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Showing posts with label immigration. Show all posts
Showing posts with label immigration. Show all posts

Tuesday 18 July 2023

A Level Economics 24: Migration and Labour Markets

Migration can have significant impacts on labor markets, both in the origin and destination countries. Here are some key effects of migration on labor markets:

  1. Labor Supply:


    • Increase in Available Workers: Migration can increase the overall labor supply in destination countries. Migrant workers bring additional skills, qualifications, and labor resources that can fill gaps in specific sectors or occupations facing labor shortages.

    • Impact on Wages: The increase in labor supply due to migration can affect wages, particularly in sectors with a high concentration of migrant workers. If the labor supply increases more rapidly than the demand for labor, it can put downward pressure on wages in those sectors.

    • Complementarity and Substitutability: Migrant workers may possess skills and qualifications that complement the existing workforce, leading to improved productivity and specialization. Conversely, they may also be seen as substitutes for native workers in certain occupations, leading to increased competition for jobs.

  2. Labor Demand:


    • Fill Skill and Labor Gaps: Migration can help address skill and labor shortages in certain industries or occupations. Migrant workers can contribute to meeting the demand for labor in sectors where there is a lack of local workers with the required skills or willingness to work in those roles.

    • Sectoral Effects: Migration patterns can influence the composition of labor demand in different sectors. For example, sectors such as construction, agriculture, and healthcare often rely on migrant labor to meet seasonal or specific industry demands.

    • Entrepreneurship and Innovation: Migrant workers may bring entrepreneurial skills, innovative ideas, and cultural diversity to the labor market, contributing to economic growth and fostering business development.

  3. Wage Differentials and Remittances:


    • Wage Differentials: Migration can contribute to reducing wage differentials between origin and destination countries. Migrant workers often earn higher wages in destination countries compared to what they would have earned in their home countries, which can help bridge income gaps and improve living standards.

    • Remittances: Migrant workers frequently send remittances, which are monetary transfers sent back to their home countries. Remittances can have positive effects on the labor markets of origin countries by increasing household incomes, stimulating local consumption, and potentially supporting investment in education, housing, or small businesses.

  4. Skill Drain and Brain Gain:


    • Skill Drain: The emigration of highly skilled workers from origin countries, often referred to as brain drain, can lead to skill shortages and loss of human capital in those countries. This can negatively impact labor markets and hinder economic development in the origin countries.

    • Brain Gain: On the other hand, migration can also result in brain gain for destination countries. Highly skilled migrants can contribute their expertise, knowledge, and innovation to local industries, research institutions, and the overall economy, leading to positive labor market outcomes.

It's important to note that the impacts of migration on labor markets can vary depending on factors such as the scale and composition of migration, labor market institutions, policy frameworks, and the social and economic context of both origin and destination countries. Careful management and policies that consider the needs and challenges of both native and migrant workers are essential to harness the potential benefits of migration while addressing any associated concerns or disruptions in labor markets. 

Saturday 17 June 2023

A Level Economics Essay 16: Immigration and Labour Markets

Evaluate the impacts of an increase in immigration on labour markets. 

An increase in immigration can have various impacts on labor markets. Here's an evaluation of the potential effects:

  1. Increased labor supply: Immigration results in an increase in the number of workers available in the labor market. This can lead to a larger labor supply, which may affect wages and employment levels.

Positive impact:

  • Greater labor supply can address labor shortages in certain industries or regions.
  • Increased competition for jobs may lead to greater efficiency and productivity as firms have access to a larger pool of skilled workers.

Negative impact:

  • In sectors where immigrants are concentrated, increased labor supply may lead to downward pressure on wages, particularly for low-skilled jobs.
  • If there is a mismatch between the skills of immigrants and the demand in the labor market, it can result in unemployment or underemployment.
  1. Skill complementarity and specialization: Immigrants often bring unique skills and knowledge to the labor market, complementing the skills of the domestic workforce. This can contribute to specialization and increased productivity.

Positive impact:

  • Immigrants with specialized skills can fill gaps in the labor market, especially in sectors that face skill shortages.
  • Diversity in skills and perspectives can stimulate innovation and entrepreneurship.

Negative impact:

  • If there is a significant wage differential between skilled and unskilled immigrant workers, it can create income inequalities within the labor market.
  1. Impact on native workers: The presence of immigrant workers can have both positive and negative effects on native workers.

Positive impact:

  • Immigrant labor can fill positions that native workers may not be interested in, allowing native workers to pursue higher-skilled or higher-paying jobs.
  • Immigrant entrepreneurs can create new businesses and job opportunities for native workers.

Negative impact:

  • In certain cases, native workers may face increased competition for jobs, especially in sectors where immigrants are overrepresented.
  • Native workers with lower skills or education levels may experience wage pressures or displacement.
  1. Fiscal impact: Immigration can have fiscal implications, as immigrants contribute to tax revenues while also utilizing public services and welfare benefits.

Positive impact:

  • Immigrants can contribute to economic growth and tax revenues through their participation in the labor market.
  • Younger immigrants can help support an aging population and alleviate the burden on social security systems.

Negative impact:

  • If immigrants have limited access to social benefits or face barriers to employment, there may be a strain on public services without commensurate contributions.

Overall, the impacts of increased immigration on labor markets are complex and multifaceted. They depend on factors such as the skills and qualifications of immigrants, the structure of the labor market, and the existing economic conditions. Policy interventions, such as ensuring appropriate skill matching, promoting integration programs, and addressing wage differentials, can help maximize the positive impacts and mitigate potential negative effects on labor markets. 

A Level Economics Essay 15: Productivity and PPF

 "UK IMMIGRATION CONTINUES TO RISE" - Using diagrams explain, in each case, how changes in population and agricultural productivity may affect an economy’s production possibility frontier.

Production Possibility Frontier (PPF) represents the boundary or curve that shows the maximum potential production combinations of two goods an economy can achieve, given its available resources and technology. It illustrates the trade-off between producing different goods or services.

Productivity refers to the efficiency with which inputs, such as labor and capital, are utilized in the production process to generate output. It measures the amount of output produced per unit of input. Higher productivity means more output can be produced with the same amount of resources or the same level of output can be achieved with fewer resources.

  1. Changes in Population: When there is a change in population, particularly an increase, it can have an impact on an economy's PPF. Let's assume that the population of an economy increases, meaning there are more people available to participate in economic activities.

Diagram:

  • Horizontal axis: Quantity of consumer goods
  • Vertical axis: Quantity of capital goods

Initially, we have a PPF curve that represents the economy's production capacity based on the existing population. However, with an increase in population, the available labor force also increases. This can lead to a shift in the PPF curve outward, indicating an expansion of the economy's production capacity.

The outward shift of the PPF curve signifies that the economy can now produce more goods and services, both consumer goods and capital goods, due to the increased availability of labor. This can result in higher output levels and an expansion of the economy.

  1. Changes in Agricultural Productivity: A change in agricultural productivity can also impact an economy's PPF. Let's assume there is an improvement in agricultural techniques or technological advancements that increase the productivity of the agricultural sector.

Diagram:

  • Horizontal axis: Quantity of consumer goods
  • Vertical axis: Quantity of agricultural goods

Initially, the PPF curve represents the trade-off between producing consumer goods and agricultural goods, based on existing levels of productivity. However, if there is an increase in agricultural productivity, the economy can produce more agricultural goods using the same amount of resources.

As a result, the PPF curve shifts outward, indicating an expansion of the economy's production possibilities. The economy can now allocate more resources to the production of consumer goods without sacrificing the production of agricultural goods. This can lead to higher output levels and improved living standards.

It's important to note that the diagrams presented here simplify the relationship between changes in population, agricultural productivity, and the PPF. In reality, the impact of these factors can be more complex, as there are other variables at play, such as technology, resource availability, and the overall efficiency of resource allocation. Nonetheless, the diagrams help illustrate how changes in population and agricultural productivity can influence an economy's production possibility frontier.

Monday 20 June 2022

BREXIT - The Great Taboo in British Politics

George Parker and Chris Giles in The FT






As he battled to save his job this month, Boris Johnson warned his MPs not get into “some hellish, Groundhog Day debate about the merits of belonging to the single market”. Brexit, he warned his mutinous party in a sweaty House of Commons meeting room, was settled. 

Later that day, Johnson limped to victory in a confidence vote, but only after 41 per cent of his MPs had voted to oust him from Downing Street. He is safe for now but the defining project of his premiership — Brexit — still hangs like a cloud over Britain’s fragile economy. 

Johnson may not want his party “relitigating” Brexit but neither does Sir Keir Starmer, leader of the opposition Labour party, around a third of whose supporters voted Leave in the 2016 referendum. Nor does Andrew Bailey, governor of the Bank of England. Rishi Sunak, the chancellor, would rather talk about something else. Brexit has become the great British taboo. 

But as the sixth anniversary of the UK’s vote to leave the EU approaches, economists are starting to quantify the damage caused by the erection of trade barriers with its biggest market, separating the “Brexit effect” from the damage caused by the Covid-19 pandemic. They conclude that the damage is real and it is not over yet. 

The UK is lagging behind the rest of the G7 in terms of trade recovery after the pandemic; business investment, seen by Johnson and Sunak as the panacea to a poor growth rate, trails other industrialised countries, in spite of lavish Treasury tax breaks to try to drive it up. Next year, according to the OECD think-tank, the UK will have the lowest growth in the G20, apart from sanctioned Russia. 

The Office for Budget Responsibility, the official British forecaster, has seen no reason to change its prediction, first made in March 2020, that Brexit would ultimately reduce productivity and UK gross domestic product by 4 per cent compared with a world where the country remained inside the EU. It says that a little over half of that damage has yet to occur. 

That level of decline, worth about £100bn a year in lost output, would result in lost revenues for the Treasury of roughly £40bn a year. That is £40bn that might have been available to the beleaguered Johnson for the radical tax cuts demanded by the Tory right — the equivalent of 6p off the 20p in the pound basic rate of income tax. 

Despite these sobering figures, Johnson’s complaints about the prospect of “relitigating” Brexit was exaggerated, intended to portray himself as the victim of a putative plot by pro-Remain MPs. In fact, British politicians — and the wider country — are still traumatised by the bitter Brexit saga, and deeply unwilling to revisit it. 

Still, this month has seen the first stirrings of a debate that until now has been buried as the evidence of Brexit-induced economic self-harm starts to pile up. Few are talking about reversing Brexit altogether, but another question is being asked: should the UK start to explore with Brussels ways of softening its edges? 

Show, don’t tell 

Downing Street insisted this week it was “too early to pass judgment” on whether Brexit was having a negative impact on the economy, which could be heading into a recession. “The opportunities Brexit provides will be a boon to the UK economy in the long run,” Johnson’s spokesman said. 

Both Johnson and Sunak insist that it is hard at this stage to separate Brexit’s economic impact from the shock of Covid. In the meantime, the prime minister promotes the “benefits of Brexit”, such as new trade agreements with Australia and New Zealand and the freedom for the UK to set its own rules. 

Sunak has promised a reform of rules in the City of London, including reforming the EU’s Solvency II rules to allow insurers to spend more money on infrastructure projects. He has announced eight new freeports with special tax privileges. 

But economists have not yet been able to find any significant positive impacts of these policies. Some, including Johnson’s patriotic promise to put a “crown stamp” on pint glasses in pubs and to allow traders to sell their wares in pounds and ounces, are primarily symbolic. 

Critics of government Brexit policy are routinely derided. Suella Braverman, attorney-general, last week accused the ITV presenter Robert Peston of “Remainiac make-believe” after he challenged her over the government’s unilateral plan to rip up the Brexit treaty relating to Northern Ireland. Braverman claimed the so-called Northern Ireland protocol had left the region “lagging behind the rest of the UK”. In fact, Northern Ireland (the only area of the UK to remain in the EU’s single market for goods) is the best performing part of the country, apart from London. 

When Bailey appeared before the House of Commons treasury committee in mid May, the BoE governor acknowledged that his predecessor Mark Carney had made himself “unpopular” for saying Brexit would have a negative effect on trade, but that the bank held to that view. 

Kevin Hollinrake, a Tory member of the committee, says Bailey was trying to avoid becoming a political target and was “deliberately avoiding” talking about Brexit. “It’s a singular issue for the UK,” the MP says. “We have changed our immigration rules. It’s about non-tariff barriers. You’ve got to be willing to look at what’s happening on the ground.” 

While some gloomy predictions have failed to materialise, such as former chancellor George Osborne’s 2016 warning of a recession immediately after a Leave vote, there is growing evidence that Brexit is causing more lasting damage to UK economic prospects. 

Ministers are becoming more reluctant to proclaim the economic upsides of Brexit. Kwasi Kwarteng, business secretary, was asked last week at the FT Global Boardroom to list some Brexit benefits. He focused on the UK’s ability to respond swiftly to Russian aggression in Ukraine — “it has substantial benefits particularly in international policy” — rather than on business. Sunak’s allies say the chancellor’s approach is to “show, not tell” on Brexit, pushing through City regulatory reforms rather than giving boosterish speeches on its economic merits. 

The fallout in data 

The first and most obvious economic blow delivered by Brexit came when sterling fell almost 10 per cent after the referendum in June 2016, against currencies that match the UK’s pattern of imports. It did not recover. This sharp depreciation was not followed by a boom in exports as UK goods and services became cheaper on global markets, but it did raise the price of imports and pushed up inflation. 

By June 2018, a team of academic economists at the Centre for Economic Policy Research calculated that there had been a Brexit inflation effect, raising consumer prices by 2.9 per cent, with no corresponding increase in wages. 

Some households, such as those relying on state pensions, were compensated in higher benefits, but the CEPR team found no overall offset with higher incomes. “The Brexit vote delivered a swift negative shock to UK living standards,” they wrote. 

While the UK was still in the EU and during the Brexit “transition phase”, there were no significant effects on trade flows. But this has changed since stricter border controls were introduced at the start of 2021, imposing no tariffs, but significant checks and controls at the formerly frictionless border. 

Economists have used this point in time to contrast how the UK’s trade performance compares with those of other countries before and after the TCA’s imposition. The results have been increasingly ugly, especially for small companies trading with Europe. 

Red tape caused a “steep decline” in the number of trading relationships after January 2021, according to a study by the Centre for Economic Performance at the London School of Economics. The number of buyer-seller relationships fell by almost one-third, it found. 

The same group found food prices had risen as a result of Brexit. Comparing the prices of imported food such as pork, tomatoes and jam, which predominantly came from the EU, with those that came from further afield such as tuna and pineapples, it found a substantial Brexit effect. “Brexit increased average food prices by about 6 per cent over 2020 and 2021,” according to the research. 

Summing up the effects on trade in which imports from the EU have fallen while exports have not risen, Adam Posen, head of the Peterson Institute of International Economics, says “everybody else sees a recovery in trade following Covid and the UK sits flat”. 

The third visible effect of Brexit on the UK economy has been in discouraging business investment. In the first quarter of 2022, real business investment was 9.4 per cent lower than in the second quarter of 2016. That fall was mostly due to Covid, but it had flatlined since the referendum, ending a period of growth since 2010 and falling well short of the performance of other G7 countries. 

Weak investment is a particular worry for Sunak, who sees business investment as the route to greater prosperity. Before departing the BoE in 2020, Carney told a House of Lords Committee that Brexit uncertainty was holding back business investment. Worse, he said, business planning for various Brexit scenarios was taking up a lot of management effort. “Time spent on contingency planning is time not spent on strategic initiatives,” he said. 

Since then, negative perceptions of the UK have continued among business with the chancellor finding he had little bang for his £25bn buck of super deductions in corporation tax to encourage capital spending. As Bailey told MPs last month, the super-deductor was “not at the moment having the impact that was expected”. 

Complaints about high immigration was one of the most contentious issues of the referendum, with a central promise of the Brexit campaign being tougher controls over the number of people entering the country. While net immigration from EU countries has stopped, with effectively no change apparent in the two years to the end of June 2021, net immigration from non EU countries has remained high, with 250,000 in the latest year. 

Collateral damage 

There is, as yet, little appetite among Britain’s political leaders for a return to the EU — even if the other 27 member states were prepared to open the door. Even the pro-EU Liberal Democrats admit reversing course is a long-term aspiration, rather than an immediate goal. 

As part of his attempt to avert a coup, Johnson wrote to MPs this month that he had “created a new and friendly relationship with the EU”. The opposite is true. Brussels restarted legal action against the UK this week over the Northern Ireland protocol: relations are at rock bottom. 

The EU has warned that British scientists will be excluded from the €95bn Horizon research programme as “collateral damage” in the row about Northern Ireland. The prospect of any kind of rapprochement at the moment, at least while Johnson remains prime minister, seems remote. 

But in recent weeks, a tentative debate has started over whether the UK would be better off trying to reach accommodations with the EU to smooth trade in some areas, rather than launching a new front in the Brexit war with unilateral action over Northern Ireland. 

In an article much-discussed at Westminster, the pro-Leave Times columnist Iain Martin wrote this month: “To deny the downsides of Brexit on trade with the EU is to deny reality.” 

Tobias Ellwood, a former Tory defence minister, suggested Britain should rejoin the EU single market to soften the cost of living crisis, and said there was “an appetite” for a rethink and claimed polling indicated “this is not the Brexit most people imagined”. And Daniel Hannan, a leading Tory Brexiter, repeated his longstanding view that Britain should have stayed in the single market under a Norway-style relationship with the EU, while adding that to rejoin it now “would be madness”. 

Anna McMorrin, Labour shadow minister, was recorded telling activists: “I hope eventually that we will get back into the single market and customs union.” She was forced to apologise by Starmer: such talk remains dangerous in political circles. 

Even so, a Starmer-led future Labour government would change UK relations with the EU. The party’s mantra has become “make Brexit work”: rejoining the single market may be off the agenda, but Labour wants to find ways to improve on the bare-bones tariff-free trade agreement Johnson negotiated with the EU. 

Rachel Reeves, the shadow chancellor, told the Financial Times last year that Labour wanted to strike a deal with the EU to reduce the most onerous paperwork and checks on food exports. The party also wants an agreement with Brussels on the mutual recognition of professional qualifications. 

Even among the Eurosceptics in Johnson’s cabinet, there is now an acceptance that the UK should be seeking to rebuild economic relations with the EU, including in areas like the Horizon programme, to avoid exacerbating the looming cost of living crisis. 

“Would I like to be in a better place on Brexit?” asked one pro-Brexit cabinet member. “Yes, absolutely. But we’ve got to find a way of doing it without it looking like we’re running up the white flag and we’re compromising on sovereignty.”