Immigration that fills gaps in the domestic jobs market can help push down UK inflation, the deputy head of the International Monetary Fund (IMF) has said. The prime minister has said rates of legal immigration are “too high”. Yet the IMF’s Gita Gopinath told BBC Newsnight that “with inflation as high as it is there are benefits to having workers come in.” The government said the immigration system could “flex to the needs of the economy”.
Net migration (the difference between the number of people entering the country and those leaving on a long-term basis) is at a record level in the UK – at 606,000 in 2022, according to the Office for National Statistics. Meanwhile, UK headline inflation fell to 8.7 percent year-on-year in April, but core inflation – which excludes volatile food and energy prices— rose to 6.8 percent, the highest in the G7.
“In this context, with inflation as high as it is, having workers who can fill the shortages in some of the sectors that we are seeing right now will help with bringing inflation down,” Ms Gopinath, the deputy managing director of the IMF, said. “So, I think there are benefits to having workers come in.” The latest official statistics showed the UK still had more than one million vacancies in the three months to April 2023.
The industries with the highest vacancy ratios were accommodation and food (5.5 percent), health and social work (4.5 percent) and professional scientific jobs (4 percent). Economists have identified the UK’s tight labor market, exacerbated by the impact of Brexit on flows of European Union workers and the impact of the COVID pandemic, as one of the main contributory factors to high domestic inflation.
April’s higher-than-expected inflation rates led many to predict the Bank of England will raise interest rates higher than previously thought, from their current 4.5 percent to above 5 percent. But Ms Gopinath downplayed the idea that the UK has considerably worse core inflation than other developed economies. “It would not make a big difference between small differences in numbers in core inflation,” she said.
Source: IBP