The economics of immigration

Paul Johnson

Hello, and welcome to this edition of the IFS Zooms In, I'm Paul Johnson, I'm director of the Institute for Fiscal Studies. And today, I'm going to be talking about immigration, the economics of immigration and, to some extent, the politics of it. And I'm going to do that with Madeleine Sumption, who's a political scientist, who's director of the Migration Observatory at the University of Oxford. And no one could be better placed to put in some kind of context the occasionally rather heated debate and discussion we're having about immigration numbers at the moment. Madeleine, welcome.

Madeleine Sumption

Thanks for having me.

Paul Johnson

Perhaps you could start just by saying a little bit about what the Migration Observatory is and what work you do.

Madeleine Sumption

Yes, the Migration Observatory is based at Oxford University, and we produce impartial analysis for policy and public audiences of migration. So, we're looking at the impacts of migration and the impacts of migration policies in the UK.

Paul Johnson

A very big issue for a very long time now. Arguably immigration played a big role in the Brexit vote back in 2016, we've had significant inward immigration for some period of time, and of course within the last few weeks we've had the news that, in 2022, net migration to the UK was around 600,000, which I think was a record. Could you just put some of that in a little bit of historical context, I mean are we looking at a period of historically high levels of inward migration to the UK? And do we look unusual international?

Madeleine Sumption

This is a period of unusually high immigration. If you look back over the last 20 years or so, net migration, which is the measure that's most used in the political debates in this country, for better or worse, has bumped along somewhere between 2 and 300,000 in any given year, with some ups and downs. The most recent figures that came out at the end of May 2023, this year, has suggested that net migration was just over 600,000, and that comprises immigration of around 1.2 million, and then just under 600,000 emigrations - so, then immigration minus emigration, of course, being net migration.

And it's unusually high at the moment for a couple of reasons, there were lots of things that happened in 2022 that aren't typical, the most obvious one being the war in Ukraine a lot of Ukrainians who left the country, most of them obviously didn't come to the UK, but some of them did, the UK granted around 200,000 visas, so that made-up just under 20% of all non-EU migrants coming to the UK. But we've also had this really interesting boom in recruitment of international students, that I think it's been much bigger than many expected, and then there's been an increase in the number of skilled workers coming to the UK, particularly in the health and care sector.

And so, these three things together have really combined to push up the numbers much higher than they would usually be. I think it's reasonable to assume that those numbers will drop off again in the next two or three years. Obviously, migration is really difficult to forecast, but we expect to see, you know, there aren't many Ukrainians coming in anymore, and then we expect to see a bit of an increase in emigration of international students who tend to be temporary. And together I think those and a couple of other factors are likely to bring the numbers down.

Paul Johnson

So that sort of explanation of why we've jumped in the last year from 2 or 300,000 to 600,000 is really useful as well to hear those gross numbers, so just over a million coming in, but more than half a million people leaving, the UK population is obviously in flux to a remarkable degree, actually, when you're talking about those kinds of numbers. You said that net migration has been at the 2 to 300,000 mark for about 20 years or so. If you look back before that, if you look back over the 80s and 90s, actually, that 20 years itself is relatively unusual, isn't it?

Madeleine Sumption

That's right. So historically, immigration to the UK has fluctuated up and down. So, there were periods of slightly higher migration just after the war, when we had the Windrush generation coming to the UK and other Commonwealth migrants. There was a period of quite low migration, particularly around the 70s and early 80s. And in some periods, actually some years, there was net emigration from the UK, and that was mostly because there weren't many migrants coming in and Brits left the UK in larger numbers than they returned from abroad.

But a lot of things have changed since then, and I think in particular the global market for international study looks very different from what it did in the 70s and 80s, and that's not just a UK thing, you see that everywhere. So, there's a large market for international study, most of those people go home, but some of them will stay on. And there's just a lot more work-related migration as well at the moment that we used to see, this is probably partly a function of globalisation, so you have IT workers and professional services.

But the NHS over recent years, I think one of the really striking things that we've seen on and off, so, we saw in the early 2000s, for example, there was significant recruitment of overseas workers into the NHS. But that's really taken off in the last few years and is one of the areas - some of these other things I've talked about, the Ukrainians or students, those numbers appear maybe to be levelling off or falling, but actually immigration of skilled workers into the health and care sector appears to be accelerating still, so that's a really important part of this picture.

Paul Johnson

Just, I mean without getting into the yet at least into the sort of pros and cons of it, I mean I remember 70s and early 80s when I think we probably were in one of those periods of net emigration, or certainly not much in the way of net immigration, and that appeared to be associated with an economy that wasn't doing very well, wasn't creating very many jobs. I remember people worrying about the brain drain and so on, of the higher skilled people leaving the UK. Is it fair to say, or not, maybe it's not given what you've said about this being significantly focused on the NHS, but do you find that it's more successful economies which tend to have net inward immigration, or is it something else that's drawing people in other than a successful economy? Because the UK economy doesn't feel like it's been mega successful over the last few years and yet we do still seem to be drawing people in in significant numbers.

Madeleine Sumption

Yes, no, the state of the economy is really important. And if you look sort of at the statistical research, looking across a number of countries, tends to show that when the economy is doing better there's more migration. Obviously, the clearest recent example of this was 2020 with the COVID pandemic and immigration ground to a halt, now, of course, that wasn't just the economy, it was also travel restrictions. But we have seen over time that the immigration is often affected by the state of the economy.

It's not the only thing going on. International students obviously are coming some of them do work, but they're coming primarily for educational institutions in the UK, and not necessarily with a view to staying long term. And then you'll also have family members who, you know, and the assumption is that those people would move regardless of the state of the economy. Obviously, family - currently is only 6% of non-EU migration to the UK, so it's a pretty small piece, that's partly just because we've got these other unusual things going on like so many Ukrainians coming, and historically family has been one of the important drivers.

Paul Johnson

Yeah. Just again to get, again before we get into the sort of analytics of it, just to get people's heads around scale, am I right in thinking there's around 6 million people living in the UK, whose original nationality is different from British? In other words, we can think of there being around 6 million people who have immigrated into the UK and that’s sort of the impact on the population of immigration?

Madeleine Sumption

So, it's currently around 10 million people who were born abroad.

Paul Johnson

10 million, yeah.

Madeleine Sumption

A few of those will be people who were always British, so, people were born abroad to British parents and then have moved back, and they wouldn't typically be considered migrants, although they are obviously international migrants in a strict sense of the word, but yes. And then the number of foreign nationals will be much lower because, especially non-EU citizens, less so on the EU side, but non-EU citizens, once they've been in the UK for six or so years will tend to become a UK citizen.

Paul Johnson

So about 10 million people in the country who were born abroad obviously there has also been people moving out of the country, but the population is several million bigger than it would have been had we had zero net migration over the past 10 or 20 years.

One of the things I've really struggled to get my head around is the sort of counterfactual question, which I think is the question that a lot of people have in their mind when they're thinking about the impact of immigration, which in a sense is: supposing we had zero net immigration over the last 20 years, does it even make sense to ask the question what would the country look like? What would the economy look like? Presumably, it would just be completely different to what it is, but in a way that it's really quite hard to speculate?

Madeleine Sumption

Yes, it is, and I think it's difficult to imagine in the current world actually having a zero net migration, in the sense that people move around, they marry people from other countries and then some of those people will want to come back to the UK. So, I think some level of net migration is, I think, inevitable for a normal looking economy in the 2020s.

But yeah, I mean I think the country would look very different in terms of population. I mean obviously from an economic perspective, it's actually surprising that a lot of the economic research tends not to suggest that the impact of immigration is really big. If you look at measures like impacts on wages or on public finances, different views on public - we might come onto this in a moment - different perspective of public finances give you slightly different answers. But in general, one of the running themes is actually the impacts on immigration are relatively small, but one area where it does have a really big impact is on the population, it makes the country bigger. And economists, as you will know, tend not to have a firm view on what the right size of the population is, but it's certainly clear that the immigration has changed the composition a fair amount.

Paul Johnson

And that's one of the reasons I asked the question actually is I know of course that a lot of economic studies do suggest that the impact on wages, for example, are quite small, but my sense of those studies is that they're not really asking the question that I just asked, which is what would the country look like if it had 6 million fewer people or whatever the appropriate number is in it? I mean they tend to look at the impacts over relatively short periods of more marginal changes, and I'm sure it gives you the right answer to the question, what's the impact on wages next year of having an extra 100,000 people coming in this year? But what I'm not sure is whether it tells us anything useful about how different does the economy look today to what the economy would have looked like had we had 2 million rather than 6 million net immigration over the last 20 years? I mean, we just would have fewer businesses, presumably, fewer people in work, a different set of services that people can access and so on and so on. And actually, the impact of that on all of our wages and productivity - the reason I'm asking is I have a sense we just don't know the answer to that question, but I just wonder whether you have any more sense of that?

Madeleine Sumption

I think there may be more subtle impacts that don't get picked up by these studies that just look at the impact on the hourly wage of workers at different points than the wage distribution. We know that immigration changes the composition, the sort of industrial mix of the economy. And so if you have, effectively you know in the long run, and I think probably one of the reasons that immigration doesn't seem to have big impact on wages is that in the long run, employers hire the people who are in the population, right, they sort of rely on the workforces that are there, and if that workforce gets bigger, the jobs will be created to employ those people. Now, if the people who come in have particular characteristics, then obviously you expect the industries that use people with those characteristics to expand. And, for example, we saw after 2004 that when you had a lot of EU workers coming and they were willing and motivated to work in seasonal agricultural jobs, you saw an expansion in the production of some labour-intensive produce like soft fruit for example.

And it's quite difficult to measure this in particular, but you know there are areas of the economy that have relied quite heavily on migrant workers. So probably the hospitality industry would have been larger as a result of the availability of migrant workers to do those jobs, or certainly larger and or potentially more labour intensive. And there is a little bit of quite interesting evidence that effectively that the technology that employers are using depends to some extent on migration, more labour-intensive technologies are more worthwhile if there are a lot of people willing to do the jobs that are relatively low wage. So, yes, those kinds of things definitely do have an impact.

Paul Johnson

So really, or several really interesting things that you said there, I didn't know that point about the sort of soft fruit industry having got bigger because of the availability of migrant workers. And it's always struck me, actually, as a choice we can make as a country, that we can decide to have soft fruit industry, but actually if we can't have that with our native-born workforce, and we don't want so much immigration, then actually, bluntly, the cost to the country of not having a soft fruit picking industry isn’t enormous, and that seems to me to be a choice that we have.

Madeleine Sumption

Yes, no, absolutely. And I think in the debate people often have this idea that we need a certain number of people for a given industry and that the economy has to have these people, otherwise something bad will happen, and I think the reasonable person will agree that there probably isn't an optimal number of raspberries that the UK ought to be producing. And then it gets into questions about these things are quite tradable, we could buy them from abroad, and actually consumers aren't willing to pay a huge amount more for British strawberries and raspberries, even if they say in principle that they like them. So, it comes down actually, I think to these more subjective and political questions about, you know, do we like the idea of having a large soft fruit industry? And I think fundamentally that's not actually immigration policy question, that's a broader political choice.

Paul Johnson

Yeah, no, I completely agree with you on that. But you also mentioned the sort of role that companies can play in adjusting the technology they use depending on the available labour force, and I think that's one of the - much more elegantly put - is sort of where some of those who want to reduce immigration are coming from as well, I sense, in the sense that I think they might say that if we didn't have this big pool of cheaper labour, we could have higher productivity because firms would invest more in machinery. Or indeed that where these are somewhat higher skilled jobs, British firms would be forced to spend more on training British born workers. I mean is there evidence of that? Might that be an effect of reducing immigration?

Madeleine Sumption

So, this is a really tricky one because there is micro-level evidence that firms adjust in the way that I described, that they're less likely to adopt labour saving technologies if a lot of labour is available to them. There are then these kind of more macro level studies that try and identify how, over periods of numbers of years, immigration has affected total factor productivity and so forth. You would expect there to be an impact that, just purely through the compositional effect, you would expect that if you have fewer people coming into low productivity jobs, that the composition of the economy would substantially shift towards higher productivity jobs. And it's actually, the findings from - I mean there it's only a handful of studies so far that looked at this, and they don't seem to find the answer that you would expect, in theory, they tend to suggest the overall immigration has a positive impact on productivity. But I think there's, and economists are scratching their heads about why that is, and I think there's probably just more work to be done, and obviously some of these macro studies, it is quite difficult to know whether you're really capturing exactly the thing that you're trying to measure.

Paul Johnson

That's interesting, I scratch my head about this because, as you probably tell from some of my questions, I find these questions extremely hard to get one's head around. And as I say, I think the counterfactual is particularly hard to contemplate. There's a whole series of other things it would be great to talk about. So, we've talked a little bit about impact on the sort of broader economy and. wages and so on. What do we know about the impact - there are two things I think that people who are worried about immigration are particularly concerned about, one is concerned about housing, and potential impact, if you've got several million more people, common sense would suggest that's something that is maybe pushing up rents or house prices in some sense. Again, is there evidence that sort of backs up that common sense view of what might be happening, or is that for some reason not right?

Madeleine Sumption

There is some evidence that immigration has increased house prices. Not, perhaps, by as much as you'd expect, but you know, other things affect house prices over time, including just the growth in average incomes. And obviously, partly it depends on you've got both the supply and the demand side of the equation, so, it depends on how many houses are being are being built, and there's actually an interesting little snippet of evidence that the impact of immigration on house prices seems to be greater in areas that have more restrictive planning practises, so refusing more planning applications, which is what you would expect.

Paul Johnson

Yeah, and I suppose the other thing that people get concerned about is the geographic concentration of immigration. I mean, first of all, to what extent is this inward migration spread evenly across the country? To what extent is it really focused on London, or is it actually focused on a sort of smaller number of spots around the country?

Madeleine Sumption

So, it’s not spread evenly at all, London has always been the major destination. England has a higher share of migrants in the population than Scotland, Wales or Northern Ireland. There have been different groups of migrants have been more likely to live in different areas, and so one of the things, the kind of geographic trends that was most striking, was after EU enlargement in the 2000s and 2010s, some areas in the East Midlands and East of England started seeing much more immigration, particularly from Eastern Europe, than they had seen previously. Places like, you know Boston in Lincolnshire is but the classic example that went from having just a few percent of the population being in born abroad to initially 10%, 15% and upwards over the following years. And so, I think often when there's a discussion about capacity, what does the capacity of you know our infrastructure or our public services to accommodate more population? It's often not so much the total share of migrants and the population, but the pace of change and whether areas are sort of expecting the change. So, if you have a big, unexpected change, then you would expect that it may be harder for public services to catch up.

Obviously in the medium to long term, in theory the impact of migration on public finances is thought to be close to zero, so the average person pays in tax and roughly the amount that it costs to provide them with services or benefits. But in the short run, the money isn't necessarily going to go to the right places, or indeed go to the right places immediately, especially when we struggle to measure exactly where people are going in the short run, which has sometimes been a problem.

Paul Johnson

As we've discovered in lots of areas of economics, that distribution really matters. So even if overall in the short run, the overall public finance impact you think might should be positive, because most immigrants are working and actually helping to pay the pensions and health costs of older natives, so neutral or possibly even positive in aggregate. But that doesn't help if you happen to be living in an area where the public finances aren't being directed to increase the number of places in the local health centre, or the local school, or to keep public services locally going, and that may also be true of all sorts of other change that happens in the economy that may be good in aggregate, that is hurting particular communities, or having at least particular effects on particular communities. And I don't know what your view is, but my sense is that some of the some of the problems with the concept of high levels of immigration is quite closely associated with, on the one hand, yes, this is good for the economy overall, but on the other, that's not taking account of the actual or perceived effects in very local areas.

Madeleine Sumption

Yes, and I think, obviously, some of the perceived effects are not fundamentally economic effects, and those more of the social impacts or how people feel about those changes in their communities, which obviously is very difficult to measure and quantify in any meaningful way. I think when you're looking at public services, there's also a big difference between types of services, and so if you look at the NHS, for example, migrants who come to the UK, at least initially, they tend to be young and young people don't use health services much. And indeed, particularly recently many of them have been health and care workers, so I think it's quite difficult to argue that on average migration is putting pressure on the health service because the health service is relying so heavily on people coming in to staff the jobs.

The picture is different if you look at schools, where not necessarily right away, but after a few years many migrants will have children, obviously some of them are working as teachers, but it's not a job in which they're overrepresented. So yeah, you'll get a different picture, and it will also depend on the complicated things that you know much more about than I do in terms of the funding formally for different services and how the money is distributed when additional people need services provided to them.

Paul Johnson

And one of the problems is that those funding formulae are updated with long lags and they don’t work very well quite often, and that can lead to some areas winning and some areas losing in ways that can be blamed on immigrants rather than the incompetence of central government and getting the funding right.

I just wanted to drill down a bit into a little bit more first of all on the sort of economic composition of the immigrant population, and then on a couple of the areas that we've mentioned, particularly healthcare, we've talked about soft fruit pickers, which is obviously, as it were, one end of the skill or wage distribution, but it's also the case, isn't it, that a large fraction of people right at the top of the wages distribution, people coming into the City of London and so on are born abroad. I mean how does the immigrant population look in terms of where it sits in the overall sort of wage distribution within the UK? Is it a big chunk at the bottom and a chunk at the top, and not much in the middle? Or is it evenly distributed? What does it look like?

Madeleine Sumption

If you look on average for all migrant groups, it's not that far from evenly distributed, but different migrant groups are overrepresented in different areas. And so, on the non-EU side people tend to be overrepresented in highly skilled jobs, many healthcare occupations, IT, professional services, and oh yes, into the kind of research and tech. If you look at EU migrants, there are actually quite a lot of EU migrants in research actually, but on average they have tended to be overrepresented in lower wage jobs.

Now obviously this will change to some extent under the new immigration system because one of the striking things, we've been talking about net migration currently of EU citizens is estimated actually to be negative, which is a really big change from 5 or 6 years ago, and we have a more skill selective immigration system. But I think it's still a little bit early to say exactly how the sort of skill composition is changing, partly because we don't yet have good data. There were some disruptions in data collection with the pandemic.

But also, because this other thing happened at the same time. So, before Brexit, we had this interesting sort, there was going to be this Brexit experiment and the idea was we were going to have a skill selective system, free movement will end so people won't be able to come into low wage job industries like hospitality anymore, and employers will need to adjust to that, there'll be no replacement schemes, and so we'll see a sort of change in the composition of the labour force. But then what happened was just as the post Brexit immigration system was coming in, all of this other stuff happened with people coming from Ukraine, people coming from Hong Kong, and then a larger number of international students and their family members who can work part time during their studies. Which means that actually the new system is not actually as skill selective as we might have expected in advance. So, only actually only 13% of non-EU long term migrants were main applicants coming in on a work visa, most people coming to the UK and not coming for a specific job. And so, I think yeah, it may be some time before we work out how much that composition has actually changed in practice. And the picture for 2022 will probably be quite different from the picture a few years from now when the new system is bedded down and hopefully the war in Ukraine is over.

Paul Johnson

Okay, that's really interesting. So, there's obviously quite big changes going on and we don't quite know where that's going to go into the medium term. And I have to say I hadn't appreciated that the non-EU migrant population was on average somewhat, I think you were saying higher skilled or higher waged than the EU immigrant population, obviously there's a distribution of both.

But you're very much getting into I think one big issue that puzzles a lot of people which is the sort of post Brexit experience, where I think there was an expectation that following Brexit inward migration would fall because clearly, as part of the European Union, we didn't have any control over it, at least part of the reasons people voted for Brexit was to get immigration under control. And yet, even ignoring the exceptionally big numbers in the most recent year, it's pretty clear that net immigration hasn't gone down, at least, over that period.

To what extent is that, do you think a deliberate policy choice to ensure that pretty much as many people are coming in to keep the economy going, to keep the universities going, and so on, and to what extent do you think it's actually sort of accidental? My guess is that most people would have bet in 2016 that, post leaving the EU, net migration would have gone down, but the experience is that it hasn't.

Madeleine Sumption

That's right. I mean, I think that was the reasonable expectation that net migration would go down as a result of Brexit, and that's what effectively all of the forecasts suggested would happen. And the basic logic was we got the system towards EU citizens is becoming much more restrictive, so that will go down, and that's happened, we've seen the net migration of EU citizens actually negative. There was also some uncertainty about what would happen on the non-EU side because we had a slightly more liberal system, but not dramatically more liberal, it was really mostly just going back to a policy that had been in place around 2008/2010. And so, the expectation was there might be a bit of an increase in non-EU, but that increase has been much, much larger than anticipated. Part of that is I think just because of things that had nothing to do with Brexit. So, the war in Ukraine and the scheme that was open for people to come from Hong Kong.

There's also some of the increases driven by groups who were already eligible for the old immigration system but are now coming in larger numbers, for example NHS nurses coming from non-EU countries, they've always been eligible, there are more of them now, and that's much more to do with what's going on in the NHS than the immigration system.

There were a couple of liberalisations that do seem to have led to larger number. I think that the number of people who come in following these liberalisations is actually larger than a reasonable person would have expected. I think it's been a bit of a surprise. And so, the two biggest examples there are international students where the liberalisation in question was a post study work visa, but we have a lot more international students coming in now than we did when we last had this effectively equivalent post study work visa about 15 years ago. And care workers where I think it was difficult to predict how many people would take up the offer when that was liberalised early last year, and so far, it looks it looks like around 57,000 care workers got visas in 2022 to take up those jobs. So, it's quite a significant contributor to the overall numbers.

But I don't think it was a deliberate strategy to have a liberal system that would increase numbers. I think it was more that there were a number of liberalising decisions, either on the work and student side or things like Ukraine and Hong Kong, and the take up was quite high across the board and that's added up to probably higher numbers than were projected in advance.

Paul Johnson

And ignoring Ukraine and Hong Kong, am I right in thinking that, you know, a big part of the increase of people coming in have been from Africa, and particular areas like Nigeria and from southern Asia?

Madeleine Sumption

Yes. Yeah, that's right. And the nationality composition depends a little bit on which categories we're talking about. India and Nigeria, there have been big increases partly because people from those countries come both as international students and as skilled workers, particularly in the health and care sector. Among skilled workers we also see a lot of Filipinos at the moment, and that's again because of health and care. And then there are other groups, China is very important in the international student market, but we don't tend to have so many people coming on work visas from China, for example.

Paul Johnson

And of course, if you're looking international students, essentially what we're talking about is people sometimes find hard to get their head around that, this is a great export market, isn't it? This is essentially people bringing their money to the UK to pay for what we have quite a high reputation for internationally, which is higher education. They bring that money, in most of them then, as you say, go home after they've done their degree, I mean, and universities nowadays I think would struggle without that market.

Madeleine Sumption

Yes, the share of revenue that universities get from international student fees has been creeping up over the years, and I suspect when we get the data for this past year, it will be particularly large because there's been such a big increase. So, I mean, international students - the government has had an explicit strategy of trying to increase the number of international students. Published an international education strategy in which it set out a target to increase the numbers to 600,000 by 2030. Now that happened almost a decade earlier than expected, but what's happened seems broadly consistent with the strategy. They also identified various priority countries because I think there was a desire to diversify away from China, which was overwhelmingly the country of origin for a lot of international students. And India and Nigeria were among the priority countries that were to be targeted. So, from that perspective, it's been broadly in line with government policy, although perhaps the numbers have, you know, gone up faster than many expected.

Paul Johnson

Yeah, it's an interesting way of putting it, because of course that's not quite how government puts it and it's talking about the numbers quite often. The other group you've mentioned quite a lot, of course, is the number of health and care workers coming into the country where one senses that we are in competition with countries around the world for skilled workers in these sectors, and where it looks like we have failed quite badly to train enough nurses and care workers and doctors, indeed, of our own. I mean to what extent is this a sustainable way of running our health and care service? Is this likely to be a sort of shortish term blip or are we going to be running at these levels for a long period and increasingly staffing our health and care services with people trained overseas.

Madeleine Sumption

It's a good question. I mean, even before this recent increase, the UK was more reliant than your average OECD country on overseas trained doctors, for example, and that will have only increased in the last few years. I think again it comes back to these policy trade-offs, that you know unlike many other areas of the labour market this is one that really the government has a degree of control over the health and care labour market, that it doesn't in many private sector dominated industries. And one of the levers that it has is that it funds the training places, and obviously that training has a cost, ss the UK gets a good deal effectively from people who someone else paid to train them and they come over to the UK. And obviously there are some costs associated with them coming up to speed with UK practises.  

But I think in the longer run, there's a question, you know, how much is it appropriate to rely on overseas workers? Especially if, as you see in care for example, if one of the reasons that people are coming is that the jobs have become unattractive to British workers, and ultimately in almost every occupation it's still a majority of people doing the job who are British – when I say British, who are not migrants, who have never migrated. And so, you need to maintain a labour market that can keep those people in the jobs and attract them in. And I think the concern with care at the moment, is just that the wages are quite low, there's been long standing debates about how to fix the funding for social care, but the outcome of the current funding system is that a lot of care workers are being paid the minimum wage. And it's a difficult and stressful job and a lot of people want more than the minimum wage in order to be willing to do it if they can go and work in an Amazon warehouse, or in a bar down the road, then many people would prefer to do that. And so, I think in the long run it's difficult to see a resolution to some of the shortages in social care without addressing the factors that have made it unattractive to local workers.

Paul Johnson

Absolutely. I mean it sometimes seems to be somewhat ironic that a government that says it wants to control immigration, and one of the reasons it says it wants to control immigration is that it says that high levels of immigration reduce the incentive on firms to invest in training and raise wages and so on, is doing exactly that in the labour market it controls most closely, which is the doctor labour market, the nurse and care labour markets, is exactly using immigration to avoid paying for training British doctors and to avoid paying a decent wage to British born care workers. So, it's a very strange situation they've got themselves into on that front.

Madeleine Sumption

Back in 2020, when the government published the policy statement on what the new system would look like, it had this really interesting statement, it said this is a very different system and employers will have to adjust. And I think for the most part, it looks like employers are adjusting throughout the private sector, and the employers who haven't adjusted are the ones where it's the government doing the employing. So, I think maybe it's sort of underlines that sometimes there's adjustments actually can be quite difficult. They sound easier on paper than they are in practice.

Paul Johnson

Yeah. And the market economy is offered better adjusting than the government run economy. Before we end, I just wanted to ask a final question on scale of immigration. We've had a government which for the last 13 years has been saying we want to get immigration down, we want to get immigration down. For a while, it said they wanted to get immigration down into the 10s of thousands and its never run below around about 200,000 or so. We’ve got a government now where it's seeing very high levels of net inward migration saying it wants to get immigration down. What would it need to do if it really wanted to achieve that? And what do you think the impacts might be?

Madeleine Sumption

I think it depends what you want to get net migration down too, and I think one of the reasons I think politicians now, having learned from the experience of the last 15 years, they're quite reluctant to put a specific number on it, is that it's actually, it's very difficult to predict what a given set of policies is going to give you in the way of numbers. Government policy typically doesn't set the number of people who will be issued visas, they set the criteria, which kinds of people are eligible for visas, but in any given year, the number of people taking up that offer will be quite different. But that doesn't take away from this broader fact that you can have more or less restrictive policies, and in the medium term, that will lead to higher or lower numbers.

For a long time, there was a target of net migration below 100,000, which I think is, it's so much lower than even the average over the last 20 years or so, that it's difficult to imagine – I don't think you could achieve that through just trimming around the margins. Just to illustrate, that target was met once in 2020, but the target had been abolished by then, but it was achieved in 2020 because of the global pandemic and that was obviously a shutdown of the entire economy. So, it's possible that you're looking at transformations on that kind of scale in order to actually get migration in the long run below 100,000.

But certainly, I think if the government just wants to reduce overall migration, it would need to make more restrictive policy choices. And there are any number of places where that can be done, whether it's on international students or on work or on refugees, and all of those will come with their own trade-offs and will be unpopular in their own ways, so I think it's one of those that you know, there's never a free lunch as an area, any area of public policy.

Paul Johnson

Yeah, you mentioned refugees there and actually, I've deliberately kept off the topic of illegal immigration and refugee immigration, so let's leave that to one side just so that listeners know that that's a deliberate choice to not talk about refugees or indeed small boats.

Sorry, just one final thing, the world is changing there's a lot of lower income countries are training more skilled people, people are worried about the impact of things like climate change and political instability in other parts of the world. Do you think the pressure on all sort of European, North American, what we might think of as Western countries, to accept a bigger movement of people, or pressure for a bigger movement of people into these sorts of countries, not just the UK, growing over the coming years? I mean, have we got to get used to the idea of an increasingly globally mobile population?

Madeleine Sumption

Yes, I mean, so you've just said that you've made the choice not to talk about refugees and part of this is of course a refugee question, and that's where I think in some ways the issue of pressure to accept people will be greatest. I think there is, in terms of legal migration broadly speaking, the government controls, especially now that we've left the EU, the government issues visas and controls who can come to the country. I'm slightly sceptical, there's often this narrative that we're in this global war for talent, and that we need to have attractive policies, I think for the moment, that doesn't seem to be an issue for a country like the UK. There are some countries that would like to attract more migrants than they do, but the UK has not been one of those countries for a while. And I think because of some of the factors that you mentioned, you've got growing middle classes in many developing countries, relatively high levels of education, I think probably there is always going to be a reasonably large number of people who would quite like to come to the UK, but as always these things are very difficult to predict.

Paul Johnson

Very difficult to predict indeed, we probably ought to bring it to a halt, though there are a whole series of questions I'd like to pursue further. I think actually we might ask you on again to pursue some of those issues. But it's been absolutely fascinating talking to you, Madeleine, and I hope listeners have found the same, we know a lot here, but it's been very evident that there are a lot of things that we don't know, and as Madeleine quite clearly says, and which is something I say very frequently, the future is quite hard to predict, the past is often quite hard to explain, but the future is even harder. So, thank you so much.

If you want to see any more of the work that Madeleine and her unit have done, do head to www.migrationobservatory.ox.ac.uk. And if you want to see more of our work then go to www.ifs.org.uk. To further support us please do consider becoming a member of the IFS for as little as £10 a month, you can find out more in the episode description. Thank you for listening and see you next time