Migrants and the public purse

In this article, Ian Preston, Professor of Economics at the University College London, writes on the research undertaken on “the effects of immigration on the wages and employment of natives in the host country (for example, Friedberg and Hunt 1995; Manacorda et al 2012; Dustmann et al 2013). Most empirical studies have failed to find any convincing evidence of substantial negative impact.” Yet people associate immigration with lower wages and a burden on the public purse.

“Much research has been devoted across many countries to the question of whether generous welfare systems act as magnets for economic migration, comparing welfare dependence of immigrants and natives or looking for association across countries between the nature of migration flows and welfare entitlements, with mixed results. Evidence for the UK shows that levels of benefit receipt and use of social housing are lower among recent immigrants than among the UK-born (Dustmann and Frattini 2014).”

For more, see the article here.

Here you can access the article by Christian Dustmann (University College London) and Tommaso Frattini (University of Milan) summarising the research on migrants’ fiscal impact.

Here are some snippets:

“Between 1995 and 2011, immigrants from EEA countries made a positive net fiscal contribution of about £8.8 billion (in 2011 equivalency), compared with an overall negative net fiscal contribution of £604.5 billion by natives. Thus, between 1995 and 2011, EEA immigrants contributed to the fiscal system 4% more than they received in transfers and benefits, whereas natives’ payments into the system were just 93% of what they received, resulting in an overall netative contribution. This is, of course, not surprising since the UK ran a deficit over many of these years.

“On the other hand, immigrants from non-EEA countries have made a negative fiscal contribution overall when considering all years between 1995 and 2011 by about £104 billion. There are two factors that may explain this shortfall. First, their demographic structure – non-EEA immigrants have had more children than natives, and we have allocated educational expenditure for children to immigrants (ignoring that immigrants arrived with their own educational expenditure paid for by the origin country).

dustmannnov13fig1

Fiscal Contribution of Migrants 2000-2011

“The contribution of recent immigrants (i.e. those who arrived after 1999) to the UK fiscal system has been consistently positive and remarkably strong. Between 2001 and 2011, recent EEA immigrants contributed to the fiscal system 34% more than they took out, with a net fiscal contribution of about £22.1 billion. At the same time, recent immigrants from non-EEA countries made a net fiscal contribution of £2.9 billion, thus paying into the system about 2% more than they took out. In contrast, over the same period, natives’ fiscal payments amounted to 89% of the amount of transfers they received, or an overall negative fiscal contribution of £624.1 billion. The net fiscal balance of overall immigration to the UK between 2001 and 2011 amounts therefore to a positive net contribution of about £25 billion, over a period over which the UK has run an overall budget deficit.

dustmannnov13fig2(1)

The data show that migrants arriving since the early 2000s have made substantial net contributions to public finances.

Read more on why this is so on Vox and the New Statesman.

Their journal article is here.

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