IMMIGRATION is not an easy subject for an economics columnist, and not just because it is hard to write about it without offending somebody. It is difficult because the economic impact of immigration is hard to quantify and much disputed.

Not only that but any economic benefits have to be set against what some would see as the significant social costs of a fast-rising immigrant population.

That rise is now estimated at a net 190,000 a year, according to the latest projections from the Office for National Statistics, with more than 90% of that, 171,500, going to England, 9,500 to Wales, 8,500 to Scotland and 500 to Northern Ireland. This is in the context of a population expected to rise to 65m by 2016 and 71m by 2031.

In net terms, immigration will add the equivalent of the population of Northampton each year, or 1m extra people every five years. For this small set of islands, these are significant numbers.

So let me try to steer a course through the economics of this. One reason for doing so is that the House of Lords economic affairs committee is conducting an investigation into the economic impact of immigration and has assembled an impressive array of written evidence. Those who want to dig further should look at its website, which can be accessed through www.parliament.uk .

There are contributions from business, with the Institute of Directors saying that three-quarters of its members believe that foreign-born workers make a big positive contribution to the economy and, more controversially, that they “significantly outperform the existing workforce across a whole range of measures, including productivity, education and skills, work ethic, reliability and the amount of sick leave”.

The City of London Corporation waxes lyrical about the historic contribution of immigrants, noting that “City street names such as Lombard Street date back to the reign of King Edward I, when land was given to goldsmiths from the Lombardy region in Italy”. More recently there has been a significant City influx from the Continent and America and the corporation notes that London’s overall foreign-born population rose from 1.17m to 2.23m between 1986 and 2006.

J Sainsbury says it has used migrant labour to fill “pressing gaps in both skilled and unskilled areas” and praises the work ethic of such staff.

This kind of thing would be a red rag to the unions, it might be thought. But the Trades Union Congress, in its submission, is also strongly supportive.

“The overall economic impact of immigration is limited but positive,” it says. “Migrant workers contribute more in taxes than they receive in services, and migration probably leads to slightly higher levels of employment and wages for native workers. Migration may possibly be linked to an increase in wage inequality in this country, but the evidence is not conclusive.”

The government’s take on the economic impact of immigration is also reassuring. It believes that in the short term the impact of immigration on the public finances is positive, though the last official study was some years ago. It concluded that migrants paid £2.5 billion more in taxes than they took out in benefits and the use of public services. This net gain to the exchequer is likely to have grown, the government suggests.

The long-term impact of migrants is more difficult to assess, it accepts. An American study pointed to a large overall positive impact but any conclusion for Britain is sensitive to the number of dependants each migrant has, and whether they remain in Britain until retirement. As it is, the effect of migration will be to ameliorate the consequences of Britain’s ageing population.

The dependency ratio – the ratio of dependants to working-age people – is 61% and will rise to 74% over the next 50 years. With zero net immigration it would increase to 82%.

The arrival of migrant workers has meant employers have not had to outbid each other for scarce labour. This has helped the Bank of England by delivering lower wage rises for a given rate of economic growth than would otherwise have been the case. Interest rates have thus been lower in recent years than they might have been.

But have migrant workers, by helping to keep a lid on wages, merely impoverished some groups of workers in Britain, particularly the unskilled and the young “Neets” – not in education, employment or training – setting up huge social problems?

David Blanchflower, the Bank of England monetary policy committee’s labour-market expert, says not, though in his submission he argues that fear of unemployment prompted by the arrival of migrants may have helped restrain wages. In general, however, the detailed research suggests that migrants have not been taking “our” jobs.

So why, apart from the fear factor, have migrants helped keep wages down? Traditionally, foreign workers earned more on average than the native-born population, the figures being bumped up by well-paid foreign workers in certain sectors like the City.

The recent arrivals from eastern Europe have changed that. They earn less, on average, than the native population. Their numbers, we know, have been significant. Their effect, therefore, may genuinely have been benign – allowing most native workers to still enjoy reasonable pay and salary increases while reducing the rate of average earnings growth sufficiently to reassure the Bank.

We do not know, of course, how long this effect might last and it will not convince the doubters, of which there are many. Bob Rowthorn, emeritus professor of economics at Cambridge, argues that the economic benefits of immigration, to the extent that they exist, are “minor” and “transient”.

In the meantime, he suggests, “the interests of more vulnerable sections of the domestic population may well be damaged, and any economic benefits are unlikely to bear comparison with its substantial impact on population growth”.

It would be good to be able to refute this with proof that the economic benefits of migration are large and overwhelming. So far, however, that proof does not exist.

PS: Ever since the publication of the infuriatingly successful Freakonomics, people have been looking for intriguing links between apparently unconnected things. The one that stood out in the book was the apparent link between the change in American abortion laws in the 1970s (making it easier for expectant mothers to get rid of unwanted children) and the fall in crime in the 1990s. Many others have challenged the link, but it was intriguing.

The authors of Freakonomics, Stephen Dubner and Steven Levitt, are still at it. Recently they wrote a piece asking whether Jane Fonda was responsible for global warming. The argument was that a 1979 film in which she starred, The China Syndrome, put a generation of Americans off nuclear power, and thus ensured that the world’s biggest emitter of greenhouse gases carried on emitting.

That set me thinking that there must be other links like that. Did the classic 1987 film Wall Street, starring Michael Douglas as the lizard-like Gordon Gekko, precipitate the October 1987 crash? Sadly no, though it might have contributed to investment bankers being permanently unloved. The film was not released until December that year. Likewise, the news that a sequel to Wall Street is in preproduction, but will come out after the current market turbulence, supports the view that art imitates life, not the other way round.

But there must be other examples where movies have anticipated important real-life events, or changed behaviour in a way that brings those events about. Any suggestions gratefully received – and if there’s a bestselling book in it, I promise to share the spoils.

david.smith@sunday-times.co.uk

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