How changes in the rates of migration and variations in the 65+ employment rate can boost uk output

How changes in the rates of
migration and variations in the 65+
employment rate can boost UK
output
Ben Franklin, International Longevity Centre – UK
@ilcuk
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.

Previous literature/research
 Previous research has focused on the isolated impact of migration or
alternatively changes to the age structure of the population on
economic output (see for example, OBR Fiscal Sustainability reports).
 Previous projections of output have assumed a single scenario for
growth in productivity per worker but the impact of migration and
changing age structure on output is likely to be different at different
levels of labour productivity.
 Output is also likely to be affected by changes in the level of labour
force participation of older workers.
 This research seeks to fill this gap in literature by looking at the
combined impact of changes in migration and 65+ employment rates
on UK output under different assumptions of labour market
productivity up to the year 2037.

Assumptions*
Assumptions for each scenario
1. Low migration, zero increase in long run average employment rates
Downside
Base
Upside
Annual growth rate in productivity per worker
0.8%
2.2%
2.6%
Employment rate of 16-64 year olds
71.5%
71.5%
71.5%
Employment rate of 65+
6.1%
6.1%
6.1%
Population projections
ONS low migration variant ONS low migration variant ONS low migration variant
2. Central migration, zero increase in long run average employment rates
Downside
Base
Upside
0.8%
2.2%
2.6%
71.5%
71.5%
71.5%
Employment rate of 65+
6.1%
6.1%
6.1%
ONS principal projection
3. Central migration, increase in 65+ employment rate
Downside
Base
Upside
0.8%
2.2%
2.6%
71.5%
71.5%
71.5%
Annual employment growth rate of 65+
2.6%
2.6%
2.6%
4. High migration, increase in 65+ employment rate
Downside
Base
Upside
0.8%
2.2%
2.6%
71.5%
71.5%
71.5%
Annual employment growth rate of 65+
2.6%
2.6%
2.6%
ONS high migration variant ONS high migration variant ONS high migration variant

*A further and significant assumption is that the productivity of migrants and over 65s is the same as the rest of the working population.
Both assumptions are reasonable. NIESR have shown that increasing the number of migrants actually raises overall levels of
productivity. Research on the productivity of older workers is inconclusive on whether age makes them less productive. In fact there is
research to show that some aspects of cognitive performance can improve with age.


Headline findings
 Relatively small year on year changes to the 65+ employment rate and
rates of migration can make a significant difference to overall levels of
ouput – particularly towards the end of the forecast period.
 Assuming population grows in line with ONS’s high migration variant
and the employment rate amongst the 65+ cohort rises in line with the
20 year trend, output can be 12% higher in 2037 than in a low
migration, zero 65+ employment growth scenario.
 Assuming base levels of labour productivity growth, this equates to a
boost in output of £322bn in 2037 and £3.3 trillion over the entire
forecast period relative to the low migration, zero 65+ employment
growth scenario.

Headline findings cont…
 At lower levels of labour productivity, increased migration and
increased employment rates amongst the 65+ cohort has a
dramatic affect on rates of GDP growth, particularly in the last 6
years of the forecast period.
 Assuming downside rates of labour productivity growth, but high
levels of growth in migration and employment amongst the 65+
cohort - the average annual economic growth rates increase from
0.9% to 1.4% (1.6x) during the years 2031-37. At base levels of
productivity the shift in growth rates is less substantial - rising from
2.2% to 2.7% (1.24x) over the same period.


Charts and tables
The base case
Average annual GDP growth rates under different
assumptions for migration and 65+ employment


Charts and tables
The downside
Average annual GDP growth rates under different
assumptions for migration and 65+ employment


Policy implications
 Small increases over time to 65+ employment rate and migration,
can cumulatively build up to make a significant impact on UK output.
 If we are in fact entering a period of stagnant productivity growth
(see Summers and Krugman’s work around “Secular Stagnation”
amongst others), boosting the labour force will be critical to driving
output.
 Policymakers must think long-term rather than short term, to
consider how to facilitate better working environments for the elderly
to encourage working beyond 65. And hasty measures that seek to
curb immigration today may inadvertently be shifting the UK onto a
lower growth path going forward.

Many thanks

Ben Franklin
Research Fellow
International Longevity Centre - UK
benfranklin@ilcuk.org.uk
02073400440
Twitter: @ilcuk

How changes in the rates of migration and variations in the 65+ employment rate can boost uk output

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