Immigration needs a more holistic approach

A year ago Pat Rabbitte became the first political leader to pose questions about the possible downsides of immigration

A year ago Pat Rabbitte became the first political leader to pose questions about the possible downsides of immigration. His response to a question in an interview in this newspaper triggered a debate about one of the biggest social and economic changes to have taken place since the State's founding. This was much needed.

A transformation of the magnitude that has taken place in Ireland in recent years, and in particular since EU enlargement in 2004, rarely happens without public unease. To assuage concerns, frank discussion about the nature and consequences of the phenomenon is essential.

The debate that followed Mr Rabbitte's comments was measured and calm compared to most other countries. It also differed in focus. Elsewhere, alarmism about immigration is usually most loudly voiced by those who fear or dislike diversity. In Ireland, it has come mainly from those who talk of a "race to the bottom" in worker protection and pay.

One year on, the alarmists' talk of a slippery slope to Dickensian working conditions, "worker displacement" and "wage degradation" has not come to pass.

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On worker protection, this was entirely predictable. Claims that immigration is accompanied by an inexorable decline in standards were always bogus. Standards are a political issue, not an economic one. Unlike wages, they are set by government, not the interplay of supply and demand. The more concern that exists about their erosion, the more pressure there is on lawmakers to reinforce them.

This is exactly what happened in 2006. The latest social partnership deal raised labour standards and made their enforcement more rigorous. Nor is there a shred of hard evidence to suggest that displacement has taken place. Joblessness has hovered steadily just above 4 per cent since the beginning of the decade. This did not change when 75 million additional Europeans gained access to the Irish labour market in May 2004. Developments in long-term unemployment - probably the best indicator of displacement - have been even more reassuring. It stands at just 1.3 per cent of the labour force, among the lowest in Europe. That it has actually declined since early 2004 gives the lie to claims that people are being pushed on to the scrapheap by the newly arrived.

So far, so rosy. But what about salaries and wages? Those who worry about immigration are on much firmer ground when they fret about its effects on incomes because an increase in the number of workers can put downward pressure on pay rates.

The good news is that there has been no "wage degradation" (falling wages, in plain English). On the contrary, since the EU's 2004 expansion, economy-wide pay has continued to rise. It is true that rates of increase have decelerated marginally, but as this trend's origins preceded enlargement, immigration can only be said to have played some part in change since 2004.

Even when developments in the sectors of the economy in which immigrants have clustered are examined, the picture is largely the same (although conclusions must remain somewhat tentative as data on the national/non-national composition of employees at a sectoral level are not gathered).

In the building trade, which has by all accounts attracted an unusually large number of foreign workers, pay patterns show no correlation with those of immigration. Wage growth accelerated after enlargement, slowed sharply in the first half of 2006, then recovered in the autumn.

Only two sectors - manufacturing and the hospitality industry - have seen a discernible slowdown in wage growth since enlargement. In the former, too many factors are in play to attribute lower pay rises to immigration. Only for those waiting tables and pulling pints could it be suggested that immigration has depressed wage growth, and even here caution is needed because limited data make precise evaluation impossible.

When it comes to other benefits and costs of immigration, things become even harder to weigh up. Some upsides of immigration - fresh dynamism, new skills and different ideas - are as unquantified as the downsides: extra congestion, a further inflating of the property bubble and stretching the education system in places.

Also hard to evaluate is the effect diversity has on social cohesion. Robert Putnam, a guru on the subject to so many politicians - the Taoiseach included - published new findings on the phenomenon in 2006. He says that society's glue is eroded by greater diversity: the less people have in common, the less likely they are to hang together in pursuit of common goals. It would be wrong, however, to exaggerate this. A lot of nonsense is spoken about social capital. Everyone cosying together may warm the cockles of collectivists' hearts, but rowing in at community meetings, parish events and the local scout troop is probably less essential for society's wellbeing than voguish social capitalists suggest.

All that said, given the speed and scale of the recent change, the many unknowns about the benefits and costs of immigration, and the risk that problems similar to those in other countries could arise in the future, a more focused, co-ordinated and strategically-minded response may be needed.

One way to achieve this could be to appoint a junior minister to take a more holistic approach to the multi-dimensional challenges the phenomenon throws up. This could help ensure mistakes in other countries are avoided, the lessons of their successes are applied and those who are uneasy about recent changes are reassured. To continue with a hands-off approach would be to tempt fate. If something were to go wrong - an economic downturn, for instance - the experience could yet turn sour.

Dan O'Brien is a senior editor at the Economist Intelligence Unit. Breda O'Brien is on leave.