THE BAD ECONOMICS OF MASS IMMIGRATION. On the whole, business leaders tend to support an open door immigration policy, which helps address skills shortages in key industries. But, more particularly, it also puts downward pressure on wage costs. The effect is similar to having permanently high levels of unemployment, since it creates an inexhaustible supply of cheap labour. This may or may not be good for corporate profits but it is certainly not good either for productivity or for living standards among low and middle income earners. By making labour cheap, it removes a powerful incentive to productivity gain. To see why this is the case, look at what’s happened since the crisis began six years ago. During this period, many private sector jobs have been created, a remarkable achievement given the collapse in output. This has helped keep unemployment lower than it would otherwise be, which is plainly to be applauded, but it has come at the expense of real incomes. Much of the job creation has been in low-income or part-time employment. Real incomes have experienced their worst squeeze since the 1920s. Yet this is not just a recent phenomenon. The squeeze on real incomes, particularly at the lower end of the scale, pre-dates the crisis. Foreign competition, both in the form of immigration and imported goods and services, has been a big constraint on wage growth. This, in turn, has limited the incentive for efficiency gain. Cheap labour has become a substitute for investment in plant, machinery, training and research and development. While income per head is becoming progressively becalmed. Ireland is an open economy that certainly needs to be in the market for top international talent. Yet high levels of low-end immigration have been, at best, a zero sum game and, by holding back necessary investment in the future, possibly quite a negative economic influence. No free market liberal would argue the case for preventing employers from hiring foreign labour but there are other forms of state intervention that might indeed be appropriate were it not for the fact that the European Union makes them unlawful – for instance, imposing levies on use of cheap foreign labour. By making low skill employment more expensive, the levy system would provide a powerful incentive for productivity gain in construction, retail, social care and other largely domestically bound industries. These levies could then be channelled back into tax incentives for training and other forms of business investment. Relying on population growth, and the falling unit labour costs it brings about, to stay competitive is a road to nowhere. The Juncker curse (after the Luxembourg prime minister) has it that Western politicians know what needs to be done, they just don’t know how to get re-elected after doing it. Immigrant workers end up costing the State nearly two billions in social welfare alone every year, they cost another two billions in Health, Education and Housing, Policing and Prisons too. Thats four billions a year and forty billions plus that mass immigration has cost Ireland so far, and that we borrowed in the Bail Out to pay for. We doubt if such a level can be sustained without another crash. Do we want people like the National Front types taunting, we told you so. None of their solutions like mass deportation are necessary but a downscaling of the huge welfare payments to many immigrants, and especially the abolition of rent allowances to all but citizens and natives of the country is necessary now.
Posted on: Fri, 28 Mar 2014 13:48:00 +0000
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