Migrants 'key to pension crisis'
Foreign workers needed to boost tax take
Up to 10 million immigrants might be needed in Britain by 2025 to ensure pensioners can continue to receive £80 a week from the basic state pension, research out today suggests.
Researchers at Cass Business School in London have developed mathematical models of the likely course of the pensions crisis, which point to the need to work longer, save more and allow in more immigrants who will pay sufficient tax to keep the system afloat....
"The UK is facing some tough decisions in terms of state pensions provision. We can increase our work force via migration, we can work longer or we can increase contribution payments - even if we do this it only keeps the current state pension system stable until 2030," said Cass's Professor Lee Mayhew.
"The only other option is to combine these factors - work longer, increase migration and increase contribution levels," said Professor David Blake, another of the report's authors.
These are similar conclusions to those of Adair Turner, who compiled a major report into pensions for the Pension Commission, which was released last month.
http://money.guardian.co.uk/pensions/story/0,6453,1340523,00.htmlEstimates of the levels of immigration required to maintain the viability of the UK state pension were made by David Blake for the House of Lords Select Committee on Economic Affairs. Grant that it is necessary to make some difficult choices in order to keep the pension bill within reasonable limits (set by the growth in the wage bill), Blake asks whether immigration could help us to avoid the costs that are implicit in the other main options (a cut in pension benefits; more saving during the working life; an extended working life)? The criterion of success would be a stable ratio between the pension bill and wage will. “Under plausible assumptions”, and on this interpretation of success, annual net inflows of about 500,000 migrants would be required “to save the pension system”. Only when immigration levels are set unfeasibly high, does immigration hold out the prospect of avoiding the necessity of making other major adjustments to pension policy.
[unfeasibly high being a political determination, not an economic one]
http://www.ageing.ox.ac.uk/ageinghorizons/text%20only/pension%20reform/textonlyreplacementmigration2004.htmFrom Blake's report:
"It is highly likely that the demographics will dominate the economics over next 50 years in the UK, since increases in labour productivity by themselves will not be sufficient to compensate for the combined problems of population ageing and declining fertility. It is therefore also highly likely that pensions and immigration issues will increasingly dominate the political agenda on national resource allocation over next half century."
http://www.lse.ac.uk/ubs/pdf/dp15.pdf"The main conclusion of this report is that a targeted immigration policy which attracts young individuals
in sufficient numbers would both stop population decline and slow population ageing. In my view, if current demographic trends continue then population decline and population ageing will lead to a sizeable reduction in the standard of living of Scottish people. Scotland in not unique in this respect, since population ageing is a feature of most industrialised nations. For example, the current economic problems in Germany clearly have a demographic dimension...
It is somewhat bizarre that the Scottish Executive warns us that population decline/ageing is our “number one” problem and yet at the same time they are virtually powerless to do anything about it....
It is clear that the numbers of net migrants needed
to stop population decline, and at the same time decelerate population ageing, are not small. 50,000 net migrants per year is about one per cent of the total Scottish population. It is not difficult to see that managing a migration flow of this size would present a serious challenge to the people of Scotland and their government. It is worth noting that such a number may seem unrealistically large. However, in percentage terms it is not dissimilar to the targets set by, for example, Australia, Canada and New Zealand—all countries that are committed to increased immigration.
http://www.scotecon.net/publications/Wright%20Immigration.pdf"Immigration benefits the U.S. economy overall and has little negative effect on the income and job opportunities of most native-born Americans, says a new report* by a panel of the National Research Council. Only in areas with high concentrations of low-skilled, low-paid immigrants are state and local taxpayers paying more on average to support the publicly funded services that these immigrants use.
"Immigrants may be adding as much as $10 billion to the economy each year," said panel chair James P. Smith, senior economist at RAND Corp., Santa Monica, Calif. "It's true that some Americans are now paying more taxes because of immigration, and native-born Americans without high school educations have seen their wages fall slightly because of the competition sparked by lower-skilled, newly arrived immigrants. But the vast majority of Americans are enjoying a healthier economy as the result of the increased supply of labor and lower prices that result from immigration."...
The National Research Council is the principal operating arm of the National Academy of Sciences and the National Academy of Engineering. It is a private, non-profit institution that provides independent advice on science and technology issues under a congressional charter.
http://www4.nationalacademies.org/news.nsf/isbn/0309063566?OpenDocument