In an article on recent trends in immigration from Poland to Britain, the NYT repeatedly refers to the need for such immigration to prevent labor shortages. This is a strange comment. Britain has a market economy, not a centrally planned economy. In a market economy, prices adjust to supply and demand. If there is an inadequate supply of workers to do things like working as custodians, restaurant work, or to work in other traditionally low-paying jobs, the market will cause the wages of these workers to rise. At a high enough wage, more workers will be willing to do these jobs. In addition, the price of services increase, so that the demand for this labor falls. In a market economy, higher wages are the mechanism through which labor shortages are eliminated. The result of this market process is that workers in low-paying occupations are paid more money and the price of the services they provide increases. While this improves the standard of living for people in low-paying occupations, it does have a negative impact on the standard of living of more highly paid workers (like doctors and journalists) and people who get their income from capital. (Of course the winners and losers would be reversed if Britain focused on immigration of highly educated workers.) At one point the article claims that immigration has benefited England's economy, noting a report that showed immigration added $12.3 billion to its economy in 2006. This is equal to 0.5 percent of GDP. It's not clear from the article whether this increase refers to the effect of a single year's immigration or immigration over some longer period of time. But, assuming the former (which seems more plausible), the report would seem to imply that immigration actually lowered per capita in Britain. The rate of immigration of Poles alone would have increased Britain''s population by more than 0.6 percent, implying that the net effect was a decline in per capita income of 0.1 percent last year.
--Dean Baker
