Labour Migration (Revision Essay Plan)

Here is a guided answer to a synoptic essay question: Evaluate the likely micro and macroeconomic effects of a sustained fall in inward labour migration into the UK (25)

Micro effects of a fall in labour migration

Micro effects might focus on:

1. Business costs e.g. rising wage/labour costs if shortages of workers occur – identify the sectors likely to be most affected
2. Impact on the housing market (to buy and to rent) if there is a slowdown in population growth – will it make renting more affordable?
3. Effects on consumer prices – some prices might increase if labour costs rise, for example in the farming industry; care homes might have to raise their fees if they cannot attract the workers they need, some might close.

Macro effects of a fall in labour migration

Macro effects might focus on:

1. Consequences for the rate of unemployment – will there be an expansion of domestic employment as migrant workers are replaced? Or will a decline in migration cause a decrease in aggregate demand causing slower GDP growth?
2. Impact on the government’s finances. Are migrants net-contributors to the Treasury? Will NHS costs rise if the NHS cannot find the workers it needs to deliver public services?
3. Effects on competitiveness – will a fall in migrant inflows affect productivity and a decline in the number of skilled workers / entrepreneurs wanting to live in the UK? How will UK firms respond – perhaps by ramping up spending on apprenticeships?