In the past two decades, the UK has experienced a steady flow of net migrants into the economy. Net migration is a significant factor in the growth of the UK population. But, does this net migration help or hinder the UK economy?
Net long-term migration to the UK was estimated to be 260,000 in the year ending June 2014. This compares to net migration of 182,000 in the previous 12 months.
In the past five years, the UK population has been boosted by net migration of around 1,000,000.
Inflows and Outflows
- In 2011, the top 3 countries for source of migrants was India, China and Pakistan.
- The top 3 destinations for people emigrating from the UK was Australia, India and US.
Impact of Net Immigration on UK Economy
1. Increase in Labour Force
Migrants are more likely to be of working age – such as, students, and those looking for jobs. They may bring dependants, but generally net immigration leads to an increase in the labour force and increases the potential output capacity of the economy.
2. Increase in aggregate demand and Real GDP
Net inflows of people also lead to an increase in aggregate demand. Migrants will increase the total spending within the economy. As well as increasing the supply of labour, there will be an increase in the demand for labour – relating to the increased spending within the economy. Ceteris paribus, net migration should lead to an increase in real GDP. The impact on real GDP per capita is uncertain.