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BREXIT 2016
Policy analysis from the Centre for Economic Performance

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CEP BREXIT Analysis
Brexit and the Impact of Immigration on the UK
Swati Dhingra, Gianmarco Ottaviano, John Van Reenen and Jonathan Wadsworth
May 2016
Paper No' CEPBREXIT05:
Read Abstract | Full Paper (pdf)
| Technical Paper (pdf)

Tags: brexit; immigration; uk government policy; uk economy; wages; employment; eu referendum

Press Release - Wednesday 11th May 2016

Brexit and the Impact of Immigration on the UK

New analysis by the Centre for Economic Performance

A reduction in immigration from the European Union (EU) following a vote for Brexit would not lead to any improvement in living standards for those born in the UK. Cuts in EU immigration would not offset the big fall in UK living standards caused by the reduction in trade and investment that would result from Brexit.

These are among the conclusions of new research by the Centre for Economic Performance (CEP) at the London School of Economics. The fifth in a series of #CEPBrexit reports - co-authored by Professor Jonathan Wadsworth, a former member of the Home Office's Migration Advisory Committee - analyses the impact of EU immigration on the UK, an issue that lies at the heart of the referendum campaign.

The researchers highlight the empirical evidence showing conclusively that EU immigration has not had significantly adverse effects on average employment, wages, inequality or public services at the local level for people born in the UK. Falls in average real wages of UK-born workers are more closely associated with the biggest economic crash for more than 80 years.

Ending free movement of labour would damage the national economy. First, it would curtail the country's full access to the Single Market. Second, it would lower GDP per person since EU immigrants have higher employment rates than the UK-born and therefore help to reduce the budget deficit. And third, there is evidence that lower immigration harms national productivity.

The new CEP report shows that:
  • Between 1995 and 2015, the number of immigrants from other EU countries living in the UK more than tripled from 0.9 million to 3.3 million. In the year to September 2015, EU net immigration to the UK was 172,000, only just below the figure of 191,000 for non-EU immigrants.

  • The big increase in EU immigration occurred after the 'A8' East European countries joined in 2004. In 2015, about a third of EU immigrants lived in London, compared with only 11% of the UK-born. 29% of EU immigrants were Polish.

  • EU immigrants are more educated, younger, more likely to be in work and less likely to claim benefits than the UK-born. About 44% have some form of higher education compared with only 23% of the UK-born.

  • Many people are concerned that immigration reduces the pay and job chances of the UK-born since this means more competition for jobs. But immigrants also consume goods and services and this increased demand helps to create more employment opportunities. So we need empirical evidence to settle the issue of whether the economic impact of immigration is bad or good for people born in the UK.

  • Our new evidence shows that the areas of the UK with large increases in EU immigration did not suffer greater falls in the jobs and pay of UK-born workers. The big falls in wages after 2008 are due to the global financial crisis and a weak economic recovery, not to immigration.

  • There is also little effect of EU immigration on inequality through reducing the pay and jobs of less skilled UK workers. Changes in wages and joblessness for less skilled UK-born workers show little correlation with changes in EU immigration.

  • EU immigrants pay more in taxes than they use public services and therefore they help to reduce the budget deficit. Immigrants do not have a negative effect on local services such as education, health or social housing; nor do they have any effect on social instability as indicated by crime rates.

  • The refugee crisis is unrelated to our EU membership. Refugees admitted to Germany have no right to live in the UK. The UK is not in the Schengen passport-free travel agreement so there are border checks on all migrants.
Jonathan Wadsworth commented: "The bottom line, which may surprise many people, is that EU immigration has not harmed the pay, jobs or public services enjoyed by Britons. In fact, for the most part it has likely made us better off. So far from EU immigration being a 'necessary evil' that we pay to get access to the greater trade and foreign investment generated by the EU Single Market, immigration is at worse neutral and at best, another economic benefit."

John Van Reenen highlighted: "The immigration impact hinges on the post-Brexit trade deal - if we go for a deal like Norway or Switzerland, immigrant numbers won't change much, as free movement of labour is part of the package. But if we go for a looser trading arrangement we lose out much more from falls in trade and foreign investment"

Swati Dhingra said "Although some people value a diverse society with other Europeans, many other people do not. For this latter group, cutting back EU migration may bring cultural benefits, but Brexit would bring a financial cost."


For further information, contact:

Authors:
Jonathan Wadsworth, Email: j.wadsworth@lse.ac.uk Swati Dhingra, Email: s.dhingra@lse.ac.uk

Gianmarco Ottaviano, Email: g.i.ottaviano@lse.ac.uk

John Van Reenen, Email: j.vanreenen@lse.ac.uk

Media Enquiries:
Helen Durrant on +44 (0)20 7955 7395; Email: h.durrant@lse.ac.uk

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