A number of ideas have been mooted in the last few years to try to tackle rising concerns over immigration. The Conservatives have a net-migration target, and have tightened up significantly on non-EU migration. Yet the immigration target remains a vexed issue, illustrated most recently by Theresa May’s conference speech. The government has also targeted migrant access to welfare, though the evidence for welfare tourism is extremely limited, so these moves seem unlikely to make a significant dent in the numbers.
Labour struggled to provide a coherent message on immigration in the run-up to the 2015 election. Their policies were as tough as the Tories’ in many areas, particularly migrant access to welfare. However, Ed Miliband’s rhetoric focused more on tackling the undercutting of native labour through raising the minimum wage and cracking down on employers who failed to pay the minimum wage. More recently, some Labour figures have tried to tie concern over immigration into the austerity debate; the argument goes that anger over immigration is misplaced, with cuts to public services and a failure to invest in housing to blame instead.
There is another policy that has been mooted, most recently by Owen Jones, which he calls the “immigration dividend”. As he describes it:
“Communities with a higher level of immigration should receive extra funding, calculated on the basis of how many immigrants they have. This would make a real connection between the economic benefits of immigration uncovered by academic studies and the reality of people’s lives.”
Behind this is the same logic that underlies the New Homes Bonus and the Community Infrastructure Levy when it comes to new housing developments. There are perceived costs associated with building new homes: disruptions during construction, pressure on public services and infrastructure caused by the new people moving in, and an erosion of a town’s character or beauty that might cause those already living there to see the value of their properties fall. The benefits of new homes don’t necessarily go to local people, so to balance the costs and benefits and promote local support for new development, central governments pay local authorities which increase the number of homes in the area. The Government has also given local authorities the power to set charges on developers to build, the proceeds from which are kept locally.
The immigration dividend is a similar rebalancing idea: there may be local costs to immigration, such as pressure on public services and infrastructure, while most of the benefits go to the Treasury. Thus, to rebalance the costs and benefits, it is argued, local authorities that have more immigrants should receive additional funding.
If we were all the perfectly rational, self-interested, economic actors that are the foundation of classical economics – this might work. The problem, as even most neoclassical economists will admit, is that we are not.
First, we know that the immigration debate is about much more than money. Yes, undercutting wages and pressure on public services matter, but so do fears about the effect of large-scale immigration on identity and cohesion, both at a local and national level. Second, there are theoretical reasons why such a policy might not work, and might even be counter-productive. The political philosopher Michael Sandel argues that the introduction of market mechanisms – in this case, monetary payment for taking additional immigrants – can crowd out existing non-market norms.
To illustrate this point, Sandel cites the example of a nuclear waste facility to be built near a village in Switzerland. When initially asked, despite the facility being viewed as an undesirable addition to the area, a slim majority of residents said they would accept it at an upcoming referendum. When the economists running the survey added a financial incentive to the proposal, with residents compensated with an annual monetary payment, support dropped to 25%.
Sandel’s argument is that residents initially felt a sense of civic duty; they should do their part by accepting the facility that was necessary for the good of the country. This was then ‘crowded out’ by market norms. Residents didn’t like what they saw as an attempted bribe.
We can’t know for sure exactly what psychological processes were at play. Sandel might be right that moral and civic commitments get ‘crowded out’, or it might simply be that, in his Swiss example, the introduction of financial incentives primed residents to think about the costs, or make the costs seem larger than they otherwise might do.
We also know that people are strongly attached to the principle of reciprocity. Experiments such as the Ultimatum Game and the Gift Exchange Game show that the principle of reciprocity is ingrained to the point where we cease to behave as classical economists would expect. Reciprocity is clearly relevant to attitudes to immigration; just consider the debate over migrant welfare and concerns over public services.
One might think that reciprocity and ‘moral and civic commitments’ would work in opposite directions: altruism versus selfishness. But these terms don’t accurately capture what’s going on. Moral and civic commitments often have a reciprocal tint, and reciprocity itself is about balancing contributions and receipts, not about getting as much as possible for oneself.
The risk with the immigration dividend, then, is that willingness to live alongside migrants might decrease as a result. Moral and civic commitments people feel might be crowded out by the market mentality of ‘what’s in it for me?’ Or, more simply, people might be primed to think about the costs of immigration more, or overestimate them, as a result of the financial incentive.
So how might the policy be rescued to work in such a way that it retains a sense of reciprocity and rebalancing costs and benefits, but doesn’t crowd out people’s moral and civic commitments (or prime them to focus on the costs of immigration)?
The first thing to note is that the immigration dividend is not precisely analogous to the examples Sandel uses. The key difference is that money would presumably go to local authorities or some kind of local fund paid for by central government, rather than directly to individuals. The way that money is spent is going to be crucial in determining which psychological processes come to the fore.
If spent on council tax cuts, for example, it is closer to the Swiss example. If the money is spent on local infrastructure and public services, such as surgeries or housing, which come under pressure from large rates of in-migration, that might be the fairest response in terms of reciprocity, but it is still a transactional arrangement that focuses on mitigating the costs, and thus risks falling foul of the problems Sandel’s examples highlight.
One option is to earmark the money specifically for promoting integration. This would help communities not just to mitigate the costs, but also to maximise the benefits, of immigration. By bringing communities closer together, the money could reinforce those moral and civic commitments, rather than crowd them out. For example, funding for community-led initiatives promoting harmony and cohesion, or for ESOL, which is being cut dramatically, could be brought back and targeted at those areas which need it most.
However, this kind of earmarked funding is not without its problems. It can be extremely inefficient, as spending is no longer be based purely on need. Thus, huge amounts of ESOL funding might flood into an area that, despite high levels of immigration, doesn’t really need it. While it might help to regain public confidence, councils would be justifiably annoyed at being told by central government how to spend money, especially when core services are under so much pressure.
We need to get immigration policy right as a matter of urgency. The ‘immigration dividend’ is well-meaning, but fails due to its limited understanding of human nature, as being rational, selfish utility maximisers. If it is going to work, it needs to be more than a bribe.