Forgetting the legality/illegality issues for a moment I have to say how much I appreciate the influx of Asian people into this country and in the future I will probably have the same view of the Eastern Europeans now coming in. I do not see them as a threat at all. They keep us more competitive than we would otherwise be and we can learn from them.
Many of them have a great work ethic ,are providing many entrepreneurs , work superbly as communities ,raising capital for business, and supporting their extended family and older people . What is not to like about any of that. Many of their values are similarly worth looking at for example would you like your children to be respectful ,appreciative ,work hard at school to cement their futures ,or would you rather have them over gratified ,under appreciative yobs who think the world owes them a living. These are deliberately exaggerated stereotypes ,but behind every stereotype there lies data that created the stereotype in the first place.
At my daughters private school do you where the bulk of the top achievers were ? Guess.
Well I feel better for that
Hi Chump,
I do agree with your post. I had the same impression for quite some time living in London. Not sure if it's the same outside of the big cities.
One other big issue with migrant workers is during times of growth like post war and more recently they are good for improving productivity and placing pressure on wage increases but in a down turn, things also can get a lot worse for all concerned. I think the hope is that the economy will find it's level and people will naturally leave or adjust.
The following article from Investors Chronicle details the case for and againts immigrant workers.
I've had to past the whole article as the link is in the paid subscription site. Apologies for the long post.
More migrants please!Created: 27 April 2007 Updated: 30 May 2007
Immigration is at a record high. Official figures, which are probably an understatement, show that, in the last two years for which we have numbers, 1.15m people came to live in the UK - more than offsetting the 739,000 that have left.
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But this is not the only record. Official figures also show that profit rates of non-oil companies at the end of 2006 hit their highest levels since current records began, and probably their highest since the early 1960s. Also, the misery index - the sum of the inflation and unemployment rates - will fall close to a 40-year low in the next few months, when last year's rises in utility bills fall out of the inflation measure. And real interest rates - the gap between base rates and inflation - are near a 26-year low.
All these records are connected. To see why, imagine there was no immigration, and you wanted to hire a plumber, but all plumbers were working flat out. What would happen?
The only way you could get a plumber would be to pay him enough to tempt him away from work he's already doing. This would cause inflation, as the prices charged by plumbers would rise. It would also mean that some valuable job would go undone, as the plumber moved from the lower-paying job to yours.
Now, consider what would happen if you could hire a Polish plumber. You wouldn't need to attract a British plumber away from his existing work, so plumbers' wages wouldn't rise. And there'd be more plumbing work done.
A country with immigration therefore has higher output and lower prices than a country without immigration.
What's more, because you don't have to pay more to get the job done, you've got more money to spend on other stuff. That creates work and profits for others. And because inflation doesn't rise, the Bank of England can keep interest rates down. That means low mortgage rates and hence higher consumer spending. Again, that creates work and profits.
Better still, low interest rates increase capital spending. That increases profits in the short run, and creates even more jobs in the long run.
This, however, is not the only reason that migrant workers are a good thing. Some complement existing workers, which means they can raise natives' wages directly. If an Albanian roofer joins a workforce, roofs are put on houses more quickly, so plasterers and electricians don't have to wait to start work. So they get more done and earn more. If a French anaesthetist joins us, surgeons can get more work done. And if an Italian IT expert arrives, lawyers can get more work done because they spend less time cussing their computers. In such cases, supply and demand both grow. Again, profits are higher, without causing inflation.
There is, of course, a third situation: immigrants may directly compete with native workers. If so, the latter suffer either lower wages or job losses. But, even in this case, the losses are only temporary. Lower wages mean lower prices. That means consumers have more to spend on other things. If, say, cleaners' wages fall as a result of competition from immigrants, their clients have more money to spend on other things - say, DIY equipment. As they spend this money, jobs are created in DIY stores. And lower prices mean lower interest rates. That raises investment, and hence jobs, in the long run.
The effect of immigration on native jobs
So, which of these outcomes is truest? Sure, there's anecdotal evidence for our third situation. But, although anecdotes are good journalism, they're a lousy basis for thinking about the world. A survey by Simonetta Longhi at the University of Essex has concluded that the effect of immigration upon native jobs was "negligibly small" (see
www.tinbergen.nl/scripts/papers.pl?paper=06050.rdf). On average, a one-percentage-point rise in the proportion of immigrants in the labourforce cuts native jobs by 0.024 per cent.
Indeed, even a flood of migrants doesn't displace native workers. Philippe Legrain, author of Immigrants: your country needs them, points to Israeli experience. After the collapse of communism, Russian jews fled to Israel, swelling the working-age population by 15 per cent between 1990 and 1997. During this time, unemployment among native Israelis fell.
Instead, it seems to be our first two outcomes that are the true ones. Christian Dustmann of University College London has studied the impact of immigrant workers on native British ones and concluded that "there is little evidence of overall adverse effects of immigration" (
www.ucl.ac.uk/~uctpb21/Cpapers/ecoj_1038.pdf). If anything, he says, effects on wages are "positive but statistically poorly determined".
International evidence corroborates this. In a study of immigration into the US between 1990 and 2004 , Giovanni Peri of the University of California at Davis (
www.econ.ucdavis.edu/faculty/gperi/Papers/ perott_august_2006.pdf) concludes: "Average wages of natives benefit from immigration."
Indeed, not even MigrationWatch, the pressure group campaigning for "moderate and managed" immigration, claims that natives suffer economically from immigration. In a recent report (
www.migrationwatchuk.org/pdfs/economic/1_16_Impact_of_imm_on_GDP_per_head.pdf), it said the impact of immigration on GDP per person was "minimal". Not negative, just minimal. And this ignores the long-term benefits of lower inflation and interest rates and higher capital formation.
So, immigration is a good thing. It increases output, profits and employment, and helps keep down inflation and interest rates. Monetary policy committee member David Blanchflower says: "Most people would probably agree that extra immigrant workers in the economy would raise supply potential."
Even immigration minister Liam Byrne has spotted this. "Our long boom without inflation would have been impossible without migration," he said recently.
All that's happening here is yet another manifestation of Adam Smith's famous invisible hand. The free decisions of rational people help make everyone better off. Let's put this another way. Many of our clothes are now made in the Far East where wages are low. Most of us regard this as a wholly good thing. Only a cretin or a European Commissioner - the two are hard to distinguish - would propose banning such imports. But such a ban is, economically speaking, the same as a ban on immigration. In both cases, we stop labour entering the country. It's just that, in one case, the labour is embodied in a T-shirt, and in the other it's embodied in a person.
Here's Philippe Legrain again: "The economic benefits of immigration are analogous to those of international trade. In effect, immigration allows rich countries to import low-cost, low-skill labour-intensive services from poor countries. By doing so, we reduce the costs of such services, which allows more people to benefit from them."
Restricting immigration is just like restricting imports - a way of making us poorer.
So why the scepticism?
All of this raises the question: why, if it's so clear that immigration is good for jobs, do so many people think otherwise?
There are numerous cognitive biases at work. One is a simple fallacy: the lump of labour error. This is the idea that there's only a fixed among of work to do, so that if foreigners (or machines) do it, there'll be fewer jobs for the rest of us. But this, as centuries of growth in wealth and population proves, is just plain wrong in the long run.
There's also the status quo bias: we prefer things as they are and distrust change and unfamiliarity. And there's an adverse halo effect: because immigration creates problems in some areas - overcrowding on public transport, the breakdown of older communities - we assume it must be a problem in all respects. But it isn't necessarily so.
There are, however, a couple of more legitimate reasons for scepticism about the economic benefits of immigration. First, some types of worker do see wages fall as a result of competition from immigrants. Professor Peri estimates that wages of unskilled Americans have fallen as a result of immigration. And Dr Dustmann estimates that UK-born workers with middling qualifications have suffered a fall in employment.
Both agree, however, that the gains to other, higher-skilled, native workers are greater than these losses.
Secondly, Pia Orrenius of the Federal Reserve Bank of Dallas has found that the longer immigrants stay in the US, the greater the downward effect they have on the wages of unskilled natives (
http://ftp.iza.org/dp2481.pdf). This is because long-stay immigrants become more like native Americans, and so become closer substitutes. This suggests a delightful trade-off: immigrants who are well integrated into native society do more damage to natives' wages than those who remain separate. That's not something you hear from those who call upon immigrants to become better integrated into British society.
Why should investors care about the minority of workers who do lose?
Backlash. That's why. Political pressure to compensate these losers might lead to higher taxes or to tougher restrictions on immigration, either of which would hurt profits.
Here, though, lies what is - from the point of view of people like us - another great benefit of immigration. It actually reduces demand for income distribution.
There's lots of academic research to support this. Yale University's John Roemer has estimated that American voters' racism has reduced income-tax rates by around 15 percentage points (
http://pantheon.yale.edu/~jer39/R&R.Lee&roemer. 1.04.pdf). Chicago University's Enzo Luttmer says (
www.nber.org/~luttmer/loyalty.pdf): "Welfare benefit levels are relatively low in racially heterogenous states." Just compare Scandinavia or Japan or South Korea to the US or Brazil.
The mechanism here is simple. If people think income and redistribution will benefit a different ethnic group, they'll oppose it. As Harvard University's Alberto Alesina says (
www.economics.harvard. edu/hier/2001papers/HIER1933.pdf): "Racial animosity in the US makes redistribution to the poor, who are disproportionately black, unappealing to many voters."
This is depressing for anyone with a rosy view of human nature. But it's good news for investors: it helps keep taxes down.
There are a couple of other ways in which investors should, in principle, benefit from free immigration.
First, it should increase the incentives for native-born workers to become more skilled. No-one, after all, wants to be so poor that they have to live in the worst areas, or so badly trained that their job can be better done by an immigrant. Immigration, then, acts as a boot up the backside.
Also, it must be remembered that the case for free immigration is primarily one of liberty. Employers should be free to hire whom they want, landlords to have the tenants they want, and workers to take the jobs they want.
If a government doesn't respect these basic liberties, isn't it also likely to violate investors' freedoms too? Wouldn't you, as an investor, feel safer under a government that promoted economic freedom rather than restricted it? Economic research suggests you should. Marshall Stocker of US fund management company Sanderson and Stocker estimates that countries enjoying rising economic liberty also see better stock-market performance (
www.cato.org/pubs/journal/cj25n3/cj25n3-14.pdf). "Cross country equity returns are directly related to increases in economic freedom," he says. And freedom to move jobs is a basic economic freedom.
So, it's clear that free immigration is a good thing for the economy and stock market.
This doesn't, of course, mean immigration is wholly good. Perhaps immigration reduces social cohesion. Australians give us earache about the failings of our cricket team and Portuguese win our football trophies.
These are all heavy burdens. But let's be clear - the economic effects of immigration are almost wholly beneficial.
So, below, we debunk some of the most common myths about immigration.
MYTH: "WE NEED TO CONTROL IMMIGRATION"
Everyone agrees that immigration should be controlled. But it doesn't follow at all that it should be managed by the state, which does such a fantastic job of managing our schools and hospitals.
Instead, immigration can be managed by the market. There are numerous ways in which a free market limits migration. Most people don't want to migrate anyway. The World Bank (www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2006/09/13/000112742_20060913111024/Rendered/PDF/359990DR0complete.pdf) recently surveyed 15-24 year-olds in some of the poorest countries, asking: "If it were possible for you legally to move to another country to work, would you?" Only 3 per cent of Bangladeshis said they'd move permanently. Only 7 per cent of Ethiopian men said they would. And even in Iraq only 21 per cent of men and 16 per cent of women said they would.
Employers prefer native workers, all else equal. It's cheaper to advertise locally than in Poland. It's easier to check natives' references and qualifications. And many employers prefer English speakers.
As western companies invest in poorer countries, and as these get richer, job opportunities there will improve, reducing people's need to migrate. As Poland and the Ukraine build football stadia in preparation for the Euro 2012 tournament, demand for builders will divert Poles away from the UK.
The UK's economic boom, which has sucked in migrant workers, could end. As it does, Polish plumbers and Albanian plasterers will go home. Why - given that the market manages most things better than the state - should these mechanisms work less well than government meddling?
MYTH: "IMMIGRANTS DEPRESS DEMAND BY SENDING MONEY HOME"
Last year, migrants sent a mere £669m home - just 0.05 per cent of GDP. If we add in all transfers overseas by households, plus wages paid to overseas workers, remittances become more substantial. In 2005 - the latest year available - they were £6.3bn. But even this is only 0.5 per cent of GDP - less than the UK handed over to the European Union. And so what if migrant workers add more to UK supply than to demand? The MPC's David Blanchflower says this has reduced inflationary pressure (
www.bankofengland.co.uk/publications/speeches/2007/speech297.pdf). That means interest rates have been lower than they would otherwise have been.
MYTH: "EVERYONE WINS FROM IMMIGRATION"
The fact that immigration leads to higher wages and employment generally does not mean every single person gains. A minority of native workers do compete for jobs with immigrants. These suffer lower wages and worse job prospects.
But this, in itself, is no case for restricting immigration.
For one thing, these losses are offset by gains for others. This suggests that - in theory - it's possible for winners from immigration (those who can employ plumbers they previously couldn't or firms who benefit from lower wages) to compensate the losers. Immigration is, then, what economists call a potential Pareto improvement. That this is not converted into an actual Pareto improvement reveals a fault not with immigrants but with our institutions for pooling economic risk. Also, the lower wages caused by immigration should be merely temporary. Lower wages mean lower prices and lower interest rates and hence, in the long run, higher output and employment.
Remember, though, that almost all economic progress creates some losers - it's what the Austrian economist Joseph Schumpeter called creative destruction. For example, the invention of the car was a great thing - but it was disastrous for saddlers and ostlers. It was no case for banning cars, though. The great 19th century French economist Frederic Bastiat pointed out the stupidity of protecting natives from competition. Why not, he said, shutter up all windows so that candle-makers wouldn't have to face unfair cheap competition from the sun (
http://bastiat.org/en/petition.html)!
Do-it-for-me replaces diy
The Polish builder is rapidly becoming as British an institution as chicken tikka masala. And the arrival of the Pole with the scaffolding pole has coincided with the decline of the UK DIY boom.
Several years ago, UK homeowners were busy nailing away to the sound of 'If I had a Hammer', sung by 'Handy' Andy Kane from the iconic television programme Changing Rooms. But the curtain was finally brought down on Changing Rooms (which, at the height of its popularity, regularly attracted 10m UK viewers) in 2004. 'House' music today is played to a more Slavic tune, as Polish workers offer to do the kind of building and decorating tasks we no longer want to undertake. And the fact that they do so at relatively low cost makes their services even more attractive to UK homeowners. Significantly, however, they are also benefiting home-improvements retailers, as lower labour costs leave more in consumers' coffers for spending on such things as kitchen and bathroom ranges.
Consider Kingfisher, owner of the B&Q retail chain. Ian Cheshire, chief executive of B&Q, says the chain is in the process of converting from 'DIY shed' to 'home-improvements' retailer. He stresses that, while the DIY market has been 'flat', the DFM ('do it for me') market has been robust and represents continuing growth opportunities for Kingfisher. Furthermore, Mr Cheshire says that many of B&Q's items are now advertised in Polish, in order to grab the attention of the builders who are actually buying the products.
In fact, Mr Cheshire is now seeking to grow the trade side of the business. And he believes the DFM market, allied to the successful trial of a new store format, can help drive a 25 per cent improvement in sales productivity from existing larger stores.
In a similar vein, home improvements retailer Homebase, owned by the Home Retail Group (which also owns Argos), also looks set to benefit from the migration of Polish workers. However, Homebase represents just 35 per cent of Home Retail's total sales, so the upside potential for the group from immigration is more limited.
This limitation does not, however, apply to Galiform, which owns builders merchants Howdens and is already benefiting from the DFM trend. Galiform specialises particularly in kitchens. It currently operates from 360 depots, but management plans to increase this by around 60 depots in 2007 and by around 40 depots a year thereafter. More significantly, though, underlying sales in 2006 rose by a stunning 5.9 per cent, backing up the widespread view that DFM is a good place to be right now.
The arrival of the Polish builder, then, seems to offer a win-win situation for consumers, specialist retailers and the workers themselves. The builders benefit from the boost to their earnings from working in the UK. Consumers benefit from the fact that they offer relatively low labour costs. And home-improvements retailers are boosted by the fact that there is more money left in consumers' wallets to spend on their products.
Shunil Roy-Chaudhuri