Poultry externalities
What a Northern Irish chicken factory exposes about Britain's approach to migration
Following this year’s 12th of July celebrations, there were clashes between rival gangs of men in the Co Tyrone town of Dungannon. So far, so standard.
What made these disturbances unique however was that rather than being made up of loyalists or republicans, these gangs were made up entirely of men from the small Southeast Asian nation of East Timor. Videos of the disturbance posted online show groups of men armed with knives and other weapons confronting each other in the middle of a housing estate. Two men have since been charged in relation to the disorder.
Show this video to someone transported from the 1980s, unfamiliar with the migration policies of the modern British state and their first thought might genuinely be that the Troubles had gone on so long that the IRA and loyalist paramilitaries had started to deploy Timorese mercenaries due to a lack of manpower. Even if more mundane, the true story of how Timorese gangs came to scrap it out on the streets of Dungannon is nevertheless much more revealing about Britain’s approach to migration.
Moy Park and cheap labour
Founded in 1943 just outside of Dungannon, Moy Park is a billion pound company and Northern Ireland’s largest employer, with several thousand employees across the province, primarily concentrated at its factories in Dungannon and Craigavon.
Moy Park’s successful business boils down to one core product: chicken. If at some point this century you have bought a chicken at a major British supermarket or enjoyed a chicken burger from a major fast food chain, then odds are you have eaten meat that was processed in one of these factories.
As you might expect, working in a chicken factory is not everyone’s idea of a dream job. Long, shift-based hours on busy production lines for relatively low pay and potentially little prospect of advancement makes this a far cry from the graduate office job that a generation and a half of young Brits have grown up to expect.
Nevertheless, Moy Park’s labour force historically has been drawn from the towns where its factories are based. In an economy as challenged as that of Troubles-era Northern Ireland, there were always willing workers to take on these jobs and even today you will still find many Northern Irish people employed there.
However, around the turn of the millennium two major changes occurred that would fundamentally alter the business calculus of large companies in Northern Ireland like Moy Park. The first was that following the reduction in violence post the Good Friday Agreement, Northern Ireland experienced reasonably strong economic growth, with GDP per capita increasing from 77.7% of the UK average in 1997 to 82.3% in 2006, even at a time of relatively strong growth in the UK as a whole. Higher incomes (particularly at the bottom of the distribution) meant that Northern Irish labour was no longer as cheap as it had been for firms such as Moy Park. The second change was that at the same time, an entirely new pool of cheap labour opened up to companies in the form of migrants from a series of EU countries, including the newly acceded EU10 and Portugal1.
That last country in particular is important in this case. Upon gaining its independence in 2002, Portugal granted citizenship to close to the entire population of East Timor (a former Portuguese colony). This granted the residents of this small Southeast Asian nation full access to the European Union and its labour market.
Facing rising wages amongst domestic workers, firms began to look overseas for alternative sources of labour. According to interviews with Timorese diaspora, in 2000 a Northern Irish meat factory began advertising job opportunities at their Northern Irish plants in Portugal. One Timorese man living in Portugal at the time took up the offer, hence beginning a sequence of chain migration that would lead to upwards of one in every 500 of the country’s entire population ending up in a series of small market towns over 8,000 miles away.
Moy Park and its Brazilian (yet another Lusophone connection) and later American corporate owners undoubtedly benefitted greatly from this influx of labour to replace its increasingly expensive Northern Irish workforce. Lower living standards at home, limited alternative employment prospects within Northern Ireland and a willingness to live in cramped HMOs meant that Timorese workers had a much lower ‘reserve wage’ than their Northern Irish equivalents. This led to the rapid ‘Timorese-ification’ of the company’s workforce. By 2016, 800 of the 1,800 employees at the firm’s Dungannon factory were from East Timor, with hundreds of others working a similar plants nearby. This almost certainly enabled Moy Park to hold wages at a lower level than they would otherwise have been able to, contributing to it ultimately becoming a £1bn company.
Third party costs
What is less clear however is whether this influx has delivered the same unalloyed benefits to wider Northern Irish society as it has to companies like Moy Park. Swapping domestic labour for foreign labour produces a clear net gain for the companies employing it (in the form of a lower wage bill), but it can, and often does, create other costs on wider society, for which the employer is does not pay.
The increase in population associated with bringing over migrant workers creates additional pressure on infrastructure and public services such as health and education. If the migrants in question are net fiscal contributors (i.e. pay more in taxes than they receive in state services or benefits), then in theory they are covering any additional costs they put on public services via their taxes. However, the low paid nature of this work (Moy Park has been fined in the past for failing to pay its workers the minimum wage) means that in this case, the migrant workers are typically earning much less than the ~£38,000 salary required before a household becomes a net contributor on an annual basis. Once you consider the costs associated with translation services2, future dependents and the inevitability of the migrants themselves ageing into old age (with the associated pension and health costs), the probability that these workers will be net fiscal contributors over their lifetimes is vanishingly low.
Crimes committed by migrants add a further dimension to this calculation. Unlike public services or economic activity, crime is not an activity characterised by “displacement”. It is not true to say that had the Timorese gangs not been there to fight in Dungannon last month then some other violence would have taken its place. Criminal activity by migrants and the costs associated with it are therefore almost entirely “additional” to the society which must then bear them and those costs would not have existed had those individuals not been living there. This also makes arguments around whether or not migrants commit crime at a higher or lower rate than locals a bit of a void debate, ultimately all3 migrant crime is additional relative to a counterfactual where they were not living in the country.
What we therefore have here is a case of what in economics are known as negative externalities: where there are third party costs to an economic activity for which no compensation is paid. The economic activity in question here is the hiring of migrant labour, an exchange that benefits both parties in that transaction (the employee who receives a salary and the employer who reduces their costs), but imposes external costs on society (those set out above), which neither the employee nor the employer adequately compensate.
Internalising the externality
The best and most efficient way to deal with externalities is to ‘internalise’ them: essentially force the parties in a transaction to bear the external costs currently being borne by a third party. As set out above, in Britain’s current economic model, this does not happen and is a key reason why we see such discontent with current migration policy.
One way to force migrants and employers to bear the cost they impose on society as a whole is via salary thresholds for visas and entry. Higher salary thresholds, surcharges and strict rules regarding dependents all increase the probability that a migrant will be a net fiscal contributor and cover the costs of the public services they use. Since many of the Timorese migrants in Northern Ireland entered via the EU prior to 2021, they faced none of these barriers and have achieved settled status despite their relatively low fiscal contribution. The lowering of the Skilled Worker Visa salary threshold in 2020 that precipitated the Boriswave is a further cautionary tale in how a society that fails to adequately select the migrants it allows to enter will face the fiscal consequences for decades to come.
Another option is to impose more of the costs on the employers who import migrant labour, an approach that has been almost entirely absent from the UK’s policy mix on migration, with the government recently taking steps to make workers from India even more attractive relative to domestic ones. Higher payroll taxes on migrant workers is one option a future government could consider to force firms to face more of the external costs when hiring from abroad. Another, potentially more targeted option would be for a firm to post a bond or deposit to the government of a given value (say £50,000) for every migrant worker visa it wishes to issue. When that migrant worker then imposes costs of the state that would not have occurred had they not been brought over (e.g. crime as set out above, or translation services), then the estimated costs involved (or a portion thereof) will be deducted from that deposit. Any remaining value once the individual in question leaves the relevant visa will then be returned to the company. Such a system would force firms to both a) face some of the external costs of the transaction they are currently benefitting from and b) conduct stricter vetting of those they bring over.
For decades now, companies seeking to reduce their wage bill have reaped the benefits of mass migration to the UK, with all of the costs being picked up by society as a whole. If Britain is to solve the challenges it currently faces, then that calculation must start to be rebalanced.
Although Portugal had been an EU member since 1986 an economic boom throughout the 1990s meant migration to the UK only took off in the early 2000s.
In the interviews linked above, few Timorese migrants had learnt English and two which did were working as translators.
I’m sure there are some edge cases where this is not the case (e.g. if a migrant driving a car had not been there to break a red light then a local driver might have been able to, there is likely some displacement activity in the drug trade) but these are a small minority of overall crimes.