Immigration isn’t a topic much discussed nowadays, because it’s one where
the Tories and Lib Dems don’t agree. That’s a shame. Because there’s an urgent problem to be fixed in the British labour market: that every time the economy grows, it sucks in
immigrant workers. If this dysfunction continues, it will finish Cameron. The News of the World (where yours truly is a
) has today looked at the latest figures for this. I reprint them for CoffeeHousers below. They show that during that disastrous fourth quarter in 2010, where the economy
shrank by 0.5 percent, the number of employed British-born people fell by 110,000. As grim as you’d expect. But the number of foreign-born workers actually rose – by 7,000. This fits a
trend. David Cameron and IDS rightly lambast the last government for the fact that almost all of the jobs created in the boom years can be accounted for by higher immigration. But the same trend
persists in the post- years. The below chart makes it clear: in spite of all the economic turmoil, the immigrant workforce population stands at a record high.
So let’s look at foreign-born workers, as a share of the workforce. It is also at a record high. Pretty soon, we’ll have overtaken America as an immigrant country – except
we’ll have combined mass immigration with mass unemployment. And that is fundamentally dumb thing for an economy to do. Ignoring this problem won’t help.
What to do? The Tories want to tighten border controls, and the LibDems think this is illiberal. My analysis is different. I think the problem is demand for immigrants, not supply of them. Say you
cut down on the Ozzies and Americans (as we’re doing), then we’ll simply see more of these well-educated, hard-working Poles or other EU immigrants. Cameron’s pledge to reduce
immigration to the “tens of thousands” will not be met. I could be proved wrong here, but I don’t think choking the supply of immigrant labour will help – and may indeed
retard economic growth.
Our problem is that we pay millions not to work. We bribe the unemployed to go live in welfare ghettoes and not bother us. One in five kids grows up in a workless household. Iain Duncan Smith has
plenty more of these figures – and his reforms, outlined last week in the Welfare Reform Bill, are the best chance we have of fixing this. But the IDS agenda takes ten years.
My proposal is to accelerate the IDS reforms. To have an emergency, lower tax on low-paid workers – thereby making it more worthwhile to work. Ah, you may say, we can’t afford tax cuts
now. But in Sweden, that’s what Reinfeldt did
: his ‘stimulus’ was to reduce tax charged
to low-paid workers (but not those on the dole), thereby increasing the incentive to move from benefits to work. More did, the economy grew faster and the tax cut paid for itself.
Something seismic has happened in our economy. Mass immigration has broken the link between UK jobs and UK dole. The two used to be a see-saw – and that see-saw has been snapped. Problem is
that our economists haven’t realised this yet. They are still using the econometric models of yesteryear – they don’t realise the seesaw is broken. They are making forecasts (for
dole costs, and other things) that imagine the dole queues will shorten as the economy expands. It won’t work.
To make the IDS welfare reforms affordable, they had to be stretched over ten years. But I wonder if there is a false economy here. I wonder if it is affordable to keep 5.3 British people on
benefits while our immigrant workforce stands at 3.9 million and counting. Don’t blame the immigrants: if there’s a vacuum in the UK labour market, it will be filled. Our system is to
blame: it needs fixing. Osborne needs to help out with the soaring cost of living, he needs to reduce dole, he needs to address the immigration problem. A tax cut for the low-paid, I humbly submit,
would do all three.