Saturday, June 25, 2016

Some demographic perspectives on Brexit and the future United Kingdom

I've been spending today taking in the fact that the vote in the British referendum on European Union membership went in favour of the Leave camp. There's certainly going to be repercussions in Canada, with Torontoist noting the impact on Toronto-based businesses of British instability, the Toronto Star observing that the United Kingdom has become a less attractive platform for European business, and the CBC observing that British departure jeopardizes a Canadian-European Union free trade agreement that has taken seven years to bring to the point of completion. (Brexit proponents hoping for a quick deal should take note.)

The first important thing that needs to be said about Brexit, at least from a perspective relative to population, is that the desire of Brexit proponents to somehow come up with a new relationship with the European Union that will keep the single EU market as before while keeping out EU migrants looks impossible. The freedom of movement of workers is one of the foundational "four freedoms" of post-war European integration, one of the elements of this internal single market, and it's very difficult for me to imagine a circumstance in which a seceding member-state would be allowed to pick and choose what elements of its old membership it could keep. What would be the incentive for any polity to give that prerogative to a seceding member-state? The proposals of Québécois and Scottish sovereigntists for continued integration with their parent states, on the terms of the separatist entities and only in the areas they wanted (only, I would add, in the areas that people were unsure the separatists could handle like monetary policy) come to mind.

Norway, Iceland and Liechtenstein do belong to the European Economic Area, often mentioned, but they have no ability to pick and choose. Switzerland is not a formal member of the EEA but it comes quite close, with a tailored package of treaties which provides it with access to the single market. Switzerland's decision two years ago to limit free migration following a 2014 immigration referendum has triggered a continuing crisis with the European Union still far from being solved. Britain's negotiating partners in the European Union may well be willing to accept EEA membership, but I would be surprised if free movement of people would be sacrificed. Yet if that did not happen, how can a post-Brexit government drawing its support substantially from anti-immigrant sentiment accept such a deal? There will be economic shocks ahead.

It can't be doubted that immigration, perhaps most recently the Middle Eastern refugee crisis but also post-2004 immigration from central Europe, helped trigger Brexit, as noted by Migration Information.

The topic of migration has been central to the referendum debate. For an astonishing nine consecutive months, voters have identified immigration as among the most important issues facing Britain (based on Ipsos MORI polling). In April, 47 percent rated immigration as the most pressing concern; just half that number identified the economy as the most important issue. However, when asked specifically about their vote on Europe, respondents cite the economy as their primary consideration, with migration a close second.

The public debate on migration has encompassed several dimensions, including whether being part of the European Union enhances or decreases security; what the United Kingdom’s response should be on accepting refugees for resettlement and providing additional funds to help resolve the refugee crisis; and above all what migration flows will look like in the future and whether restrictions on migration are compatible with Brexit (and the resultantly-necessary new EU trade deal). The underlying theme is to what degree and at what cost the national government can control and restrict migration by leaving the European Union.

Not surprisingly after the Paris and Brussels attacks, both sides share a general concern over terrorism and security related to migration. Remain campaigners claim improved intelligence sharing between EU countries will increase security, while Leave proponents argue that the United Kingdom’s greater ability to prevent movement once outside the European Union and increased border security will reduce threats.

With EU Member States having received more than 1 million asylum seekers and migrants in 2015, both sides contend the crisis will dramatically influence voting decisions. The United Kingdom has played a highly limited role in the refugee crisis thus far (refusing for example to take part in the EU scheme to relocate 160,000 refugees across Member States). Coupled with relatively low numbers of spontaneous arrivals of refugees and the absence thus far of a terrorist attack on UK soil, suggestions that terrorism and Europe’s refugee crisis will decide the referendum appear exaggerated.

Public opinion on future migration flows and restrictions currently matter more to voters. The most passionate Leave supporters (representing around one-quarter of the UK public) are very strongly correlated with the most anti-immigrant UK voters. Voters strongly attached to an “English” (as opposed to a “British”) identity—a disproportionately Conservative-leaning group crucial to the outcome—favor leaving the European Union. Furthermore, anxieties over migration extend beyond this group, with two-thirds of the public favoring migration restrictions.

I'll quote at length from the introduction to Open Europe's April 2016 study "Where next? A liberal, free-market guide to Brexit". Migration, the authors suggest, is not likely to fall even in the case of Brexit.


a) While there would be political pressure to reduce immigration following Brexit, there are several reasons why we believe headline net immigration is unlikely to reduce much:

The business case for maintaining a flexible supply of labour. The evidence suggests that, with a record high employment rate, the UK’s labour market is already tightening;

the political and economic challenge of finding policy alternatives to relieve pressure on the public finances caused by ageing demographics, where immigration can help smoothen the path to fiscal sustainability;

the effects of globalisation on migration flows, which the UK is not alone in experiencing;

and the likelihood of some constraints on UK immigration policy under a new arrangement with the EU.

b) Nevertheless, free from EU rules on free movement, the UK would likely pursue a selective policy more geared towards attracting skilled migration, which could be more politically acceptable.

c) Open Europe would recommend a system seeking to emulate the points-based systems of Canada and Australia. The system could be weighted strongly towards those with a job offer, but also offer a route for skilled migrants seeking work. Such a system could give priority to UK industries and employers suffering skills shortages but also allow a flexible supply of skilled workers to enter the UK labour force subject to a cap which could be varied depending on economic circumstances. However, there is likely to be a continued need for migrant labour to fill low-skilled jobs. Therefore, the UK would also need a mechanism to fill low-skilled jobs or meet labour shortages where employers have recently relied on EU migrants.

d) However, there is likely to be a trade-off between the depth of any new economic agreement with the EU and the extent to which the UK will have to accept EU free movement. The evidence from the precedents of Norway and Switzerland suggest that the deeper the agreement, the more likely the UK will need to accept free movement. This might mean building in preferential treatment for EU citizens in the UK’s new points system, which would give EU nationals priority over non-EU nationals, or it could create a separate temporary migration scheme for migrants from the EU.

e) The UK is far from alone in its migration experience in terms of developed economies. Between 2000 and 2015 the UK received 3.7 migrants for every thousand people, which puts it just above the average but below countries such as Canada, Australia, Norway and Switzerland. If the UK had experienced the same level of immigration as Canada or Australia there would have been an additional 3 million or 4.4 million migrants respectively coming to the UK over the past decade – though of course the UK is a more crowded country.

A points system, as The Independent has argued, might well lead to more immigrant admissions. I've observed here, at least as far back at 2012, that British anti-immigrant sentiment is general. Whether European Union, Commonwealth, or other, immigrants just aren't welcome.

A post-Brexit United Kingdom will become less attractive for migrants. It may, between hostile policies and a worsening economy, become much less attractive. I feel justified in discounting scenarios where Britain will become more attractive, more open to immigrants. If the resulting shortfalls in labour last, this may well lower the United Kingdom's long-term potential for economic growth. What a waste of potential!

Who knows? If things get bad enough, we might even see emigration on a substantial scale. CBC reported that the number of Britons googling how to move to Canada after the referendum results has sparked sharply. I would not at all bet against seeing here in Toronto a wave of British immigrants not at all unlike the Irish immigrants who came just a few years ago.

(For further reading, I recommend the Brexit site of the Migration Observatory.)


Ben said...

The UK is not Iceland or Liechtenstein. There is no doubt that the EU bureaucrats and politicians would like nothing more than punishing the UK and seeing it collapse as a warning against any other country who would think about leaving. But the UK is the 2nd european economy, the 5th world one, the first european military, an important power, a leading trade partner with most EU countries. The UK collapse would be as bad for Europe than for the UK.
So the eurocrats will make a show but in the end they will give the British most of what they want, they have no choice.

Randy McDonald said...

"So the eurocrats will make a show but in the end they will give the British most of what they want"


A collapse is unlikely. Much more likely is a quiet, uneven, immiseration of the United Kingdom, with the European Union as a whole being less exposed.

Why would the EU make a bargain that would run against its stated goals, and its past behaviour? Why would the UK get away with limiting migration where Switzerland has not?

Ben said...

Why ? For all the reasons I gave you. The UK is not Switzerland. It is powerful and it can harm the EU very much if it wants to. The EU is not in a situation where it can allow itself to sustain more economic pain. This is realpolitik.

Richard said...


Except that in any scenario where the UK harms the EU, the UK is itself harmed more.

Randy McDonald said...

"Why ? For all the reasons I gave you. The UK is not Switzerland."

That is meaningless. Is there any reason to think Europeans will respond well to being threatened? If anything, this might be a good way to strengthen European solidarity. A Britain demanding a particular deal that would undermine decades of relatively consistent and uniform policy should not expect to go far.

What does it matter how much of an asset, or not, the United Kingdom is for its European partners when the UK has just resolved that these are no longer its partners?