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Author: Adelina Fendrina

Productivity is the fundamental driver of national prosperity, and thus of increasing wages and improving standards of living. It is therefore only natural that boosting Britain’s production capabilities is seen by many as the route to Brexit’s success. In fact, leaving the European Union grants the UK the possibility to disengage itself from many of the union’s heavy regulatory restrictions and adopt a more liberal approach to a variety of issues, among which is immigration.

When migrants move to countries with higher productivity, they ensure efficiency in labour allocation and also supplement the skill composition of the workforce, which then encourages specialisation, increases productivity and raises national wages. The aim for Britain should therefore be to outline a system of policies that would boost the contribution of immigration to economic growth, namely one based on prioritising highly skilled immigrants because of their higher contributions to innovation and productivity.

One way this could be accomplished is by rethinking the regulatory approach towards non-EU migrants with a view of attracting more high-skilled workers. This begins with recognising that the skilled non-EU migration cap has consistently hindered economic growth – hitting this upper limit for the past few months has led to a staffing crisis in many key economic sectors.

Such labour shortages mean that it is imperative Britain remains open for immigration from the EU – an endeavour which could be achieved by abolishing the net migration target that was meant to scale back immigration to the “tens of thousands”, but its impracticality made it economically unfeasible, since it could only be achieved by severely depressing the economy. Furthermore, it is vital that the devised immigration policy does not deter international students from studying in the UK.

If immigration numbers are to be restricted, a way to allocate visas that maximises the economic benefits of immigration would be the establishment of an auction system for employer permits to hire migrant workers. Utilising the price mechanism to form an auction market for tradable employer permits would allow employers to adapt easily to changing economic conditions and market-determined prices would ensure the efficient allocation of scarce resources.

With this in mind, liberalisation of Britain’s immigration restrictions is fundamental to ensuring productivity growth and thus improving living standards. As Jonathan Portes, director of the National Institute of Economic and Social Research, puts it, being “open for business” means that Britain cannot be closed to migration.

Source: https://www.adamsmith.org/blog/immigration-after-brexit

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