NIESR: Lower output and higher taxes - the impact of reducing immigration
New research published recently by NIESR shows that significant reductions in immigration should the UK leave the EU would lead, in the long run, to lower GDP per capita; this in turn would necessitate higher taxes. However, although the impact is significant it is not quantitatively large and would take a considerable time to materialise.
The model used in this research brings together labour market, fiscal and other macroeconomic effects into one framework. It also adds a dynamic perspective, differentiates between natives and different categories of immigrants and captures compositional effects resulting from immigrants’ different age and qualification profiles. These features make this research the most comprehensive analysis of the long-term impacts of immigration on the UK economy to date.
The paper compares “Leave” and “Remain” scenarios for migration to the UK after the referendum, and assesses their macroeconomic impacts. “Leave” assumes that net migration from the EU countries will decline by two thirds compared to “Remain”. By 2065, in the Leave scenario, aggregate GDP and GDP per person are 9% and 1% lower respectively compared to the “Remain” scenario. Reduced migration after leaving the EU has a significant negative impact on the public finances, primarily because of a higher dependency ratio, which is the fraction of young and old people of the total population. Accordingly government spending rises as a share of GDP by 1.1 percentage points in 2065, requiring an increase in taxation of about £400 per person (2014 pounds). As a result, post-tax wages are 2% lower in the Leave scenario.
Leaving the EU would have a rage of economic consequences for the UK. This paper only looks at the effects associated with the possible change in migration policy.
Katerina Lisenkova said: "Our research shows that lower migration has an overall negative effect on the UK economy. In general EU immigrants benefit the UK economy for two main reasons – they are on average much younger and are more highly qualified than the general population."
The research paper is entitled “The long-term macroeconomic effects of lower migration to the UK”.
For a full copy of this paper, please contact the NIESR Press Office:
Luca Pieri on 020 7654 1931 / email@example.com
To discuss the article, please contact:
- Katerina Lisenkova: firstname.lastname@example.org or 020 7654 1951
NIESR aims to promote, through quantitative and qualitative research, a deeper understanding of the interaction of economic and social forces that affect people's lives, and the ways in which policies can improve them.
Latest News from
JRF - New ONS figures reveal inflation rates are at five year high19/10/2017 10:35:00
Ashwin Kumar, Chief Economist at the Joseph Rowntree Foundation, responded to the latest figures from the ONS
IFG - Cycle of crisis, cash and repeat in public services costs government £10bn19/10/2017 09:35:00
The Government is spending over £10bn in five years just to keep troubled services – such as hospitals and prisons – going, according to a new report. Yet this extra money is not sorting out any of the underlying problems these services face.
NIESR: Head of UK Macroeconomic Forecasting reacts to the latest CPI inflation data18/10/2017 13:25:00
NIESR’s Head of UK macroeconomic forecasting, Amit Kara yesterday commented on the latest CPI inflation data.
Policy Exchange - The Clean Growth Strategy: worth the wait?17/10/2017 13:35:00
The Clean Growth Strategy, published last week after long being delayed, signifies a step change in Government thinking and is ambitious in its scope.