Is immigration good or bad for the economy?

Published: 6th Oct 2015

Home Secretary Theresa May has claimed in her Conference Speech today that:

"at best the net economic and fiscal effect of high immigration is close to zero. So there is no case for immigration of the scale we have experienced over the last decade."

Effect of immigration on the public purse is relatively small

The impact of immigration on the public finances is relatively small according to most studies, costing or contributing less than 1% of UK GDP. Immigrants from the European Economic Area and recent immigrants are more likely to have a positive impact (or less likely to have a negative impact).

No overall figure necessarily represents the experiences of any individual or local area: for example immigration's public service impacts vary by region.

There is no correct number for the impact and a lot depends on assumptions, but "at best" the impact is small but positive. The two studies cited by the Home Secretary confirm this:

  • The House of Lords Economic Affairs Committee said in 2008 (its most recent report): "the fiscal impact is small compared to GDP and cannot be used to justify large-scale immigration."
  • An OECD study last year showed a positive impact on the public purse in the UK, and overall a "broadly neutral impact" on the public purse in developed countries.

These are not the only studies nor are they the most recent on this subject. We've summarised the recent research in our briefing with the University of Oxford's Migration Observatory.

Immigration's impact on the wider economy

Immigration also affects jobs, public services and welfare.

Jobs

  • Research does not find a significant impact of overall immigration on unemployment in the UK and a small impact on wages — lower paid workers are more likely to lose out.

Public services

  • It is not possible to say with certainty what the implications of migration are for the cost, availability and quality of public services.
  • Impacts are likely to vary by area and depending on the type of public service.
  • If foreign-born people in the UK used public services in the same way as demographically similar UK-born people, they would be expected to make less use of health and social care, but greater use of education.

Welfare

  • Foreign born people are less likely to be receiving key Department for Work and Pensions (DWP) out-of-work benefits than the UK born, but more likely to be receiving tax credits.

For more information see our joint briefings with the University of Oxford's Migration Observatory on unemploymentpublic services, and benefits.

 

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