Cost and Benefits of Inward Labour Migration to the United Kingdom - Essay Example

Table of Contents Executive summary 2 Introduction 3 The costs of inward labour migration in the United Kingdom 4 The Benefits of inward labour migration in the United Kingdom 5 Why attitudes towards immigration are generally hostile 8 Evaluation of the current policy towards labour migration in the United Kingdom 9 Conclusion 10 References 12 Executive summary This present report seeks to assess the main cost and benefits of inward labour migration to the United Kingdom. Thirdly, the paper seeks to explain why the attitudes towards immigration are generally hostile. In the last section, the report will crtically evaluate current policies towards labour migration in the United Kingdom. Under the cost of inward labour migration to the UK, it was noted that the main cost is decrease of wage rate and salaries because of abundant labour supply, while one of the key benefits is low inflation rates due to restrained growth on wage rate and salaries. On the question of why attitudes towards immigration are generally hostile, it was noted that the native population become hostile because they have to compete for the minimal jobs opportunities with the immigrants. In addition, an increase of immigrants lead to restrained growth of labour cost. As for the current policy towards labour migration in the UK, it was noted that currently these polices aim at discouraging labour migration to the UK, and so far the policies have been able to decrease the number of net migration to the UK. Introduction Firstly, Hatton and Tani (2005) defined immigration as the process of going to live in a foreign country permanently. Secondly, immigrants are persons who go to live permanently in a foreign country. It is of essence to acknowledge that there are cases of illegal immigration in the United Kingdom and the European region at large, but this present study will mainly ignore the existence of illegal immigrants in the UK. Greenaway and Nelson (2000) stated that inward labour migration to the United Kingdom has been facilitated by globalization, which encourages the movement of labour from one region to another. In particular, as of 2010, immigrants in the UK made up ten percent of the entire UK population and currently, the number of international immigrants to the UK stands at 250,000 (Office for National Statistics, 2012). The Institute for Public Policy Research (2004) noted that the UK authorities try to control immigration into the country using a Point Based System that rationalizes the control of immigration. The system has five tiers that include highly qualified personnel, skilled personnel with job offers in the UK, students, and temporary employees. However, the tier for less qualified personnel was recently suspended. It is crucial to note that immigrants are motivated to migrate into foreign countries mainly because of prospects or possibilities of getting high paying jobs, and favorable tax and welfare systems in the foreign countries. Secondly, immigrants are motivated to migrate into foreign countries because of non-financial reasons that include better living standards in the foreign country, opportunities to study in the foreign countries, or an opportunity to rejoin other family members residing in the foreign countries (McKinsey Global Institute, 2005). The costs of inward labour migration in the United Kingdom Advocates of immigration, argue that it is justified to encourage immigration in order to boost the labour market, which is continually crippled by the rising number of ageing population, and shortages of skilled workforce in some sectors of the labour market. However, Migration Watch UK (2007), which is a pressure group against immigration, stated that inward labour migration comes with its adjoining cost to the UK that includes decreased wages and salaries for local workers because of abundant labour supply. This is to say that, with an increase in inward labour migration, the UK labour market is likely to witness an increase in labour supply, which according to the general theories of economics will lead to a decrease in demand. With decreased demand for labour, economic theories also stipulate there will be a decrease in cost of labour since employers can cheaply acquire labour, which is abundant in supply (Riley and Weale, 2006). Another potential cost for inward labour migration to the UK, is increased cases of unemployment that can occur when immigrants have skills that are irrelevant to the market demands (Champion et al. 2007). This is mainly attributed to the fact that immigrants undergo a different learning syllabus that does not reflect the demands of the labour market in the UK. Secondly, there is a scenario whereby personnel that are more qualified may migrate into the UK thus limiting the chances of less qualified British nationals from getting employment. This will also equally lead to an increase in unemployment levels within the country. Thirdly, Dustmann et al. (2005) stated that an additional increase in the number of inward labour migration to the UK definitely increases pressure on the welfare of workers, which include health, housing, and benefits. The increased pressure on welfare necessitates an increase in taxes to finance government expenditure on additional infrastructures required to support the growing demand. Summarily, it can be stated that inward labour migration to the UK leads to an increase in taxes, which lowers disposable income of domestic workers and even lowers their living standards. Lastly, the inward labour immigration to the UK puts a pressure on the available resources. For example, Meadows (2006) argued that the city of London, which attracts a lot of foreign workers experience a persistent demand for housing that pushes up the cost of housing as well as living in the city mainly because of an influx in foreign workers. The Benefits of inward labour migration in the United Kingdom According to the writings by (Manacorda et al. 2006), it is noted that inward labour migration to the UK leads to an expansion of the labour supply. This is beneficial because sectors that commonly experience shortage of labour supply are able to fill the gaps; some of these sectors include state education, construction, agriculture, and the computing sector. Moreover, the Point Based System for rationalizing the immigration gives tier 1 to the highly skilled personnel and this enables the UK labour market to attract workers with exceptional skills from different countries to work in sensitive sectors such as finance sectors in South-East England and London. In addition, because most immigrants tend to be young, the inward labour migration to the UK creates a trend whereby there is a continual and constant increase of working population. Secondly, in the studies conducted by Erber (2011), it is noted that inward labour migration to the UK lowers the demand for labour and hence restrains the growth of wages and salaries. This fact is illustrated in the chart below whereby an increase in labour supply because of inward migration lowers the real wage rate. To the general economy of the UK, the inward labour migration helps to tame interest rates as well as the level of inflation because of the restrained growth of wage rate. In an instance where the labour supply is low, there is likely to be a high demand for labour which then leads to an increase in wage rate that equally contributes to inflation and subsequent increase in interest rate by the Bank of England. Real wage rate Labour supply with migration W1 W2 E1 E2 Employment The image below shows how inward labour migration to the UK can lead to increase in labour supply, which lowers wage inflation. A decrease in wage inflation enables the decline in cost of production that further allow producers to sell goods and services at a lower price while still earning good returns (Pugel, 2012). Figure 2: Analysis image of how reduced cost of labour can increase profits with lower prices on consumer products Source: http://www.tutor2u.net/blog/index.php/economics/comments/a2 Thirdly, Salvatore (2012) noted that the aggregate demand for goods and services would increase because working immigrants would increase the number of people with disposable income, and thereby facilitating the growth of the local economy. Furthermore, some of the immigrants have entrepreneurial skills that can lead to the creation of jobs even to the locals, which will lead to an expansion of the UK economy (Godley, 2001). Moreover, because immigrants come from diverse backgrounds, it is possible that they can create a good synergy with their British counterparts, which can lead to great innovation and entrepreneurship. The immigrants also create a wide source of government finance through the taxes that they pay (Longhi et al. 2005). For example, if traditionally the UK government used to collect taxes from a million working domestic workers then an increase in the number of workers within the UK will mean that the government will have an additional source of revenue, which will facilitate further developments of infrastructures as well as the general economy. In the studies conducted by Mundell (1957), he stated that the inward labour migration to country is beneficial in that it contributes to increase in business efficiency within the country. In particular, inward migration enables the availability of skills that complement the domestic skills, and this provides the labour market with flexible workforce. For example, an immigrant African nurse can provide a good childcare thereby enabling the mother to continue working, which makes her flexible despite her role as a mother. Why attitudes towards immigration are generally hostile Perhaps by referring to the writings by Pollard et al. (2008) can help to explain why attitudes towards immigration are generally hostile as it is stated that even thou a single mouth comes with two pair of hands, the hands can at times make more or less that what is required. Therefore, there are possibilities that immigrants can increase the economic productivity of a country and there are possibilities that they might create pressure on the limited resources, thereby negatively affecting the quality of life for the locals (Longhi et al. 2006). South Africa is a perfect example of a Nation that is generally hostile to immigrants since there are usually many reported cases of xenophobic attack on foreign immigrants especially from the Somali origin who are seeking refuge in the country. Kirby and Riley (2006) stated that immigrants are in most cases usually more economically active than the local population; therefore, the local or native population will generally be hostile to them because they are willing to do certain jobs that the natives are not ready to do. For example, in the UK, the natives do not prefer blue collars jobs mostly in industries such as the construction industry, and they do not prefer jobs that are considered demeaning like washing toilets, being house helps, offering baby care and nursing old people, among others. On the other hand, immigrants will readily accept such jobs. Immigrants will also readily accept lower wages and salary even thou they are well qualified, these makes employers to prefer immigrant workers as compared to the native workers who have the same set of skills but will demand a higher pay. Therefore, the native population will be hostile to immigrants because they will come up and take up jobs at even a lower rate thereby denying them employment opportunities. Evaluation of the current policy towards labour migration in the United Kingdom One of UK’s policies towards migration is the Point Based System, which rationalize the immigration control process of the country. Through this system, the UK only, allow labour migration of highly skilled personnel and skilled personnel with job offers from UK’s business organisations or government agencies (Migration Watch UK, 2007). However, the current policies prohibit the labour migration of less skilled personnel and this is perhaps to prevent such personnel from competing with the less skilled personnel in the UK for the limited job opportunities available to this class of workers. The current policies towards labour migration in the UK seek to ban migration of workers from non-European Union member countries. This policy seeks to reduce the number of immigrants from non-EU nations because of some of the costs of inward labour migration in the country, that have been listed above. The enactment of such policies is justified by the continued outrage from certain quarters within the UK society that are lamenting over the continued increase of immigrants workers in the country. The policy seeks to bar mostly non-EU immigrants instead of EU immigrants because the UK is part of the EU, and therefore it is required to allow easy movements of citizens from the member states (Barrell et al. 2006; Hatton and Tani, 2005). According to figures released by the Office for National Statistics, the current policies towards labour migration in the UK have contributed to the slight decrease in net migration to UK, which currently stands at 250,000 but was previously 255,000 in September 2010 (Office for National Statistics, 2012). Conclusion It has been observed that inward labour migration to the United Kingdom has its advantages as well as disadvantages. To the local population, the advantages are quite few since they have to compete for limited job opportunities with the immigrants and the wage rates as well as salaries are restrained from increasing. Card (1990) further noted that in most cases inward labour migration to any country does not totally benefit the economy since immigrants transfer back their earnings to their loved ones back at their home country. Therefore, it creates a scenario whereby the immigrants benefit from the UK economy while the UK economy does not benefit from the immigrants who do not plough back their money to boost the economic growth of the country (Markova and Black, 2007). Dench et al. (2006) lamented that the benefits of inward labour migration to the UK are only experienced by the UK employers who are in pursuit of cheap labour and do not want to improve the livings standards of the native population in the UK. Conclusively, it can be stated that inward migration to the UK should be discouraged through stringent labour migration policies. This is because it creates unnecessary tension to the limited resources that the country has and furthermore, it does not encourage employers to pay high wages and salaries to the native population, who will certainly plough back the money to develop the local economy and elevate their own living standards (May et al. 2007). References Barrell, R., Guillemineau, C. and Liadze, I. (2006). Migration in Europe, National Institute Economic review, 198, 36-39. Card, D. (1990) The impact of the Mariel boatlift on the Miami labour market, Industrial and Labour Relations Review, 43, 245-57. 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