Britain is convulsed with anxiety about immigration, with claims of too many EU citizens coming here, the benefits system being abused and wages being forced down. An expert on immigration looks at the evidence

1 Didn’t the European Union just start off as a Common Market? When did free movement of workers start?

Long before the UK joined in 1973, the Treaty of Rome (1958) established what was then the European Economic Community, with four basic principles, called the “four freedoms”.

These were: free movement of labour, capital, goods and services. The objective was to establish a liberal market economy, where people could trade with each other across borders; free movement of labour was seen as part of that.

And the expected benefits were very much those that economists in general think you get from removing such barriers, allowing goods, services, capital and people to move freely within a given area.

It is true that over the years free movement rights have been progressively extended, to allow for people to move to look for jobs as well as take them; and with that, especially after eight new member states joined in 2004, mobility within the EU has greatly increased. But it’s very odd for people to say that what we’re seeing now was somehow not intended, or not what the UK signed up to. Exactly the opposite is true.

2 Did the UK government agree to allow in workers from the new member states in 2004 on the basis of a forecast that turned out to be hopelessly wrong?

This is a myth. The decision not to apply the “transitional provisions”, which would have allowed the UK to delay full free movement rights, wasn’t taken because of the supposed “Home Office forecast” (actually, not a forecast and not the work of the Home Office) that only 13,000 migrants would arrive. In fact, there were three far more important arguments for the decision.

First, a broader geopolitical one. The UK had been pressing for the countries of the former Eastern bloc to be allowed in to the EU, despite the reservations of some other countries, like France; they were seen as likely allies for the UK’s generally liberal, pro-free-trade positions in EU debates. So the decision was seen as a way of cementing our relationship with them, and in particular the Polish government.

Second, the economics. The UK economy was doing well, with lots of jobs being created. The analysis suggested that immigrant workers – particularly the reasonably well-educated and motivated ones likely to arrive from the new member states – were likely to boost the UK economy without doing much, if any, damage to the prospects for native workers.

And third, the practicalities. This aspect is often ignored, but was a very important factor at the time. The UK only had the right to apply transitional provisions restricting the ability of the new EU citizens to work legally – not stop them coming here in the first place. Turning them away at the border was never (and still isn’t) an option. And, without a “labour inspectorate” and with a relatively flexible labour market, the assumption was that the result would simply be a massive upsurge in illegal working. This hardly seemed an attractive alternative.

3 What were the impacts on jobs and wages of this move?

Facebook Twitter Pinterest Ugandan Asians arrive at Stansted airport in 1972 Photograph: Keystone/Getty Images

The short answer seems to be: not much. Indeed, it’s fairly obvious that wages are generally higher and jobs easier to come by in areas of high immigration like London, while many low migration areas have relatively depressed labour markets. Take Clacton, for example, where the immigrant population is less than half the national average – wages are 20% below the national average, while the proportion of people on benefit is far higher. Of course, this mixes cause and effect. But since the big increase in immigration from the EU in 2004 there have been a number of studies on this topic, using sophisticated econometric techniques to tease out the actual impacts. A government summary of the evidence concluded that there was “little evidence in the literature of a statistically significant impact from EU migration on native employment outcomes”. So it doesn’t appear that they take our jobs. On wages, the picture is more mixed, with some evidence immigration actually pushes wages up overall, while exerting downward pressure on wages for low-skilled workers. But as yet the impacts seem pretty small – certainly compared to other factors such as technological change, employers’ increasing demand for skilled workers and the positive impact of the national minimum wage.

4 But how can this be? Isn’t it just the economics of supply and demand – if you increase supply of workers, wages will fall? And if an immigrant takes a job, then a British worker can’t.

No. People who say this (and many do) usually don’t actually know or understand basic economics. More immigrant workers does increase the supply of labour. But, because immigrants earn money, spend money, set up businesses and so on, it also increases the demand for labour. And it’s true that, if an immigrant takes a job, then a British worker can’t take that job – but it doesn’t meant he or she won’t find another one that may have been created, directly or indirectly, as a result of immigration. So immigration may have a negative or positive impact on jobs and wages for British workers; so far, the evidence suggests that the direct impacts have been rather small.

Over the longer run, however, the indirect impacts are likely to be larger, and here the evidence suggests that the impact is likely to be positive. Immigrants have different skills and experiences to native workers, so they complement rather than substitute for natives, helping raise wages and productivity for everybody. And, in general, economists think that competition – including in the labour market – leads to efficiency gains. Again, over time, this should result in increased productivity and hence higher wages all round. My own profession – economic research – is a good example: London is full of foreign economists, many from parts of Europe like Italy or Greece where jobs are scarcer. Most British economists would agree that we have benefited hugely overall from the openness of the academic labour market.

5 Do we have a problem in the UK with benefit tourism?

Facebook Twitter Pinterest Jewish migrants from eastern Europe in the East End of London. Photograph: Heritage Images/Heritage Images/Getty Images

Some immigrants abuse the benefit system – as do rather more Britons. But the evidence that a significant number of people come here just to claim benefits is very thin. When the government was asked by the European commission to substantiate its claim that this was a real problem, its response was that the commission was placing too much emphasis on “quantitative evidence” (that is, numbers and facts).

The government’s own figures show that migrants are about half as likely to be in receipt of a DWP out-of-work benefit as people born here. Many migrants from the EU, however, are in low-paid work (including self-employment) and so receive tax credits; as the numbers settling here permanently have grown, and they start having kids, this has become quite a significant phenomenon. But it’s not benefit tourism.

6 And what is the broader impact on the public finances?

Recent immigrants from the EU are much younger, and considerably more likely to be in work, than the average Briton. And since most public spending goes on pensions, health care for older people and education, it is hardly surprising the overall impact is likely to be positive in the short term. Without EU migrants, the deficit would certainly be bigger than it is now. Of course, immigrants get old too, so it is important to look at the long-term impacts as well.

Research here at the National Institute of Economic and Social Research suggests that, if the prime minister were actually to meet his target of reducing net migration to tens of thousands, the very long-term impact (looking out to 2060) would be significantly higher taxes (or lower public spending) of about £30bn a year in today’s money. The Office of Budget Responsibility has produced very similar projections.

7 But what about the argument about pressure on the public services?

Facebook Twitter Pinterest A teacher giving English lessons to immigrant children from India and Pakistan at a school in Walsall, Staffordshire, in 1969. Photograph: Ian Tyas/Getty Images

Immigration increases demand for the main public services – health, education, etc. But since these are funded by taxation, it’s the net costs and benefits that matter; overall, stopping EU migration would cost public services more in lost tax revenue than it would save in reduced demand. And migrants often work in public services, especially the NHS. That doesn’t mean there aren’t significant local pressures, particularly where funding is slow to respond to population growth, as it has been for schools. But even here the effects may not be those expected. Despite the pressures of a growing population and a very large number of children for whom English is not the first language, London schools significantly outperform the rest of the country, especially for more disadvantaged children. And recent research suggests that the presence of children from eastern Europe actually improved the educational attainment of kids here already.

8 Does that mean immigration doesn’t cause any problems?

Of course not. Many of these impacts are averages. Immigration can make us all better off, on average, and not cost jobs or push down wages, on average – but that doesn’t mean some people and places don’t lose out. It would be very surprising if they didn’t. Broadly, there are two main concerns. The first is simply the pressure of increasing population on housing, public services and transport, especially in London. These are problems of success, not failure, but none the less real. The second is those who are particularly likely to lose out, not necessarily from immigration but wider economic trends – those with few skills or qualifications, living in seaside towns or some former industrial areas. Just as in other periods of rapid economic change – for example, the decline of mining and manufacturing in the 1980s – it should be the role of government to maximise the gains but ensure those who do lose out are helped or protected.

9 Is the idea of an “emergency brake”, or a “points-based system” for EU immigration realistic?

It’s very difficult to reconcile these proposals with existing EU law (or even indeed with the agreements negotiated by European countries outside the EU, like Norway or Switzerland). But even leaving law and politics aside, some very difficult practical questions would have to be asked. For example, what would trigger the “emergency brake”, given the lack of evidence of negative impacts at a national level? Certainly not unemployment; we could hardly claim that unemployment at 6% constitutes an emergency when it’s close to twice that in the eurozone.

Would any limit apply on a country-by-country basis, which would seem arbitrary and potentially unfair? Or would they apply to all EU nationals, so if we let in more Lithuanians then we’d have to let in fewer Germans? What about Brits living elsewhere in the EU, or moving there in future? What about the two million or more EU citizens currently living here? Would they be entitled to go home and then return here, or would they have to apply for a work permit next time? What about “mixed” families, an ever growing number? Would those married to a British citizen, or with a British child, be exempt? It wouldn’t be accurate to describe these proposals as half-baked – they aren’t yet anywhere near that stage.

Jonathan Portes is director of the National Institute of Economic and Social Research.

The Observer and the British Academy are holding a series of free events discussing immigration. The third debate, on Thursday 13 November at the Bishopsgate Institute, London EC2, will explore immigration and the UK Economy. Speakers include: Professor Ian Goldin (University of Oxford), Professor Sir David Metcalf (LSE), David Goodhart (Chair of Demos) and Nazek Ramadan (founder of Migrant Voice and Migrant Refugee women of the year). To find out more, visit: britishacademy.ac.uk/debates