In this article I consider another madcap scheme. This article should be read in conjunction with “Radically reforming welfare, part 1″.
Yesterday, I considered replacing all social security with cash payments.
One problem with welfare for all is that it encourages immigration that wouldn’t happen in a free market. For example, in the Union debate on Thursday (“This House believes the multicultural experiment has failed”), Nigel Hastilow mentioned the true story of an Afghan immigrant with seven children who receives £170,000 a year in benefits.
Any British welfare system needs to be paid for by British taxpayers. We can afford a welfare system which benefits a few, because most people work.
But if we offer benefits to everyone resident in the UK, we create a massive incentive for people to immigrate to the UK; to become resident and collect benefits. This is especially true for the benefits system I advocate. UK taxpayers could not possibly afford to pay for benefits for the whole world.
If we’re going to have benefits, the obvious solution is to only pay benefits to British citizens.
If we do that, we could do away with all migration controls and their costly bureaucracy, and have completely open borders.
I feel uneasy about mass immigration for one reason: population size. Just as London has become more built-up over the years relative to the rest of the country, I can envisage the UK becoming more built-up relative to the rest of the world. In 1726, César de Saussure could write, “Chelsea is one of the finest and largest villages outside London… Marylebone is a fine large village about one mile from London.” Could the UK become an “ecumenopolis”, with no greenery left?
I am inclined to support free markets, including free markets in labour and housing. Without state assistance, an immigrant can only move to a country if someone is willing to sell them a house and they are able to pay. If they are able to pay, they are likely to make a productive resident. And as more people move to the UK, property prices will rise, creating a neat negative feedback loop. But while free markets will allocate resources most efficiently, including the allocation of land, this may result in situations which most UK citizens would think are bad, such as the conversion of farmland and national parks into cities. Population growth in the UK is slowing, and without net immigration the UK population is expected to decline from about 2020. Immigration is the only thing that will increase the population. That said, I am inclined to trust the market, as long as distortions like benefits for immigrants are removed.
On average, citizens of other countries resident in the UK are net contributers of tax. But without the minority of immigrants who are net beneficiaries of the welfare system, we would be even better off. Immigration boosts GDP per person by a miniscule amount. Without unproductive immigrants we would be even better off.
In 2006, 400,000 people emigrated, but almost 600,000 immigrated. I wrote, “We can just cap immigration at 350,000, and implement a points system to get the most skilled immigrants.”
I now see that a points system is bad. It’s bad because it uses a bureaucracy instead of a market, so will cause an inefficient outcome. If we’re going to limit immigration, there are much better ways to do it.
Tim Harford explains the idea of tradable citizenship in his article “When it comes to foreign workers, some ideas aren’t so crazy” (Financial Times, 27th September 2008).
Shortly after the Soviet Union collapsed, a Russian bureaucrat travelled to the west to seek advice on how the market system functioned. He asked the economist Paul Seabright to explain who was in charge of the supply of bread to London. He was astonished by the answer: “Nobody.”
Fifteen years later, I had thought that almost everyone had abandoned the notion that a committee could plan its way through the unimaginable complexities of an advanced economy. I was wrong.
Earlier this month, the Migration Advisory Committee presented a list of professions that would qualify migrants for entry, broadly on the grounds of UK skills shortages. They include geologists of all stripes, veterinary surgeons (but not other veterinarians), chefs (but only those paid £8.10 an hour), sheep shearers with a British Wool Marketing Board bronze medal (or equivalent) and ballet dancers (but not choreographers, nor other dancers).
At least the old Russian bureaucrat would have had an answer to the question, “Who is in charge of the supply of sheep shearers to the UK?” It is the Migration Advisory Committee.
Cory Doctorow explains the problem:
“Jacqui Smith, the British Home Secretary, had unilaterally (and on 24 hours’ notice) changed the rules for Highly Skilled Migrants to require a university degree, sending hundreds of long-term, productive residents of the UK away (my immigration lawyers had a client who employed over 100 Britons, had fathered two British children, and was nonetheless forced to leave the country, leaving the 100 jobless).
If we’re going to limit immigration, the best way to do it would be to create a market for immigration, as Tim Harford explains:
Here’s a crazy alternative: the government could restrict immigration simply by auctioning the right to work in the UK. Permits would have various durations (a month, a year, in perpetuity). Citizens would get a free lifetime permit; non-EU residents would have to pay, or persuade their employers to pay. The price of the permits would depend on their scarcity, a decision that might just be within the competence of the state.
As well as allowing employers and migrants to decide for themselves whether they would get enough out of the match to justify the price of admission, the auction system would raise money to help pay for the public services migrants are so often blamed for clogging up.
It would have other advantages, too. Migration hawks would have a constructive way of expressing their xenophobia: they could buy permits and “retire” them, thus demonstrating that they really did value the absence of foreigners more than others valued what the foreigners had to offer. Citizens who wanted to leave could sell their permits on the way out.
I prefer a slightly different system: we make citizenship and the right to work the same thing. That would do away with tourists or spouses needing visas. More significantly, citizenship would then gain a person not only the right to work in the UK, but also also a Basic Income as described in “Radically reforming welfare, part 1″.
The government would not sell short-term permits. Rather, it would grant all current citizens a life permit. There would then be two ways to aquire citizenship:
- Be born here (actually this would be more complicated to prevent an incentive to come to Britain just to have a baby and gain your child an income for life).
- Buy it from a current citizen.
The population could therefore be kept below a maximum, but who precisely made up that population would be left to the market.
Now, I’ve said that if we remove artificial incentives to immigrate, so the only incentive to immigrate is the opportunity to build a better life for yourself, then we could have open borders and immigration would probably not be a problem.
So why am I advocating a limit on immigration at all?
America was founded as a libertarian society, to which people could come to make a better life for themselves, through their own efforts. At first, its population was composed of immigrants. It was a dynamic population: anyone with enough initiative to immigrate, without expecting any help, was someone with the initiative to create wealth. This helps to explain why America has created more wealth than any other country on Earth.
But over the years, its population has become a population merely descended from immigrants, and its population has become coddled by welfare, albeit much less than people in Europe (Charles Murray’s idea that that it “‘drains’ the life out of people – particularly the spiritual life and sense of meaning”).
UK citizenship under this scheme would be valuable for two reasons. It would guarantee an income paid by taxation, and it would give the holder the right to work in the UK. Someone living in the UK and not working would only be getting the first benefit: the guaranteed income. But someone who wanted to come to the UK and work would get both benefits. So citizenship would be more valuable to a would-be immigrant than to the current holder. If the guaranteed income was £5,000, and the market interest rate was 5%, a holder who wasn’t working would be willing to sell it for slightly more than about £100,000. They could move abroad to somewhere cheaper, and live in relative luxury for the rest of their life. They could invest that money and continue to receive an income for £5,000 for the rest of their life, but not paid for by the British state.
The would-be immigrant would be happy to pay £100,000 because they would get something more in return: not just an income of £5,000 (which their £100,000 was already getting them), but the right to work in the UK instead of wherever they lived already.
The UK would therefore gradually become full of dynamic people with initiative, who want to work, generating more wealth and making everyone better off. Everyone who receives the basic income would pay tax on the wealth they generate themselves, so if more wealth was being created, there would be less need for the basic income!
We need immigration controls in this manner, not because immigration is a problem, but because welfare is.
Politically impossible, of course, and perhaps impractical, too. But it cannot possibly make less sense than that list. If nothing else, the high price of permits might remind those of us lucky enough to have been born in a wealthy country how fabulously privileged we are.
