Migrant Benefit Study

by Christian Dustmann, Professor of Economics at University College London and Director, Centre for Research and Analysis of Migration,
and Tommaso Frattini, Assistant Professor of Economics at University of Milan and Research Fellow, Centre for Research and Analysis of Migration.

1. On Friday January 20^th The Telegraph published an article by Chris Grayling (Minister for Employment) and Damian Green (Immigration Minister) entitled "Labour didn’t care who landed in Britain - The last government had lax immigration and a chaotic way of controlling foreign benefit claimants."
   
2. That piece seems to suggest that foreign born nationals are more likely to claim benefits, and are possibly not entitled to do so, without providing any information that would be needed for appropriate assessment. A key line in that article states that "As a result we now know that there are 371,000 people who were foreign nationals when they entered Britain who are claiming benefits."
   
3. That number is actually very good news: immigrants are far less likely to claim benefits than natives. Of course, this cannot be deduced from the piece in the Telegraph, as we are not told what is the number of foreign born individuals who live today in the UK, neither are we told what is the total number of benefit claimants. Inspection of the British Labour Force Survey (BLFS) shows that around 5.6 million individuals living in the UK in 2010 (in the age range 16-65, which is the age range within which individuals are most likely to be in the workforce, and to claim such benefits) are born in another country, with the overall population in the UK in that age range being almost 40 million. Thus, immigrants constitute 14 percent of the total working age population. According to DWP, there are 5.7 million benefit claimants as of May 2011. Thus, the share of the 371,000 individuals who were foreign nationals when they entered Britain among benefit claimants is only 6.5 percent. Therefore, assuming that those who entered as foreign nationals are also foreign born, it follows that they are less than half as likely to claim benefits as native born individuals.
   
4. If we really want to assess whether immigration imposes a burden for the UK public finances, we need to consider both immigrants’ benefits receipts and the tax payments immigrants make. That of course requires a far more involved analysis. Our previous research on the fiscal consequences of immigration from the eight Central and Eastern European countries that joined the European Union in May 2004 (so called A8 countries) has done just that (Dustmann, Frattini and Halls 2010). It investigates the effect immigration from these countries had on the welfare system, by computing benefit receipts of immigrants who came to the UK between 2004 and the first quarter of 2009, using information from the BLFS and data from several government departments on the budget and on tax- and benefit payments, and covering the fiscal years 2004/05 to 2008/09.
   
5. The research shows that A8 immigrants over that period were less likely to be claiming welfare benefits or to be living in social housing than individuals born in the UK. Further, they made a positive contribution to the UK fiscal system, paying more in taxes than they receive in direct and indirect public transfers (such as benefits, NHS healthcare and education). For example, in 2008/09, A8 immigrants represented 0.91% of the total UK population, but contributed 0.96% of total tax receipts and accounted for only 0.6% of total expenditures. In particular:
   
   • The study also shows that A8 immigrants who arrived after EU enlargement in 2004, and who have at least one year of residence – and are therefore legally eligible to claim benefits – are over 50% less likely than natives to receive state benefits or tax credits, and to live in social housing. Comparing the net fiscal contribution of A8 immigrants with that of individuals born in the UK, in each fiscal year since enlargement in 2004, A8 immigrants made a positive contribution to public finances.
     
   • In every year since 2004, A8 immigrants made a positive and substantial net contribution to public finances. For instance, in the fiscal year 2008/09, A8 immigrants paid 37% more in direct or indirect taxes than was spent on public goods and services which they received. This was even more remarkable because the UK was running a budget deficit over those years, meaning that overall, individuals living in the UK made a negative net contribution to public finances.
     
   • The study also demonstrates that on average, A8 immigrants have a better educational background than UK-born workers, but receive lower wages - especially in the period immediately after arriving in the UK. Despite this, A8 immigrants are net contributors to the public finances. The main reason for this is that they have a higher rate of labour force participation (increasing the number of fiscal contributors), and make less use of benefits and public services.
     
6. We have subsequently extended our research to the entire UK immigrant population. First findings show that for those cohorts who arrived after 1995, the ratio of their share of total tax payments to their share in the total population is always larger than the share of public expenditure they receive, relative to their share in the total population Thus, all these immigrant cohorts contributed more than the native born to public finances.
   
7. As researchers in the field of immigration, we are acutely aware of the limitations in data about the foreign population in the UK, and we welcome any effort to enhance the current knowledge base. The government’s effort to link information on immigrant status to administrative data on benefits receipt is therefore a very welcome addition. However, it is equally important that any research conducted is carefully and clearly documented, and that any research results are presented in an appropriate manner that avoids misrepresentation in the media. This is particularly important in an area as sensitive as immigration. Research on migration, in particular when publicised by government sources, needs to be appropriately reported and benchmarked if it is to be of any use in enhancing our knowledge of such an important and complex phenomenon.
   

References
"Labour didn’t care who landed in Britain" by Chris Grayling and Damian Green: http://www.telegraph.co.uk/news/uknews/immigration/9025260/Labour-didnt-care-who-landed-in-Britain.html
Dustmann, C., Frattini, T. and C. Halls (2010), "Assessing the Fiscal Costs and Benefits of A8 Migration to the UK", Fiscal Studies, vol. 31, no. 1, pp. 1–41. See also CREAM DP 18/09 http://www.cream-migration.org/publ_uploads/CDP_18_09.pdf
Other comments:
Jonathan Portes commented on his blog: http://notthetreasuryview.blogspot.com/2012/01/migrants-benefits-and-public-services.html
The BBC reported: http://www.bbc.co.uk/news/uk-16643677; http://www.bbc.co.uk/news/uk-16659847