Immigration’s Economic Input in the United Kingdom

Immigration is one of the most important debated topics in the United Kingdom today. Britain has always been a destination of the migrants. However, the recent influx is almost unprecedented. Relative to population, the scale of immigration is now so much greater than during any period since the Anglo-Saxon and Danish invasions over a thousand years.

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Public opinion holds that there should be a reduction in the immigration which has been very much increasing lately, especially sharply so over the last decade. As this situation prevails, it is realized that the immigrants’ contribution differs based on the type thereof. For instance, Bankers make a large positive contribution to the exchequer. However, on the other hand, extreme unskilled workers with their families owe the government more than they pay in taxes.

Looking back to the history of immigration at the beginning of the century, it is known that there was a policy adopted which aimed at expanding immigration into the United Kingdom so as to promote economic growth and satisfy the demands of employers. It is said that this policy rested on four related but separate arguments. These included the benefit of overall GDP and fiscal balance, the satisfaction of employers’ demands for labour, alleviation of labour shortages and the corresponding damping of inflationary wages claims [2]. According to this policy, it opines that migration is and always will be essential and necessary for the growth of the UK economy, which would otherwise collapse without it.

Following thus, there have always been consequences of the migration activities that went on and which are still going on today. Eastern European immigrants arriving in Britain offer the country their willingness to take up minimum paying jobs. This has greatly enhanced the UK economy, in that it has been saving it from the threat of inflation. Thus, low inflation has helped keep the pound in a good position and also enabled it to fare well against its European counterparts.

Further, it has also strengthened the nation’s import of resources and goods on more favorable terms. Firms have been able to fill the gap of skill shortages and positions which are regarded as less desirable by British workers. Stagnating industries now have available to them enthusiastic and hardworking candidates who would work to boost up production, thereby expanding the industry to a great extent which wouldn’t have otherwise been possible.

However though, we must realize the fact that though this might seem an advantage to the UK economy, yet, it might not be very much so as regards to the workers. It is realized that importing labour to ‘contain inflationary pressures’ [2] is just the language of macroeconomics which otherwise refer to keeping down the wages of workers therein making their income and welfare less than it should otherwise be.

With regards to employment, immigrants may take jobs that would otherwise have gone to native workers. Competition from immigrants can also decrease the wages of the native workers, especially the unskilled. Thus, in such cases, nationals will be paying less tax but receive more benefits, thereby, net fiscal contribution of nationals will fall as a result of immigration.

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In the employment aspect, we also come across differences of wages between the skilled and the unskilled. Low wages and unemployment prevails among the less skilled. British companies are growing in their profits at the fastest pace while the wages of ordinary workers are rising very slowly. John Philpott, Chief Economist at the Chartered Institute of Personnel and Development, remarked, ‘High levels of immigration were a significant reason for subdued wage growth. Clearly immigration has been good for UK plc but it is clear from these numbers that businesses rather than workers are benefiting’ (Guardian 16 August 2007) [2].

With immigration and economic activities going side by side, we have its impact on the GDP of the United Kingdom. Immigration is said to expand overall GDP roughly to the extent that it expands the working age population. It has been observed that the benefits of immigration to the individual are trivial in relation to average incomes and may be slightly negative. The macroeconomics indicators only show the most modest or, it can be said, no response to the very substantial increase migration inflows of the last decade.

It is said that there has been only a little change in overall GDP trends in the years since immigration has accelerated as compared to the time when more restrictive policy prevailed. The Treasury insists, on the most elementary assumptions (which are partly wrong) about the workforce participation, that migration has elevated trend growth of GDP by 0.25% from the underlying 2.5% to 2.75% (HM Treasury 2006, 2007).

Record migration has, however, not stopped the forecast being revised downwards to 2% in October 2007 per budget report, and less than 2% according to most City sources [2].In whatever cases, the annual rate of overall GDP growth of the United Kingdom is an unsatisfactory and inappropriate criterion. The overall GDP is strongly related to population size and its growth is in part a function of population growth. UK GDP is several times that of Switzerland but the people’s standard of living therein is comparatively lower to the latter.

As regards to the pension of the immigrants, it is said that their fiscal effect should be considered over their life cycle. It is the case at present that their age structure is significantly lower than that of the population as a whole. This present situation reduces the cost of their pensions for the time being but it will eventually take a turn since they would have to be paid for their lifelong service to the nation.

Immigration has not only affected the United Kingdom in its economic aspect but also in the population thereof. It is said that since the start of the century, the net immigration had accounted for about 65% of the population growth in the UK. Further, over half the birth rate increase is due to an increase of births to immigrant mothers. At present, it is said that immigrant mothers make up 24% of all births in England and Wales [2]. Figures that have been released by the office of National Statistics show that the average number of children has risen for a fifth straight year to 1.87 which is the highest rate since 1980.

Further, looking back to the last decade, it is seen that there was a 77% increase in births by mothers who were born outside of the United Kingdom. This figure however climbed to almost 150,000, over a fifth of all babies in 2006 [9]. According to the 2004 – based Principal Projection of Government Actuary’s Department (GAD), 85% of population growth to mid-century is projected to arise from the direct or indirect effects of immigration, which also goes for the immigrant themselves and their children [2].

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Some of the features that caused this rise in population can be said to be due to older women. These older mothers played a part in raising the fertility rate, in that they gave up their careers to get pregnant. It has been found out that the births to women aged between 35 and 39 rose 7% last year. Moreover, the number of babies born to women aged 40 and above has almost doubled in the last decade. Another cause for the increase of births is due to the fact that there evolved many advances in the fertility treatments and there was quite a lot of pressure from the workplace that made women decide to divert their energy to a more meaningful aspect of life [9].

In England, the women in the west Midlands had the most children. There was a 1.96 children rate per woman while the lowest rate was the north east at 1.78 children. The infant death rate remained at the lowest level ever. In 2006, there were 3,368 infant deaths recorded in England and Wales [9].

As immigration continues, it is found that one-eighth of the working population in the United Kingdom is accounted by people who were born overseas. The report into the economic impact of immigration reveals that in the final quarter of 2006, people born overseas accounted for 12.5% of the working population. This came up from 7.4% a decade earlier. The report also stated that migration added 0.5% a year to the working age population between 2001 and 2006 [7]. It has been realized that immigrants are of the working age. This age of the immigrants is said to help in overcoming the problems of the ageing population, filling particular niches and balancing the generational gap in pension provisions. It also gives rise to lower income tax. Immigrants of working age, it is said, help contribute to taxes.

The immigrants, as have been mentioned, are younger than their UK counterparts. It is found that 15% of men in their late twenties are immigrants compared to 6% of men in their fifties. This reflects the fact that the total number of immigrants has risen while UK’s birth rate is falling [6]. Immigration is therefore keeping the dependency ratio (of older people to the working population) down. Thus, allowing more young immigrants into the country helps in alleviating the ‘dependency ratio’ [6] problem which would otherwise require taxes of the working age individuals to support the growing number of individuals above retirement age.

Even so, however, it must be noted that immigration into the United Kingdom remains concentrated heavily only in London, south-east England and the east of England. Thus, the employers in the rural areas are still struggling to fill the vacancies.

As is with all respects of study, each has its own merits and demerits. It has its facts and it has its fictions. Herein, referring to the point stated above, we have to somehow involve other findings that will better our understanding and increase our insight of the impact of immigration on the United Kingdom, through referring to the demographics. It has been said that immigration could bring relief to the relatively large mass of pensioners, in that, the immigrants are still young and in the working age. However, it cannot, but be realized that many of the immigrants will be pensioners in 25 years, thereby adding more to the problem.

Data collected from the office for National Statistics showed there are 11,129,000 people aged under 16, compared with 11,272,000 aged 60 and over. Further, it is found that the number of people of state pension able age is to increase to 12.2 million in 2010. By 2016, there will be 400,000 more people claiming state pensions than children, rising to more than two million in 2031. [10]

In 2006, it is said that there were 3.3 people of working age for every person on a pension. However, this ratio will slowly decline to 2.9 within 25 years. Thus, it means that there will be comparatively fewer tax payers to support the ageing population. [10]

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Having been through all that is said and observed about immigration and its impact on the United Kingdom, it is essential that one takes a look at the other side of things, the other side which would clarify if all that is said of immigration and its impact is fully reliable or not. Most often at times conventional economic evaluations regarding the impact or effects of immigration are framed or evolved within the narrow criteria of output, tax, and welfare transfers. The economic or partly economic externalities arising from immigration and from population of recent immigration origin are not considered in the evaluations.

These could include statistically disproportionate cost in education, crime, security, health, race- relations and multicultural activities, remittances and asylum. Further, it would be realized that the higher population size and density arising from immigration imposes congestion costs and diverts investments to new infrastructure and housing. It also impinges on space and amenity and accelerates the output of waste and green house gas emissions. These might, in their own ways prove to have costs sufficient to tip the economic balance substantially against large scale migration into the United Kingdom [2].

It is often said that immigration contributes a whole lot to the United Kingdom and its economy. It has been observed that without immigration, the UK economy would not be able to stand. But when one looks at the state of affairs more closely, one finds that the things stated is not very much in line with the reality of things happening.

For instance, not all the immigrants have professional skills or even education, for that matter of fact. Thus, not all would be able to contribute to the UK economy in a positive way. Take the case of unskilled immigrants. They are the net consumers of taxes. Their children are educated in state schools and their health requirements are looked after by the NHS. These immigrants are eligible for state benefits if they are in the situation of having no work or source of income. There is a strain on the housing stock and public services. Immigration only results to crowded schools, hospitals, etc…Also, state subsidized housing gets more difficult to obtain.

Thus, it is observed that even with the large scale of immigration, yet, as have been mentioned before, this cannot solve the pension crisis nor the problems arising due to the ageing population. It can just delay the day of reckoning since in due course of time, immigrants themselves would grow old and need pensions.

The injection of large number of unskilled workers into the economy does not benefit the bulk of the population to any great extent. It is cleverly said to benefit the nannies and the house-cleaners and all the employers who want to pay low wages. It does not however, benefit indigenous, unskilled Britons who have to compete with immigrants who are willing to work hard for very low wages under unpleasant working conditions. It can be pointed out that immigration has its winners and losers. Employers of labour, especially low productivity employers, seeking cheap labour and their immigrant employees are the most obvious beneficiaries. Others often lose.


  1. MigrationWatchUK. The Impact of Immigration to the UK. 2004. Web.
  2. Coleman, David. The Economic Impact of Immigration Submission to the House of Lords Select Committee on Economic Affairs. (Date: ?). Web.
  3. ARTICLES. Polish Immigrants Growing Role in British Consumer Spending. (Date: ?) Web.
  4. Dustmann, C., Hatton. T. and Preston. I. The Labour Market Effects of Immigration. 2005. Web.
  5. Pettinger. T. The Effect of Immigration into the UK. 2007. Web.
  6. Center for Economic Performance. Immigration: The Evidence from Economic Research. (Date: ?). Web.
  7. BBC News. Migrants ‘One Eighth of Workers’. 2007. Web.
  8. Kelly, Charles. Immigration to the UK falls Whilst Record Numbers Leave. 2008. Web.
  9. Henry, Emma (and agencies). Rising Immigration Fuels 26-Year Fertility High. 2007. Web.
  10. Johnston, Philip. The Future is Grey as Pensioners Take Over. 2007. Web.
  11. Rawthorn, Robert. Never Have We Seen Immigration On This scale: We Just Can’t Cope. 2006. Web.
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