Trade, Development, and Immigration

Immigration: a pragmatic proposal

If you follow debates around immigration, you will probably have come across some variant of the following three-way debate between Right-Wing Robbie, Leftie Lottie, and Libertarian Larry:

Right-Wing Robbie: “The latest net migration figures are totally catastrophic. We can’t cope! The country is full! We don’t have enough houses. We don’t have enough GPs. We don’t have enough hospitals. We don’t have enough school places. The roads are blocked. The country is already bursting at the seams. How on earth are we supposed to cope with even more people?”

Leftie Lottie: “I find it outrageous, and deeply distasteful, that you are trying to demonise migrants by scapegoating them for the problems caused by capitalism and right-wing policies. This isn’t dog whistle racism anymore – this is a foghorn!”

Right-Wing Robbie: “Are you denying that we have a housing crisis?”

Leftie Lottie: “Not at all! But that’s got nothing to do with migrants. It’s because Thatcher sold all the council houses, and abolished rent controls.”

Right-Wing Robbie: “Have you seen the NHS waiting lists?”

Leftie Lotte: “Yes. Which only exist because the Tories have been systematically defunding and undermining our NHS. It’s not “failing”, it’s being failed. Deliberately. The Tories want it to fail, so that they can…”

Right-Wing Robbie: “School places!”

Leftie Lotte: “Austerity!”

Right-Wing Robbie: “Roads!”

Leftie Lotte: “Tory cuts!”

Libertarian Larry [smiles, smugly]: “Curious how neither of you are noticing a pattern here. All the sectors you are talking about are, directly or indirectly, state-controlled. Healthcare? The state! Schooling? The state! Infrastructure? The state! Housing? Requires land, and who controls the supply of land, via the planning system? The state!

Are the supermarkets complaining about how they “can’t cope”? Are the pubs? Are the restaurants? Are the gyms? No! You’re both missing the point. The state is the problem, the free market is the solution!” [Leans back, folds arms, evidently self-satisfied and pleased with himself]

I’ve often been Libertarian Larry myself, in these debates. (Just last week, as it happens.) It’s a case that needs to be made, both because it’s correct, and because nobody else – neither the Left nor the Right – is making it.

But, admittedly, it is not always a hugely helpful argument. It reminds me a bit of a conversation I once had with someone who was studying German, and who was complaining about how difficult it was. For some reason, I thought it was a good idea to reply: “You know, if we lived in a parallel universe where the Norman Conquest never happened, you wouldn’t be having those difficulties right now. English would then be a direct and undiluted descendant of Old Saxon. It would be about as close to modern German as Dutch, and the Dutch find German easy.”

While that point is correct, and while it might even have been interesting in a different context, I don’t think I was helping that person a great deal. Because we are not in that universe. And neither are we in a universe where Britain has adaptive, flexible markets for housing, healthcare, schooling and infrastructure. Market-based reforms in those areas are a bit more realistic than reversing the impact of the Norman Conquest on the English language, but I’m still not expecting either of them to happen any time soon.

So here’s a more interesting question for Larry: what would be the best – or least bad – immigration policy given the current constraints on housing supply, and assuming that there will be no meaningful market-based reform in public services?

Larry would then have to grudgingly accept tighter immigration restrictions than he would ideally like to see. How could this be done in the least bad way?

In principle, the government has a lever with which it can very easily control how permissive, or how restrictive, the immigration system is: the salary threshold. This is the minimum salary you have to earn in the UK in order to be eligible for a work visa. Raise that threshold, and the system becomes more restrictive; lower it, and the system becomes more permissive. This is not the whole story, but the salary threshold is an important variable, which the government can directly control.

Let’s have a look at how that threshold has evolved in recent years.

Under the old, pre-Brexit system, it stood at £30,000 for people from outside of the European Economic Area. EEA citizens, under free movement rules, did not have to meet any minimum salary criteria.

Under the new, post-Brexit system, the salary threshold was cut to £26,200, and it was now extended to EEA citizens as well. Thus, from the perspective of non-EEA citizens, the system became more permissive, and from the perspective of EEA citizens, it became more restrictive.

Since then, the system became more permissive by accident, for the simple reason that the threshold remained at £26,200, which, given that this was a period of high inflation, constituted a cut in real terms. Had it been uprated in line with inflation, it would have been a little over £31,000 in 2023.

This makes a huge difference, because lots of people earn in that range. It has meant a large increase in the number of people from outside of the EEA who qualify for a UK work visa, and as a result, the number of non-EEA arrivals shot up.

If the government follows through with it, the salary threshold will increase one-and-a-half-fold, to £38,700, this Spring. Maybe that is defensible, maybe it is too drastic an increase, but either way – it is quite clear that these sudden, dramatic ups and downs are driven by news headlines, rather than any systematic policy considerations. I know proponents of a permissive immigration system, I know proponents of tight immigration controls, but I don’t know anyone who thinks the system should swing back and forth between these positions.

So how about taking this important variable out of day-to-day politics via an automatic uprating system? This could, for example, mean pegging the salary threshold to the median salary (or perhaps a point slightly above that, say, at the 55th percentile of the salary distribution). This would mean that work migrants would always have to be above-average earners, and thus highly likely to be fiscal net contributors.

There is currently also a special, reduced salary threshold for younger people. This makes sense: a recent graduate without work experience is unlikely to be a high-earner just yet, but they are likely to experience significant career progression in the near future. The system proposed above could deal with this, too. How about this: if you are under the age of, say, 30, your minimum salary threshold for moving to the UK would not be based on the national median, but on the – substantially lower – median of your age group. There’s obviously a trade-off between accuracy and simplicity: we would not want an administrative nightmare with two dozen separate, age-specific salary thresholds. But a system with two or three rates would be no more complex, and perhaps a bit simpler, than the system we currently have.

This would, of course, not settle debates around immigration. Right-wing Robbie would still say that immigration is far too high, Leftie Lottie would still say that the immigration system is racist and borderline fascist, and Libertarian Larry would still want his free-market reforms in housing and public services. But it would mean more economic sense, and less politics.

Head of Political Economy

Dr Kristian Niemietz is the IEA's Editorial Director, and Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).

4 thoughts on “Immigration: a pragmatic proposal”

  1. Posted 15/02/2024 at 14:27 | Permalink

    people are not up in arms about legal immigration. It’s the illegal ones. Stop conflating the two!

  2. Posted 16/02/2024 at 12:46 | Permalink

    ‘Larry would then have to grudgingly accept tighter immigration restrictions than he would ideally like to see. How could this be done in the least bad way?…Larry would then have to grudgingly accept tighter immigration restrictions than he would ideally like to see’

    The issue with this reasoning is it implicitly assumes a nationalist premise, i.e., it is the responsibility of the state to ensure the maximum welfare of its people. Liberals rightly question this, as a basic tenet of their ethical theory is everyone is equal, and, should be treated equally. Assuming, for the sake of argument, we take this general idea in its utilitarian form, as the IEA typically does, it would not necessitate a salary as high as mused, because, the gains to third world immigrants from moving to Ethiopia etc. more than outweigh the losses British people would probably undergo due to an unresponsive state and planning system. Dr Niemietz clearly has more in common with Right Wing Robbie than he may have thought.

  3. Posted 18/02/2024 at 10:52 | Permalink

    Amusing and entertaining blog as always! but I’m not so sure that the populist, nationalist right can be reasoned with in this way- if there concern about immigration was driven by a rational concern about resource consumption they would be focused on the supply-side reforms that would actually solve the issues. The likes of Jenrick, Braverman and the Reform crowd just see it as an issue that ‘ordinary people’ are concern about and so exploit it to try and win popularity.

  4. Posted 18/02/2024 at 16:55 | Permalink

    Very sensible proposals. I have always regarded the key metric to have some reference to GDP/capita. Below this measure, and especially well below, your immigrant is notionally of relatively low productivity (and vice versa). We seem to have been importing relative poverty of late. Hence the one factor in the nations’ poor productivity outcome in recent years. It is doubtful that a Labour Government would do anything of substance (just window dressing) because on average, poor immigrants are left leaning. Why cut off your supply of future voters.

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