Now I know that the world is upside down right now, but before this, the UK went through massive change. We said yes to Brexit and a formal break up with Europe, leaving and bring in more control over our immigration.
Its something that has been on the minds of millions and in the thoughts even with a global pandemic, I thought I might shed some light on some of the key points that might put your mind at ease.
Let us start with employment.
Employment, or your ability to get a job to get paid. This talks about how hard it is to get a job, or when you have a job, how often on average your wages increase for the same job! This all comes under the bracket of the labour market.
The common misconception is that people who are immigrating to the UK for work are going to “take our jobs”. There is some actual economic precedent to this, but in very specific circumstances. Basically, it affects the actual statistics like a grain of sand to a beach.
The problem is that people often overuse key trigger words and very specific data sets to try and get you to believe them. So what does the data say? Really – mostly inconclusive about migrants and jobs for the average person, on either end though, like lower skilled jobs such as retail, to higher skilled jobs such as STEM, there is more data on what will happen.
Take a look at the evidence from the migration advisory committee. It suggests that there have been no problems with UK born workers gaining employment in higher-skilled sectors, with some problems for lower-skilled work (entry-level jobs that require no qualifications), so in theory, the evidence can point towards the UK born unskilled workers being better off at achieving employment post brexit.
Source: Migration Advisory Committee (MAC): https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/741926/Final_EEA_report.PDF
So in essence, there is some circumstantial evidence to suggest that UK born workers that are less educated will be better off in achieving employment and benefits of there being growth in wages for the lower paid, with a growth decline for the higher skill employment. Although there is little to no evidence about any other changes.
What does the Economics say though? Basically, There are a few theories on the market, one is that supply creates its own demand and looks like this:
(yeah, its that old!) It’s a theory called Say’s Law that suggests supply creates its own demand, around 200 years old actually.
It applies here as a classical theory, suggesting that the more people in the labour market, that have a job, the more demand for other products and services (food, taxis etc), which means the more jobs it creates, its something I am currently working on for my dissertation and helps to base it around job multipliers (jobs that create more jobs by accident) in simple terms! Anyway, less migrants due to Brexit will overall have a negative impact on this law, as there will be less people employed overall, less demand for jobs also, meaning less jobs created through that demand!
That’s classical economic theory, with Keynes Demand creates its own supply being on the other side, but we’ll go into that another time.
There is a chance that productivity in the country will be negatively affected by the restriction of foreign workers in the economy. This is due to arguments that immigration is vital to the economy and closely linked to productivity, although the evidence isn’t fully conclusive.
This is bad news for a few reasons, as the ability to improve your standards of living is almost relies entirely on that economies ability to raise output per worker overtime! With fewer people looking for jobs, less demand and job creation = less spending and productivity = no improvement on standard of living. This is the absolute skeleton of how that process would work, but this is how it would go down.
Problems you could potentially see in the future that you would see would be a lack of people in services like restaurants and customer service because there are fewer people to fill these roles because of the point system implemented by the government. Restricting immigration for work in the UK has no real effect (based on the evidence) overall in many cases, with some small deviations both positive and negative.
Finally, let us look at the Economy as a whole. What I mean by this is benefits, taxes and other potential impacts that immigration could have on the Economy.
If you look at this from Oxford Economics, it shows that on average, the European Economic Area (EEA) citizens contributed more to national insurance and income tax. So, if this follows, a restriction on migration may impact this negatively. This is because the contributions may rise (due to the new points system), overall there will be fewer contributions as there will be a restriction of people entering the UK, so in layman’s terms: non-UK workers contribute more money than they take, but there will be less money overall because of restrictions on immigration because of fewer people entering the UK.
By the way, the new point system can be viewed here: https://www.gov.uk/government/publications/uk-points-based-immigration-system-employer-information/the-uks-points-based-immigration-system-an-introduction-for-employers.
So to conclude; there are a few points that we can take from this:
- Youre not likely to see any short term impacts
This is because of COVID-19. This pandemic has had astronomical economic impacts on a global scale, since us leaving Europe is so closely bound to the pandemic, its unlikely that we’ll be able to see how much its actually affected us
- Don’t always believe what you read/hear
This is a given, but even the people you are supposed to believe can skew data in their favour! The best way to see accurate figures to make your own decisions will come from the government, like the Office for National Statistics, or in this articles case, the Migration Advisory Committee!
- Most of the data gives circumstantial evidence
The problem is that a large country like the UK has never left something like the EU before, we’re in new territory, we can see what markets are like in similar circumstances but overall, the scariest thing is that we just don’t know, yet!
How does this affect you?
In the long run, we will benefit from the money we save that we would otherwise have to pay to the EU, but lose out on the free trade, movement and other policies, so overall, could affect the growth of the economy. This affects us by having fewer opportunities available to us.
Other than this, we limit productivity, innovations and public service contributions, which affects how we receive benefits, income and our services. We rely a lot on immigration to fill in the gaps in the economy, the jobs that people don’t want to provide services and contribute effectively. We will see less of this, which will impact the way you receive your products and services in the future.
You might not immediately see the impacts on your jobs and wages, but over time, you will start to see it, as prices won’t go down as quick due to economic factors like economies of scale (as there are fewer people to create demand for the product/service) also on product innovations, as innovation and immigration are uniquely linked, with freedom for movement to high skilled areas (like London) helping to stipulate greater innovations. We are likely to see prices rise, or not fall, because of these factors. There are some benefits though, such as prices of housing. These will not artificially rise because there isn’t any more demand in the Economy or strain for finding housing.
By Nathan Nolan