Influences on the Economy: Immigration

Immigration is simply the movement of people from one country into another host country. Whilst the benefits to the economy include contributions to the labour market and filling the gaps in necessary skills, the costs of increased housing and services have garnered lots of controversy.

In the first quarter of 2024, studies showed that foreign-born workers made up over a fifth of the working population. Given that around 60% of immigrants are working age, this therefore seems beneficial to the national workforce. The UK, for example, is suffering extreme job shortages:

    - Over 40,000 nursing vacancies 

    - Cybersecurity workforce shrunk by 65,000

    - Need for 700,000 new technicians

The influx of skilled workers may be able to fill the void, reducing pressures on companies and public services. This means that extreme cost-cutting measures, such as the significant lay-offs and redundancies, as well as stagnated wages, can be curbed. Productivity of organisations can improve whilst more citizens earn a disposable income. This subsequently leads to increased levels of taxation, which can strengthen government earnings and the overall economic trajectory. 

With regards to the UK, one major concern is the rapidly ageing population, which is set to increase by 10% over the coming decade. This means that the levels of productivity is set to decrease further, reducing economic output and GDP. Hence, the rise in the immigrant population could help prevent this decline by restabilising the workforce. 

Immigrants are also a major contributor to entrepreneurship: 39% of the UK's 100 fastest-growing start-ups have at least one immigrant co-founder, even though less than 15% of UK residents are foreign-born. Small to medium sized businesses contribute to over half the national economy, and lead to an increased level of GDP output and corporation tax earnings.

As more people enter the country, demand for basic necessities increases. The housing market is a very prominent example: since the immigrant population has risen from the late 1990s, house prices in the UK have risen by 20%. Whilst this may be beneficial to the overall cash flow of the economy, and raise earnings for those selling real estate, it has also led to a housing market crisis for buyers.

Britain has a backlog of 4.3 million homes, and therefore needs to build over 300,000 houses a year to deal with the influx of immigrants. This target has not yet been met, and has led to plans which involve damaging the Green Belt and countryside in order to construct new villages. Since these are government sponsored plans, taxation to regular citizens have therefore increased.

The increase in taxes are also as a result of the increase in asylum seekers and refugees, who require accommodation and basic supplies. It is also to help keep public services like the NHS afloat, as they experience severe pressure from an increased population demanding free healthcare. The overwhelming pressure on the NHS has led to waiting times increasing and cost-cutting being at the forefront of all objectives (through reducing staff, cutting pay and lowering the quality of overall care service). 

Finally, there is a challenge with social and cultural integration. A rise in both legal and illegal immigrants has led to civil unrest within communities, with enclaves forming around central parts of London, thus leading to less tolerance of other practices. This has been made apparent by the recent protests and riots across the country, but clear examples of conflict between different religions, races and world views have been prevalent on a small scale in nearly every community. Whilst some argue that it is the multiculturism that brings both harmony and benefits to the UK, the cost of damage due to riots and the cost of setting up features to cater to different cultures and practices have proven to be extremely high. Given that the cost of damage of the 2011 riots were about £133 million, the ongoing riots may end up exceeding this. 

The rise in illegal immigrants in particular has created a huge controversy, as citizens feel they are being charged more tax to fund the welfare of people who have not legally entered the country and are draining the country's resources. In fact, the economic burden on the British taxpayer of an illegal migration population of 1.2 million is £14.4 billion. More gravely, there is a huge concern surrounding the lawless behaviour of some refugees, which have resulted in stabbings, assault and an exponential rise in crime, which also diminishes economic strength.

Overall, immigration is one of the most significant factors influencing the economy today. Whilst the initial benefits of legal, working age migrants seems very attractive, the consequences of over-immigration and the rise in refugees entering through the borders may cause more harm than good both in the short and long term.