Jonathan Portes on the Economics of Immigration

“I cannot count the number of people who’ve told me on Twitter, ‘Of course immigrants increase British unemployment! Of course immigrants drive down wages. It’s just the law of supply and demand.’ And it’s an almost infallible rule that people who say that do not understand basic economics and do not understand supply and demand, because immigration adds to both supply and demand.”

So recounts Jonathan Portes, a professor of economics and public policy at the School of Politics & Economics of King's College, London and the former chief economist at the Cabinet Office, in this Social Science Bites podcast.

Portes is explaining to interviewer David Edmonds how the “lump of labor fallacy” -- that there’s only a certain number of jobs to go around when in fact the number of jobs in an economy is not fixed – often plays out in the popular debate on immigration. “The key here,” Portes adds, “is that immigration leads to demand as well as supply.”

The economist has a long and storied career in British economics, having been chief economist at the Department for Work and Pensions before his stint in Cabinet and then director of the National Institute of Economic and Social Research from February 2011 until October 2015. His latest achievement is the release of What Do We Know, and What Should We Do About Immigration, one of three books in the debut release of SAGE Publishing’s new ‘What Do We Know’ series of social science explainers. (SAGE is the parent of Social Science Space.)

One of the things that he definitely knows is that for anyone who sees immigration as an unalloyed evil (or boon, for that matter) is certainly mistaken. He likens immigration to trade, which is generally reckoned to be a good thing. “Trade and immigration are in some way very closely analogous and that the results that you get about the overall benefits – with the possible issue of distributional consequences – are very similar.” Those ‘distributional consequences,’ of course, often get the outsize headlines.

“The UK has always been a country of immigration in some ways, going right back to the Norman conquests, if you like” Portes observes. Pre-European Union, surges in immigration often came from  refugees like the Huguenots or from commonwealth countries. “Step change,” he adds, did not accompany immediate entry in the EU, but did in the 1990s. “It coincided with Tony Blair’s government and some of the policy changes that Blair introduced, but it wasn’t driven by that, but by globalization.” The number of arrivals tripled from about 50,000 a year net migration to 150,000 a year. Another jump came in 2004, when workers in the new Eastern European member states in the EU – Poland, Hungary, the Czech Republic, Estonia, Latvia, Lithuania, Slovakia, Slovenia – flocked to an open UK labor market.

He offers quick correlation to test the direst worries about the continuing influx. He looks at two decades of heavy immigration into the UK, in particular in the last five years, and then at the unemployment figure, at 4 percent the lowest since the current way of measuring joblessness were instituted. “It doesn’t prove anything, because of course there are lots of other things going on. But it does sort of tell you that if immigration really had a big negative effect on the employment of natives, that’s not really consistent with the aggregate data.”

Portes admits that there’s more to immigration that employment and wages; those just where the good data reside. “It’s much harder when you’re looking at more complicated issues – business startups, productivity, innovation. There is some evidence that immigration has had positive impacts ... but its more suggestive and more qualitative.”

So ever the academic, he does caveat. But being the former bureaucrat, he also interpolates. Portes offers Edmonds the example of British higher education. “Instinct tells me that [immigration has] been good. Would we have the world-leading universities that we have in London if we had to solely rely on Brits to fill the jobs? I think it’s almost inconceivable that we would.”