Low-Waged Immigration - Part 2

This second part of my possibly incoherent and illogical musings focuses on the costs and benefits to both source and host countries of immigrants. It concludes that, to the extent that an immigrant is beneficial to the host country, it is negative to the source country - and where the source country is poor, this should not be consider an acceptable exchange.

Migration means that investment, demand and supply become split over countries. The net benefits and costs may not be spread equally, benefits may not be accrued where they are most needed or costs occur where they can best be tolerated.

For example:

A citizen of Poland is raised and educated in Poland. Poland is investing in this child, whilst the child is not yet contributing to the economy (other than to create a demand to be met). The child grows up and qualifies for a particular job. The adult, let us say a nurse, sees that pay and working conditions are better in the UK. She leaves Poland to work in the UK.

Poland trained and invested in this nurse, but is not getting the benefits of the training. The nurse has left. This is a cost to Poland, who likely cannot afford such a cost, nor is it appropriate for a well-off country like the UK to take advantage of free movement of people to attract workers away from countries who need them.

The nurse, however, does not get a job in nursing (immigrants are more likely to be over-qualified for their job than are natives); she gets an entry-level job. She is still happy with this, because it is still better pay and working conditions than in Poland. However, the training she received is doubly wasted because now no-one is benefiting, neither her home nor her host country.

The loss of the worker in Poland means a loss of demand for goods and services including healthcare, housing, food, clothing, transport and education of any future children. The reduction in demand for these things means that less supply is needed, which in turn means that fewer jobs are needed.

In the UK, the arrival of the worker means demand for all these things is created. However, the UK already struggles to meet the demand in these areas. This is not just a consequence of austerity; there wasn’t enough supply before austerity. More funding from the government is needed, which means the government needs to either reduce expenditure in other areas or increase taxes. However, this is a separate issue from the one we have here, which is simply that at this point in time, more people does not lead to economic growth. It simply leads to more congestion. Until we have equal supply to demand, we do not need more people. What we need is for either the government or the people already here to have more money.

The additional worker may create additional demand through the money she earns. She purchases various goods and services, creating a flow of money around the economy. On some of these she pays tax, as well as paying National Insurance and Income Tax. However, she is in an entry-level, low-wage job. In the UK, it is estimated that an individual needs to earn almost £30 000 in a given year to be paying more into the Treasury than she receives as various benefits of living in a rich country. The low-waged, whether immigrant or native, receive more from what the government spends on such things as transport, police, rubbish collection etc. than they give in taxes.

Additionally, the immigrant may send wages back to her home country. This may help the home economy, but it does not help the host country.

 

The consequence of the migration is as follows:

·         To the extent that there is an increase in demand for goods and services created by the presence of a person (as opposed to his or her spending power), the source country loses out and the host country gains.

·         To the extent that the demand for goods and services created by the presence of a person is currently under-supplied, the source country gains (one less person to cater for) and the host country loses (more competition for limited goods and services).

·         To the extent that there is an increase in demand for goods and services created by spending power, the source country loses (less money in the economy) and the host country gains. However, this has to be measured against the gain to the host country of a citizen getting a job and therefore having the same spending power whilst reducing expenditure on benefits.

·         To the extent that wages earned by an immigrant are sent to the source country, the source country gains and the host country loses.

 

To sum up:

The UK economy can benefit from the presence of an additional person through increased demand and increased spending power. However, the increased demand also increases congestion (a negative) and if money is sent to the source country then there is not as much increased spending power (also a negative).

The source country can gain if money is sent back, but it also loses out on both demand and the investment it made in a citizen whilst the citizen was a child.

It appears that any gain to the UK is countered by increased competition for important services, thus lowering quality of life for natives due to such things as waiting lists and increased prices. In contrast, hiring a native worker would not increase congestion, would increase spending power compared to an immigrant who sent money home, and would reduce expenditure on benefits.

For the source country, the only gain is if money is sent home (which the host country, when considering its own interests, would not approve); otherwise, the source country loses its investment, workers and demand.

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