The OBR still isn’t revealing the true costs of mass migration
The OBR still isn’t revealing the true costs of mass migration
The OBR gets a lot wrong and has done so for a very long time. No where is the UK’s so-called fiscal watchdog more error prone than in its forecasting of mass migration.
The OBR gets a lot wrong and has done so for a very long time. No where is the UK’s so-called fiscal watchdog more error prone than in its forecasting of mass migration.
On the most basic level it, alongside the ONS, repeatedly underestimate the numbers entering the country each year.
As previous CMC research shows, its modelling has too long relied on a one-size-fits all approach to those entering our country and assumed any economic gains are uniform across every single working migrant, and that their working profile exactly mirrors the British population. This is patently absurd – given a large number of foreign nationals working in the UK are students, and therefore legally allowed to only work 20 hours per week, as well as those in the care sector and in pay brackets that are far below the national average.
However, some headway, and we stress only some, was made in its latest report on Fiscal Risks and Sustainability. The introduction of a “low wage migrant” variable has opened a long-needed conversation about the implications associated with a migration policy that is for from discerning in who it lets into Britain.
Under their assumptions a “low wage migrants” will never make a positive economic contribution to Britain. An individual arriving at the age of 25 will have cost the British taxpayer £35,000 in their first ten years in the country, £151,000 by the time they are of pension age, and £387,000 by the age of 78. This is before we even consider the fact that these individuals become eligible for social security after just five years. Indeed, as research from the CMC recently revealed, there are over 1.69m foreign-born individuals in the UK who are either economically inactive or unemployed.
What the OBR has got wrong
The OBR has been audaciously conservative in defining “low wage” migrants as those individuals coming in on the 25th percentile of UK average earnings (by which we assume they mean £26,200, as per previous government definitions) as we will discuss momentarily. But even with this pro-migration gerrymandering, the number arriving in 2023 who the OBR would consider “low wage” is still a staggering 121,715 of work visa main applicants.
The manifest problems with the OBR’s migrant assumptions are that they have turned a blind eye to some 280,000 dependents that arrived alongside work visa main applicants. Not only that, but they have also assumed that the average migrant, which they place at 25 years of age, will be celibate for their time in Britain, have no offspring, and as such have given no consideration to the costs imposed on the British Treasury of education and other services for these young people.
This makes the OBR’s decision to simply define “low wage” migrants as those on the 25th percentile look, frankly, ridiculous. Under their own assumptions, the OBR implicitly notes that a so-called “average wage” migrant, who has just one child whilst in Britain and no adult dependents, would be approaching the age of 50 before they even began to offer some slight fiscal benefit to Britain. Even a so-called “high wage” migrant with one child would need to reach the age of 42 before they break even. Yet the OBR completely ignores these factors.
Defining “low wage”
Of course, £26,200 is the outmoded threshold of the “25th percentile”, with the government having recently uprated it to £29,000 for those entering Skilled Worker positions. But regardless of the changes with this rate, the “25th percentile” is not the most suitable definition of “low wage”.
A large proportion of the British population are net recipients from the government - over half of all households are net recipients. This has been reported on extensively. However, by nature of these individuals being British citizens, they are far more likely to have had ancestors that have made accumulative contributions to the British economy and capital stock over time. Furthermore, such transfers of wealth that take place through benefits, the provision of healthcare and education, are only truly morally acceptable when conducted within a nation state. It is only through the cultural and historic bonds of a nation that you can mitigate the rational sense of injustice which accompanies large transfers of wealth from those who are net contributors.
Individuals moving to the UK as first-generation migrants should be making an overwhelming positive economic contribution to justify their arrival. They do not have the same national bonds, historical and cultural, that are required for a just transfer of wealth. Yet far too many of the 2023 cohort do not make such a contribution.
Nearly between 55 and 60% of working migrants earn less than the OBR’s definition of a “low wage” (depending on which iteration of “25th percentile” one chooses to assess).
Over 50% of those earning less £26,200 come from just three countries: India, Nigeria, and Zimbabwe. A further 36% come from Ghana, Pakistan, Bangladesh, the Philippines, Sri Lanka, Kenya, Nepal, and South Africa.
These are all nationalities where the ratio of main applicant to dependent is over 1:1 (with the exception of the Philippines where it is 1:0.95).
In total the 121,715 who entered the UK on a salary of less than £26,200 will have brought with them roughly 185,000 dependents.
“Low wage” as £34,500
The previous Conservative government, looking to undo some of the damage its immigration policies had set in motion, raised the minimum salary threshold for skilled workers entering the UK to £38,700. This was done due to grave concerns that Britain was becoming a low-wage nation and reflected the findings of a 2018 report commissioned by the Migration Advisory Committee, which projected that a non-EEA migrant would only begin to “break even” in the UK when earning £38,000 due to them being “more likely to have dependent children and non-working adults in part because family migration is more important”.
But, even if we consider the 40th percentile of RQF3 jobs, which is well under the median at £34,500, the prospects of a positive fiscal contribution actually being made look remote.
In 2023, around 70% of main applicants arrived under this salary threshold and the breakdown of this cohort is overwhelmingly non-EEA: 54% came from India, Nigeria, and Zimbabwe. A further 35% came from Ghana, Pakistan, Bangladesh, the Philippines, Sri Lanka, Kenya and Nepal. Around 2% came from Western countries (EU member states of Five Eyes members).
All but one of the top twelve nationalities arriving under this threshold have a main applicant: dependent ratio of over 1:1, and the 165,000 main applicants brought with them roughly 240,000 dependents. A ratio of 1: 1.45.
Individuals associated with a salary of less than £34,500 accounted for over 77% of migrants on a work visa last year.
Further still, this does not account for the fact that non-Western migrants are disproportionately accounted for in UK birth rates, accounting for a sixth of all births in the UK and over two thirds of all migrant births. The Total Fertility Rate (TFR) for a non-UK born woman is 2.03.
We are not therefore only needing to consider the additional costs imposed by an additional dependent per two main applicants, who at best are likely to be in an even more lowly paid and/ or part-time position, but also the costs associated with providing services for this large birth rate. This is arguably why the Migration Advisory Committee’s own commissioned report set the “break even” threshold at £38,000 for an average non-EEA household, which, if we were to account for inflation would actually have risen to £47,000 in 2023 money.
The OBR has opened the door to a more thorough conversation on its newly introduced variable of “low wage migrants”, admitting for the first time that some migrants are a net cost on the economy. What it does not yet admit, although the inexorable logic of its own conclusions shall lead it there, is that the situation is actually far, far worse than it can currently fathom.