Employers, migration and the ‘diversity dividend’ – IPPR

Government, local authorities and employers have underestimated the economic benefits that migrants bring to local economies, according to a new report to be published by the Institute for Public Policy Research (ippr) in September.

The report, which looks at the local economic impacts of migration, argues that discussion about local economic impacts tend to focus on just a few issues such as public services and wages, neglecting many positive contributions that migrants bring to local economies.

ippr’s report sets out the three different ways in which migration has a positive affect on local economies. These include:

• improving the ‘skills mix’ in an area,
• increasing an area’s diversity, and
• changing the size and productivity of local economies.

The report shows that migrants play a key role in changing the local ‘skills mix’ by filling skills gaps, and doing jobs that UK workers don’t want to do. ippr argues that local government and employers need to ensure that the benefits produced by employing migrant workers are accompanied by local strategies to ensure that indigenous workers’ wages and job opportunities aren’t damaged; and to ensure local businesses don’t become overly reliant on migrant workers.

ippr says that employers benefit from diversity because diverse workforces tend to be more productive and creative, which boosts business performance. Local economies also benefit in a number of ways, because migrants:

• may have different skills which can lead to the establishment of new types of businesses
• generate greater business diversity
• tend to be more entrepreneurial, which greatly benefits local areas that rely on entrepreneurs to boost growth and employment
• have important links with their countries of origin which can benefit local areas – for example, by expanding the size of the market that local firms can sell to.

However, ippr argues that employers and local economies aren’t reaping the full benefits of migration because many migrants are staying for short periods instead of settling in the UK. ippr analysis has shown that over a million migrants came to the UK from the eight countries that joined the EU in May 2004 have arrived in the UK since accession, but around half of those have now returned home.

ippr’s report recommends that local and central government should ensure they are doing enough to attract and retain migrants and develop local strategies to maximise local business benefits. At the same time government should ensure that British born workers receive adequate training and career development opportunities.

Laura Chappell, ippr Research Fellow, said:

“Migrant workers can bring enormous benefits to local businesses and areas. However, many of these contributions – such as new ideas and ways of working, and an entrepreneurial spirit – may have been neglected in the past. To get the most out of migration, local communities, alongside local leaders, businesses, universities, and central government, need to recognise the variety of benefits that migrants can bring, and plan accordingly.

“Political leaders also need to sharpen their narrative about migration, particularly on the longer-term effects on local areas. Migration flows are critical, but the bigger story is how we manage more diverse communities to deliver the greatest benefits for all.”

Your Place or Mine? The local economics of migration by Max Nathan is the first part of a series of eight papers looking at the economics of migration. It will be published by ippr in September.