The Long Term Economic Impacts of Reducing Migration

There are several debates on how migration will affect United Kingdom’s economy short term and long term. Many oppose to immigration for several unfounded fears like jobs being handed over to immigrants and overcrowding in United Kingdom. Although these concerns are valid, there have been studies and existing data showing the exact opposite. The next question that is being raised about migration is its economic impact in United Kingdom.

In December 2013 a paper released with the title “The Long Term Economic Impacts of Reducing Migration: the Case of the UK Migration Policy” that was written by K. Lisenkova together with her colleagues from National Institute of Economic and Social Research and University of Ottowa came with a conclusion that if the number of migration level is reduced in United Kingdom, the GDP capita will be reduced and it will worsen the public finances. Although the gross income will slightly increase, the taxes will also increase thus cutting the after tax wages making the purchasing power of the population weaker. The experiment was based on the migration target of the UK coalition government of reducing the number of migration from hundreds of thousands to tens of thousands.

Although the inclusion of the A8 countries in European Union in 2004 increased the number of immigrants in United Kingdom, the recent stricter requirements for non-EU nationals reduced the number of migration. Despite the government’s effort of reducing the number of immigrants, in 2012 there were still a total of 177,000 net migration that is way above the target of reducing the numbers down to tens of thousands. With the current policy despite the stricter rules applied to non-EU nationals, the projected number of immigrants will be roughly at 200,000 a year in the next 50 years. The study’s conclusion of the reducing the number of immigrants will negatively affect United Kingdom’s economy is based on its current goal of reducing net migration level to tens of thousands.

The study shows that in 2060, if United Kingdom will continue to only allow tens of thousands of immigrants the aggregate GDP will decrease by 11% and the GDP per person will also decrease by 2.7%. Another negative economic impact of reduced net migration level brought by the decrease in GDP is that the government spending will increase by 1.4 percentage points. This is turn will create a need to increase the tax percentage to support the government budget. By 2060, tax will increase by 2.2 percentage points. This in turn will cause lower after tax wages thus decreasing the wage by 3.3%.

In the long run, United Kingdom’s economy will be negatively impacted if the government decides to continue its goal of limiting number of immigrants. This study was conducted and the results were released to help the government come up with an informed decision about migration.