1. BREXIT and Migration: The Economics
L Alan Winters
Professor of Economics
CEO, Migrating Out of Poverty Research Programme Consortium

2. Outline BREXIT vs. non-BREXIT The nature of the flow
The BREXIT thesis and objective
Can they do it?
Should they do it?
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BREXIT and Migration

3. The Counterfactual I Y ?BREXIT? time 8th March 2016
BREXIT and Migration

4. The Counterfactual II Y BREXIT time 8th March 2016
BREXIT and Migration

5. Net Migration 1975-2015 Source: ONS, Migration Statistics Quarterly Report: February 2016
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6. The BREXIT Thesis Migration is unsustainably high – harms natives
Can’t control numbers while in EU (Nigel Farage’s 500 million)
Can’t control composition to favour skills
Net migration fairly high by historical standards, >0.5% per year
Farage: 500 million people waiting to come to Britain – AND THIS LECTURE?
Similarly, 60 million Brits could come to London (8 million Scots)
what’s the difference?
Trade off – Leavers say if control EU migration, we would allow more from outside
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BREXIT and Migration

7. (I) Immigration from EU Source: ONS, Migration Statistics Quarterly Report: February 2016
BAU
EU14 growth in 2008 – probably crisis
since 2012 reflects austerity in original members – likely to abate
EU8 – steady state - rel income continues to increase
EU2 - accession 2007 – steady entry under self-employment rules (builders)
From 2014 unrestricted – catch up – even though doing well, relative income is very low
Likely to abate anyway
DEPENDS ON SECTORS MIGRANTS WORK IN TOO – MORE LATER.
Effect of exit depends on relative economic fortunes – what effect will BREXIT have?
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8. Relative income (rel Y%)
Drivers of Migration
Unemployment (U%) .
Relative income (rel Y%)
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9. Education Source: Wadsworth J
Education Source: Wadsworth J. (2015) Immigration and the UK Labour Market, CEP, LSE
Migrants – younger and better educated. These are stock data, so EU14 and A8 reflect more modern trends than traditional migrants and natives.
BUT THEY INCREASE RELEATIVE SUPPLIES OF SKILLS!
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BREXIT and Migration

10. Occupations Source: Wadsworth J
Occupations Source: Wadsworth J. (2015) Immigration and the UK Labour Market, CEP, LSE
Elementary – e.g. cleaning, bar, agriculture; skilled – classes 1, 2, 3, 5
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11. Sectors Source: Wadsworth J
Sectors Source: Wadsworth J. (2015) Immigration and the UK Labour Market, CEP, LSE
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12. Can they do it? Migration from EU likely to abate anyway
Steady state for EU2, Economic recovery
But pressure to recruit into key sectors
BREXIT would restrict less-skilled access, but
Flow restrictions may not cut migrant stocks
Needs of service sectors and construction
Probably cut skilled inflow too
Finance sector, MNC circulation, life-cycles
Net effect negative but not massive
Once in, stay put – informality increases; stress of enforcement?
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13. Migration Boosts Output
Moves workers to where most productive
Macro/regional/sectoral
Eases adjustment to shocks
Accommodates long-run trends
Allows agglomeration
Why doesn’t trade do this?
Costly, and impossible for many things (services)
Sticky relative sizes of sectors in each location
In fact, migration has a positive effect on trade
Networks; easy contacts
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14. Matching
Individual benefit – getting a better job and being able to focus on it
skilled women’s participation
As important for UK emigration as immigration
Firms benefit
critical workers (key for MNCs and hence for FDI)
Migration can affect industrial structure:
Horticulture, Clothing, Catering, Type of building
Skilled women – increase hours of work (US cross-city) Cortes-Tessada
Hong Kong ‘FDWs increased the participation of mothers with a young child (relative to older children) by percentage points and have generated a monthly consumer surplus of US$130-US$200.’ Cortes Pan (2013)
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15. Gains from Mobility (in order of size):
Migrants themselves – huge
Same person might double output even in Europe
Employers (capital)
Complementary workers
Better managers? More workers to organise?
Society in general, including
Consumers of goods and services
Fiscal authorities
AND POSSIBLE LOSSES FOR COMPETETIVE FACTORS
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BREXIT and Migration

16. Costs: Economic and Social
Competing workers
Weak wage effects – migrants may increase demand for non-traded goods – hence labour.
Enforcement of minimum wages matters
Previous migrants often hit hardest
Congestion
Health, Education, Housing (but evidence is weak)
Social Cohesion
Slight evidence of stresses, but many other factors
Cohesion of Europe – co-operation
John McLaren – Shot in the Arm – US cities.
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17. THANK YOU
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BREXIT and Migration