Cut red tape to boost growth? Start with immigration
So the changes to skilled migration introduced by the government - a set of new burdensome and bureaucratic rules and regulations, including a quota on skilled migrants - are new labour market regulations. Indeed, in contrast to almost all other such regulations, which are at least designed with an eye to ensuring that the benefits to employers and employees outweigh the costs, these changes were designed expressly to make it more difficult for businesses to employ the workers they want.
As a consequence, they will reduce growth and make us poorer. And these impacts - áccording to the government’s own estimates - are potentially very large. As I said in my testimony to the Treasury Select Committee after the 2011 Budget:
“The extra employment regulation that the Government has imposed on employers wishing to employ migrant workers—the cap on skilled migration—will, using the Government’s own methodology, reduce UK output by between £2 and 4 billion by the end of the Parliament.”
More radical changes to immigration policy might have even larger impacts. A recent paper by one of the leading US researchers on the economic impact of immigration suggests that, looking across countries, the impact of openness to immigration on per capita income is large and positive - indeed, larger than the impact of openness to trade. They conclude:
“We interpret these results as consistent with the idea that immigration enriches the skill and idea variety of countries, increases their productivity and eﬃciency and, in the long run, it is an important contributor to their economic success.”