Mark Littlewood is Director General of the Institute of Economic Affairs.
Unsurprisingly, the government has been struggling somewhat with how to implement its policy of imposing an immigration cap on non-EU immigrants. Fortunately, in The Challenge of Immigration – a new paper published by the IEA today and available on our website – Nobel prize winning economist Professor Gary Becker comes up with a radical, but simple solution. Once you’ve decided how many “visas” or “permits” you’re going to issue, sell them.
There are all sorts of arguments about whether imposing a cap is the right idea and how problematic (or beneficial) it is that the EU has internally open labour markets. But, for now, cast those arguments aside. If you’ve settled on a policy of imposing a ceiling on immigration, ask yourself how you’re going to decide who gets the green light and who gets blocked.
You have two basic choices. You either go down the bureaucratic route or down the market-orientated route. Sadly, Theresa May has headed down the former path. Government officials will continue to wade through millions of pieces of paper attempting to judge who has the skills and expertise to meet the nation’s overall needs. They will have certain rules to guide them, of course. So, because of special exemptions, if your abilities lie in playing football, you will effectively be treated as more desirable than someone who’s a wizard at engineering.
Inter-company transfers of talent from abroad will be allowed if a salary threshold of £40,000 is met. This, the state determines, is the cut off point at which you are a desirable and necessary addition to our economic life. If you’re a young person earning £35,000 with enormous earning potential, you probably don’t make the cut. Stay and make your millions in your own country, thanks very much.
Becker’s solution is elegant but extraordinarily straightforward – once you’ve decided how many places are available each year, sell them off. You don’t need a central planning committee to try and weigh up the different recruitment needs of Premier League football clubs and mini cab firms. You just let the market decide which workers are the most desirable. And there’s the payback too of a revenue stream flowing into the government’s coffers.
It’s extremely difficult to predict what the market clearing rate would be for the right to immigrate to the UK. And one might even choose to sell a diversity of different “products”. But an estimate of £30,000 to relocate to and work in this country doesn’t seem unreasonable. Gary Becker speculates that a price of $50,000 might attract as many as one million immigrants into the USA. If the number for the UK was set as low as 20,000, the price might well be higher. And if 20,000 entry tickets were sold at this conservative price, the revenue stream would amount to £600m. That wouldn’t make an enormous dent in the budget deficit. But it’s surely too big a sum to casually cast aside even if our fiscal position was much healthier than it is today.
Some of the objections to Becker’s case are easy to predict. In particular, how would younger workers who have great potential, but little in the way of savings, afford tens of thousands of pounds? Becker suggests a loan system – not dissimilar to the way student loans commonly operate for those in higher education. He also fairly points out that companies may very well assist with the fee – or even pay it outright – to assist younger, promising workers.
The immigration debate raises considerable passion – and often venom too. Many free market liberals believe – with alterations to the welfare state – considerable liberalisation is desirable. But even with a non-libertarian starting point of strictly rationing entry, there could still be a vital role for the price mechanism. Becker’s approach has much to commend it and it surely offers a better solution than a swarm of bureaucrats and politicians deciding exactly who comes in and who doesn’t.