Migrants go home

This title is not a BBC correspondent adopting a slogan the British National Party might use. It is a statement of fact.

Migrants go home, as well as arrive in our country, with consequences for the economy.

And at this conjuncture where many things we’ve been used to for the last decade are now moving into reverse (most notably house prices), it’s worth asking whether inward migration from central Europe is about to turn as well.

The starkest reason to think it might is that the Polish zloty has risen against the pound by 20% in the last year.

The earnings you can make here don’t look nearly as impressive to your friends and family back home anymore.

In addition, wages in Poland are rising fast: 7% in 2007 (with inflation at 4%).

So overall, UK wages relative to Polish wages measured in Zloty, have fallen by a quarter.

That’s a pretty big change in 12 months.

Polish adverts in a west London shop windowA second possible factor that will begin to bite, is that the UK construction boom has probably peaked. The latest data is inconclusive, but new construction orders in the second half of 2007 were down on the first half.

Anecdotally, it is demand in construction that has fuelled a good deal of the central European migration.

Reliable and up-to-date statistics on inward migration are hard to come by. The data we have on accession country workers registering here suggests the inflow peaked in the second half of 2006; but this gives us no bearing on the outflow at all.

The Times reported earlier this month that the Polish embassy had noted that a “tipping point” had been reached, with more Poles returning. But so far, the evidence is mainly anecdotal.

If it is hard to know whether the exodus is underway, it is even harder to assess the consequences.

The City consultancy, Capital Economics concludes that “potential GDP growth is likely to slow gradually from the recent rates of 3% or even higher, to more like 2.7%”.

That is undoubtedly possible. But it is worth thinking about the effects in more detail.

And surely the labour market is where to look. If the economy slows, outward migration might soften the impact. As the demand for labour goes down, instead of unemployment going up, the supply of labour might adjust.

In that sense, one could view migration as a buffer that has softened the inflationary wage pressure of a boom, and which can now soften the labour market effect of a slowdown.

It would almost be as though UK plc had chosen to hire temps for a few years, to see it through a rather busy period.

The outflow of workers might have less benign consequences too.

If migrants have held wage inflation down, an absence of migrants might drive it up, just at a time when there is a threat of inflationary expectations rising.

And away from the labour market, think about house prices! At a time when they are falling, a reduction in migrant numbers might intensify the difficulties faced by buy-to-let investors, and the market as a whole.

This is still in the realm of speculation.

In reality, it’s far too early to call an end to the accession migration boom. And it is undoubtedly the case that many of the recent wave of migrants will settle in the UK permanently.

But one can reasonably hypothesise that if migration reverses, the things that we have associated with migration over the last decade, will do so as well.

Comments   Post your comment

  • 1.
  • At 05:20 PM on 21 Feb 2008,
  • John wrote:

Poles may well return home to find that their jobs have been filled by Ukranians, the Ukranians return home to find that their jobs have been filled by Khazaks, etc.

  • 2.
  • At 05:39 PM on 21 Feb 2008,
  • andy williams wrote:

It's all rather perverse in a way. The 'migrants' (they're not really migrants, they're EU nationals exercising their rights) are here because of market forces. The same market forces that allow employers to exploit low wages and landlords to exploit buy-to-let.

Yet it's the same employers and landlords that will whine like billy-O when there beloved market forces mean that the Poles go home to better conditiopns and the indiginous population that remains will seek higher wages and lower rents.

Either capitalists like, support and want market forces or they don't.

The only alternative is a controlled economy which the same capitalists despise.

  • 3.
  • At 06:33 PM on 21 Feb 2008,
  • aisha wrote:

hello, well i didn't read al of the article but just whizzed past it. i guess its got to do with what Jacqui Smith said.
i was born in the uk and live here, my parents were emigrants.
i was quite upset to hear what she said, its a stark reminder that we're not wanted(or needed?)!
Just knowing the pure fact that a member of parliament and government could not have said this in public 5 or 10 yrs ago. i feel that its just because of 9/11 and 7/7 and muslims are feeling the effects.
Its just a law for muslims, to stop so called terrorism. the more they make laws like this, more `home-grown terrorism`!

  • 4.
  • At 07:11 PM on 21 Feb 2008,
  • Diversity wrote:

Not too many years ago, in a period when the British contruction industry was short of work, quite large numbers of British construction workers took jobs in Germany. I suspect almost all of them came home before the Poles followed them here. Some builders have been accustomed to going where the work is at least since the Middle Ages. Today more of them travel further.

And what do you mean by "will settle in the UK permanently"? Nowadays,footloose people follow the opportunities, and the better living conditions, pretty freely from country to country. That is why Turkish restaurants in Spain seem to all be run by Turks who have moved on from Germany. Nevertheless, an awful lot of wanderers keep to the idea of returning home one day.

  • 5.
  • At 08:22 PM on 21 Feb 2008,
  • Colin Brown wrote:

The reason polish migrants are starting to go home,is so they can claim back all the tax they have paid while working in this country.
After a short while they will return.
Wish I could do that.

  • 6.
  • At 09:29 PM on 21 Feb 2008,
  • charlie wrote:

whatever the BNP might say this is a disaster for this country. Immigrants lower costs and ease capacity pressures, thus producing growth as well as controlling inflation - a heaven sent mix almost. Perhaps it is time to stop thinking about how to stop immigrants coming, but how to get them to come in the first place....

  • 7.
  • At 09:40 PM on 21 Feb 2008,
  • andrew K wrote:

Being often in Poland,I know that most Poles would be quite happy to return once they have earned some of the higher wages in the west.This is of course quite different from many other immigrants who are either afraid to go back,or don't see much of a future in their country.

  • 8.
  • At 10:51 PM on 21 Feb 2008,
  • Andrew wrote:

I would hate to spoil you statistics, but inflation in Poland in 2007 was at around 2% and not 4. I hope you don’t mind the slight clarification, I ‘am sure better research next time will avoid such pitfalls.

  • 9.
  • At 07:18 AM on 22 Feb 2008,
  • Stewart Gebbie wrote:

If the anecdotal evidence is borne out by real data then this is a great example of mobility of labour at work.
However, the downside is that we can expect, is that with the labour market having fewer workers, costs will be higher, inflation will be higher so interest rates will remain higher. This implies that the building industry will face a bleak future of margins being squeezed at both ends. Costs to build will be higher and prices squeezed down as there are fewer buyers around. Sounds to me like a good time to sell shares in house builders as this sector has still to see tougher times ahead

  • 10.
  • At 11:07 AM on 22 Feb 2008,
  • David wrote:

There is of course one type of migrant who will never go home - those on benefits.
My wife and her ex sister in law both come from a South American country.

My wife works and wants us to go to her home, her ex sister in law lives off the tax man and will only leave this country if we stop giving her money. She is an asylum seeker but admits that she was not in danger.

Therefore migrants going home could take away the gold and leave the very expensive dross.
An immigration policy that was stricter on benefits would help of course - but no chance of that.

  • 11.
  • At 11:12 AM on 22 Feb 2008,
  • Ralph Moulang wrote:


I would say that this is less like speculation and more like good social economics - analysis that should be expanded upon.
I for one know quite a few accession migrants who work here, but have families back home. Even those with no ties generally save more than they spend, and the savings are generally sent home.
Their return will probably affect rents, but, as I suspect most to be employed as temps or cash-in-hand workers (implying that their welfare & private insurance contributions are small) their departure should have null effect on the economy as a whole.

  • 12.
  • At 11:59 AM on 22 Feb 2008,
  • Dave wrote:

As you quite rightly point out, population migration is one of the key controls for the economy.

Essentially there are only 3 big things that can be used to control an economy. Fiscal policy, monetary policy and population migration. The economy of the last 10 years has always been a bit of a swindle because it has been largely controlled through fiscal policy. Labour inherited a very successful economy from the Tories in 1997. As the economy started to cool off in the early 2000s, they tried to keep it running by borrow and spend based fiscal policies. This would usually be inflationary, and require strict monetary policy to manage correctly, but population migration has to a large extent flattened that.

Unfortunately, I'm not sure your conclusions are right. By using fiscal and population policies to control the economy, in many ways it is queuing the country up for a more severe drop. As the economy starts to slow, and population moves back out again, you will get a number of effects. Firstly, government tax income will decrease, both because of difficult times for business, less consumers (due to migration), and less income tax (again from migration). Secondly, the amount the government can feasibly borrow to prop up the economy falls. At the same time we are reaping the economic results of our Middle East adventure coming through in high oil prices and this is a big inflationary push for which the only remaining control is a tight monetary policy.

With all 3 things pushing the economy in 1 direction: tight monetary policy, tight fiscal policy, and an outflow of population; we could easily see the worst recession since the last labour government in the late 70s.

  • 13.
  • At 12:09 PM on 22 Feb 2008,
  • russ wrote:

It's hard to imagine that settling in the UK would be preferable for the majority of recent immigrants. In terms of housing, a major contributor to quality of life, the UK offers poor value for money relative to other European destinations.

Of course if they choose to leave in large numbers as the economy cools and their home nations become more attractive, then another of the crutches underpinning our spectacularly high house prices is kicked away.

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