The stark public debate around Brexit has shown that immigration is a key issue for the British public. In this blog, I discuss how a new approach developed by economists – assessing the effect of immigration on happiness – could help us better understand how immigration has affected the public and how it may continue to do so in the years ahead.
After triggering Article 50, the future of EU immigration to the UK and of EU immigrants in the UK is uncertain. Whatever the changes in terms of migration policy and migrants’ rights will be, the UK will remain a high immigration country, with many immigrants coming from the EU. Understanding the consequences of immigration is therefore a priority for researchers and policy makers in both the UK and the EU.
Economists have traditionally focused on the consequences of immigration on the labour market, in particular on the wages and employment of native low-skilled workers. The empirical evidence for the UK (effectively summarized in this analysis) shows that:
- on average, immigration from both within and outside the EU does not reduce employment opportunities nor lower the wages of UK-born workers
- less skilled UK workers might have experienced some negative effects, but these are thought to be small.
Notwithstanding this evidence, it is possible that immigration influences other aspects, such as prices, crime rates, and health services. Yet again, the evidence (also mentioned in the report) does not point towards sizeable effects of immigration on these outcomes. So if immigration is not bad for the economy, why do we often observe public aversion towards it?
Two recently published studies focusing on Germany help us looking at immigration through a different, complementary, perspective to the one adopted so far by economists. This new strand of research argues that using happiness data may help us understand the effects of immigration beyond the economic sphere (e.g. wages).
The approach links the subjective well-being of German citizens to changes in the level and composition of immigration in the region where they live. Subjective well-being is measured using answers to the question “How satisfied are you at present with your life as a whole?”
The first study shows that, on average, more immigration in the region increases the subjective well-being of citizens. The effect varies across groups: for example it is larger for younger than for older people. Importantly, immigration produces a positive effect on the satisfaction of Germans with their dwelling and leisure time. Other domains – such as satisfaction with their income, job and health are instead unaffected by immigration.
The second study provides evidence that the more ethnically diverse the area where German citizens live is, the higher their subjective well-being. However, living in immigrants’ enclaves (i.e. areas where there is only one or a predominant ethnic group) is associated with a decrease in well-being.
Should one expect the findings for Germany to hold for the UK? While there is still no comparable evidence, survey data indicates that nearly 70% of British people are in favour of reducing immigration – twice as many as Germany.
In my view, there are several factors suggesting that the effect of immigration on subjective well-being of British people could differ from the German case, but the following three are the key ones:
- Similarly to Germany, the UK is a high immigration country. However, due to different historical, political and economic reasons, the immigrants’ composition in the two countries diverges in terms of their origins and skill levels (see Table 1 and Figure 1).
- The spatial distribution of immigrants in the two countries differs substantially. According to OECD statistics, in the UK immigrants are concentrated in London (about 40% of EU migrants live in the capital). Also in Germany EU migrants live prevalently in cities, but they are more evenly distributed (e.g. only 11% of them live in Berlin).
- Both Germany and the UK started to slowly recover from the financial crisis. However, contrary to Germany where wages are increasing, in the UK real salaries (i.e. after accounting for inflation) have declined since 2007. While empirical evidence suggests that immigration has little to do with this (see e.g., this analysis), public perception might be different, as immigration is often seen to cause worsening life standards and rising inequality.
Table 1 – Migrants stock: Top 5 origins
Source: United Nations (2015)
Figure 1 – Skill composition of the foreign-born
Source: OECD, 2010/11
These three factors point to one common channel through which immigration could impact happiness in the UK: the social interaction between immigrants and natives. The negative perception of immigration could originate from the scarce interaction between the British-born population and immigrants.
The Brexit vote is quite emblematic. If one interprets the referendum outcome as the reverberation of how British people are unhappy with migration, the vote statistics would suggest that aversion towards immigration varies substantially by age, education and geographic areas. The share of those who voted leave is inversely proportional to the share of EU migrants living in the local authority (Figure 2).
Figure 2 – % of EU migrants and % voted leave across local authorities in England and Wales
Source: The electoral commission (2016) and 2011 Census
The net “remain” vote expressed by London is an illustration of this aspect as well. Moreover, voter polls indicate that older and less educated people were more likely to express a leave preference. Hence, it looks like those who voted to exit the EU (read: to reduce immigration) are people who have less contact with EU immigrants – the old, the less educated and the residents in rural areas. This means that – albeit this is just an educated guess – the effects of migration on happiness might be positive for some groups and areas and negative for others.
The arguments I outlined above imply that there could be many people happier if immigration is eventually reduced. But equally, there might be a significant share of the British-born population experience a decrease of their well-being as a consequence of curbing immigration. More empirical evidence is needed to understand whether migration is “good” or “bad” for British people.
By Dr Corrado Giulietti is Associate Professor in Economics at the University of Southampton.