Aging population
The UK’s population is getting older. In other words, more old people depend on fewer working-age people, which means the UK needs immigration to do the work. As statisticians put it, the UK’s old-age dependency ratio (OADR) is increasing. This is the ratio of those of pensionable age (65+) to every 1000 of working age (15-64).
The UK OADR was 280 in 2020 and will reach 352 by 2041 (a 26% increase in 21 years), according to ONS. It will continue to grow during the rest of the 21st century according to the UN (see Figure 6.1 for the trend).
Everything else being equal, the rising OADR will increase the UK’s demand for migrant workers. The same is true in other developed nations. As a result, the UK is competing with its European neighbours to attract migrant workers.
Figure 6.1: UK old-age dependency ratio
Sources:
United Nations, Department of Economic and Social Affairs, Population Division, World Population Prospects: 2024
ONS, Overview of the UK population: 2020, February 2022
Workers to support economic growth
In simple economic terms, a growing working population means growing GDP. However, for the overall standard of living to rise, overall GDP per capita must also rise.
Free movement of people within an economy is necessary for it to be healthy alongside free movement of goods. services and capital. It allows people to move to where they are needed. This applies within a large economic area like the EU or the US just as it does within the UK. Provided they are free and able to do so, people will choose to move between countries for the same wide variety of reasons as between regions within a country. Please the section on Freedom of Movement for the EU’s detailed rationale.
The relationship between immigration and economic growth is complicated. For example, the value that a migrant worker creates involves more than their salary level or the additional GVA that they contribute. Factors to consider include:
- skill levels:
- skilled individuals are likely to be more productive than the lower-skilled
- however, lower-skilled workers play key roles in critical industries, for example, agriculture, hospitality, and social care
- how many years an individual is likely to work and whether they are full-time or part-time
- how many dependants they support
Policy alternatives take years
Policy alternatives to reduce the need for migrants, like raising the retirement age or encouraging families to have more children, take years to have meaningful effects.
In the long-run, the UK will need to find alternatives to migration to sustain its working age population. For example, technological change (such as artificial intelligence and robotics) is likely to change workforce requirements, which may reduce demand for migrant workers. However, the UK and the EU seem likely to need migrant workers for a long time.
Source:
Eurostat, Population structure and ageing, February 2024
LSE, The link between growth and immigration: unpicking the confusion by Professor Alan Manning, October 2022
Resolution Foundation, Life in the slow lane – assessing the UK’s economic and trade performance since 2010, June 2024