Since the beginning of the millennium, the UK has experienced a steady flow of net migrants into their economy. Independent of political views, there is evidence of some positive impacts of these new inhabitants in the UK economy. According to this article, nearly 50% of people asked believe that immigration has had a positive impact on the UK. Although it may not seem like much, that is up nearly 30% from 2011. Of those that are migrating into the UK, roughly 43% of them have university degrees compared to only 21% of British adult population. Professor Rob Ford, who researches immigration trends at the University of Manchester, states several reasons as to why he believes people are favoring immigration: the Brexit vote itself may have led to some people believing that the immigration issue has been dealt with and in the political environment, those who oppose U.S. President Donald Trump.
Now, since I am looking at the long-run model, all factors are mobile between industries, that is, labor and capital. This means that labor will go to labor-intensive industries while capital goes to capital-intensive industries. This ensures that neither industry gets an upper hand on the other because in the long-run model, the capital to labor ratio is equal. The labor skill of those who migrate into a country have the potential to drive down wages. Low-labor migrants can cause a flood of labor which causes wages to go down. However, for the UK, 43% of those migrating in have a university degree. This will cause an increase in competition and therefore neutralize any negative effect on wage. The increased labor pushes a countries PPF out and allows for more demand. In this graph, it is shown that demand is increased which will not have a negative impact on wage. Immigration also has a positive impact on returns to land and capital depending on where it goes to. With more workers, owners of land and capital benefit because of the marginal production these workers add.
In conclusion, independent of politics, immigration in the long run can be very beneficial for a nation. Although at first it may lower wages, the net gain is greater than any loss that occurs. It raises a countries PPF and increases the returns to land and capital.
I agree with the facts you brought up about the long-run model, that being the labor will go to labor-intensive industries and the capital will go to capital-intensive industries. Then creating balance making the capital to labor ratio in equilibrium. Immigration can be very beneficial for an economy to grow with a possibility of having an abundant of high-skilled workers and job expansion.
ReplyDeleteI very much like and agree with this blog post regarding immigration on the UK. Being from the UK I can understand the political viewpoint but the facts do not lie, as you said 43% have university degrees and a lot of the jobs that immigrants take are within the national health service, which is crucial to the UK. This gives the UK a more skilled labor force which does not have a negative impact on wage.
ReplyDeleteI agree with your concluding statement, however, I don't think an increase in competition for high-skilled jobs (due to the higher-education) will cause wage neutralization; my preposition is that wages decrease because of increased labor supply, i.e., competition. The wage neutralization will happen in the long-run and I would attribute this to the reaction of competition via lower levels of productivity. In the short-run as migrants flow in, there'll be more supply, which will lower the wage. The wage is lowered due to the MPL decreasing. The wage rises again because producers have to cover the cost of less products being produced with the same amount of labor; this drives the cost of the product up and then there is a corresponding wage increase (which can be seen as an inflation of wages).
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