigration to small regions can have a negative, but mostly short-term impact. If the receiving country is in a downturn there could also be some small negative effects but, again, these are rarely permanent. It is worth stressing that the long-term impact of migration on local wages and employment is nil.

On the fiscal burden, MGI also reviews the evidence and concludes that migrants contribute more in taxes than they receive in benefits. The global pension problem is eased, slightly, by immigration. When people moan about pressure on health services and schools caused by immigrants they should realise that it’s all the fault of government for not spending the taxes contributed by those immigrants.

MGI tackle head-on the on salient issue that comes up time and again: integration. They suggest 180 ways the integration problem could be sorted; nobody gets this one completely right, not even countries like Canada. Get integration right says MGI and global GDP could be further boosted by around $1 trillion.

Similar conclusions have been reached by many researchers. The IMF for, instance, has published numerous studies, all pointing in the same direction. This week saw another IMF attempt to convince increasingly sceptical world opinion that “high and low-skills immigration both raise incomes and confer broad benefits on advanced economies”. Like MGI, the IMF stresses the need to do better on integration.

When we move away from the economic and financial consequences of migration we confront the ultra sensitive questions surrounding the reasons why it is the central topic of political debate in so many countries.

The IMF’s language is almost tortuously uncontroversial: “Surveys show that in Europe personal concerns over the compositional effects of migration – such as language and culture – matter much more to people than economic concerns such as jobs”.

Sane response

This business columnist will resist the temptation to explore this in less polite language but will merely point out that language and culture are always evolving. In any event, the IMF is correct to argue, albeit implicitly, that initiatives to improve integration constitute a far more rational (and humane) response than building walls.

Brexit has inevitably fuelled an outpouring of analysis of the consequences of restricting migration into the UK. The independent fiscal watchdog, the Office for Budgetary Responsibility (OBR) has recently guesstimated that public finances will, via lower immigration, be hit to the tune of £6 billion over the next three and a bit years. And that’s almost certainly an optimistic estimate: if the OBR had used IMF or MGI assumptions (about things such as immigration and productivity growth) they would have come up with a much bigger fiscal hole.

Jonathan Portes of the UK’s National Institute of Economic and Social Research this week told the House of Lords that reduced EU immigration could see businesses close, food prices rise and social care cut: all due to worker shortages. Agriculture risks seeing crops left in the ground.

It might surprise some people to learn that according to IMF data, over 20 per cent of Ireland’s working population is comprised of immigrants. That’s a bigger proportion than in the UK or US where, of course, immigration is causing deep and profound political schisms.

Angela Merkel may have caused uproar by taking in a million and more refugees over the past couple of years but Germany still has a smaller migrant workforce than does Ireland.

Perhaps it is to Ireland’s credit that not too much is made of this; but maybe it is something we could quietly celebrate. It is certainly worth asking why immigration is not about to overthrow the established political order here in the way that it has on both sides of the Atlantic and could yet do so in France, Germany and other countries.

‘Berlin or Boston?’ used to be the question, but maybe we have more in common with Toronto.

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