Growth is welcome but real per capita growth would be better
Nigel Williams, 2 January 2014
The seven-year transitional arrangements have passed. EU rules now permit Romanian and Bulgarian nationals to enter the UK on similar terms to other EU countries. Growth may well follow. Most visitors are expected to take up employment. Increasing the labour resources available to employers from a source accustomed to lower wage levels gives the opportunity to get more work done for the same money. The Daily Mail has discovered UK jobs advertised in Romania as, among other things, nurses, mechanics, taxi drivers, care assistants. These are all jobs that UK citizens wish to see done, but the existence of the adverts reveals that there is a gap between what local people expect to receive for them and what the employers or public are prepared to pay. Closing that gap makes growth possible.
However, that growth may be less valuable than it looks. On the positive side, an overseas worker gains a higher income and an employer fills an unattractive role. In most individual cases, the new migrant worker expects to obey the law, work hard and fulfil what the employer expects. There is no need to raise wage levels in order to recruit; no need to increase taxes to pay more for public staff. Yet the proceeds of growth now need to be shared more widely. If the gap between the available wages and an acceptable income existed already, widening the access to that work makes the gap permanent, at least until the whole EU has risen to UK standards of living. Taking the motivated workers from poorer countries deprives their economies of opportunities to invest and grow. Polish sources are already reporting concerns over depopulation. Turning Romania and Bulgaria into wealthy trading partners may, longer-term, be mutually more beneficial than using their best labour to keep UK wages low in certain sectors.
It is hard to encapsulate economic well-being for all in a single statistic but GDP per capita, expressed in prices that allow for inflation, is a good place to start. If the growth brought about by migration is sufficient to raise everybody’s output, even when it is spread over the resulting greater population, then it is a benefit indeed.
For the sake of European comparisons, this graph is expressed in Euros. Some effects may be due only to exchange-rate fluctuations. It does show some patterns. Prior to 2007, UK growth still outstripped the growth in population. Poland has managed to continue that trend even after the crash but the UK per capita GDP stayed pretty flat up to 2012, while Germany’s caught up. The distance between the economies of Bulgaria Romania, even Poland, and that of the UK reamins substantial but, in relative terms, has been closing.
Real GDP growth needs to be greater than the growth in population. If the growth is less than that, it is not the fault of the individual migrants, who are responding to identified gaps in the market, but it is a reminder that policy needs to find answers too for the people whose best job opportunities are diminished by migration.