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ABSTRACT .......................................................................................................... 3 iNTRODUCTION.................................................................................................. 4
OVERVIEW .............................................................................................................................. 4 KEY ISSUES .............................................................................................................................. 6 BACKGROUND INFORMATION ............................................................................................... 7
TOPIC DESCRIPTION ........................................................................................... 9 LITERATURE REVIEW ........................................................................................ 11
THEORY ................................................................................................................................. 11
BASICS ........................................................................................................................................... 11 POTENTIAL AND ACTUAL OUTPUT THEORY .................................................................................. 13 ECONOMIC GROWTH AND PRODUCTION POSSIBILTIY FRONTIER ............................................... 20 INFLATION AND IMMIGRATION .................................................................................................... 22 UNEMPLOYMENT AND IMMIGRATION ......................................................................................... 24
IMPERICAL RESEARCH........................................................................................................... 27
IMPACT OF IMMIGRATION ON NATIVES....................................................................................... 27 GDP PER CAPITA ............................................................................................................................ 29 WAGES .......................................................................................................................................... 30 UNEMPLOYMENT .......................................................................................................................... 31
METHODOLOGY ............................................................................................... 32
RESEARCH PROBLEM ............................................................................................................ 32 HYPOTHESIS .......................................................................................................................... 33 RESEARCH QUESTIONS THE SOURCES OF DATA ........................................................................................................ 34
AVAILABLE SOURCES OF DATA...................................................................................................... 34
ANALYSIS AND FINDING ................................................................................... 40
IMMIGRATION AND THE UK ECONOMY ............................................................................... 40
DETAILED ANALYSIS OF THE CONTRIBUTION OF IMMIGRATION TO THE GDP .................... 41 ANALYSIS OF THE FINDINGS ................................................................................................. 42
1 Immigration is positively related to economic growth .............................................................. 42 2 Immigrants performs important tasks in UK ............................................................................. 43 3 Immigration helps senior citizens .............................................................................................. 44 4 Immigrants play important role in Health services.................................................................... 44 5 Immigrants will perform the job which British will not ............................................................. 44 6 Immigration increases national output...................................................................................... 45 7 Immigration and effect on prices ............................................................................................... 46 8 Immigration and interest rates .................................................................................................. 46 9 Immigration helps exports ......................................................................................................... 47 10 Immigration and their fiscal contribution to host country ...................................................... 47
CONCLUSION ................................................................................................... 49 REFERENCES..................................................................................................... 51
For the economy of United Kingdom, Immigrants have become very crucial and irreplaceable part of its development. It is very surprising to notice that the eighth part of the British work force is comprised of immigration. Where city of London being even more flooded with immigrants. Many firms and even many sections of government operated public sector uses the efficient workforce of immigrants. But it is said that the excessive immigration over net emigration results into the high growth in the population of the UK. It is also not viable to support the claim that the sole purpose of immigration is just to fill the job vacancies of certain skill shortage. No wonder that such claims are not based on sound analysis and may contain errors, but Immgrants surely contribute to the expansion of the UK economy. There are more concerns of increasing population in the country as well as the population density. Such trends are characterised as the economic consequences of the rising immigration in the country. It is also considered that immigration also has high impact on the housing demands of the country, but with supporting in depth analysis, it can be drawn that immigration is not the only factor that causes the housing crysis over the country. Based on the overall conclusion, it can be said that immigration not only fills up the labour shortage on the UK’s labour market but also contribute to the economic growth. Even though the economic effects of immigration is not considerably big on the native population of the UK but it has positive implication over the long period of time. Besides immigration has highly supported the commerce and industry of the UK economy.
The issues related to immigration have become the most important aspect of the United Kingdom economy. Significant to notice, 12% of total labour force of UK consists of immigrants. This proportion is quite higher in London city. While various arguments hold an opinion that the immigration (less emigration) doesn’t provide any considerable benefit to current native population. The most of the leading authorities has favoured the immigration in various ways, which highly supports that immigration brings the benefit to the host country. The supporting evidence could be statement on the London’s mayor’s London plan which indicated London being the most culturally diverse city in the world. Furthermore there is few more citation in mayor’s plan about immigration. ‘London’s diversity is one of its great historical social, economic and cultural strengths. New arrivals moving to London from overseas will contribute further to it. London is already a highly diverse city, one of the most multi-racial in the world. Nearly one-third of Londoners are from black and minority ethnic communities…and) a significant growth in (these) is projected over the next 15 years. International in-and out-migration has been high and is projected to remain so’ (Spatial Development Strategy for Greater London, February 2008) It is not only the city of London which has gained the benefit from the immigration, A few words below from the Mayor of New York’s immigration department. ‘If New York City is the capital of the world, it's because of the energy and vision of generations of immigrants. Immigrants are 36% of New York's population and 43% of the labor force. They continue a long history of spurring growth, fuelling our economy, and building dynamic communities’. David miller – the mayor of the Toronto, Canada; ‘It happens that Toronto's two largest groups of immigrants are from China and South Asia. That means we have a natural advantage in this shifting global economy. We already have the cultural and business links to make Toronto a hub of trade and business between North America and Asia’ Thus, Immigration can be seen as the proof that the implication of its presence brings the cultural diversity and economic growth in major cities those are called “The capitals of the
world”. The key objective of this report is to gathering relevant data to strengthen the support to the fact that immigration has positive impact on the UK’s economic growth. Since the early beginning of the 21st century, The UK has depicted the constant economic growth and financial strength over other European countries as well as the other countries in the world. One of the important reasons of such a concrete economic expansion can be traced down to the increase in international immigration in the UK since early 21 st century. But the considerable issue is can the country still sustain the expansion brought by the immigration. The current emerging trends of population rise in city area and the population density bringing down the standard of living with high cost of living is totally worth the concern. It has been very important to study the various impacts of immigration on UK economy to ensure that are leading to economic growth. The government has repeatedly emphasized on GDP as a measure of economic impact of immigration in the UK. This turned out to be irrelevant and misleading criteria. The center point of the analysis should be effect in resident income per head due to immigration. Looking at the demographic effects of rapidly rising immigration is definitely raising the public concerns. There is a strong need of an analysis of effects of immigration on economy, culture and society. Ignoring the other effects, which are highly subject to the personal point of view, economic effects are highly rationale to analyze .A critical analysis is based on certain arguments Immigration brings enormous benefits to the economy in the UK as it stimulates the growth in economy. Immigration is the additional labour force needed to do the work that residents won’t do. Fiscal benefits gained by the UK economy from immigration are significant.
The public view about immigration:
Agree Disagree Nuetral 40%
As seen from the above chart. there are certain issues that require the priority of action by government Build an effective database of the extensive data and statistics of immigration in the UK. The attempts are also made in light of understanding the economic implication of immigration on the native population of the UK. The economic implications are strictly based on anything related to economic scope of the impact.) The central theme over the discussion is focused on certain issues The data available on the background information of recent immigration The concrete evidences of relation between immigration and unemployment The impact of immigration on income and standard of living of native population The scale of job skill shortage needed to fill out with immigration The fiscal benefits of immigration to the government of the UK 6 . It is not either beneficial or harmful. this discussion only focuses on the impact of immigration on the UK as overall and disregarding regional differences. While 23% of people are those who are neutral stating that it is necessary to have immigrants but for doing the job which residents won’t do. (Still it may exhibit certain important points those are highlighted on basis of regional diversity. As this debate has a wide scope and confused many often it is crucial to clarify the boundaries of the debate. public services. national health services. Besides. Thus. Better implementation of the statutory employment conditions and minimum wage rates. unemployment. there is 37% of population who believes that Immigration has good effect on economy and stimulates economic growth. native population’s income. - KEY ISSUES The key issue of this report is to monitor the contribution of immigrants to the growth of the UK economy. It does not consider any social or cultural impact of immigration on the country and so not included in the discussion of the issue. It includes impact of immigration on economic growth and its indicator. the housing issues. To review the economic effects of immigration on the country supported with firm evidences and implementing the policy tools to remove the negative impact rather than restricting immigration at all. 40% of people suggests that Immigration has negative effect on the UK economy and should be reduced.
They are the weakest component in population estimates and projections in the United Kingdom.” (Migration Statistic 2008 Annual report. the estimated illegal immigrants in the UK in 2001 were approximately around 430000. As per the Home Office records. Explanation for why it is difficult to gather data about illegal immigration . it is 7 . with the probable exception of Australia where they count everybody in and they count everybody out”-Prof. there is very little data available on the scale and scope of illegal residence of immigrants and illegal employment as well. which monitors official figures. some immigrants on student visas work more than the 20 hours legally allowed during term time (Q 223). Salt (University college London). Another major reason of data being inadequate is the illegal immigration. both nationally and at local level” (p 35). It is significant to notice that the data available on the immigration trends in the UK is not enough. The Statistics Commission. Just like the most of the other countries.- The economic impact on housing sector and population density Judgment of arguments that suggests negative impact of immigration on the economy. scope and demography. in practice. to define and draw a clear line between “legal” and “illegal” in the employment of immigrants. 2008) Population growth in the UK in last few years has also lead authorities to point out immigration responsible for it. The above data is extremely essential to understand the implications of immigration.“no country in the world knows how many people there are who are living or working illegally. For example. Britain has been experiencing the fastest population growth rate earlier this decade and such growth have not been noticed since 1960s. In words of Dr Anderson from Oxford University – center of migration “the Home Office estimate excludes immigrants who are residing in the UK legally but breaching the conditions (including any employment restrictions) attached to their immigration status. BACKGROUND INFORMATION It is crucial to review the main characteristics of the target population on the basis of scale. According to Karen Dunnell from the National Statistics “there is now broad recognition that available estimates of migrant numbers are Inadequate to meet all the purposes for which they are now required. Thus. a situation described as “semi-compliance” (Q 223). described the available statistical information on immigration as “weak” (p 505). It can be extremely difficult and contentious.
Determining the rights of immigrants in Britain labour rights.significantly seen that proportion of immigrants to the resident population has increased due to net immigration. Distribution of job seekers "such as benefits. including the use of Family reunification and the rights and benefits to remain permanently in British Columbia Citizenship. Immigrants have become 12 % of the total working age population in the UK in compare to only 8 % in 2001 and 6 % in 1981. most immigrants who hold a work permit may only work for qualified Allows the employer. relevance. The upward movement of the line chart definitely supports the argument of steadily high immigration in the UK. 23 % and 19% respectively. Immigrants authorized to work in unskilled jobs Right to family reunification. Immigration status is also significant for the economic analysis of the implication of immigrants. and non EEA domestic residents in the United Kingdom is free Employment in the United Kingdom. 2. As Annex 8 different types of immigration status showed Associated with different rights and restrictions. Switzerland. 8 . benefits and rights. For example. Instead. The net immigrants in the UK are estimated to be 10 % of total population. enter changes various types of law. up to 3% of the total working age population of the UK is from Africa and Middle East. The above chart from Total International Migration estimates shows the rise in immigration and emigration and net change in net immigration. and Canada being 24%. such as Australia. But it is lot lower in United Kingdom rather than other countries in the world. According to the Labour Force Survey. but the skilled and highly skilled are allowed.5% from India and only 1% from A8 countries.
Immigration has been the controversial issue for years in not only UK but several other countries.TOPIC DESCRIPTION I have chosen this topic as a part of my dissertation as per my knowledge of the recent changes in the economy and the concern of government and society about it. One related argument to that is immigration mostly pay more taxes than they receive the benefits. My topic for the “dissertation is immigration and economic growth in the UK”. Excess supply in contrast to demand creates worst mismatch “unemployment”. But most of the arguments related to the migration are about its economic costs and benefits. 2002) There is a lot debate and controversial arguments on the immigration and the effects it has on the Britain and the European Union countries and political influences seen in the France. ANALYSIS: WHO GAINS FROM IMMIGRATION? (Schifferes. Denmark and Netherlands. It is treated as the simple economic issue that the excessive immigration brings more supply of labour in the economy than rather needed. The arguments are often found that immigration has high suspect of creating unemployment in the economy and thus bringing down the minimum wage rates. Not only has that immigration provided the needed labour skill supply to boost the economic growth. Borjas. But as per Prof. excessive supply over demand brings down the prices and in this case the wage rates. One major reason for their controversy is the assumed effect that immigration has on the labour market and wage rate regulation system of the economy. Majority of experts blamed excessive immigration to be the one of the reason causing this recession. and the UK government is no exception. Sudden economic and financial crisis has forced all the governments and business organization to find the cure of this widespread disease . The recent depression trend and economic downturn has made every government to reconsider their economic policies as well as fiscal policies. In order to see the importance of the topic I would like to consider the leading news paper articles as a scope of this topic’s public concern. As the topic it suggests that it is highly debatable and self explanatory. As per the simple rule of demand and supply. Well. It is highly discussed and analysed by various government authorities and statisticians. supporters of immigration argue that it brings positive impact on economy in a long run. 9 . Many people opposing the immigration suggested the fear of more crime and political instability due to the immigration whereas few arguments are being raised over the demolishing cultural identity of Britain.
immigrant doctors provide real benefit to the country. Talking about the immigration and unemployment. “RECORD LEVELS OF IMMIGRATION HAVE HAD "LITTLE OR NO IMPACT" ON THE ECONOMIC WELL-BEING OF BRITONS. immigration and its implication on economy have the high characteristics of concerns of public. according to the claims of the report if the net incoming immigration continues to stay the steady rate 190000 per year for next 20 years .if immigration fills in the job that country has shortage of skills. AN INFLUENTIAL HOUSE OF LORDS COMMITTEE HAS SAID”. many experts believe that there nothing to do with immigration and unemployment. the general level of price and effect of inflation and economic growth can also raise the prices of infrastructure in the economy. 10 . it would impact on housing sector and lead to 10 % rise in house prices. Despite of the argument that immigration brings the unemployment in the economy. While others believe it has little to do with the unemployment situation due to costs of employing new workers. even if in the absence of immigration. If country is experiencing skill shortage of the Doctors. Analysing the data of work age distribution of immigrants. the Germany is experiencing high level of unemployment and there is no evidence of highly dispersed immigration in the country. government and society. Thus. Justifying the rationale of the comment.BBC NEWS (APRIL 2008) Another news report by the BBC News regarding immigration based on the concrete data from the House of Lords committee. The most of the immigration in Germany is from Turkey. it brings the real benefit to the economy. it can be stated that most of the immigrants are of working age and pay high taxes and even consume less of public welfare services such as NHS (National Health services).
e. It is the summation of the market value of all goods and services produced in the country. It is also considered 11 . i. where few terms that needs to be clarified is Immigration Economic growth GDP(Gross Domestic Product) as a measure of economic growth Immigration is the movement of individuals from their native country to host country in order to engage in an economic activity or social and cultural activity . if country’s GDP was £100 billion last year and it increased to £125 billion this year. Economic growth is a measure of increase of decrease in the country’s GDP(Gross Domestic Porduct) . then it can be said that the economic growth of the country is 25%. The issue in light is “Immigration and the economic growth”. GDP (gross domestic product) or GDI (gross domestic income) is the total figure of all output products and services produced in the country in monetary terms.LITERATURE REVIEW THEORY BASICS Before we start the analysis it is necessary to go through the theoretical background and depth of the topic.
WHICH GENERATES EMPLOYMENT AND INCOME’. 1. the economic growth of the UK economy has rised consistently since 1993 and it has reflected to the employment figures. IT ALSO HELPS BUSINESSES TO BE PROFITABLE. According to the UK government. The benefits from the ecomonic growth is as below : Better standard of living : Economic growth is very crucial for the nation through which we achieve higher standard of living and poverty levels can be minimised.Income Method. Expenditure method 3. The total employment in the UK is increased from £2. 12 . ‘A HEALTHY ECONOMY LEADS TO HIGHER LIVING STANDARDS AND GREATER PROSPERITY FOR INDIVIDUALS.For the countries .From the given chart . who regard growth as a tool of erasing poverty and bringing economic stability is economic growth is primary objective to achieve.close to the indicator of standard of living. Before we move further on immigration it is necessary to understand the “Economic growth” and what are economic effects of the economic growth.Product method 2.5 million in 1993 to almost £30 million . GDP can be derived by three different methods. Rising Employment : Evconomic growth brings more employment opportunities.
More growth will allocate the expenditure for environment protection.Government can handle more development projects. DECEMBER 2002 Every coin has two sides . definitely economic growth has other side too. POTENTIAL AND ACTUAL OUTPUT THEORY : It is very crucial to know what is the concept of Potential output capability of economy and actual output achieved . More income results into more savings and it in turn grows the investment in the economy. including air travel. Economic growth and rising living standards has also meant a cut in rates of carbon emissions and natural resource depletion never possible in the 20th century” SOURCE: PROFESSOR NICK CRAFTS. The more tax revenue in government treasury . and to enjoy an array of new goods and services. Less Pollution : More economic growth enables the nation to invest and sustain the technology to produce cleaner energy .Rise in the Capital stock investment : The economic growth bring more employment to the economy and it raises the income levels of the residents. 2002 Royal Economic Society PUBLIC LECTURE. the more would be the expenditure on public goods and services and social welfare. Inequalities of Income and Wealth: The economic growth may not be the even distributed to the whole society and can cause large inequality of income & wealth. it is highly doubtful to see long run sustainability through the rapid extraction of the limited resources. “We now expect to live on average 30 years longer. but it is feared that demand pull inflation and cost push inflation cna raise price level and hike in interest rates. It is normal to have nominal inflation in the economy with high growth rate. energy consumption per head is reduced in the United Kingdom. It is not only important to achieve high rate of economic growth contionously but also to sustain the same economic growth over time. to work almost half the amount of time we used to every year. Tax revenue to Governmet: More economic activity and enormous growth increases the total tax revenue raised by the government. antibiotics. computers and televisions. The higher economic growth rate also substantially attract the foreign investment if the country’s economic growth is greater than the other. The analysis of this theory helps to understand how immigration 13 . Over last 30 years . Inflation Risk : Inflation is the potential danger on the stable economy. The way world’s natural resources are extracted .High growth rate and fast economy can cause lots of social and cultural damage to the nation as well.
theoretically it is possible to find out the value of all resources and maximum possible output that the 14 . schools. shops. hours of work. universities and similar assets produced in previous time periods. ships. climate and mineral deposits. warehouses.helps to increase the actual output of the economy and how it is related to the economic growth . effort. colleges. vehicles. the quality being dependent upon variables such as age. aptitudes and attitudes. forests. offices. houses. rivers. which consists of those individuals in the labour force with organisational and managerial ability or with financial skills. stocks of materials. airports. such individuals taking risks in starting new companies and launching innovative products – sometimes with their own and sometimes with borrowed resources. railways. roads. 1990) Let’s assume that the economy is stopped (paused) at certain point of time . although a more detailed classification would subdivide both these categories as (a) Capital Goods: • Land: all natural resources including agricultural land. (Keith G. • Enterprise. harbours. • Capital: all factories. (b) Labour Force: • Labour. machinery and equipment. which is that proportion of its population able and willing to work. In our simple model we classified resources as capital goods and labour. education. Lumsden. skills.
we do not consider technology in separate to the capital stock .the Quality and the Quantity of the Labour (Resident population plus immigration) 2. Captial stock consist of man made resources and natural resources that are used in production of goods and services. The analysis of the national output of different countries and the population of the country in proportion to its output contribution to the world economy. The quality and the quantity of the Capital stock . The population includes all the workforce which includes the Immigrants which work for the economy. Technology is also considered important in determining the national output of the economy but as we assume technology resources being stable in short term .economy can produce . 15 . In above figure It is shown that how the population of the country contributs to the national output.Thus the total output of the nation is depend on the 1. Natural capital stock is limited in nature and no one can do anything to move the resources.
4% contribution in the total world GNP.8% is Europe . Asia comes first followed by China and Africa.From the above pie chart . 16 . Asia has 10. but Europe has the second highest Per capita GNP.7% output in total World GNP. We can see the ratio of output and the population can bring the per capita GNP. The scenario with unemployed resources in the economy can be graphically presented as below.9% of the total world output. Simple math can suggest that North America has highest per capita GNP . Potential Output is the optimum output of goods and services produced when the full labour force and capital stock is employed . After that North America s economy being 29. But in real terms the full employment of resources is not possible. United kingdom being the central hub of the economic activity in Europe. There are certain factors in economy that leaves the economy below the potential output. But if we see the population distribution of these top contributing economies. the highest contribution of GNP (Gross National Product) by 32.while Japan contributing 7.
the potential output of the nation is always depend on the quality and quantity of the labour and capital stock and existing technology. Gross national product produced by the country is mainly used by four groups of individuals Consumers or households which include the Immigrants as well as they contribute to the expenditure on goods and services. This economic growth is caused by Growth in quality and quantity of the workforce Growth in quality and quantity of the capital investment Technology advancement Another reason for the growth in GNP is the rise in the Gross National Product. But positively the potential output doesn’t stay stable and grows over time.As we now come to the concept of the economic growth. 17 .
As the ultimate aim of all three concept is to evaluate the economic activity . GNE and GNI GNP (Gross National Product) is the total value of goods and services produced in the economy in one year. Lets say Potential output is an estimate of output that a country is going to have in the following year/s . we are assuming no government intervention in economy and the economy is running totally on market forces) to explain the relation between GNP . + zpz) In such scenario . The above detailing stated the concept of the Potential output and its relation to the economic growth and Immigration. we would use here a simple economy model(For the sake of simplycity . GNP = X (apa + bpb + . GNE (Gross National Expenditure) is the total value of expenditure done by households and firms (Ignoring the Governement intervention). It is obtained by sum of all products and services multiplied by its market price.GNI (Grosss National Income) is the total value of the income flow to the resource owners (Land . . firms and households. Households include all working age population including immigrants. Capital Labour and Entrepreneurship ). As immigrants supply the labour and Capital (assuming investments from immigration ) and they receive the income for the resources supplied . International exports to foreign government . 18 .Firms use the resources and product and the services . more economic expansion can lead more expenditure on products and services Government sector uses the resources for the the public goods and services and health and welfare services. The actual output of the economy is the GNP (Gross National Product) it is the sum of monetary value of all goods and services produced in a year in particular country. The expenditure is also made to buy product and services to make their livings. Simple economy model holds certain assumptions – there are only firms and households. . the results are same and all three methods are identical.
19 . GNI = C + S where C = consumer goods purchased and S = savings.GNP = C + I where C = consumer goods produced and I = investment (capital) goods.
it is just impossible to raise more labour force when you have all the resources of the country already employed in economic activity. introduction of the immigration in the economy . unemployment is reduced in the home country and it leads to the economic growth. it is a short term increase in labour force. typically seen as developing countries which have high levels of unemployment and abundant idle resources and factors of production. Immigration is the best option to the economy to expand further. The migration of the labour to the host country reduces the labour supply in native country leading to more job opportunities to fill up the vacant positions . It benefits in two way. Plus new workers can be trained but new skills and expertise is slow process of learning and involves huge amount of the time. 20 .The additional labour supply through immigration gives the boost to the economic activity of the country and brings more economic growth The Native country from where the immigrants come from . But in this case . the simplified economic model was assumed to be shoet term where the quantity of labour and capital stock is limited and it cannot be increased substaintially. The host country economy . Excess labour supply causes unemployment and therefore it adversely affect the economy. Looking at that perspective . GNE and GNI in easy way and representing the equation that states that all three equation reach to the same conclusion. The supply of other factors of the production can be easily changed but the supply of labour force is quite limited to the native population and it s age structure . ECONOMIC GROWTH AND PRODUCTION POSSIBILTIY FRONTIER As we started the discussion .The above illustration can graphically explain the concept of GNP . Thus . all the resources are fully employed and production capacity of the economy is reached to its production frontier (Maximum possible output level of the economy) . Such an assumption on the short term period is reasonable to certain extent.
As we can see the above graphical presentation about how economic growth works in the economy .In simple model . The income earned is not usually all spent and proportion of the income is saved by the households . The economic phenomenon about the issue is described as below It can be three kind of economic possibility 21 . which in turn is channelized to the investments in the economy. That increases the stock of capital investment in the economy. it is clearly seen as Savings and Investment performing the multiplier effect on the economic growth . It is also important to understand the Savings and Investment multiplier effect for the firms in the economy . The possible choice on the firm’s point of view can be to contribute resources for improving the current assets i. we can understand the positive implication of immigration to the economy. research and development projects. Thus .e trainings of the employees . Country’s capital and labour stock produces the output and earns the income on it.
the economy would have the newer resoureces the following year to replace the wear and tear to the economy. Such economy experiences the high proportion of the growth rate. there are no resources employed for the additional capital formation . Thriftland : The maximum possible retention of the resources to gain additional advantage of the newer resources the following year . INFLATION AND IMMIGRATION The inflation rate is the percentage increase per year in the average price level from one time period to another.Prodigality: In the current year of the economy . The economy experience the depreciation of the resources . then the inflation rate in time period t is defined by INFt = Pt − Pt 22 . Now the following period economy hasnot gained any additional capital which means economy grows negatively. The resultant effect would be the stable economy with no growth. economy chooses to consume all the resources to the production of goods and services . Satiated : If the economic resources in the economy are forgone for the capital formation to the same extent as the depreciation . Thus if Pt is the average price level in period t and if Pt is the average price level in period t + 1.
would consider a high-unemployment/low-inflation combination to be relatively easy to bear. such as retired persons relying on their pensions for income. an index is then constructed. initially to establish a base period. and decision making remains a political as well as an economic process. In most market economies this index is calculated monthly. who would lose real income because of inflation if aggregate demand is high. would regard a low-unemployment/high-inflation combination as relatively painless. Because the goals of policy are essentially subjective in nature. and the quantities purchased and the prices paid are noted. It is obvious that people such as construction workers. Several hundred goods and services regularly purchased each month by average households are selected.Pt Expressed alternatively. who may differ as to whether inflation or unemployment is a worse problem. policy makers will usually be in the position of being unable to please everyone. Thus. This is one reason why there is so much disagreement as to what constitutes the ‘right’ policy for a government to undertake. This index measures the average level of prices of the goods and services consumed by the typical household. the price level in period t + 1 is: Pt = Pt(1 + INFt) But what do we mean by the price level? The most commonly cited measure of the average level of prices is the Consumer Price Index. Others. people can agree about how the economy works and how policy affects the economy. The problem of choosing the appropriate policy is compounded by the fact that society is composed of many members. yet disagree sharply about what should be done. Short-term policy making is also complicated by another factor: the short-run 23 . who are likely to become unemployed if aggregate demand is low.
UNEMPLOYMENT AND IMMIGRATION Immigration is blamed on the ground that the immigration bring unemployment in the host economy and affects the resident population income. it is desirable to understand fully the nature and short-run consequences of policies designed to control aggregate demand. he gets another job at manager at B ltd. Leaves the job in London and searches for another job for a manager in London. To judge the effects of the immigration on the unemployment and the labour market . Such unemployment is called frictional unemployment. This is the next topic to be tackled. 24 .e. however. If an economy is undergoing constant change that could be positive or negative . It is quite crucial to understand the basic types and characteristics of the unemployment. The time he spent on shifting one job to the other is considered as a frictional unemployment. Before the long-term implications of any policy can be analysed. overall economic status of unemployment remains unchanged . The Understanding of this concept brings to the conclusion that immigration has nothing to do with the frictional unemployment and it would be unchanged with or without the presence of the immigrants. the appropriate short-term policy goal might be to choose an aggregate demand target that is below potential GNP.policy goal should not be decided without taking into account the long-run consequences of that policy. that high unemployment and low inflation today will permit certain preferred combinations of unemployment and inflation tomorrow that would be impossible otherwise. As the person is just changing the job to one to another and not changing the occupation . After few information and job search . in normal situations. Frictional Unemployment : With the growing world with lot of new opportunities . Lets say a manager of A ltd. I. it experiences certain degree of unemployment. As normally all the unemployment criteria are viewed in a same way and considered negative impact on the economy. People keep changing the job and searching new job takes time due to the information problems. it is not generally seen that people stick to the same jobs for a long time. In such situations. It might be possible.
Such occupation brings high employment for certain period of time and minimum or no employment for certain point of time. we can not raise the vacancies for engineers but we can surely fill up the vacancies of Doctors by bringing in the immigrants . but infact immigration has filled in the vacancy for the doctors and economy is producing more output than before. When actual output is close to potential output. it occurs due to production level of the related industry is affected by the seasonal condition such as weather . i. Thus it may seem that unemployment remained same as still those enginners are jobless. calendar or may be time period. Apparently Immigration has no influence of such unemployment. Nevertheless . it occurs due to the mismatch between the the job vacancy and the qualification of the unemployed person.e. it is not easy to create more vacancies or raise the required work force. Immigration has no effect on reducing the structural unemployment . as the term is self explanatory . It is quite essential to notice that although it is widely claimed that immigration brings unemployment in the wide proportion to the economy . There might be 1000s of job vacancies for the Doctors in the economy . it brings the essential need of finding out the real possible factors behind the stated unemployment. it bring economic growth by filling in vacancies that resident population cant . But still as we saw through example . we saw the theoretical possibility of how immigration has no direct influence on any of the above three type of immigration. but there are unemployed engineers in the economy . These measures will reduce structural unemployment. Employers will also offer better retraining allowances and financial assistance to those moving home in order to attract people from other occupations and areas. it can be cured easily . but for structural unemployment . employment is high and there will be strong competition among employers to hire labour. Employers will be more active in advertising job opportunities and the improved flow of information will reduce frictional unemployment.Structural Unemployment : In such kind of unemployment . Seasonal Unemployment : Easiest term to understand . As the earlier type of the unemployment rises from the information error . Unemployment is affected by the general level of economic activity.Thus . 25 . but it doesn’t negatively impact on the structural unemployment. But in given example . Thus the occupational mismatch causes the unemployment .
private agencies. and ‘word of mouth’. 26 . This will depend on factors such as the availability and cost of retraining programmes. For example. suitable schools for children. the railways displaced the stagecoach and canals. The better the methods of communicating information. goods produced domestically are displaced by imports. and the motor car has largely displaced the railways. billboards at the factory or office gate. new products emerge. The higher the rate of structural change. Structural unemployment will be minimised where it is comparatively easy to acquire newskills and move from one home to another. Jobs cannot be filled unless employers and employees can be brought into touch with each other. and suitable hospitals for the infirms. New economic activities expand and old ones contract. There is always some structural change in an economy. radio and TV. and technical change occurs. shop windows. Employers advertise jobs through the Internet. These changes require a redistribution in the skills and location of the workforce. the development of man-made fibres has reduced the demand for natural fibres. the cost of travel and moving home. the increased demand for holidays overseas has reduced the demand for domestic holidays. Tastes change. the manual typewriter displaced the quill. the lower will be unemployment. Employees use some or all of these methods of looking for work. local and national newspapers. Unemployment is also affected by the quality of transmission of job information. the higher will be the level of structural unemployment. Japanese cars have taken an increasing share of many domestic car markets. the electric typewriter displaced the manual typewriter. and the PC displaced the electric typewriter.When actual output is well below potential output there will be less competition among employers to hire labour and frictional and structural unemployment will increase.
Barry Chiswick from University of Illinois suggests that characteristics of immigrants is majot determinant for the consequent economic effects to the host 27 . if pension arrangements impose heavy costs on those who change jobs. Finally. the higher the level of structural unemployment. Economies that are dependent on farming. they continue to use many of their resources in them in the full understanding that unemployment will result at certain predictable periods of the yearly cycle. unemployment is affected by seasonal industries. unemployment will increase if the government imposes minimum-wage levels above the level that would be established in the marketplace. Some economies have clear natural advantages in these industries. For example. These include any action by government. Anything that limits the ease of changing or taking employment will increase unemployment.The higher are these costs. EMPIRICAL RESEARCH IMPACT OF IMMIGRATION ON NATIVES The findings of Prof. or by organisations of employers and employees that restrict the efficiency of the labour market. if local authorities discourage geographical mobility by favouring local residents in allocating houses. Hence. forestry and tourism will experience seasonal fluctuations in unemployment. restrict employment to union members. or impose unduly long periods of training. if unions impose restrictive practices. if organisations place undue restrictions on entry to certain jobs. fishing. Institutional restrictions and barriers also affect unemployment.
Chief Economist at the Home Office. Professor Rowthorn argued that immigraition will increase population density and inturn it would reduce the productivity of native population. (Borjas..His work on the above issue is explained in the example : “initially unemployment goes up. technology and capital is fully variable . downward pressures on wages. More investments in Mchinery and capital goods demand for more workforce .It produces positive income effect to native population overall when the skills possessed by migrants differ from the native population. some expansion in the economy absorbs the extra workers and at the end the thing [the economy] looks much the same as it did at the beginning except there are more people”-Prof Stephen Nickell Most well known economists gave the findings that suggested the long run impact of immigration is to expand employment and the economy i. Wage rate rises more than normal fearing inflation in the economy . Wage rates are not lowered until labour is excess supply and therefore it raises the profit of employers and capital owners. Christian Dustmann from University College London noticed that effects of immigration on native population can be judged by portfolio of skills of both natives and immigrants .otherwise it creates competition between migrants and natives and therefore reduces the positive income effect. economy in a short run supply of capital and technology cannot be increased.Such as .Full international capital mobility can even attract more investments which in turn is beneficial to residents. Analysing short run impact . in the long run economy . downward pressure on inflation. 1995) The analysis done by professor Stephen Nickell notes that the monetary policy of the host country influences significantly on impact of immigration in long run. it would not leave any impact on native population’s income.Most economic influences of immigration is divided in either – Low skilled vs Highly skilled or – Longrun vs shortrun . Immigration fills the shortage of labour and turns labour market into equilibrium in long run. suggested that: “. John Elliott. in the longer run we will expect more dynamic effects to come into play. In addition to that it is also significant to trace how quickly immigrants can adjust in the host country’s economy.. monetary policy is loosened.It is been counter argued that the probability of dynamic and spillover effects arising from immigration is not taken into account.Migration raises return on capital in short run. If economy can absorb immigrants to significant level .Prof. the primary intention of immigration is to increase the supply of labour in economy . therefore investments are accerelated in the economy and profit margins are driven down. the economic growth with no effect on native population’s income .e.thus . Considering the long term impact of immigration.country. We can think of migrants contributing to the productivity of native 28 .
the first few years negative effect on GDP per capita is seen. It is quite surprising to monitor the absence of data in such important issue.3%.8% of total population consisted of immigrants which is considerably lot lower than current scenario. As per the ITEM club suggests .Relative short term negative impact is traced due to high rate of unemployment initially .Gradually in long run positive effect on GDP per capita is achieved by 2015 being 0. (Young.Probably adding up the potential increase in capital stock due to immigration can suggest the positive per capita GDP and immigration is favpourable to the nation once again.The only limitation of this survey is – only labour supply increase has taken into account and capital supply increase due to immigration is consistently ignored leaving research finding inaccurate for finding per capita GDP. 2007) 29 . One might imagine a migrant surgeon standing next to a domestic surgeon and them learning from each other” GDP PER CAPITA There are few researches carried out on effect of immigration on GDP of the nation and GDP per capita. Results are interesting when the time baseline is considered as 2005. “I personally do think that GDP per capita is the key thing to focus on”few words from immigration minister Liam Byrne.Thus it is accepted that no research is carried out signifying the analysis of effect of immigration on native population’s per capita income in the UK.workers directly though spillover effects.Whereas the positive effects are caused by high number of working class migrants and increase in capital investment in the economy in long run. Making a simple math . difficulty in adjustment of capital stock in relation to the size of immigration. Still critics suggests that the time duration of research in question .8 % of population contributing 3% to GDP wpuld turn the results into negative impact on GDP per capita. Home office reports reveals the effect of immigration on GDP being £6+ billion in 2006 but no data could be derived for GDP per capita. it suggests that 3.It says that there is no concrete proof gained stating the effect of immigration on GDP per head. the effect of recent immigration trends on GDP per head in negligible or slightly adverse. The organised body on research of demography of the UK – The National Institute of Economic and Social Research (NIESR) estimated that migration in 7 years duration starting from 1998 has shown the effective results of increase by 3% in real term GDP. only 3. Further research carried out by NIESR also undergone the analysis of A8 projected future immigration data – using model of economy developed by them.
Ignoring the critics without any concrete evidences . But there are some fundamental difficulties experienced while analysing the effects of immigration on labour market. it is said that Migrants have very negligible effect on GDP per head or native population’s income. The current data on the immigration may be based on small sample sizes which causes considerable measurement errors when such data is used on wider terms.As shortage of labour can attract more immigration . (Smith. WAGES Immigration has wider impact on the labour market and wage rate regulation in short term and long term to the host country economy . But it also does not suggest any negative impacts which still leads to further research needs. but it decreases the minimum wage of the low paid job workers. If immigrants are scattered around the whole country .To conclude the current issue.5% decline in low paid workers’ income and rises the top workers’ income by 0. Thus. there would be very little difference caused in the original findings.6%. overall effect is considered positive as economists don’t bother to address the issues of inequality of income 30 . even if the dynamic and spill over effects are taken into account . potentially these economic areas are more affected with consequences which cannot actually represent the whole picture of the economy. the research population needs to be covered becomes much wider and local labour market researchs are no more comprehensive . it is quite important undergo the analysis of labour market impact as immigrants directly fill in the workforce. Still it is possible in theory that above empirical evidences do not suggest the possibility of siginificant benefits caused by immigrants to resident population. 1997) - - The recent studies in the UK by Profesor Dustmann and other co ordinates gives a conclusion that immigration has positive effect on the incomes of resident population. Most of the immigrants are attracted to the area of strong economic growth and major cities (London in current scenario) where employment opportunities are higher with higher wage rates.Which is further explained by the proportionate 1 % change in immigration and residents ratio results into 0.
Blanchflower has stated that though the direct competition doesn’t seem to exist . March 2003) All of the above empirical evidences suggest that immigration has negative effect on income of unskilled labour force. Prof. UNEMPLOYMENT Earlier we found the words from Professor Dustmann if there are any effects on unemployment is due to statistical error in data used for analysis or possibly a small population size targeted. there is much effect of immigration on residents indirectly. In conclusion . (LORDS. Dustmann and Prof. 2008) 31 . Riley from NIESR had an argument that if a concrete conclusion can be reached or not from the DWP studies that emigration is considered on side by side to immigration.Effective measures should be taken to set up a law that fixes the minimum wage rate according to the standard of living criteria and concrete actions should be taken against illegal employment. it can be said that the immigration has very little negative effect on the low paid workers and have little positive impact on high skilled workers’ income.Dr.Further explaination to these effects is given by Prof. that can be solved by government intervention and decing the lower limit for the wage rates (National Minimum Wage – that already is applied in the UK). Quite possible but still it is not proved yet.in the economy.Contradicting arguments to that are raised by Professor Blanchflower that the income of low skilled workers is lowered by immigration . The simulation model analysis done by NIESR reveals that in a short run immigration has the negative effects that leads to unemployment but in long term this effect is neutralised to zero.but the resultant effect is negligible.Further to this .These effects are accepted on fair basis.The presented facts overall is sufficient to suggest that the impact of immigration on economy and unemployment is short term in nature in the UK . Ian Preston “immigrants appear to be most concentrated at precisely the same points where we find the most negative wage effects” (al.Although.
theory and principles used for the academic purposes. Research is a scientific activity based on facts .METHODOLOGY Research is a purposeful activity carried out for the search of knowledge and solutions to the particular problems. the research problem is in critically evaluated on the basis of literature review and theoretical models. The crucial analysis of the data is carried out to reach the conclusions which are based on the hypothesis and the research questions formulated. but it is quite impossible to reach an extensive definition to such a broad terminology. There are several definitions of the term “research ” given by various experts . The facts and figures as well as the data about empirical research is gathered . it is necessary to gather the background information about the subject of research problem.first of all . making deductions and reaching conclusions and at last carefully listing the conclusions to determine whether they fit the formulated hypothesis or not ” – Clifford Woody The methodology of the research is described as a systematic approach for solving the research problems. organising and evaluating data. Immigration has been raising concerns to the UK government about its 32 . “Research comprises defininig and redefining problems .collecting . RESEARCH PROBLEM Research problem is a crucial part of the research on which whole research is based. The methodology is of this research is based on the aims and objective of the study . The research problem this study is quite straight forward and one of the biggest debate issue in curret UK economy. formulating hypothesis or suggested solutions.
While the government is trying to stop more immigration flow in the economy certainly suggests that immigration is considered to have an adverse effect of the economy. immigration is related to the economic growth of the UK in economic point of view” For the above hypothesis “immigration” is a dependent variable . The hypothesis may include the possible predicition of the outcome. whereas “economic growth” is an independent variable. The supporting evidences to the government actions are the government reports outlining the rise of the immigration and the negative implication of that. HYPOTHESIS Developing the hypothesis is to develop a tentative statement that suggests the possible explaination to certain cause and effect relationship. Thus . Hypothesis to this research study “despite of the statistical data about the immigration. As generally .cost and benefits to the nation.? 33 . RESEARCH QUESTIONS The main research question of the study is “WHAT IS THE ECONOMIC IMPLICATIONS OF THE IMMIGRATION ON THE UK ECONOMY ?” The research question stated above is broad in a nature and has many sub questions to be followed WHAT IS THE POSSIBLE RELATION BETWEEN IMMIGRATION AND ECONOMIC GROWTH. hypothesis is often substituted as a theory. the problem is to go beyond just the statistical data of the government reports and analyse the effect of immigration in economic point of view. The problem of research is to identify if immigration is beneficial to the UK economy or not if yes then to what extent ? Does immigration gives significant contribution to the economic growth ? if yes then government actions towards immigration are justifiable. though it should not .
In 2009. 14% of the working population in the UK consist of immigration . The arguments has raised that the recent decrease in immigration is due to the global recession and high unemployment rates in the UK since last few years. WHAT ARE THE INFLUENCES OF THE IMMIGRATION ON THE LABOUR MARKET OF THE UK ECONOMY? As the immigration is part of the nation’s labour market . WHAT ARE THE IMPLICATIONS OF THE IMMIGRATION ON THE RESIDENT POPULATION? It is also important to analyse the implication of immigration on the resident population of the UK on its level of income . important to find out what extent it affects the regulation of the labour market in the nation TO WHAT EXTENT INTEREST RATES AND INFLATION IS RELATED TO IMMIGRATION IN THE UK ? To find out any relationship that immigration may possibly have on general price indices and monetary flow of the economy THE SOURCES OF DATA AVAILABLE SOURCES OF DATA - - Immigration has increased at significant level since 1995 .- - - - - It is quite crucial to analyse the exact relationship between immigration and economic growth rather than just gathering data about demographic characteristics of the immigration WHAT IS THE ECONOMIC IMPORTANCE OF THE IMMIGRATION IN THE UK ECONOMY ? To find out the sole purpose of introduction of the immigration in economy and to analyse if immigration still holds the same economic importance WHAT IS THE EFFECTS OF IMMIGRATION ON THE NATIONAL OUT PUT AND GDP OF THE UK ECONOMY ? Immigration can affect the national output and the GDP of the nation but it is necessary to find out positively or negatively and to what extent. Today UK has 5 million immigrants of the working age . 34 . from which incoming immigrants are decreasing since 2006 and total amount of the immigrants has also decreased. level of minimum wage rate and standard of living. the same figure was seen 8% in 1995.
9% or the United States which 13. from last 15 years it rised to 13%.5% but since then . There are few graphical presentation of data which are more easier to explain the difficult issue like immigration. In comparison to the resident population .6% in compare to 10% of the UK itself. most of all immigrants are concentrated around London. The time scale taken into consideration is large – 30 years. immigrants are more educated . Brent has 60 % of the working population as immigrants in compared to lowest being Knowsley by 3%. It is straightforward to see that till 1995 the immigrants proportion was stable between 7 % to 7. Germany which is 12. 35 .- - The UK experiences lower proportion of immigrants as compared to Australia which is 25%. As seen in the given chart supplied by Labour Force Survey. the figure 1 shows the proportion of immigrants in the UK’s total working age population in a long run.
It is interesting to see the top contributer countries of immigration in the UK. In 1985 16.5% of immigrants from india .5% of the immigrants were from Ireland . 6.since 2009 raising concerns and government policy actions it decreased little to 12. 5.If we consider figure B for the short term analysis of the last decade immigrant population of the working age was 9% in 2000 . 13.9% of immigrants from Pakistan . where the graph displayed its peak in 2009 being 13% .5%.1% 36 . The country of origin of immigrants in the UK is worth analysing.
NY=North Yorkshire. If we analyse the country profile of latest new immigrants in the country . india has been largest sender of immigrants being 10. TW=Tyne & Wear. we can see the proportion of the working age population in various major city across the UK. GM=Greater Manchester. WM=Rest of West Midlands.5% of immigrants from france. Note: LO=London. WY=West Yorkshire.1% from germany and 3. WMM=West Midlands Met. EM=East Midlands. SC=Scotland. 37 .7% . 5. NO=North of England.4% immigrants are from india . SE=South East. The maximum concerntration of immigrants is found in London in 2009 and minimum in north of England by 4% in 2009. Where as in 1995 the immigration was less dispersed and more concentrated in London and the least in South Yorkshire by 4%.2% . The red bar indicated in the chart in all the data on year 1985 . From the above graph..9 % immigrants from Poland.6% from germany . 5.5 % from Africa .9% from South Africa and 3. but in 2009 .from Jamaica 4. SY=South Yorkshire. ME=Merseyside. it is also important to notice that new immigrants are more and more disperse in case of geographical distribution. 8. SW=South West. As the immigration has rised in last few year in all over the country. Poland being 7. 11. NW=North West. where as immigrants from Pakistan rised to 7. WA=Wales. EA=East Anglia.9% .whereas the green bar in the chart indicated all the data of 2009. The issue is more clear in below graph. It is more rised in the major city areas mostly in London . 3.6% immigrants from United States. NI=Northern Ireland.
Immigrants are more educated on an average than that of the residents. Education has a lot to do with the selection of occupation and industry by the immigrant. Whereas only 18. The occupational distribution of the immigrants is as above.7% in energy. There are 53% of the residents who have left school under age of 16 .3% of immigrants are occupied in agriculture .4% in new immigrants. 11. 13% in 38 . such ratio in immigrants is 24.To some extent. 6. There are large number of the immigrants who are working for the professional occupations. It can be seen from the above table that out of all immigrants in the UK majority of the immigrants are occupied in the restaurants and hotels.7% of the resident population has level of education till 21 or more years in compare to 38% of all the immigrants and 50% of all the new immigrants. 8. 11% in retail.1% in manufacturing. Whereas more of immigrants are living in London where there is no scope of agriculture .3% in contruction.8% and 15. 6. no employment is seen in agricultural sector. where as 70 % of immigrants finished the education of Masters by the age of 22. 14% in transport. Analysing the data . From the above chart we can see the education profile of resident is compared to existing and new immigrants. education is the key indicator of the occupation and education of the industry. This education gap is rising over time and more and more immigration is educated only 20% of UK residents finish their Masters education by the age of 22 .
2% for the immigrants.5% of its working age proportion.the larger number of immigrants being 15.6.8% of residents and almost same proportion of immigrants.11. the facts accumulated can be presented as below.1% respectively for residents and immigrants.8% and 9. There are 7.7% in compare to 10.finance . 14. in managerial occupation . If the occupational statistics of the resident population is compared to the same of the immigration . 39 .6% of residents are in administrative occupation whereas 8.6% of immigrants. 9.6% in other occupations.1% of residents are engaged in professional occupations whereas 16.5% of the total immigrants are engaged in the same occupation.4% of resident population’s working age people employed in Sales jobs whereas same for the immigrants is 6. there are 16.9% of the resident population and 8.3% of immigrants are in the same occupation. Personal services has 8.5% of immigrants are engaged in Processing sector. Such data in Assistant professional job is 14.8% in public administration . In Skilled trade 10.6% in education .4% of the resident employees whereas 12.7 for residents and 14. 13.4% of resident wok force. 7.1% in health and 8.
40 . In addition to the that the representative from the government department has claimed that immigration literally contributes more than 15% to the UK economy.It is important to notice that only the immigration that falls under working age criteria is considered while calculation their contribution to the GDP. GDP is the primary concern about indicator of the immigration contribution to the groeth of the UK economy. stating that immigration only symbolise 0. it will consist 5. If we add up them. In fact.8 million to the working age population. It suggests that these arguments are highly based on the simple methodology which is not reasonable and as so both arguments are considered inaccurate and misleading. It has scrutinized the claims in depth to reach the conclusions .whereas their significant GDP (Gross Domestic Product) contribution to the UK economy is 10%. This amount of benefit doesn’t add any significant growth per capita income of the resident population.4% of the total GDP alone. one of that is .3% each year so the per head benefit of the additional immigration is 7p per week. As we reviewed the first argument stating that the 8% of the immigration population contribute the overall GDP by 10 % .5%. First of all. Such population increase by 0. According to the recent estimates provided by the Government Actuarys Department (GAD) net immigration being 130000 per annum. immigrants consist of 8% of the total UK population . the existing immigration and its dependants are ignored. The reliable source about the information that is provided in this report – is Migration Watch . it doesn’t consider the children of the immigrants those are born in the UK. the proportion of immigration to the total resident population reaches to 10% and their total contribution to the UK economy is revealed as 9.2 million to the total and about 3. the argument being the contribution to GDP higher is consistently wrong. On the other side . it is such a big statistical error.5% growth in economy – quite exaggerated. Which is equal to 0. focusing on the comment of the prime minister of the UK . the treasury officially claimed that the new incoming immigration contribute 0. In this simple calculation of total migration .ANALYSIS AND FINDING IMMIGRATION AND THE UK ECONOMY The economic justification provided by the reports and findings of UK government .8% . There are mainly two arguments in major. The recent projections on net immigration trends till 2003-2031 . if the net immigration disappears all of a sudden. In another argument made by the prime minister of the UK in his speech . According to this rationale . the growth rate that the UK economy is experiencing will be lowered by 0.35% growth rate in total immigration.
The similar argument has restated in the House of the lords in February 2004 by Baroness Scottland of Asthal saying . From the above data it can be said that in 2001. (Russell Haque:.000 a year a rise of 6.74% being 2. “Migrants make up 8 per cent of the population but generate 10 per cent of our total wealth.31 million out of the total working age population of 26.33 million people comprising 89. this is very broad issue with the wider scope . Effectively managed legal migration is vital to Britains economic and social interests.DETAILED ANALYSIS OF THE CONTRIBUTION OF IMMIGRATION TO THE GDP The government consistently stated that only 8% of the immigration population of the UK contributes the 10% growth in the economy and its GDP (Gross Domestic Product).91% of the total population in 2001. The principal population projection shows the population rising from 59.men) who were born in foreign countries were 10% of total UK population in 2001 Out of total 3. Some of the interesting facts traced down in this analysis. First of all the definition and characteristics of immigrants is considered by government is any foreign born person even including the british citizens born overseas.146 m. 2. immgrants perform better overall than the residents and and on an average immigrant receives 12% more than the resident population in the UK. Legal migrants make up eight per cent of the UKs population but generate 10 per cent of our gross domestic product. David Blunkett saying .700 million in 2031 based on net migration of 130. will argue in a speech this evening. Out of it 24.554 million in 2003 to 65.63 milion immigrants . December 2002)1 As mentioned before Migration Watch 1 - - - 1. The percentage of the working age population (working age population in the UK is considered as people between age of 16 to 60 –women and 65.5%. Migrants are substantial net contributors to the Exchequer. the Home Secretary. David Blunkett. The natural change (no migration) projection shows the population rising to 41 .31 million immigration contributed to the labour market of the UK economy. The resident population born in the UK were 32. the total contribution of immigration in total working age population was 8. February 2004) In addition to this claims . In reference to the statement of Russell Haque from the department of work and pensions.” (Baroness Scotland of Asthal speaking in House of Lords .22 million people were considered under the working age population making it 74. The press release made by the Home Office suggested in November 2003 included the major speech by the Home secretary .5 million Average earnings of the working age population differ from immigrants to the resident population. The data compared of wages and earnings of residents and immigration population . immigrants have 19% higher income than those of the resident population.
181m a compound annual growth rate of just over 0. it is just a simple math as the population increases. If the population of certain country rises by x% the economic growth of that nation would rise by X%. other factors assuming constant.965m. still 60. (Office for National Statistics: National accounts: GDP by category of income.432 million an annual growth rate of 0. The corresponding comparison for the working age population shows that migration will cause this to grow by 3.undergone the gross analysis of the weekly income of the native employee and immigrants and found out that on an average an immigrant earns £415 per week compared to 487 per week for the resident population. On the contrary it has .3%. From the above chart it can be said that the resident population according to their age group there are 21% of children and approximately 20% of retired senior citizens and leave the rest of the population as working age people.) The demographic analysis of the age distribution of the population is as below. total output increases proportionately.34%. ANALYSIS OF THE FINDINGS 1 IMMIGRATION IS POSITIVELY RELATED TO ECONOMIC GROWTH It is very simple to understand for even a common man that immigration has positive relation with economic growth. 8% of immigrant children 75% of working age population and 18% of senior citizens. Even if it is assumed that the immigrant are just half productive than the native population. 42 . The rise due to migration is therefore 5. where basic assumption would be immigrants are equal productive as the native population. Now it is quite transparent to see that immigrants have more working age population than the counterparts.519m a rise of 0.793 million on a base population of 38.
2005) 2 IMMIGRANTS PERFORMS IMPORTANT TASKS IN UK This issue cannot be proved just by theory but it needs concrete evidences as well. We would be discussing supporting data and supporting evidences that immigration produces that in later sections. The empirical evidences are seen below. living and such more activities and such spending leads much more vacancies and employment. it should not be restricted entirely. Economic growth is a positive effect to economy but not unless it produces additional output per head. but surprisingly surveys revealed that the key job vacancies are constantly high and that suggests that more economic growth needs more labour to perform some of the vital jobs which can be facilitated by immigration. where Government consistently considered GDP as indicator of economic growth. the only thing that can increase economic growth is increasing the size of labour force. On counterpart the wastage of talent and resources in less developed country can be saved and unemployment can be reduced. Immigration is most feasible way to add up the labour force. There are 3 factors to economic growth. (Stewart. Such a large immigration must have filled some vacancies at least. Thus. But still it is not true that immigration fills in every vacancy available and leads to unemployment. assuming two countries one being developed and another being less developed. which are labour. In another point of view. Measures of economic growth may be misleading in case of immigration statistics. it serves both purpose of growth in developed and less developed country – A win-win approach. That can resolve the issue of frictional unemployment. They spend money on food. capital and technical skills. Even if immigration has its downsides. the income earned by immigrants still stays in the economy and circulates in the circle of income. Whereas some advocates of immigrants just compare the output of immigrants with total output of nation and consider the resulting answer as the proportion of immigrants in economic growth. If short term surplus or deficit specific skills can be solved by immigration. If logically considered. America has welcomed millions of immigrants every year from last twenty decades.economic growth can be achieved proportionately (it would not achieve any surplus economic per head). 43 . Developed countries already having strong position on capital and technical skills. Thus immigrants from less developed country can transfer some part of their income to their home country which can be turned into the additional capital resources in the less developed country‘s economy. that is beneficial.
same criterion applies to all major industry as it would collapse if half of their skilled workers are gone. Health system and construction industry functioning would be disrupted. 2005) 3 IMMIGRATION HELPS SENIOR CITIZENS Mostly immigrants are the young age population which indicates that they are one of the increased tax payers. Immigrants. It is a point that immigrants help pensioner’s indirect way. which are young tax payers. it also increases the spending and investments proportionately so that economy still stays in equilibrium. 4 IMMIGRANTS PLAY IMPORTANT ROLE IN HEALTH SERVICES As seen in the UK economy the national health services NHS is run by considerable amount of immigrants who are technically skilled for the particular job. However the replacement to that task in health service can take several years which is not acceptable in such a core aspect of nation. There are some arguments against it “the immigrants would also turn citizen after some time and they would not like to do such job which will need more immigrants 44 . It is feared that if immigrants disappear all of a sudden. It has the same scenario for construction industry. Thus end of the day the native citizens are benefited from the pension fund that is raised by immigrant population. (leader.If we try to understand this in theoretical aspect. Households spend their income buying those good and services provided by industry . gradually they grow old and return to their own countries but their contribution to national pension fund stays in the country which actually adds up the pension fund for native citizens. 5 IMMIGRANTS WILL PERFORM THE JOB WHICH BRITISH WILL NOT There are certain numbers of jobs which are low paid and native citizens would not be comfortable to perform such jobs in such low wages but these jobs are performed by immigrants. a simple economy has industry and households where industry provides employment and pays for the labour capital and entrepreneurship that households have provided and produces goods and services to the households. Thus. it doesn’t mean it leads to unemployment.If immigration create an additional supply of labour.
But of course these jobs have primary importance which is filled by immigrants.Peri) According to economic theories. Sooner or later the wages rise due to economic growth and employer has to decide about the vacancies. 2007) 6 IMMIGRATION INCREASES NATIONAL OUTPUT The top expert on immigration. If country produces all products even if its production costs are greater. it can increase national output per head. The solution can be found by producing the product by using low wage immigrants to produce than importing it. But if the skilled labours are sent back to their countries as soon as their services are no longer required. 45 .Education and training facilities would create additional labour supply of particular skilled required and in long term.But if essential number of vacancies are filled with appropriate skilled labour. There is no total agreement on any particular issue in economics. For example in 2002-2005.Thus. There are certain experts who think that immigration raises national output per head by small proportion but it is not (G. but it is not always feasible to import as it negatively affects the economy. there was a relative shortage of plumbers in UK. George Borjas mentions that immigration has very minor effect of national output per head.and it will go on and on. shortage is vanished . but so do the other factors. there would be lot more new career opportunities rising. Imports of such products should be beneficial. Certainly the policy of sending them back after they no longer required is social and moral issue in Europe and North America. Another important aspect is import and export in the country. Let s say if an employer is getting an unskilled worker for 2 pounds per hour. Such advantage sought from the immigration if temporary in nature under the assumption that immigrants remain in the host country. Plumbers initially were paid more and then paid normally when shortage was no longer experienced. Native population would grab those opportunities and leave the old job vacancies unfilled. he would create demand of lot more employees. Labour shortages are the main reason for raising inflation and inflation forces government to take anti-inflationary measures . the situation turns to the favour of the country. Immigration from Poland helped as polish plumbers were imported but after increased number of natives acquiring the plumbing knowhow. economy might not experience the short supply of particular skill.”In any economy where economic growth is rising. But as seen in current scenario government is in shortage of such skilled labour and thus immigration of skilled labour is the only feasible option and lead to economic growth This effect never stays constant and surplus or deficit of certain labour skill keeps changing . (Dustmann.
46 .B.Say . The argument is that if we did not have low wage immigrant agricultural workers we would have to raise the pay for agricultural work (shock.. but it is not only beneficial for native population and it benefit whole population. who gave Say’s Law which states that excess labour supply autonomously generates the demand that is required to create employment. Or employment stays constant. in turn it also keeps the inflation down to the proportion of the output per head increase.But the academic studies on which these articles are based do not mention the concrete information about immigration help reducing interest rates.and they raise. This can result into two scenarios which are beneficial to host country.. there are certain factors needs to be analysed. But it has the same limitation as the above argument. Immigrants may cause the temporary decrease in interest rates.. The Royal Society of Arts does not enlarge on exactly what is wrong with imports. and this would mean importing more food. But it can have clearer picture when it is related with inflation. If the employment is increased such as the level of acceptable level of unemployment will not accelerate the inflation. horror).. the labour shortages keep changing and the resultant effects of immigration can be highly variable . Perhaps they are not aware of the fact that we import and export tens of billions of pounds of stuff every year and that the mix of stuff exported and imported is constantly changing. Before we enter into this debate. which will increase national output.If immigration at certain point is beneficial. Either country will reduce unemployment by filling in the vacancies.7 IMMIGRATION AND EFFECT ON PRICES It is not obvious to see how immigration is related to price system of the host country. it might not be after few years. demand" th (England). Thus.. As we have seen in previous arguments that Immigration helps in economic growth and raises the national output per head by filling in the essential vacancies. it will be able to reduce inflation to certain extent.There are few references about French economist of 18 century J. A study done by The bank of England reveals that "immigrants are extra consumers. (Jenkins) 8 IMMIGRATION AND INTEREST RATES It is sometimes seen in UK s newspapers the claims about immigration bringing the interest rates down .
Immigrants remit the certain extent of their earning to their home countries. following situation should be explained. The common case of Government intervention in an economy is dealt with raising tax revenue and providing 47 .In a closed economy. To extent to those earnings remitted to their home country. which was not evidently true. after that the major immigrants arrived. which leaves no extra benefit for natives. as it brings economic expansion and reduction in unemployment. 9 IMMIGRATION HELPS EXPORTS The speech made by Robin Cook. cannot exploit that advantage for a long time. Thus the consequent growth and jobs created are in proportion to the immigration. UK has been the World premier financial and business centre even before world war II. The credit of that is given to the immigrants. Only 1% of immigrants work in a job which use their own language and involved in international business Germany has been successful in exports since last 50 years. the situation would not be the same anymore. But in presence of immigration certain flow of savings is remitted to home country. 10 IMMIGRATION AND THEIR FISCAL CONTRIBUTION TO HOST COUNTRY The UK government has revealed that immigrants contribute about £250 million a year in total tax revenue than they withdraw from public services. The direct effect of interest rate decline would be on savings and borrowings . the total amount of borrowings equals to total amount of savings. which was no help by the immigrants as large immigrants in Germany are from Turkey. To understand how it cannot be any beneficial to the natives. the UK former foreign minister in 2001 that many languages spoken in the UK boosts the exports and international business. Immigrants lose their native language after two generations. it is obvious that immigration does not considerably help the exports of the country because of their language expertise. the interest rates decline than otherwise it would have. which reduces the money supply circulation in current economy of host country. Reduced interest rates are positive to economic growth and beneficial for economy as a whole. Moreover it is least relevant in the case of the UK. The UK’s major exports are done in North America where medium of language is almost same. Thus.
48 . Immigrants pay tax on the earning they earn. VAT on the purchases they make.public welfare. The surplus amount of tax paid to government creates extra welfare per head for natives. but usually they don’t consume public welfare facilities which are long term.
how the labour market and unemployment work.CONCLUSION Immigration has always been the controversial issue for the government of several countries. the findings have led to a strong support to the fact that immigration has substantial contribution to the growth of economy.immigration increases overall economic activity of the UK economy which contributes to the economic growth. Immigration fills in the tasks of daily lives of UK citizens. commerce and business activity in the UK . available capital stock and Labour forces. What are the implications of the immigration on the resident population? - - - 49 . Immigrants have high technical and professional know how which can be utilised efficiently. Not only the basic level job . What is the effects of immigration on the national out put and GDP of the UK economy ? Immigration can affect the national output and the GDP of the nation but it is necessary to find out positively or negatively and to what extent. All of those crucial tasks that british workforce wont be ready to do. After the analysis of the historic data and statistical reports . the picture of important role of immigration can be reached.while immigration adds up into the effective labour supply of the UK economy. this leads more benefits to the country than before in absence of immigration. What is the economic importance of the immigration in the UK economy ? To find out the sole purpose of introduction of the immigration in economy and to analyse if immigration still holds the same economic importance. following answers to the research questions are derived What is the possible relation between immigration and economic growth. It is impossible to imagine such jobs done in absence of immigrants.after analysing the basic fundamental economic concept about economic growth and how it is actually achieved. I started with the research problem that what is the relation between immigration and economic growth. National output of the UK is highly based on only two factors .? Immigration fills in the gap of skills that economy doesn’t have . Many stastistical reports have suggested that immigration has very little or even nothing to do with the economic growth and therefore it should be reduced.but considering the importance of immigrants in day to day operation . their consumption and spending patterns also bring growth to the National output and GDP.
important to find out what extent it affects the regulation of the labour market in the nation. inflation and unemployment go hand in hand and has no relation with immigration. structural or seasonal unemployment and not only that but it also provides the efficient workforce to fill of the shortage of skills make the labour market of UK run smoothly. To what extent interest rates and inflation is related to immigration in the UK ? To find out any relationship that immigration may possibly have on general price indices and monetary flow of the economy. What are the influences of the immigration on the labour market of the UK economy? As the immigration is part of the nation’s labour market .A detailed analysis of labour market mechanism in the UK economy suggested that immigration has very little to do with the frictional . level of minimum wage rate and standard of living. There are many tasks performed by immigrants because of that resident population can gain the high standard of living. - 50 . and the wage rate decrease can be stopped by government regulations which is already applied in the UK . From the analysis of the data immigration bring more benefit than the cost to the UK economy . Considering all the points . apparently the surplus contribution raises the per capita income of the resident population.It is also important to analyse the implication of immigration on the resident population of the UK on its level of income . Immigration has very little negative impact on the UK economy and it brings economic growth in the UK. As analysis suggested .
(2005). O. Home Office Online Report.doc. S. amsterdam: amsterdam university press. ( December 2002).uk/imm. CAPDM Limited. Rowthorn. Jenkins. (2002). a. w. (1997). (2007). control of immigration. T. Russell Haque:. Economics.ethnic. Demographic and Fiscal Impacts. Scotland.section 4. p37. jandl. gender and national identity. Borjas. Journal of Economic Perspectives . (March 2003). Smith. germany: international academic publishers. Dustmann. Washington D. M. The economic impact of immigration. e u labour migration trands. (February 2004). T. hampshire: Ashgate publishing ltd. (2007).ndo. . Migration in the UK. M. H. edward.. BBC News . Baroness Scotland of Asthal speaking in House of Lords . Who gains from Immigration. (2005). U K : home department. G. The Economic Benefits from Immigration. l. LORDS. D. The politics of migration and imigration in europe. European immigration A source book. P.impact and policy. Lumsden. 2009: T J international ltd. Sunday Times . (1995). The Economic Impact of Immigration.co. www. bela galgoczi.C. Re-thinking the gains from immigration. senker. National Academy Press.3 . I. Economic.d. B.). H. The local labour market effects of immigration in the UK. England. (2007). e. g. leader.d. p 8. Office for National Statistics: National accounts: GDP by category of income. migration. C. The New Americans. m. (2007-08). Geddes.Peri. gropas. (1990). R. O. New york: rosen publising group. 2001. Migration Statistic 2008 Annual report. phoenix: the oryx press. (2006). G. A. Schifferes. (1994). S. P. social issue in american history imigration. (2008). 51 . 9(2):322. (n. A. London: Department for Work and Pensions. Edinburgh. London: Office of National Statistics. (2008). T. (n. (2008). London: Select Committee on Economic Affairs. innovative concepts for alternative migration polices.REFERENCES al. University of Cambridge. NBER . London. J. ana bravo.). The debate about immigration . Royal Society of the Arts. (April 2004). "Migration: A Welcome Opportunity. london: sage publication ltd. a. department. (2007). Keith G.
(2005). Spatial Development Strategy for Greater London. Stalker.uk/thelondonplan. humpshirer: biddles ltd. Stewart. oxford: oxford university. H. Young. a.nsf/UK/ITEM_Club_Special_Report. London: www. D. Steve cohen. E. (2002). (2001). From immigration controls to walfare controls. taylor. oxford. Live and work in britain. Retrieved from http://www. (2007.london. Devlopment of british immigration law. vaughan. Uma. 52 . Guardian . taiwo adesina.com/global/assets. ITEM Club Special Report: Migration and the UK economy.A. surrey U K : crimson publication. mackays of chatham ltd. 1-14. P..ey. (2010). n. (2008). The no-nonsense guide to international migration.(February 2008). k. u k. &. U K : new internationalist publication ltd.gov. immigration worldwide. (2008).Segal. December). B. H. (1986). a simple guide to u k immigration. E.
APRIL 2004) 53 .(ROWTHORN.
After the analysis of the historic data and statistical reports .but considering the importance of immigrants in day to day operation . the findings have led to a strong support to the fact that immigration has substantial contribution to the growth of economy.? Immigration fills in the gap of skills that economy doesn’t have . commerce and business activity in the UK . Many stastistical reports have suggested that immigration has very little or even nothing to do with the economic growth and therefore it should be reduced.after analysing the basic fundamental economic concept about economic growth and how it is actually achieved. I started with the research problem that what is the relation between immigration and economic growth. this leads more benefits to the country than before in absence of immigration. Immigration fills in the tasks of daily lives of – 54 . how the labour market and unemployment work.immigration increases overall economic activity of the UK economy which contributes to the economic growth.CONCLUSION Immigration has always been the controversial issue for the government of several countries. following answers to the research questions are derived – What is the possible relation between immigration and economic growth. What is the economic importance of the immigration in the UK economy ? To find out the sole purpose of introduction of the immigration in economy and to analyse if immigration still holds the same economic importance. the picture of important role of immigration can be reached.
and the wage rate decrease can be stopped by government regulations which is already applied in the UK . What are the implications of the immigration on the resident population? It is also important to analyse the implication of immigration on the resident population of the UK on its level of income . apparently the surplus contribution raises the per capita income of the resident population. Immigrants have high technical and professional know how which can be utilised efficiently. National output of the UK is highly based on only two factors . important to find out what extent it affects the regulation of the labour market in the nation. structural or seasonal unemployment and not only that but it also provides the efficient workforce to fill of the shortage of skills make the labour market of UK run smoothly.UK citizens. It is impossible to imagine such jobs done in absence of immigrants. From the analysis of the data immigration bring more benefit than the cost to the UK economy . their consumption and spending patterns also bring growth to the National output and GDP.A detailed analysis of labour market mechanism in the UK economy suggested that immigration has very little to do with the frictional . level of minimum wage rate and standard of living. What are the influences of the immigration on the labour market of the UK economy? As the immigration is part of the nation’s labour market . To what extent interest rates and inflation is related to immigration in the UK ? To find out any relationship that immigration may possibly have on general price indices and monetary flow of the economy. Not only the basic level job . As – – – 55 . There are many tasks performed by immigrants because of that resident population can gain the high standard of living. All of those crucial tasks that british workforce wont be ready to do. – What is the effects of immigration on the national out put and GDP of the UK economy ? Immigration can affect the national output and the GDP of the nation but it is necessary to find out positively or negatively and to what extent.while immigration adds up into the effective labour supply of the UK economy. available capital stock and Labour forces.
impact and policy. Journal of Economic Perspectives . Baroness Scotland of Asthal speaking in House of Lords . inflation and unemployment go hand in hand and has no relation with immigration.ndo. m. London. The Economic Benefits from Immigration. I. edward. The local labour market effects of immigration in the UK.). B. 2009: T J international ltd. control of immigration. REFERENCES al. bela galgoczi. migration. NBER .ethnic. 56 .Peri. (2007). U K : home department. gender and national identity. ana bravo. 9(2):322.doc. (2007-08). (1994). G. Immigration has very little negative impact on the UK economy and it brings economic growth in the UK. Re-thinking the gains from immigration.uk/imm. (February 2004). germany: international academic publishers.analysis suggested . a. H. w. social issue in american history imigration. O. department.. T. (March 2003). Borjas. D. phoenix: the oryx press. England.co. e u labour migration trands. Dustmann.d. (1995). (2006). Considering all the points . e. G. www. l. (n. Home Office Online Report. (2007).
M. u k. Scotland. P. oxford. (1990). amsterdam: amsterdam university press. . T. D. Jenkins. Smith. The Economic Impact of Immigration. LORDS.section 4. Spatial Development Strategy for Greater London. (2005). London: Department for Work and Pensions. S.). CAPDM Limited. Who gains from Immigration. The New Americans.d. J. surrey U K : crimson publication. H. Washington D. A. Russell Haque:.3 . (2010). vaughan. London: Select Committee on Economic Affairs. (2007). (2008). innovative concepts for alternative migration polices. mackays of chatham ltd. (2008). (2001). P. Migration in the UK. Royal Society of the Arts. p 8. Stalker. BBC News . London: Office of National Statistics. a. T. a simple guide to u k immigration. Guardian . S. (n. A. p37. oxford: oxford university. (2008). R.Segal. The no-nonsense guide to international migration. Demographic and Fiscal Impacts.Geddes. (1997). 2001. senker.uk/thelondonplan. (April 2004). Economic. immigration worldwide. National Academy Press. jandl. n. Sunday Times . a. Schifferes. Edinburgh. Steve cohen. (2008).A. (2007). (2002). 1-14. ( December 2002). (2005). "Migration: A Welcome Opportunity. hampshire: Ashgate publishing ltd. (2005).london. g. Economics. k. (2008). (1986). New york: rosen publising group. European immigration A source book. The debate about immigration . O. C. Office for National Statistics: National accounts: GDP by category of income. Keith G. Uma. University of Cambridge. U K : new internationalist publication ltd. Stewart. E. P. Migration Statistic 2008 Annual report. humpshirer: biddles ltd. Devlopment of british immigration law. The politics of migration and imigration in europe. B. Live and work in britain. (2002). London: www. Lumsden. gropas. Rowthorn. leader. M. london: sage publication ltd. The economic impact of immigration. From immigration controls to walfare controls. H. taiwo adesina.gov.C. taylor. H. 57 . (February 2008).
. ITEM Club Special Report: Migration and the UK economy.Young. December). (2007. 58 .ey.com/global/assets. &. E. Retrieved from http://www.nsf/UK/ITEM_Club_Special_Report.
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