Recent protests in the UK—often led by various public sector groups, largely reflect the general population’s frustration with increasing cost of living, stagnating salaries, and overall declining standards of living.
Such broad discontent is being exploited by far-right and nationalist movements across Europe, which often manage to direct the anger toward immigration and globalization. Arguably, this rhetoric was part of the drive underpinning the successful Brexit campaign in the UK, and indeed the current Conservative government is still working to further control and reduce net immigration.
However, given the direct relationship between public finances, an aging population, and immigration, it is indeed a strange case of political disconnect.
Public services’ finances rely on a balanced combination of employment mix and growth
Public services provided by most Western governments are largely financed with income taxes paid by employed citizens and corporations. For instance, in the UK in the 2021-22 tax period, the largest spending categories were the healthcare service (23%), welfare (21%), state pensions (11% ), and education (11%), altogether totaling 66% of spending.
Most importantly, the quality of these services and the level of salaries that can be paid to the public workers providing them follow the usual supply and demand rules. As long as a reasonable percentage of the population is employed and paying taxes, the supply of funding will keep up.
However, with a population growing old, there is a higher number of people at retirement age consuming resources from the state welfare system than those at working age contributing tax payments to the overall system. This is largely driven by low birth rates in the UK and most other Western economies.
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By GlobalDataOn the demand side of the equation, it is also important that needs do not increase out of proportion with the funding. However, there is an increasing demand for healthcare and the welfare service, in part due to improvements in the health of older people, which is leading to increases in average life expectancy and, consequently, an older population.
To put it simply, there are fewer people contributing and more people consuming.
Immigration as an age pyramid prop
According to The Migration Observatory at the University of Oxford, in 2021, people born outside the UK made up an estimated 14.4% of the UK’s population, or 9.5 million people. Compared to the UK-born, these migrants are more likely to be aged 26 to 64 and less likely to be children or people of retirement age. The situation is similar in the United States, according to the Migration Policy Institute, which indicates that in 2021 people of working age (18 to 64 years) comprised 77 percent of the immigrant population, a much higher figure than the 59 percent of those born in the United States.
It is clear that despite all the negative myths touted by right-wing movements, immigration is a source of younger tax contributors for society. Most immigrants tend to be young people looking for a better chance in life—often much more willing to take less desirable jobs than locals—and hoping to start anew in a country with better opportunities.
Why does no political party openly promote immigration?
Leaving aside the obvious moral and humanitarian reasons for welcoming immigrants, it is striking that no political party openly advocates for encouraging immigration as a long-term solution to increasingly unbalanced public finances.
While there are indeed complex and delicate aspects of cultural dilution if immigration became too high, it would certainly be a less intrusive and likely more popular political program that trying to nudge people into having more children in this day and age. Sadly, too many parties are just not bold enough, and likely fear that emotional and possibly racist views among the citizenry would push back on such initiatives.
