High immigration boosts real GDP

The home secretary Theresa May will state that immigration has little economic benefit.

“at best the net economic and fiscal effect of high immigration is close to zero”. (Independent)

There are potential costs of immigration – for example, the UK is struggling to build sufficient housing to prevent rising house prices and rents. But, one undoubted benefit of immigration and a rising population is that it boosts GDP figures, which makes the economic recovery look stronger than average incomes per head.

Real GDP

real-gdp-trend-actual

Real GDP is showing recovery, with economic growth of around 2% a year.

Real GDP per capita

real-gdp-per-capita

If we look at real GDP per capita, the recovery looks much weaker, with real GDP per capita barely overtaking the level seen in 2007.

GDP-per-head-v-GDP

A rising population (of which net immigration accounts for around half) has definitely helped boost real GDP more than real GDP per capita

Average real disposable income

real-income-per-capita-quarterly

If we look at average real disposable incomes (which is a large component of Real GDP per capita), we see that average living standards have stagnated during the past several years.

This is why people may feel that the recovery has not really affected them.

 

Relative change 2007-2015

  • Real GDP (ABMI) increased by 8.4%
  • Real GDP per capita (IHXW) increased by 2.18%
  • Real disposable income per head (IHXZ) increased from £4,414 to £4,468  (1.2%)

Selective use of statistics

economic-growth-last-4-years

The government will understandably want to concentrate on figures showing real GDP per growth in the UK. But, the irony is that without immigration and a rising population the recovery looks much less strong and more feeble.

Immigration may have little economic benefit (though I dispute that – here economic effects of net migration), but it has a political benefit in making the economic recovery look stronger!

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